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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission File number 0-20738
------------------------
OLICOM A/S
(Exact name of registrant as specified in its charter)
N/A THE KINGDOM OF DENMARK
(Translation of Registrant's (Jurisdiction of incorporation or
name into English) organization)
------------------------
NYBROVEJ 110
DK-2800 LYNGBY
DENMARK
(Address of principal executive offices)
------------------------
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Common Shares, nominal value DKK 0.25 each Nasdaq National Market
Common Stock Purchase Warrants Nasdaq National Market
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
Common Shares, nominal value DKK 0.25 each
Common Stock Purchase Warrants
------------------------
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
Common Shares, nominal value DKK 0.25 each: 17,863,604
Common Stock Purchase Warrants: 922,388
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the Registrant has elected
to follow:
Item 17 [ ] Item 18 [X]
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DOCUMENTS INCORPORATED BY REFERENCE
None.
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ITEM 1. DESCRIPTION OF BUSINESS.
Certain statements included in this Report include trend analysis and
are forward-looking statements (within the meaning of Section 27A of the United
States Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the United States Securities Exchange Act of 1934, as amended (the "Exchange
Act")), including, without limitation, statements containing the words
"believes", "anticipates", "expects", "plans", "may", "will", "should",
"objective", "target", "goal", "strategy" or "continue" or the negative of such
terms or other words of similar import. Such forward-looking statements relate
to future events, the future financial performance of the Company, and involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company or industry results
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Prospective investors
should specifically consider the various factors identified in this Report that
could cause actual results to differ, including, without limitation, those
discussed in the following section, as well as in the section titled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The Company is under no duty to update any such factors or to
update any of the forward-looking statements after the date of this Report to
conform such statements to actual results.
OVERVIEW
Owing to several significant transactions undertaken by Olicom A/S
("Olicom" or the "Company") during 1999 (the "1999 Transactions"), the nature of
the Company's business has changed significantly. While this Report will
summarize the more material developments in the Company's business during the
past five years, such description must be viewed with reference to the 1999
Transactions. As a result of the 1999 Transactions and the attendant change in
the nature of the Company's business as a result thereof, the nature of the
Company's business prior to the 1999 Transactions has limited relevance.
Prior to the 1999 Transactions, the Company developed, marketed and
supported network software and hardware products that enabled personal and
work-group computer users to communicate, exchange data and share computing
resources in local area networks ("LANs"), in wide area networks ("WANs") and
over the Internet. The Company's products were marketed worldwide, primarily
through distributors, value-added resellers (including dealers, systems
integrators and other resellers) ("VARs") and original equipment manufacturer
customers ("OEMs").
COMPANY HISTORY
Olicom was organized in the Kingdom of Denmark in 1985, and offered its
shares publicly in the United States in 1992. Since December 1997, the Company's
shares have been listed on the Copenhagen Stock Exchange. Beginning in 1987,
Olicom was involved in the design, development and production of high-quality
networking products. In 1988, Olicom began marketing an increasingly broader
range of network interface cards ("NICs" or "adapters"), internetworking
products, hubs and cabling components, repeaters, converters, filters and
associated software drivers. The Company established Olicom, Inc. ("Olicom USA")
in 1990, with its headquarters in metropolitan Dallas, to coordinate marketing
in North and South America. In late 1991, Olicom introduced a line of Token-Ring
bridging products. In 1992, an acquisition enabled Olicom to broaden its product
line to Ethernet networks, and in 1995, Olicom began shipping 155 Mbps
Asychronous Transfer Mode ("ATM") NICs.
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In June 1997, with the acquisition of CrossComm Corporation
("CrossComm"), Olicom acquired a chassis-based integrated networking platform
for its Token-Ring, Ethernet and ATM solutions. In September 1997, Olicom
introduced advanced Token-Ring and ATM switching solutions, including the
CrossFire(R) 8600 Token Ring Switch.
In November 1998, the Company announced a strategy of focusing on the
Company's core businesses. Consistent with this strategy, in January 1999,
Olicom divested its interest in Lasat A/S ("Lasat"), a producer of PC modems. In
March 1999, the Company announced a suite of Fast Ethernet switching products
designed for customers migrating from Token-Ring to Fast Ethernet.
During the first six months of 1999, the Token-Ring market experienced
a dramatic and accelerating decline, leading to a significant reduction in
Olicom sales and severe operating losses. The Company also began experiencing
significantly increased competition in the Fast Ethernet market. On a continuing
basis during the period, Olicom reviewed its strategic and financial position,
and began investigating a broad spectrum of possibilities, including entering
into strategic alliances focused on Fast Ethernet technology and the sale of
Olicom as a whole. Such inquiries failed to generate suitable potential
relationships. As a result, the Company decided to divest its activities on a
piecemeal basis.
1999 TRANSACTIONS
On August 31, 1999, the Company announced the sale of its Token-Ring
business to Madge Networks N.V. ("Madge"). On September 19, 1999, Intel
Corporation ("Intel") purchased certain intellectual property and other assets
of the Company and acquired Olicom's development group. Finally, on October 27,
1999, Olicom announced the sale of all of its interest in Digianswer A/S
("Digianswer") to Motorola, Inc. ("Motorola"). In late 1999, Olicom relocated
its international corporate headquarters to a smaller facility adjacent to its
previous facilities. In addition, the Company is in the process of closing down
its U.S. headquarters and other U.S. and international offices.
Although the transactions with Intel, Madge and Motorola have
contributed to the improvement in Olicom's financial position, significant
operational losses during 1999 and substantial asset write-downs, and other
charges associated with the 1999 Transactions, resulted in a substantial
decrease in Olicom's shareholders' equity as at December 31, 1999, compared with
the same date in 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
Since the closing of the 1999 transactions, the Company's main focus
has been on the fulfillment of various product delivery and associated warranty
and service obligations, primarily through various agreements with Madge and
Intel, a warranty and support agreement with VITAL Network Services ("VITAL"),
and agreements and arrangements with Olicom's other business partners and
service providers.
With the divestiture to Madge, Intel and Motorola, the Company's assets
at December 31, 1999, were comprised mainly of, cash and cash equivalents,
accounts receivables, inventories and certain intellectual property. In
addition, there will be certain other assets and contingent payments related to
the 1999 Transactions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a further discussion of the 1999
Transactions.
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In connection with the reduction of its operating activities and the
consummation of the 1999 Transactions, the Company will retain certain
contingent liabilities, primarily relating to the return of products from United
States distributors, product warranty and support obligations (relating to the
transaction with Madge), indemnification obligations with respect to
representations, warranties and other obligations, and non-competition covenants
relating to all of the divestitures. In addition, the Company continued to have
certain lease commitments.
PRODUCTS
Prior to the 1999 Transactions, the Company's strategic focus was to
address the local area networking needs of large and medium size enterprises as
they transitioned from shared, medium speed network topologies like 16 Mbps
Token-Ring and 10 Mbps Ethernet to switched, high-speed networks. The Company's
products were fully compatible with applicable industry standards and provided
connectivity to all major PC architectures and network operating systems. The
main product lines included the following:
Desktop Network Interface Cards. NICs provide connectivity between a PC
and the network. Olicom NICs provided support for industry standard
speeds and features, as well as support for leading network operating
systems developed by major vendors.
Notebook Connectivity Products. Olicom's GoCard(R)range of PC Card
adapters provided network connectivity for the rapidly growing portable
computing market.
Network System Products. Olicom's network systems products included LAN
switches, routers, router switches and network management products.
Network Services. Olicom network services included network monitoring,
training, installation and on-call site maintenance. These services
were sold by Olicom and performed by selected partners such as VITAL
and other VARs around the world.
With the sale of the Token-Ring business to Madge in August 1999,
Olicom divested a substantial part of its Token-Ring product lines, including:
Token-Ring Desktop Network Interface Cards
Token-Ring Notebook Connectivity Products
Token-Ring Hub Products
CrossFire Token-Ring Switch Products
The transfer of these product lines was implemented during September,
October and November 1999. Olicom continued to support Madge with maintenance
activities with respect to the transferred products on technical support
projects that Madge escalates to Olicom, until this maintenance support
obligation terminated at the end of February 2000.
In September 1999, Olicom announced discontinuation of the CrossFire
ATM Switch product line. To support existing partners and customers, end-of-life
sales were arranged at reduced prices at the same time. Sales of these products
effectively ceased in December 1999.
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In January 2000 Olicom announced discontinuation of the following
additional product lines:
ATM Network Interface Cards and associated software products
CrossFire Fast Ethernet Switch Products
Fast Ethernet Hub Products
Fast Ethernet Desktop Network Interface Cards
Fast Ethernet Notebook Connectivity Products
XL Router and Switch Products (former CrossComm products)
To support existing partners and customers, an end-of-life sales
campaign began with respect to the foregoing products. The Company anticipates
that sales of these products will effectively cease by February 29, 2000.
Beginning approximately April 2000, the Company anticipates that it
will cease to market and sell products; however, the Company expects that it
will continue to fulfil product warranty obligations and technical support
obligations for Ethernet products, ATM products and XL products. Such
obligations will be performed through agreements with VITAL Network Services.
Olicom is no longer involved in the network service business. Customers
seeking network services (including general support, product replacement,
network monitoring, training, installation and on-site support for products sold
by Olicom) are referred to Madge, VITAL Network Services or NWorks (a
Denmark-based start-up service company established by former Olicom employees).
PRODUCT SALES AND MARKETING
Prior to the consummation of the 1999 Transactions, Olicom marketed and
sold its products through indirect distribution channels that included
distributors, VARs and OEMs. As is common in the LAN industry, the Company's
agreements with distributors and VARs were terminable on prior notice and
provided for the right upon such termination to return products that were
unopened and undamaged.
The Company has received notice from Ingram Micro Inc. and Tech Data
Corporation, the Company's largest distributors, of their exercise of the right
to return products. The Company has created reserves with respect to the
financial impact associated with right of distributors to return products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Olicom product sales during the first quarter of 2000 will be limited
to sales of Token-Ring products to Madge from pre-existing finished goods and
certain component inventories. In addition, end-of-life sales are ongoing for a
range of recently discontinued ATM, Ethernet and XL products. It is anticipated
that Olicom will cease to sell products sometime during fiscal year 2000. Except
for the ongoing end-of-life sales program, the Company has no active marketing
programs with respect to products formerly produced by it.
Pursuant to rights obtained in connection with its agreement with the
Company, Madge may continue to manufacture, market and sell several
Olicom-branded Token-Ring products.
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PRODUCT SUPPORT
Prior to the 1999 Transactions, the Company's distribution partners
supported the Company's products. These distribution partners had access to the
Company's sales support engineers and field engineers for end-user support. The
Company's resellers and large accounts received sales and technical training
from the Company at its training centers in greater Copenhagen, Denmark,
Marlborough, Massachusetts and Richardson, Texas.
The performance of technical support obligations retained by Olicom
after the 1999 Transactions is now being provided through VITAL and NWorks.
On-line information access is currently provided through the World Wide Web and
electronic bulletin boards as well as additional technical support available
through VITAL by telephone and telefax during extended business hours. For
Olicom products that were purchased or licensed by Madge, technical support
services are now being provided by Madge's technical support organization.
Depending on the distribution channel, the Company's products generally
have been warranted free of defects in materials and workmanship for one to
three years. Selected NIC products have a limited lifetime warranty. Before the
expiration of the product warranty period, the Company is offering parts
replacement services through VITAL for the product lines that have remained with
the Company, and Madge is providing similar services for the product lines that
it purchased or licensed from Olicom.
Olicom currently refers customers requesting maintenance and support
contracts that include on-site service and 24-hour telephone dial-in support to
Madge, VITAL or NWorks. To date, the Company has not encountered any significant
product maintenance problems.
RESEARCH AND DEVELOPMENT
Prior to the 1999 Transactions, the Company was developing new products
and enhancements to existing products, with the goal of further improving
performance, assuring continued interoperability and increasing market share. In
this connection, the Company maintained significant research and development
operations in greater Copenhagen and in Gdansk, Poland.
In connection with the agreement with Intel, Olicom's development group
was transferred to Intel, and approximately 220 Olicom development employees
based in greater Copenhagen and in Gdansk became employees of Intel. After
consummation of the transaction with Intel, and the subsequent sale of Olicom's
shareholding in Digianswer, all Olicom research and development activities were
terminated.
As part of the agreement with Intel, Olicom has access to former Olicom
engineering resources, both in Copenhagen and in Gdansk, who are now employed by
Intel, in order to handle warranty obligations for Olicom's installed base of
Ethernet, ATM and XL products.
MANUFACTURING AND DISTRIBUTION
Prior to the 1999 Transactions, Olicom outsourced all of its
manufacturing needs. Its products were manufactured in fully automated,
high-quality ISO 9002 certified production lines utilizing Surface Mount
Technology techniques, and were manufactured to meet Olicom specifications on a
turnkey basis.
In connection with the sale of the Token-Ring business to Madge, the
Company continued to maintain its contract manufacturing base to support
remaining products, and facilitated the availability of a continued supply of
Token-Ring products to Madge. Following a transition period that extended from
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August until November 1999, Madge assumed direct responsibility for the contract
manufacturers for the product line purchased/licensed from the Company.
The Company's distribution of products has been consolidated to its
Copenhagen distribution center. The Company's distribution center in Richardson,
Texas, was closed in December 1999, in line with the overall reduction in
activities.
INTELLECTUAL PROPERTY
The Company has been dependent on its proprietary technology since its
inception. The Company relied upon a combination of copyright and trade secret
laws to establish and maintain proprietary rights to its products.
The Company has had a program to file applications for and obtain
patents in the United States. During 1999, most of these patent applications
were licensed or transferred to Madge or Intel. In most cases where patent
applications were transferred, Olicom at the same time received a license of the
right to utilize the technology represented by the transferred patent
applications.
While the Company has not been issued any patents to date, several
original Olicom patent applications are currently pending. There can be no
assurance that patents will be issued from pending applications, or that claims
allowed on any future patents will be sufficiently broad to protect the
Company's technology. In addition, to the extent that patents are issued from
pending applications, there can be no assurance that any of such patents will
not be challenged, invalidated or circumvented, or that any rights granted
thereunder will provide competitive advantages to the Company. Although the
Company believes that its products and technology have not and do not infringe
the proprietary rights of others, and the Company does not have any knowledge
that its products infringe the proprietary rights of any third parties, there
can be no assurance that third parties will not assert infringement claims in
the future or that such claims will not be successful, notwithstanding the
divestitures in connection with the 1999 Transactions.
It has been the Company's practice to enter into confidentiality
agreements with its customers, suppliers and industry partners, to limit access
to sensitive information. Despite these precautions, it may be technologically
possible for past competitors of the Company to "reverse engineer" or otherwise
obtain information regarding aspects of the Company's products that the Company
regards as proprietary. The laws of some foreign countries in which the Company
sells or may sell its products do not protect the Company's proprietary rights
in its products to the same extent, as do the laws of the Kingdom of Denmark
and/or the United States.
From time to time the Company has received communications from third
parties asserting that its use of trademarks, or that its products, infringe or
may infringe the rights of third parties. There can be no assurance that any
such claims will not result in protracted and costly litigation; however, based
upon general practice in the industry, the Company believes that such matters
can ordinarily be resolved without any material adverse impact on its business,
financial condition or results of operations. Nevertheless, there can be no
assurance that the necessary licenses would be available on acceptable terms, if
at all, or that the Company would prevail in any such challenge. The inability
to obtain certain licenses or other rights or to obtain such licenses or rights
on favorable terms, or litigation arising out of such other parties' assertion,
could have a material adverse effect on the business, financial condition or
results of operations of the Company, notwithstanding the divestitures in
connection with the 1999 Transactions.
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TRADEMARK AGREEMENT
The trademark "Olicom" (the "Trademark") is a registered trademark of
Ing. C. Olivetti & C., S.p.A. ("Olivetti"). Pursuant to a Trademark Agreement
dated December 11, 1998, Olivetti extended the grant to the Company of a
worldwide license to use the Trademark. The term of the Trademark Agreement
expires on September 1, 2009, with the Company having the right to extend the
term for an additional ten years. During the term of the Trademark Agreement and
for a period of one year after any termination thereof, Olivetti has agreed not
to use itself or grant to a third party any rights to use the Trademark on
products or services of the type manufactured, marketed or offered by the
Company. Olicom has the right to terminate the Trademark Agreement for
convenience upon the provision of notice, as provided therein.
In connection with the transactions with Madge, Olivetti, Madge and
Olicom agreed to the licensing of the Trademark on terms substantially similar
to those enjoyed by Olicom under the Trademark Agreement, in order to enable
Madge to market Olicom product lines.
Olicom has trademarks on several selected products, such as
CellDriver(R), Lanscout(TM) and RapidLan(TM), and on products and services such
as CrossFire(R), GoCard(R), RapidFire(R), ClearServer(R), ClearSession(R),
ClearSight(TM), ClearCare(R), ClearPartner(R), ClearStep(R) and ExpertWatch(R).
Several of these trademarks were licensed to Madge in connection with the 1999
Transactions.
EMPLOYEES
In connection with the Company's restructuring efforts and the 1999
Transactions, Olicom has reduced staff dramatically.
As of February 1, 2000, the Company employed or retained (as employees
or independent contractors) approximately 59 persons, including 6 in sales and
marketing, 28 in operations/production (including quality assurance), and 25 in
administration and finance. Of these employees and independent contractors,
approximately 9 were located in the United States, and the remainder were
located in Denmark.
As of May 1, 2000, the Company anticipates that it will cease to have
personnel in sales and marketing or operations. At such time, the Company will
have limited personnel, primarily in finance and other administrative functions.
ITEM 2. DESCRIPTION OF PROPERTY.
OLICOM A/S LEASES
Pursuant to the sublease agreement entered into with Intel Denmark ApS
("Intel Denmark"), Olicom has subleased the premises situated at Nybrovej 112,
DK-2800 Lyngby (the "TopDanmark Lease No. 1") to Intel Denmark and the premises
situated at Nybrovej 114, DK-2800 Lyngby (the "TopDanmark Lease No. 2") to Intel
Denmark on the same terms and conditions as agreed in the head leases. The
sublease agreement is for a fixed term terminating on February 1, 2006, for the
TopDanmark Lease No. 1 and on April 1, 2008, for the sublet part of the
TopDanmark Lease No. 2. During these periods, Olicom will remain contingently
liable to TopDanmark Ejendom A/S ("TopDanmark"), as lessor of the premises, for
the performance of lease obligations by its subtenants. While Olicom A/S
provided bank guarantees
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and deposits to TopDanmark as security under the head leases, Intel Corporation
has provided Olicom with a parent company guarantee covering Intel Denmark'
fulfillment of its obligations under the subleases.
In addition, Intel Denmark is obligated to use reasonable commercial
efforts together with Olicom to procure the assignment of the head leases to
Intel Denmark with the necessary consent of TopDanmark. In this relation, Intel
Denmark is obligated to provide security to TopDanmark sufficient for the
release of the bank guarantees and deposits presently provided as security by
Olicom to TopDanmark.
Further, Olicom had leased premises situated at Nybrovej 110, DK-2800
Lyngby from Tryg Baltica Forsikring, Pensionsforsikringsselskab A/S. This lease
was transferred from Olicom to Eli Lilly Danmark A/S ("Eli Lilly Danmark") as of
January 1, 2000, and has been accepted by the lessor of the premises. As part of
this transfer, Olicom made a payment to Eli Lilly Danmark for refurbishment of
the leased premises. Further, Olicom has entered into a sublease agreement with
Eli Lilly Danmark, whereby Olicom will sublease 1,046 square meters of the
premises situated at Nybrovej 110, DK-2800 Lyngby. The sublease is
non-terminable until December 31, 2002; however, Olicom may assign this lease or
enter into a further sublease. The sublease with Eli Lilly Danmark may terminate
with at least a 12 months' written notice.
OLICOM USA LEASES
Pursuant to a Lease Agreement dated October 16, 1997, Olicom USA leased
approximately 40,000 square feet of office space in Richardson, Texas, for a
term expiring on January 30, 2005. Effective November 29, 1999, Olicom USA
assigned its obligations under the Lease Agreement to Nextel of Texas, Inc.
("Nextel Texas"). The parent corporation of Nextel Texas guaranteed its assumed
obligations under the Lease Agreement. Pursuant to such assignment, the landlord
granted Olicom USA a release from substantially all of its obligations under the
Lease Agreement (including the obligation to pay rental). So long as Nextel
Texas is not in default in its obligations under the Lease Agreement, the
landlord has agreed to pay to Olicom USA an aggregate amount of $291,183 in 44
monthly installments, which represents a portion of the increased rental
obtained as a result of the assignment of the Lease Agreement to Nextel Texas.
In connection with the assignment of the Lease Agreement, Nextel Texas also
assumed substantially all of the obligations of Olicom USA regarding the lease
of telephone equipment at the leased premises. However, as the parent of Nextel
Texas did not guarantee the obligations of Nextel Texas under the telephone
lease, the lessor of the telephone equipment did not release Olicom USA from its
obligations under such lease; as a result, Olicom USA agreed to guarantee the
performance of the assumed obligations of Nextel Texas under the telephone
lease. The guaranteed payments are approximately $7,200 per month for a period
of 47 months as of February, 2000 (or a maximum amount of approximately $338,400
as of such date).
Olicom USA also leases warehouse space in Plano, Texas, for a term
expiring on April 14, 2000. Olicom USA will utilize portions of this space to
handle returned products, and has moved its administrative offices into the
office portion of the warehouse. Owing to the April 2000 expiration date of the
term of such lease, Olicom USA is not endeavoring to sublet these premises at
this time.
Olicom USA also leases space in Marlborough, Massachusetts, for a term
expiring December 31, 2002. Of the space originally leased by the former
CrossComm, portions have been previously sublet. As part of the sale of the
services business to VITAL Network Services, it agreed to split the cost of any
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unoccupied space. As a result, Olicom USA's estimated share of rental and
operating expense attributable to this premises through 2002 is $476,637. While
Olicom USA is presently trying to sublet the remaining space, it is not
optimistic that it will be successful in doing so.
OLICOM POLAND LEASE
Pursuant to a Lease Agreement dated December 22, 1997, Olicom Poland
sp. z o.o. ("Olicom Poland") leased office space in Gdansk for a term expiring
on November 28, 2008. Commencing October 25, 1999, these premises were sublet to
Intel Technology Poland on back-to-back terms until the day when all rights and
obligations of Olicom Poland can be assigned to Intel Technology Poland.
If the lease is not assigned to Intel Technology Poland, Olicom
Poland's liability vis-a-vis the landlord will not expire until November 28,
2008. This liability is covered by guarantees provided by Intel Corporation.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. As of the
date of this Report, the Company was not a party to any legal proceedings, the
adverse outcome of which, in management's opinion, would have a material adverse
effect on the Company's business, results of operations or financial position.
See also "Description of Business -- Proprietary Rights."
On or about September 13, 1996, Datapoint Corporation ("Datapoint")
commenced litigation in the United States District Court for the Eastern
District of New York against CrossComm Corporation (now known as Olicom, Inc.
("CrossComm")), Cisco, Plaintree Systems Corporation, Accton Technology
Corporation, Cabletron Systems, Inc., Bay Networks and Asante Technologies,
Inc., individually, and as representatives of a putative class of all
manufacturers, vendors and users of Fast Ethernet dual protocol local area
network products. In its complaint, Datapoint alleges that the defendants have
been, and still are, directly infringing U.S. Patent No. 5,077,732 by making,
using, selling and/or offering for sale products embodying inventions claimed in
that patent. Similarly, Datapoint alleges that the defendants are also
infringing U.S. Patent No. 5,008,879 by using or selling products encompassed
within that patent's claims. Datapoint is seeking a permanent injunction against
all of the defendants, enjoining each of them from making, using or selling any
product that infringes either patent, and is also seeking unspecified damages
(which it claims should be trebled) and its costs and attorneys' fees. On April
15, 1998, the Special Master submitted a report in which he generally supported
the contention of the defendants as to their construction of the claims with
respect to the patents-in-suit. A Stipulated Order and Judgment was filed by the
parties, and subsequent thereto, the Court granted Summary Judgment in favor of
the defendants, finding that the accused products do not infringe the
patents-in-suit. On February 3, 1999, Datapoint filed a notice of appeal to the
United States District Court for the Federal Circuit. On January 6, 2000,
Datapoint filed a motion seeking a stay of the appeal, on the grounds that one
of the two claims that is the subject of the appeal had been rejected by the
United States Patent and Trademark Office during a reexamination.
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ITEM 4. CONTROL OF REGISTRANT.
As of February 24, 2000, the Company was not aware of any person who
was the beneficial owner of more than 10% of the outstanding shares of the
Company, nominal value DKK 0.25 per share ("Common Shares"). The following table
sets forth as of such date the number of Common Shares beneficially owned by all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Amount of Percent
Beneficial of
Ownership Class(1)
--------- --------
<S> <C> <C>
All directors and executive officers
as a group (consisting of 8 persons) 250,898 1.4%
</TABLE>
- ----------------
(1) Percentages in the foregoing table are based on 17,863,604 Common
Shares issued and outstanding as of February 24, 2000, excluding
702,291 Common Shares held in the Company's treasury.
ITEM 5. NATURE OF TRADING MARKET.
The Common Shares are traded on the Nasdaq National Market (under the
symbol OLCMF) and on the Copenhagen Stock Exchange ("CSE"). The following table
sets forth the high and low sales prices of the Common Shares for the periods
indicated, as reported by the Nasdaq National Market ("Nasdaq") and the
Copenhagen Stock Exchange.
<TABLE>
<CAPTION>
Nasdaq(1) CSE(1)
-------------------- ----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Calendar 2000
First Quarter (through February 24, 2000) 1.3 0.8 9.5 5.9
Calendar 1999
First Quarter 7.9 2.9 52.4 21.3
Second Quarter 4.5 3.1 29.6 19.8
Third Quarter 4.4 0.6 29.2 5.8
Fourth Quarter 1.7 0.5 9.4 3.9
Calendar 1998
First Quarter 30.8 24.8 214.0 177.0
Second Quarter 30.8 26.5 210.0 186.0
Third Quarter 28.4 13.7 197.0 82.4
Fourth Quarter 14.5 4.9 87.1 32.5
</TABLE>
- ----------------
(1) Prices reported for Nasdaq are expressed in U.S. dollars; prices
reported for the CSE are expressed in Danish kroner.
12
<PAGE> 13
As of February 24, 2000, there were approximately 132 United States
record holders of Common Shares, who held approximately 83% of the outstanding
Common Shares as of such date. The foregoing includes 14,826,060 Common Shares
held of record by Depository Trust Company, as nominee for various beneficial
holders.
On January 31, 2000, the Company announced that it had received
notification from Nasdaq relating to the failure of the Common Shares to
maintain a minimum bid price of $1.00 during a 30 consecutive trading day
period, as required for continued listing of the shares on Nasdaq. The Company
also announced that it had received notification from Nasdaq relating to the
failure to maintain a minimum of two active market makers for the Company's
common share purchase warrants, as required for continued listing of the
warrants on Nasdaq. The Company appealed Nasdaq's determinations of
noncompliance, and a hearing has been scheduled for February 24, 2000, with
respect to the appeal. As of the close of business on February 25, 2000, the
Company had not been advised of the outcome of the hearing.
In connection with the Company's acquisition of CrossComm on June 12,
1997, the Company issued three-year warrants ("Warrants") to purchase Common
Shares at an exercise price of $19.74 per whole Common Share. The Warrants are
traded only on the Nasdaq National Market (under the symbol OLCWF). The
following table sets forth the high and low sales prices of the Warrants for the
periods indicated, as reported by Nasdaq.
<TABLE>
<CAPTION>
Nasdaq
-------------------------
High Low
------ -----
<S> <C> <C>
Calendar 2000
First Quarter (through February 24, 2000) 0.2 0.1
Calender 1999
First Quarter 0.7 0.3
Second Quarter 0.4 0.1
Third Quarter 0.4 0.1
Fourth Quarter 0.2 0.0
Calendar 1998
First Quarter 12.8 8.1
Second Quarter 12.0 7.3
Third Quarter 9.0 1.0
Fourth Quarter 1.5 0.1
</TABLE>
- ----------------
As of February 24, 2000, there were approximately 88 United States
record holders of Warrants, who held approximately 99% of the Warrants as of
such date. The foregoing includes 918,975 Warrants held by Depository Trust
Company.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
There are no governmental laws, decrees or regulations of the Kingdom
of Denmark that restrict the export or import of capital (including, without
limitation, foreign exchange controls), or that affect the
13
<PAGE> 14
remittance of dividends, interest or other payments to nonresident holders of
Common Shares. There are no limitations imposed by the laws of the Kingdom of
Denmark or the Company's Articles of Association (except for the Share Ownership
Limit described below) on the right of nonresident or foreign holders to hold or
vote Common Shares.
The Articles of Association provide that no person, firm or entity
(each, a "person") may, without obtaining the approval of the Company's Board of
Directors, own more than 33% of the Company's share capital or votes at any time
(the "Share Ownership Limit"). The Company's Board of Directors may condition
its approval on the satisfaction of such conditions that it determines to be
appropriate. For the purpose of determining ownership of Common Shares or votes,
a person will generally be deemed to own Common Shares or votes which are
considered to be beneficially owned by such person under Rule 13d-3 under the
Exchange Act. A person who owns more than 33% of the Company's share capital or
votes at any time who has not obtained the approval of the Board of Directors
cannot be registered or otherwise accepted as a shareholder, and such person
will have no voting rights, rights to dividends or distributions, or any other
rights as a shareholder for the portion of such person's shareholding that
exceeds 33%. The Board of Directors may approve the ownership by a person of
more than 33% of the Company's share capital or votes in (i) the event that such
person has, prior to purchasing more than 33% of the Company's share capital or
votes, requested the approval by the Board of Directors to own more than the
Share Ownership Limit, (ii) the event that such person has made a legally
binding and irrevocable bona fide offer to all shareholders of the Company
(other than such person, to the extent that he or she is a shareholder) to
purchase all the Common Shares and votes in the Company at a price deemed
favorable by the Board of Directors, in its discretion, or (iii) in such other
circumstances, as determined by the Company's Board of Directors.
Other than the foregoing, there are no limitations by the Company's
Articles of Association on the right of holders to hold or vote Common Shares.
ITEM 7. TAXATION.
The following summary of certain United States federal and Danish tax
matters is based on tax laws of the United States and Denmark as in effect on
the date of this Report, and is subject to changes in United States and Danish
law, including changes that could have retroactive effect. The following summary
is also based on the current United States-Denmark Double Taxation Convention
which is subject to change. A proposal for a new treaty has been concluded
between USA and Denmark. The treaty must be ratified by the two states before it
can take effect. In Denmark the Gouverment proposed a Bill on the new treaty on
3 November 1999 but the Bill has not yet been passed by the Parliament. This
discussion is based on current laws unless otherwise stated and interpretations
thereof, and there can be no assurance that future legislation, regulations,
administrative rulings or court decisions will not adversely affect the accuracy
of the statements contained herein.
The following summary does not consider or discuss the tax laws of any
country other than the United States or Denmark. This summary does not describe
United States federal estate and gift tax considerations, nor state, local or
provincial tax considerations. Furthermore, this summary does not address United
States federal income tax or Danish tax considerations relevant to United States
holders of Common Shares or Warrants subject to taxing jurisdictions other than
or in addition to the United States, and does not address all possible
categories of United States holders, some of whom (such as financial
14
<PAGE> 15
institutions, trusts, estates, insurance companies, dealers in securities,
certain retirement plans and tax exempt organizations) may be subject to special
rules.
This summary contains a description of the material United States
federal income tax and Danish tax consequences of the purchase, ownership and
disposition of Common Shares and Warrants by a beneficial owner that (i) is an
individual citizen or resident in the United States (for United States federal
income tax purposes), a corporation or partnership organized under the laws of
the United States or any state thereof, or estates or trusts the income of which
is subject to United States federal income tax regardless of its source, (ii) is
not also a resident or corporation of Denmark and is not domiciled in Denmark,
(iii) does not hold Common Shares or Warrants in connection with any permanent
establishment or fixed base in Denmark, (iv) does not own, and has not owned
(directly, indirectly or by attribution) at any time, 10% or more of the total
combined voting power or equity of the Company, and (v) holds Common Shares or
Warrants as capital assets. The term "United States holder," as used in this
summary, means a beneficial owner of Common Shares or Warrants meeting these
requirements. UNITED STATES HOLDERS OF COMMON SHARES OR WARRANTS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO THE UNITED STATES, DANISH OR OTHER TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF COMMON SHARES AND WARRANTS.
UNITED STATES TAX CONSEQUENCES OF OWNERSHIP OF COMMON SHARES
Dividends. For United States federal income tax purposes, the gross
amount of all dividends (that is, the amount before reduction for Danish
withholding tax) paid with respect to Common Shares out of the current or
accumulated earnings and profits of Olicom ("E&P") to a United States holder
will be subject to United States federal income taxation as foreign source
dividend income. United States corporations that hold Common Shares will not be
entitled to the dividends received deduction available for dividends received
from United States corporations. To the extent that a distribution exceeds E&P,
it will be treated first as a return of capital to the extent of the United
States holder's basis, and then, as gain from the sale of a capital asset.
For United States federal income tax purposes, the amount of any
dividend paid in Danish kroner will be the United States dollar value of the
kroner at the exchange rate in effect on the date of receipt, whether or not the
kroner is converted into United States dollars at that time.
The withholding tax imposed by Denmark generally is a creditable
foreign tax for United States federal income tax purposes. Therefore, a United
States holder generally will be entitled to include the amount withheld as
foreign tax paid in computing a foreign tax credit (or in computing a deduction
for foreign income taxes paid, if the United States holder does not elect to use
the foreign tax credit provisions of the Internal Revenue Code of 1986, as
amended (the "Code")). The Code, however, imposes a number of limitations on the
use of foreign tax credits, based on the particular facts and circumstances of
each taxpayer. United States holders who hold Common Shares should consult their
tax advisors regarding the availability of the foreign tax credit.
A United States holder also may be subject to backup withholding at the
rate of 31% with respect to dividends paid on or proceeds from the sale or other
disposition of Common Shares, unless the United States holder (i) is a
corporation or comes within certain other exempt categories or (ii) provides a
15
<PAGE> 16
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules.
Sale or Other Disposition of Common Shares. Gain or loss recognized by
a United States holder on the sale or other disposition of Common Shares will be
subject to United States federal income taxation as capital gain or loss in an
amount equal to the difference between such United States holder's basis in the
Common Shares and the amount realized upon such disposition. The capital gain or
loss will be long term or short term depending on whether the holder has held
the Common Shares for (i) more than 12 months (which is subject to a maximum
United States federal income tax rate of 20% for certain non-corporate
taxpayers) or (ii) not more than one year (which is subject to a maximum United
States federal income tax rate of 39.6% for certain non-corporate taxpayers).
Capital losses are generally deductible only against capital gains and not
against ordinary income.
Capital gain recognized by a United States holder on the sale or other
disposition of Common Shares will be United States source gain. Treasury
Regulations have been finalized under which losses from the sale of Common
Shares would generally be sourced in the same manner as gains from the sale of
such Common Shares. However, the final regulations include a dividend recapture
rule and other exceptions that may apply. United States holders of Common Shares
should consult their tax advisors regarding the proper treatment of such losses.
UNITED STATES TAX CONSEQUENCES OF OWNERSHIP OF WARRANTS
Exercise of Warrants. Generally, no gain or loss will be recognized for
United States federal income tax purposes upon exercise of a Warrant. A holder's
initial tax basis in a Warrant will be equal to the value of the Warrant at the
time the holder receives such Warrant. The tax basis of the Common Shares
acquired upon exercise of a Warrant will be equal to the sum of (i) the holder's
tax basis in such Warrant and (ii) the exercise price. The holding period of the
Common Shares acquired upon exercise of a Warrant will begin on the date of the
exercise of the Warrant.
Disposition of Warrants. In general, the sale, exchange or other
taxable disposition of a Warrant will result in gain or loss to the holder in an
amount equal to the difference between the amount realized on such sale,
exchange or other disposition and the holder's tax basis in the Warrant. Such
gain or loss generally will be capital gain or loss (so long as the Warrant is a
capital asset in the hands of the holder) and such capital gain or loss will be
long term or short term depending on whether the holder has held the Warrant for
(i) more than 12 months (which is subject to a maximum United States federal
income tax rate of 20% for certain non-corporate taxpayers) or (ii) not more
than one year (which is subject to a maximum United States federal income tax
rate of 39.6% for certain non-corporate taxpayers).
Expiration. The expiration of a Warrant should generally result in a
capital loss to the holder equal to the holder's tax basis in the Warrant if the
Common Shares issuable upon exercise of the Warrant would have been a capital
asset if acquired by such holder.
Adjustments to Conversion Ratio. Adjustments made to the number of
Common Shares that may be acquired upon the exercise of a Warrant, or the
failure to make such adjustments, may result in a taxable distribution to the
holder of a Warrant pursuant to Section 305 of the Code.
16
<PAGE> 17
DANISH TAX CONSEQUENCES OF OWNERSHIP OF COMMON SHARES
Dividends. For Danish income tax purposes, the gross amount of all
distributions made by the Company to its shareholders is taxed as a dividend.
However distributions liquidation proceeds made by the Company to its
shareholders during the calender year in which the Company is finally liquidated
and dissolved are taxed as capital gain. In addition, the gross amount paid by
the Company to redeem Common Shares owned by a shareholder and considerations
paid at purchase of own shares are generally taxed as a dividend. However, a
shareholder may apply to Danish tax authorities for an exemption from the
dividend tax. If the exemption request is granted, the consideration will be
taxed as capital gain. The granting of bonus shares to shareholders, and the
right of shareholders to subscribe for Common Shares at a price that is less
than the current trading value of such Common Shares, are not considered taxable
distributions to shareholders.
In general, a Danish withholding tax of 25% is levied on all dividends.
However, a United States holder may apply to the Danish tax authorities for a
partial refund of the dividends tax that has been withheld under tax treaty. If
this refund request is granted, the Danish withholding tax on such dividends is
effectively reduced to 15%. Note that under the new treaty the rate is reduced
to 5% for corporate shareholders holding at least 10% of the share capital as
oppose to 90% to the voting power in the current treaty. Further, corporate
shareholders holding at least 25% of the share capital for a consecutive period
of a least one year may be exempt from Danish tax on dividends. The Company does
not presently contemplate the payment of any dividends on Common Shares.
However, should the Company decide to make payment of dividend, the Company will
apply to the Danish tax authorities for a blanket exemption allowing the Company
to withhold only 15% of all gross dividends paid to a United States holder.
While the Company believes that such an exemption will be granted, there can be
no assurance that this will occur. Shareholders eligible for further reduction
must apply individually for such reduction.
Sale or Other Disposition of Common Shares. Capital gains realized by
United States holders upon the sale or other disposition of Common Shares should
be exempt from Danish taxation.
DANISH TAX CONSEQUENCES OF OWNERSHIP OF WARRANTS
Exercise of Warrants. Generally, a United States holder should not
recognize taxable gain or loss for Danish income tax purposes upon the exercise
of a Warrant.
Sale of Warrants. Generally, a United States holder should not
recognize taxable gain or loss for Danish income tax purposes upon the sale of a
Warrant. However if the warrant is disposed of to the Company any (deemed)
consideration will be taxed as dividend, cf. above, unless a ruling allowing for
capital gains treatment has been obtained.
Expiration. Upon the expiration of a Warrant, a United States holder
should not recognize taxable gain or loss for Danish income tax purposes.
DANISH SHARE TRANSFER DUTY
No Danish share transfer duty is levied on the disposal of Common
Shares or Warrants.
17
<PAGE> 18
DANISH ESTATE AND GIFT TAXES.
Generally, if a United States holder acquires or disposes of Common
Shares or Warrants by inheritance, legacy or gift, such holder will not be
subject to Danish gift or inheritance taxes. If a United States holder should
make a gift of such Common Shares or Warrants to a close relative resident in
Denmark other than a spouse, the United States holder could be liable for Danish
gift tax; however the tax is subject to relief under the United States-Denmark
Double Taxation Convention with respect to taxes on estates, inheritance and
gifts.
ITEM 8. SELECTED FINANCIAL DATA.
The following table sets forth certain financial information with
respect to the Company for the five years ended December 31, 1999. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 127,469 $ 168,228 $ 238,229 $ 227,602 $ 71,291
Cost of sales 65,191 95,236 123,195 134,990 60,874
Special charges related to inventories 0 0 0 3,463 33,737
---------- ---------- ---------- ---------- ----------
Gross profit 62,278 72,992 115,034 89,149 (23,320)
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing 31,660 40,496 53,754 71,300 42,216
Research and development 9,193 12,852 17,748 23,174 14,298
General and administrative 5,662 6,848 11,032 13,657 11,218
Acquisition-related expenses 0 3,787 40,917 0 0
Restructuring charges 0 1,402 0 7,327 36,695
---------- ---------- ---------- ---------- ----------
Total operating expenses 46,515 65,385 123,451 115,458 104,427
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS
BEFORE INTEREST AND INCOME TAXES 15,763 7,607 (8,417) (26,309) (127,747)
Income from sale of activities 0 0 0 0 51,205
Interest income, net 3,297 1,531 2,966 2,302 829
Foreign currency gains (losses) (31) 675 (1,736) 481 722
Related party gain on sale of investment 0 2,878 0 0 0
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 19,029 12,691 (7,187) (23,526) (74,991)
Provision for income taxes 6,223 4,727 10,689 (531) 4,656
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARY 12,806 7,964 (17,876) (22,995) (79,647)
Minority interest in income of
consolidated subsidiary 0 539 245 (56) 660
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)$ 12,806 $ 7,425 $ (18,121) $ (22,939) $ (80,307)
========== ========== ========== ========== ==========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.87 $ 0.50 $ (1.15) $ (1.28) $ (4.50)
========== ========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING
INCLUDING COMMON STOCK EQUIVALENTS
IN 1997, 1998 AND 1999 14,748 14,786 15,821 17,894 17,864
========== ========== ========== ========== ==========
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 78,600 $ 86,407 $ 100,552 $ 76,249 $ 22,265
Total assets 127,327 127,924 162,331 149,013 48,468
Total shareholders' equity 90,127 97,509 125,559 103,023 22,438
</TABLE>
19
<PAGE> 20
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Certain statements included in this Report include trend analysis and
are forward-looking statements (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act), including, without
limitation, statements containing the words "believes", "anticipates",
"expects", "plans", "may", "will", "should", "objective", "target", "goal",
"strategy" or "continue" or the negative of such terms or other words of similar
import. Such forward-looking statements relate to future events, the future
financial performance of the Company, and involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Prospective investors should specifically
consider the various factors identified in this Report that could cause actual
results to differ, including, without limitation, those discussed in the
following section, as well as in the section titled "Description of Business".
The Company is under no duty to update any such factors or to update any of the
forward-looking statements after the date of this Report to conform such
statements to actual results. The following discussion should be read in
conjunction with the Consolidated Financial Statements and related notes.
OVERVIEW
The Company's wholly-owned subsidiaries include Olicom Ventures A/S
("Olicom Ventures"), Olicom Finance Limited and Olicom Trading A/S. Olicom, Inc.
is a wholly-owned subsidiary of Olicom Trading A/S.
During the first six months of 1999, the Token-Ring market experienced
a dramatic and accelerating decline, leading to a significant reduction in
Olicom's sales and severe operating losses. The Company also began experiencing
significantly increased competition in the Fast Ethernet market. On a continuing
basis during the period, Olicom reviewed its strategic and financial position,
and began investigating a broad spectrum of possibilities, including entering
into strategic alliances focused on Fast Ethernet technology and the sale of
Olicom as a whole. Such inquiries failed to generate suitable potential
relationships. As a result, the Company decided to divest its activities on a
piecemeal basis (see "Description of Business").
As a result of the 1999 Transactions, the nature of the Company's
business changed significantly during 1999. This discussion will summarize the
1999 Transactions (see "The 1999 Transactions"). The 1999 Transactions
significantly affected the Company's financial condition and results of
operations at and for the fiscal year ended December 31, 1999, as described more
fully below. As a result of these significant changes in the nature of the
Company's business, the following discussion will include summary references to
the Company's results of operations, liquidity and financial condition during
the period prior to the 1999 Transactions, and describe the effect of the 1999
Transactions on the Company's results of operations, liquidity and financial
condition.
The Company's functional currency is the U.S. dollar. The Company
prepares its financial statements in U.S. dollars and in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP").
References herein to "U.S. dollars", "$" or "USD" are references to United
States currency, and references to "Danish kroner", "kroner" or "DKK" are
references to Danish currency.
20
<PAGE> 21
1999 TRANSACTIONS
On August 31, 1999, the Company closed the sale of its Token-Ring
business to Madge. The consideration for the sale of Olicom's Token-Ring
business to Madge consisted of a cash payment of $15 million, of which a certain
amount was paid into escrow subject to Olicom fulfilling certain development and
other technical support commitments, and obligations with respect to
documentation and training, and additional cash payments due over the succeeding
three years based on Madge's revenue derived from the combined Madge and Olicom
Token-Ring product portfolio during this period. With respect to the additional
cash payments, a certain minimum cash amount for the whole period is guaranteed
by a financial institution and held in escrow, and will be released in
instalments over a period of twelve quarters from the closing date. Until
February 29, 2000, Madge is entitled to withhold payments capped at a certain
amount in connection with the Company's agreement to indemnify Madge with
respect to intellectual property claims. The escrowed amounts and the potential
additional cash payments have not been taken into income in 1999. The Company
intends to record these amounts and payments as income when and to the extent
received, but only to the extent that Madge does not make claims which would
have the effect of reducing the amount of monies received. With respect to a
given quarter, Olicom will receive payments in excess of the agreed quarterly
amount if Madge's revenue from Token-Ring products in that quarter exceeds the
thresholds set for the calculation of the minimum payment; however, Madge may
reduce the next quarterly payment by an amount equal to the amount of the excess
payment, if the sale of Token-Ring products in the succeeding quarter is less
than the agreed threshold. Consequently, the Company will be able to make a
complete assessment of the total amount paid by Madge only after the end of the
twelve quarters following the closing. Olicom can make no assurance with respect
to the anticipated outcome of the sale of Token-Ring products during the
three-year period above the agreed minimum amount. In addition, Madge agreed to
purchase certain Olicom Token-Ring inventory. The obligation for Madge to
purchase inventory will expire by March 31, 2000. In addition, Olicom agreed to
provide certain warranty-related services with regard to the product lines
transferred to Madge. This agreement obligates Olicom to repair or replace
defective goods in accordance with Olicom's general commercial warranty terms
for up to one year following product purchases.
On September 19, 1999, Olicom closed a transaction whereby Intel
Corporation ("Intel") purchased certain intellectual property and other assets
of the Company and acquired Olicom's development group. The consideration for
the Intel transaction included a cash payment, with a portion thereof being paid
into escrow as security for the performance of indemnification obligations with
respect to warranties, representations and other agreements made by the Company
to Intel. The escrowed amount will remain in escrow for twelve months following
the closing date, to the extent not applied to claims against the Company that
are subject to warranty and indemnification obligations. In addition, the
agreement with Intel contains a provision pursuant to which Olicom may receive
additional payments upon the satisfaction of certain conditions. Olicom can make
no assurance with respect to the anticipated outcome of this provision, which
will expire by September 30, 2000.
On October 27, 1999, Olicom closed the sale of all of its interest in
Digianswer A/S ("Digianswer") to Motorola, Inc. ("Motorola"). The consideration
for the Digianswer transaction consisted of cash, with a portion thereof being
paid into escrow as security for the performance by the Company of
indemnification obligations with respect to warranties, representations and
other agreements made by the Company to Motorola. The escrowed amount will
remain in escrow for 18 months following the closing date, to the extent not
applied to claims against the Company that are subject to warranty and
indemnification
21
<PAGE> 22
obligations. In connection with the agreement with Motorola, the Company
recorded both the cash payment and the escrowed amount as an income in 1999, as
management believes that the risk associated with the escrowed amount is
limited.
In connection with the foregoing agreements, Olicom made warranties,
representations and other agreements that are customary for transactions of this
nature. Warranty claims are barred following the expiration of stated periods
(generally, 1 1/2 to 2 years) following the closing of the respective
transactions. Olicom's liability for indemnification is limited to certain
maximum amounts, in no case exceeding the cash payments received by it. In all
the transactions Olicom entered into confidentiality agreements which limit the
detail that Olicom can disclose regarding the terms of each transaction. In
connection with the reduction in its operating activities and the consummation
of the 1999 Transactions, the Company will retain certain contingent
liabilities, primarily relating to the return of products, particularly from
United States customers, product warranty and support obligations relating to
the transaction with Madge, and indemnification obligations with respect to
representations and warranties. The Company entered into non-competition
covenants relating to all of the divestitures. In addition, the Company will
retain certain lease commitments (see "Description of Property"), and remain
responsible for litigation arising out of its operations.
Subsequent to the closing of the 1999 Transactions, the nature of the
Company's business changed, as the Company focused on (i) pushing product
through the channel (such products consisting of products on hand and products
received subsequent to such closing as a result of existing commitments to
third-party manufacturers), (ii) collection of receivables, (iii) provision of
warranty and technical support, (iv) receipt of products from distributors and
VARs who have cancelled distribution agreements, and (v) the reduction in U.S.
operations and operations in countries outside of the U.S. and Denmark.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as percentages of the Company's net sales. The Company believes
that period to period comparisons of its financial results are not meaningful
and should not be relied upon as an indicator of future performance. In
particular, the Company's 1999 results of operations were heavily influenced by
the 1999 Transactions. Consequently, comparisons between 1998 and 1999 are not
meaningful. Prior year amounts have been reclassified to conform to the current
year presentation of the financial statements.
22
<PAGE> 23
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net sales ............................................. 100.0% 100.0% 100.0%
Cost of sales ......................................... 51.7 59.3 85.4
Special charges related to inventories ................ 0.0 1.5 47.3
-------- -------- --------
Gross profit ....................................... 48.3 39.2 (32.7)
Operating expenses:
Sales and marketing ................................ 22.6 31.3 59.2
Research and development ........................... 7.4 10.2 20.1
General and administrative ......................... 4.6 6.0 15.7
Restructuring charges .............................. 0.0 3.2 51.5
Acquisition-related expenses ....................... 17.2 0.0 0.0
-------- -------- --------
Total operating expenses ........................... 51.8 50.7 146.5
-------- -------- --------
Income (loss) from operations before interest
and income taxes .................................... (3.5) (11.5) (179.2)
Income from sales of activities .................... 0.0 0.0 71.8
Interest income, net ............................... 1.2 1.0 1.2
Foreign currency gains (losses) .................... (0.7) 0.2 1.0
-------- -------- --------
Income (loss) before income taxes ..................... (3.0) (10.3) (105.2)
Provision for income taxes ......................... 4.5 (0.2) 6.5
Income (loss) before minority interest
in income of consolidated subsidiary ................ (7.5) (10.1) (111.7)
-------- -------- --------
Minority interest in income of
consolidated subsidiary ............................ 0.1 (0.0) 0.9
-------- -------- --------
Net income (loss) ..................................... (7.6)% (10.1)% (112.6)%
======== ======== ========
</TABLE>
YEARS ENDED DECEMBER 31, 1998 AND 1999
Net sales. Net sales decreased from $227.6 million in 1998 to $71.3
million in 1999. Net sales in North and South America (the "Americas") decreased
from $106.0 million in 1998 to $13.3 million in 1999, while sales outside of the
Americas decreased from $121.6 million in 1998 to $58 million in 1999.
Digianswer sales amounted to $4.7 million during 1999. This dramatic decrease in
sales was primarily due to significant price competition in the Token-Ring
market, most evident in the Americas, the failure of the Company to derive
significant sales from its Fast Ethernet product portfolio, and the effect of
the 1999 Transactions, and in particular, the sale of the Company's Token-Ring
business to Madge effective August 31, 1999. Following the Madge transaction,
the Company's sales consisted primarily of Token-Ring products sold to Madge at
extremely low margins and Ethernet and ATM products that were not part of the
product lines purchased by Madge. Such products consisted of goods on hand in
the Company's warehouses, as well as goods that were in the process of being
manufactured pursuant to existing commitments. Subsequent to the closing of the
Madge transaction and the scaling down of Olicom's sales and marketing
organizations, the Company's sales efforts were directed toward pushing through
the channels, utilizing various incentives. The Company has created reserves
with respect to the financial impact associated with right of distributors to
return products.
Gross Profit. Gross profit decreased from $89.1 million in 1998 to a
negative gross profit of $23.3 million in 1999. Prior to the Company's sale of
its Token-Ring business to Madge, gross profit was being significantly and
adversely impacted by increased price competition in the Token-Ring market. In
connection with the closing of the 1999 Transactions, the Company incurred a
$33.7 million special charge, primarily related to write-offs of inventory. In
addition, commencing with the closing of the Madge transaction, the Company
began offering incentives designed to push Ethernet and ATM inventory
23
<PAGE> 24
through the channel. Such incentives generally resulted in decreased selling
prices, which in turn depressed margins.
Expenses. Total operating expenses decreased by $11.1 million from
$115.5 million in 1998 to $104.4 million in 1999. However, when adjusted for
restructuring charges of $7.3 million in 1998 and $36.7 million in 1999, there
would have been a net decrease in total operating expenses of $40.4 million in
1999 compared to 1998, on a pro forma basis. Restructuring charges of $36.7
million in 1999 related primarily to the 1999 Transactions, and were comprised
of write-downs of $6.4 million related to fixed assets and a write-off of $6.0
million in goodwill recorded in 1997 in connection with the acquisition of
CrossComm. Other significant restructuring charges in 1999 related to external
assistance and personnel related expenses.
Depreciation and Amortization. Total depreciation and amortization,
which are included in the respective expense items, decreased from $8.9 million
in 1998 to $3.9 million in 1999. This decrease was attributable in part to the
above mentioned restructuring charges relating to the 1999 Transactions. The
depreciation of capitalized software related to the Company's integrated
management information system.
Sales and Marketing. Sales and marketing expenses decreased from $71.3
million in 1998 to $42.2 million in 1999. This decrease was primarily a
consequence of the significant reduction in activities following the 1999
Transactions, whereby the Company's Token-Ring product line was acquired by
Madge, with the result that most of the Company's then-existing sales and
marketing activities were discontinued. The Company's current sales and
marketing activity is focused on pushing remaining inventory through the
channel.
Research and Development. Research and development expenses decreased
from $23.2 million in 1998 to $14.3 million in 1999. This decrease was primarily
a consequence of the significant reduction in activities following the 1999
Transactions, whereby Intel acquired the Company's development team, with the
result that all of the Company's then-existing research and development
activities were discontinued.
General and Administrative. General and administrative expenses
decreased from $13.7 million in 1998 to $11.2 million in 1999. This decrease was
primarily a consequence of the significant reduction in activities following the
1999 Transactions, which resulted in a significant reduction in general and
administrative staff. While the 1999 Transactions resulted in lower expense
levels in sales and marketing and in research and development, the Company's
remaining activities continue to require the attention of general and
administrative personnel.
Interest and Other Financial Income. Net interest and other financial
income decreased from $2.3 million in 1998 to $0.8 million in 1999. This
decrease was primarily a consequence of a reduction in cash and cash equivalents
in the first two quarters of 1999, compared with 1998.
Income From Sale of Activities. Income from sale of activities included
net proceeds from the 1999 Transactions, less fees to investment bankers and
other related expenses. Income related to the Madge transaction included an
amount, which is the net present value of a portion of the guaranteed minimum
payment. Only after the expiration of twelve quarters following the closing of
the Madge transaction will the Company be able to calculate the exact amount of
additional payments stipulated in the agreement with Madge. Other contingent
income relating to the 1999 Transactions has not been recorded as income in 1999
(see "The 1999 Transactions" above).
24
<PAGE> 25
Income Taxes. The Company's income tax increased from a tax benefit of
$531,000 for 1998 to an income tax of $4.7 million in 1999, primarily due to a
tax asset write-down in connection with Olicom, Inc.
YEARS ENDED DECEMBER 31, 1997 AND 1998
Net sales. Net sales decreased from $238.2 million in 1997 to $227.6
million in 1998. Net sales in the Americas decreased from $112.2 million in 1997
to $106 million in 1998, while sales outside of the Americas decreased from $126
million in 1997 to $121.6 million in 1998.
During 1998, the Company's revenues were favorably influenced by the
sales of Network Infrastructure Products, as to which net sales increased from
$49.2 million in 1997 to $64.9 million in 1998. This product group includes
Token-Ring and ATM switches and the product portfolio acquired from the former
CrossComm. In addition, the Company's revenues reflected 12 months operations of
the former CrossComm, while revenues during 1997 reflected only operations of
the former CrossComm subsequent to June 12, 1997. As a consequence, primarily
due to increased price competition with respect to Network Interface Cards,
revenue derived from such products decreased to $110.6 million, from $128.5
million in 1997, a decrease of 14%.
Total service revenue during 1998 was $8.5 million, an increase of 43%
compared with 1997. However, the expansion of the Company's professional service
relationship with VITAL Network Services during the fourth quarter of 1998
resulted in decreased service revenue during such quarter. It should be noted
that levels of service revenue during 1997 substantially related to revenue
during the last six months of such period, owing to the acquisition of the
former CrossComm in June 1997 (and, as a result, service revenues during 1998
reflected revenues during a longer period than in 1997).
Gross Profit. Gross profit decreased by 22.6%, from $115.0 million in
1997 to $89.1 million in 1998, and decreased as a percentage of net sales from
48.3% in 1997 to 39.2% in 1998. The decrease in gross margins was primarily due
to increased price competition for both the Network Interface Card and switch
markets, and the Company's inability during 1998 to sufficiently reduce
manufacturing costs in its product line to compensate for declines in selling
prices. In addition, during 1998 the Company incurred a $3.5 million special
charge, primarily related to write-offs of inventory of obsolete products.
Expenses. Total operating expenses decreased by $8.0 million during
1998; however, when adjusted for acquisition-related expenses in 1997 of $40.9
million and restructuring charges of $7.3 million in 1998, there would have been
a net increase in total operating expenses from $82.5 million in 1997 to $108.1
million in 1998, or an increase of $25.6 million (or 31%) during 1998 on a pro
rata basis compared to 1997. The main reason for this increase was that 1997 did
not reflect a full year of inclusion of CrossComm's operations in the Company's
results of operations (such operations were included subsequent to CrossComm's
acquisition in June 1997). The major increases in expenses during 1998 related
to employee costs as well as sales promotion.
Sales and Marketing. Sales and marketing expenses increased 32.6%, from
$53.8 million in 1997 to $71.3 million in 1998. The increase in 1998 was
primarily due to increased marketing activities in the United States, Europe and
the Far East.
25
<PAGE> 26
Research and Development. Research and development expenses increased
30.6%, from $17.7 million in 1997 to $23.2 million in 1998. The increase in
research and development expenses was in line with the strategic decision to be
a leading supplier of Token-Ring solutions and ATM and Ethernet switching.
General and Administrative. General and administrative expenses
increased 23.8%, from $11.0 million in 1997 to $13.7 million in 1998. The
increase was attributed to an increased average number of employees in 1998
compared to 1997, and to increased occupancy expense during 1998.
Restructuring Charges. The Company incurred restructuring charges
related to two separate corporate actions during 1998. The expansion of the
Company's professional service relationship with VITAL Network Services in
September 1998 resulted in the transfer or termination of approximately 50
employees in administrative functions. As a result thereof, the Company recorded
charges of $2.3 million related to staff reductions and fixed asset write-offs.
The second corporate action was the implementation, in November 1998,
of a new business strategy that resulted in a significant reduction in the
number of employees. As a consequence thereof, the Company recorded charges of
$6.6 million related to staff reductions and fixed asset write-offs.
Interest and Other Financial Income. Net interest and other financial
income decreased from $3.0 million in 1997 to $2.3 million in 1998. This
decrease was primarily a consequence of a reduction in cash and cash
equivalents.
Income Taxes. The Company's income tax decreased from $10.7 million
during 1997 to a tax benefit of $531,000 for 1998.
LIQUIDITY AND CAPITAL RESOURCES
Although the 1999 Transactions have contributed to an improvement in
Olicom's financial position, significant operational losses during 1999 and
substantial asset write-downs and other charges associated with the 1999
Transactions have resulted in a substantial decrease in shareholders' equity as
at December 31, 1999, compared with the same date in 1998.
During 1999, Olicom had a negative cash flow of $42.1 million from
operating activities and $48.9 million (net) in capital expenditures. The
Company's available cash totaled $28.3 million as of December 31, 1999, which
represented 58.4% of total assets.
The net cash used in operating activities of $42.1 million in 1999 was
due in significant part to the Company's net loss of $80.3 million and
depreciation, amortization and write-offs of $23 million.
Net cash used for investing activities during 1998 and 1999 was $(9.8)
million and $48.9 million, respectively, and consisted, prior to the 1999
Transactions, in large part of capital expenditures associated with the
expansion of sales and marketing, and research and development activities mainly
associated with the Company's Fast Ethernet strategy. At December 31, 1999, the
Company had no material commitments for capital expenditures.
To date, inflation has not had a material impact on the Company's
financial results.
26
<PAGE> 27
The Company presently intends to retain any earnings. If and when
dividends are paid, such payment will be made in Danish kroner.
RECENT DEVELOPMENTS
Since the closing of the 1999 Transactions, the Company's main focus
has been on the fulfillment of various product delivery and associated warranty
and service obligations, primarily through various agreements with Madge and
Intel, a warranty and support agreement with VITAL, and agreements and
arrangements with Olicom's other business partners and service providers.
In late 1999, Olicom relocated its international headquarters to a
smaller facility adjacent to its previous facilities. In addition, the Company
relocated its U.S. headquarters to a smaller facility, and is in the process of
winding down its U.S. operations and closing other U.S. and international
offices.
On January 10, 2000, Olicom's Board of Directors announced the
intention of the Company's executive management team, comprising Niels Christian
Furu, chief executive officer, and Lars Larsen, chief financial officer, to
resign following the announcement of Olicom's financial results for 1999. Mr.
Furu will remain with Olicom until the end of February 2000 and Mr. Larsen until
the end of April 2000. A new management team is expected to be appointed shortly
after the Annual General Meeting of Shareholders.
On January 31, 2000, the Company announced that it had received
notification from Nasdaq relating to the continued listing of the Common Shares
and the common stock purchase warrants on Nasdaq (see "Nature of Trading
Market").
On January 31, 2000, the Company announced the discontinuation of its
branded ATM, Fast Ethernet and Enterprise products. (see "Description of
Business -- Products").
YEAR 2000
The Company to date has experienced no significant adverse effects of
the Year 2000 problem. However, the Company can provide no assurance that claims
regarding the Year 2000 will not be raised in the future.
COMMON EUROPEAN CURRENCY
The Treaty on European Economic and Monetary Union provides for the
introduction of a single European currency, the "Euro", in substitution for the
national currencies of the member states of the EU that adopt the Euro. The Euro
became a reality on January 1, 1999, when irrevocable conversion rates were set
between the national currencies of the 11 member states of the EU that have
qualified to participate, and have elected to participate, in the Euro at this
time and when foreign exchange operations in the Euro commenced. Of the European
countries in which Olicom maintains a presence, the Netherlands, France, Germany
and Spain are among such 11 member states. Sweden did not qualify, and the
United Kingdom and Denmark elected not to participate in the Euro at this time.
Poland is not currently a member state of the EU. As the Company's operational
and financial activities have been
27
<PAGE> 28
significantly reduced, the Euro is not expected to impact the Company's results
of operations to a material extent.
BUSINESS ENVIRONMENT AND RISK FACTORS (AGAIN THIS ASSUMES AN ON GOING OPERATION)
The Company's future operating results may be affected by various
trends and factors, which the Company must successfully manage. In addition,
there are trends and factors that are beyond the Company's control that may
affect its operations.
Such trends and factors include, without limitation, the following:
conditions within the networking industry, and economic conditions generally;
rapid technological change, frequent product introductions, changes in customer
needs and evolving industry standards; fluctuations in the Company's revenues
and operating results from quarter to quarter, due to a variety of factors,
including, among others, the failure of the Company to timely and successfully
execute material aspects of its remaining activities and operational and
promotional decisions by Madge, as well as by distributors and value added
resellers, which could affect their supply of, or end-user demand for, the
Company's products or Token-Ring products on which future payments are based
(see "The 1999 Transactions"); the degree of success that Madge realizes from
the integration of the Company's Token-Ring product line with Madge's
operations; any claims for indemnification that may be made by Madge, Intel or
Motorola with respect to warranties, representations or covenants made by the
Company in connection with the 1999 Transactions; the absence, in general, of
any continuing obligations on the part of distributors to purchase products from
the Company; unexpected changes in regulatory requirements, tariffs and other
trade barriers, longer accounts receivable payment cycles and other risks
associated with international operations and with the discontinuation of various
of the Company's products; the ability or inability of the Company to hedge
against foreign currency, exchange rates and fluctuations in such rates; and a
change in the value of the U.S. dollar (the Company's functional currency)
relative to other currencies.
In light of the foregoing factors, as well as other factors affecting
the Company's operating results, past trends should not be used by investors or
others to anticipate future trends, and prior operating performance may not be
an accurate indicator of future performance.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
As the Company conducts its business world-wide, the Company's sales
may be affected by changes in demand resulting from fluctuations in currency
exchange rates, as well as by governmental controls and other risks associated
with international sales (such as export licenses, political instability, trade
restrictions and changes in tariff and freight rates). The Company generates
revenues primarily in U.S. dollars (including revenues generated from the
agreements with Intel, Madge and Motorola), and incurs expenses in a number of
currencies, principally in U.S. dollars and Danish kroner. Although the Company
seeks to manage its foreign currency exposures by matching non-dollar revenues
and expenses and by entering into hedging transactions, there can be no
assurance that exchange rate fluctuations will not have a material adverse
effect on the Company's business, financial condition or results of operations.
See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Common European Currency".
28
<PAGE> 29
At December 31, 1999, the effect of a hypothetical uniform 10%
strengthening in the value of the U.S. dollar relative to the Danish kroner
would result in an increase in operating income of approximately $600,000 for
the year ended December 31, 2000. Comparatively, at December 31, 1998, the
effect of a hypothetical uniform 10% strengthening in the value of the U.S.
dollar relative to the Danish kroner would have resulted in an increase in
operating income of approximately $3.8 million for the year-ended December 31,
1999. In addition to the direct effects of changes in exchange rates, which are
a changed dollar value of the resulting expenses, changes in exchange rates also
might affect the volume of sales outside the U.S. The Company's sensitivity
analysis of the effects of changes in foreign currency exchange rates does not
factor in a potential change in sales levels.
ITEM 10. OFFICERS AND DIRECTORS OF THE REGISTRANT.
As of February 24, 2000, the members of the Company's Board of
Directors, the executive officers of the Company, and other key employees are as
shown below.
On January 10, 2000, Olicom's Board of Directors announced the
intention of the Company's executive management team, comprising Niels Christian
Furu, chief executive officer, and Lars Larsen, chief financial officer, to
resign following the announcement of Olicom's financial results for 1999. Mr.
Furu will remain with Olicom until the end of February 2000 and Mr. Larsen until
the end of April 2000. The timing of the resignations has been agreed in
accordance with the Company's reorganization. Olicom's Board of Directors is
considering the composition of the future management team.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Jan Bech........................... 60 Chairman of the Board of Directors
Bo F. Vilstrup..................... 57 Deputy Chairman of the Board of Directors
Frank G. Petersen.................. 66 Member of the Board of Directors
Michael J. Peytz................... 43 Member of the Board of Directors
Anders Knutsen..................... 52 Member of the Board of Directors
Soren Bjerre-Nielsen............... 47 Member of the Board of Directors
Niels Christian Furu............... 43 President and Chief Executive Officer
Lars Larsen........................ 35 Executive Vice President and Chief Financial Officer
Edward P. Simmonds................. 44 President and Chief Executive Officer of Olicom, Inc.
Jorgen Hog......................... 52 Vice President of Network Product Marketing
Mette R.L. Fogt.................... 36 Director of Legal Affairs
</TABLE>
Mr. Bech has been Chairman of the Company's Board of Directors since
1985. He serves as Chairman of the Board and Managing Director of ARCO-TECH
Ltd., a company engaged in the business of consulting in strategic marketing.
Mr. Bech previously served as a Vice President of Ing. C. Olivetti & C., S.p.A.,
with responsibility for its commercial activities in Scandinavia (from 1985 to
1992).
Mr. Vilstrup has been a member of the Board of Directors since 1992 and
Deputy Chairman of the Board since 1994. He is an attorney and was a partner in
the law firm of Lett, Vilstrup & Partnere, Copenhagen, Denmark (from 1972 to
1999).
29
<PAGE> 30
Mr. Petersen has been a director of the Company since 1996. He was
employed by IBM from 1957 until his retirement in 1994. At the time of his
retirement, he served as Chairman and President of IBM Nordic AB, with
responsibility for IBM's commercial activities in Scandinavia.
Mr. Peytz has been a director of the Company since 1996. He has served
as Managing Director and Chief Executive Officer of EuroCom Industries A/S since
1997. Mr. Peytz previously served as Division Director for Alcatel Kirk A/S,
with responsibility for Alcatel's space electronics business in Denmark (from
1994 to 1997). He previously was a management consultant with McKinsey & Company
(from 1985 to 1994).
Mr. Knutsen has been a director of the Company since 1997. He has
served as Managing Director and Chief Executive Officer of Bang & Olufsen A/S, a
company that develops and markets audio and visual products (since 1991).
Mr. Bjerre-Nielsen has been a director of the Company since 1998. He
has served as Vice Executive Officer and Chief Financial Officer of Danisco A/S,
a food ingredients conglomerate (since 1995). Prior thereto, he was a
state-authorized Public Accountant, being a partner at Deloitte & Touche (from
1982 to 1995) and managing partner (from 1986 to 1995).
Mr. Furu was appointed as President and Chief Executive Officer in
1998. He joined the Company in 1997 as Executive Vice President and Chief
Operating Officer. Prior to joining the Company, Mr. Furu served as Vice
President of IBM Denmark A/S and Director of Nordic PC Sales (from 1995 to
1997). Prior thereto, he served as Director of Sales for Finance and
Telecommunications for IBM Denmark A/S (from 1993 to 1995) and as Assistant to
the General Manager of Marketing, IBM Europe (from 1991 to 1993).
Mr. Larsen has been employed by the Company since February 1999 as
Executive Vice President and Chief Financial Officer. Prior to joining the
Company, Mr. Larsen was Director of Health Care, Finance and Information
Technology (and prior thereto, Director of Corporate Planning & Economy) at Novo
Nordisk A/S, a Danish pharmaceuticals manufacturer (from 1995 to 1999). Prior
thereto, he was Group Controller at Baltica Holding A/S (from 1991 to 1995).
Mr. Simmonds has been employed by the Company since 1998 and became
President and Chief Executive Officer of Olicom, Inc. in October 1999, after
having served as Director of Finance and Administration. Prior to joining the
Company, Mr. Simmonds was Vice President and Chief Financial Officer of Beckett
Corporation, a Dallas-based manufacturing company.
Mr. Hog has been employed by the Company since 1994, having served as
its Director of Business Development. In 1996, Mr. Hog became Vice President of
Strategic Marketing. Prior to joining the Company, Mr. Hog was the President of
CR Systems A/S, a Danish data communications company.
Ms. Fogt has served as Director of Legal Affairs since 1997. Prior to
joining the Company, Ms. Fogt served as Secretary to the Management at Jacob
Holm & Sons A/S, a Danish manufacturer of fiber products, primarily for the
hygiene industry (from 1995 to 1997). Prior thereto, Ms. Fogt was an attorney at
the law firm Kromann & Munter (from 1988 to 1995).
30
<PAGE> 31
Except for Mr. Simmonds, all directors and members of corporate
management are Danish citizens. There are no family relationships among
directors and executive officers of the Company or its subsidiaries.
The Company's Articles of Association provide for a Board of Directors
of four to eight members, to be elected by the shareholders to serve one-year
terms. In addition, directors may be elected for four-year terms by the
Company's employees, in accordance with Danish law. The statutory rights of the
Company employees to elect directors have not been exercised to date. Officers
of the Company serve at the discretion of the Board of Directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS
The Company has entered into Indemnification Agreements with its
directors, executive officers and key employees. Each such Indemnification
Agreement provides for indemnification of the Company's directors, executive
officers and key employees to the fullest extent permitted by the Companies Act
of the Kingdom of Denmark (the "Companies Act"). Additionally, Olicom, Inc., has
entered into Indemnification Agreements with its directors, executive officers
and key employees. Each such Indemnification Agreement provides for
indemnification of the directors, executive officers and key employees of
Olicom, Inc., to the fullest extent permitted by the Delaware General
Corporation Law. Further, such Indemnification Agreements permit advancing
attorney's fees and all other costs, expenses, obligations, fines and losses
paid or incurred by a director, executive officer or key employee generally in
connection with the investigation, defense or other participation in any
threatened, pending or completed action, suit or proceeding or any inquiry or
investigation thereof, whether conducted by or on behalf of the Company or any
other party. If it is later determined that the director, executive officer or
key employee is or was not entitled to indemnification under applicable law, the
Company will be entitled to reimbursement by the director, executive officer or
key employee.
The Indemnification Agreements further provide that in the event of a
change in control of the Company or Olicom, Inc., with respect to all matters
thereafter arising concerning the rights of directors, executive officers and
key employees to indemnity payments and expense advances, all determinations
regarding claims will be made only by a court of competent jurisdiction or by
special independent legal counsel selected by the director, executive officer or
key employee and approved by the Company or Olicom, Inc., as appropriate.
To the extent that the Board of Directors of the Company or Olicom,
Inc., or their respective shareholders may in the future wish to limit or repeal
the ability of the Company or Olicom, Inc., to indemnify directors, executive
officers and key employees, such repeal or limitation may not be effective as to
directors, executive officers and key employees who are parties to such
Indemnification Agreements, because their rights to full protection will be
contractually assured by the Indemnification Agreements. It is anticipated that
similar contracts may be entered into, from time to time, with future directors,
executive officers and key employees of the Company and Olicom, Inc.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
An aggregate of approximately $1,056,000 was paid by the Company to its
directors and executive officers as a group (9 persons) for services rendered
during fiscal year 1999 in all capacities, and
31
<PAGE> 32
approximately $841,000 was paid by the Company during fiscal year 1999 to its
senior management, consisting of the Company's President and Chief Executive
Officer, its Chief Financial Officer and its former Chief Technology Officer,
registered with the Commercial and Companies Agency of the Kingdom of Denmark.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
At February 24, 2000, the Company had outstanding options to its
employees and directors, and employees and directors of Olicom, Inc., to
purchase an aggregate of 449,950 Common Shares (the foregoing includes options
assumed by the Company in connection with the acquisition of CrossComm). The
exercise price for such options ranges from $3.925 to $30.25. Such options
terminate on various dates through February 28, 2007.
At February 24, 2000, options to purchase an aggregate of 246,000
Common Shares were held by directors and executive officers of the Company.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
See "Officers and Directors of the Registrant -- Limitation of
Liability and Indemnification Agreements."
The Company's policy is to require that all transactions between the
Company and its officers, directors and other affiliates be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties,
and that all such transactions be approved by a majority of the disinterested
members of the Company's Board of Directors.
32
<PAGE> 33
PART II
Not applicable.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS.
The Company has responded to Item 18 in lieu of responding to this
Item.
33
<PAGE> 34
ITEM 18. FINANCIAL STATEMENTS.
Report of Independent Auditors
The Board of Directors and Shareholders,
Olicom A/S
We have audited the accompanying consolidated balance sheets of Olicom A/S and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of income, comprehensive income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Olicom A/S and
subsidiaries at December 31, 1998 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred recurring
operating losses and has a negative cash flow from operations. As described in
Note 1, substantially all of the Company's operations have been discontinued,
and management is considering alternative strategies for the Company. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of the
Company's future strategy.
/s/ Ernst & Young
Ernst & Young
Statsautoriseret Revisionsaktieselskab
Copenhagen, February 24, 2000
34
<PAGE> 35
Olicom A/S
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1999
------------ ------------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,494 $ 28,327
Restricted cash 0 8,844
Accounts receivable, less allowance of
$2,577 in 1998 and $10,477 in 1999 44,837 4,157
Inventories:
Finished goods 30,633 2,837
Raw materials 8,875 1,499
------------ ------------
39,508 4,336
Deferred income taxes (Note 4) 4,335 0
Prepaid expenses and other current assets 10,262 2,244
------------ ------------
Total current assets 121,436 47,908
Investments in affiliated companies 958 0
Property and equipment:
Leasehold improvements 4,385 694
Equipment 34,826 9,755
------------ ------------
39,211 10,449
Accumulated depreciation (19,761) (9,889)
------------ ------------
19,450 560
Goodwill, net of accumulated amortization
and write-down of $3,641 in 1998 and
$9,684 in 1999 7,169 0
------------ ------------
Total assets $ 149,013 $ 48,468
============ ============
</TABLE>
See accompanying notes
35
<PAGE> 36
Olicom A/S
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1999
------------ ------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,664 $ 11,014
Accrued payroll and related expenses 6,438 801
Accrued product warranty expense 1,123 377
Deferred revenue 611 62
Accrued restructuring costs 4,935 8,680
Other accrued expenses 7,416 4,999
Notes payable, current 0 97
------------ ------------
Total current liabilities 45,187 26,030
Minority interests 803 0
Shareholders' equity:
Common shares, DKK 0.25 nominal value
Authorized and issued - 18,594 in 1998 and 18,566 in 1999 715 715
Additional paid-in capital 104,364 103,732
Retained earnings 15,789 (64,518)
Treasury stock - 731 in 1998 and 702 in 1999 (17,462) (17,104)
Unearned compensation (383) 0
Other comprehensive income 0 (387)
------------ ------------
Total shareholders' equity 103,023 22,438
------------ ------------
Total liabilities and shareholders' equity $ 149,013 $ 48,468
============ ============
</TABLE>
See accompanying notes
36
<PAGE> 37
Olicom A/S
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1998 1999
---------- ---------- ----------
(In thousands
except per share amounts)
<S> <C> <C> <C>
Net sales $ 238,229 $ 227,602 $ 71,291
Cost of sales 123,195 134,990 60,874
Special charges related to inventories (Note 5) 0 3,463 33,737
---------- ---------- ----------
Gross profit 115,034 89,149 (23,320)
---------- ---------- ----------
Operating expenses:
Sales and marketing 53,754 71,300 42,216
Research and development 17,748 23,174 14,298
General and administrative 11,032 13,657 11,218
Restructuring charges (Note 5) 0 7,327 36,695
Acquisition-related expenses 40,917 0 0
---------- ---------- ----------
Total operating expenses 123,451 115,458 104,427
---------- ---------- ----------
Income (loss) from operations before interest
and income taxes (8,417) (26,309) (127,747)
Income from sale of activities 0 0 51,205
Interest and other financial income 3,663 2,978 1,221
Interest and other financial expense (697) (676) (392)
Foreign currency gains (losses) (1,736) 481 722
---------- ---------- ----------
Income (loss) before income taxes (7,187) (23,526) (74,991)
Income taxes (Note 4) 10,689 (531) 4,656
---------- ---------- ----------
Income (loss) before minority interest in income
of consolidated subsidiary (17,876) (22,995) (79,647)
Minority interest in income of consolidated subsidiary 245 (56) 660
---------- ---------- ----------
Net income (loss) $ (18,121) $ (22,939) $ (80,307)
========== ========== ==========
Earnings (loss) per share:
Earnings (loss) per share, basic and diluted $ (1.15) $ (1.28) $ (4.50)
========== ========== ==========
Weighted average shares outstanding 15,821 17,894 17,864
========== ========== ==========
</TABLE>
See accompanying notes
37
<PAGE> 38
Olicom A/S
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1998 1999
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Net income (loss) $ (18,121) $ (22,939) $ (80,307)
Other comprehensive income (loss), net of tax:
Currency translation adjustments 0 0 (387)
Unrealized holding gains (losses) arising during period 660 30 0
Less: reclassification adjustment for gains included in
net income (121) (98) (0)
------------ ------------ ------------
Comprehensive net income (loss) $ (17,582) $ (23,007) $ (80,694)
============ ============ ============
</TABLE>
38
<PAGE> 39
Olicom A/S
Consolidated Statements of
Shareholders' Equity
<TABLE>
<CAPTION>
Other
Additional compre-
Common paid-in Retained Treasury Unearned hensive
stock capital earnings stock compensation income Total
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DEC. 31, 1996 $ 614 $ 52,348 $ 56,849 $ (11,831) $ 0 $ (471) $ 97,509
Net (loss) for 1997 (18,121) (18,121)
Issuance of 2,537 common stock to
acquire CrossComm 97 38,691 38,788
Issuance of 1,023 warrants to
acquire CrossComm 3,806 3,806
Exchange of vested CrossComm
options for Olicom options 3,834 3,834
Exchange of unvested CrossComm
options for Olicom options 1,859 (1,859) 0
Purchase of treasury stock -
630 common stock (15,716) (15,716)
320 common stock sold through offering
at the Copenhagen Stock Exchange 5,295 3,030 8,325
Options exercised -
626 common stock (3,326) 9,529 6,203
Warrants exercised -
20 common stock 1 126 127
Change in unrealized gains (losses) 539 539
Amortization of unearned compensation 265 265
----------------------------------------------------------------------------------------
BALANCE AT DEC. 31, 1997 $ 712 $102,633 $ 38,728 $ (14,988) $ (1,594) $ 68 $125,559
Net (loss) for 1998 (22,939) (22,939)
Purchase of treasury stock -
400 common stock (10,358) (10,358)
Options exercised -
609 common stock (12) 7,884 7,872
Warrants exercised -
99 common stock 3 1,950 1,953
Change in unrealized gains (losses) (68) (68)
Amortization of unearned compensation (207) 1,211 1,004
----------------------------------------------------------------------------------------
BALANCE AT DEC. 31, 1998 $ 715 $104,364 $ 15,789 $ (17,462) $ (383) $ 0 $103,023
Cancellation of treasury shares etc. (358) 358 0
Currency translation adjustments (387) (387)
Net (loss) for 1999 (80,307) (80,307)
Amortization of unearned compensation (274) 383 109
----------------------------------------------------------------------------------------
BALANCE AT DEC. 31, 1999 $ 715 $103,732 $ (64,518) $ (17,104) $ 0 $ (387) $ 22,438
----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
39
<PAGE> 40
Olicom A/S
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1998 1999
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ (18,121) $ (22,939) $ (80,307)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and write-off of fixed assets 4,954 6,937 15,960
Amortization and write-off of goodwill 1,262 1,963 7,034
Non cash compensation 265 1,004 109
Gain on sale of investment (121) (98) (24,318)
Gain on sale of activities 0 0 (26,887)
Deferred income taxes (980) (2.410) 4,335
Minority interest in earnings 245 (56) 660
Share of net income (loss) of affiliates (206) (225) (198)
Acquisition-related expenses 40,917 0 0
Changes in operating assets and liabilities:
Accounts receivable (15,716) 13,130 35,865
Inventories (98) (13,845) 32,616
Prepaid expenses and other current assets (2,198) (5,925) 6,241
Accounts payable (4,757) 5,849 (9,858)
Accrued payroll and related expenses 241 2,346 (5,250)
Accrued product warranty expense (886) 5 (746)
Deferred revenue (638) (2,331) (549)
Accrued restructuring costs 0 4,935 3,745
Other accrued liabilities 8,180 (1,099) (637)
Income taxes payable (371) (363) 113
---------- ---------- ----------
Net cash provided by/(used in) operating activities 11,972 (13,122) (42,072)
INVESTING ACTIVITIES
Capital expenditures (8,132) (12,681) (2,108)
Proceeds from sale of property and equipment 136 1,979 5,038
Proceeds from sale of investments 42,089 945 28,521
Proceeds from sale of activities 0 0 26,823
Restricted cash 0 0 (8,844)
Business acquisitions - net of cash acquired
and other investments (40,161) 0 (483)
---------- ---------- ----------
Net cash used in investing activities (6,068) (9,757) 48,947
</TABLE>
See accompanying notes
40
<PAGE> 41
Olicom A/S
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1998 1999
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Change in notes payable, current $ 0 $ 0 $ 97
Proceeds from sale of treasury stock -
Copenhagen Stock Exchange 8,325 0 0
Proceeds from options and warrants exercised 6,330 9,825 0
Purchase of treasury stock (15,716) (10,358) 0
---------- ---------- ----------
Net cash used in financing activities (1,061) (533) 97
Effects of exchange rates on cash (915) 315 (1,139)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 3,928 (23,097) 5,833
Cash and cash equivalents at beginning of year 41,663 45,591 22,494
---------- ---------- ----------
Cash and cash equivalents at end of year $ 45,591 $ 22,494 $ 28,327
========== ========== ==========
Interest paid during the year $ 58 $ 50 $ 153
========== ========== ==========
Income taxes paid during the year $ 10,645 $ 6,566 $ 2,426
========== ========== ==========
</TABLE>
See accompanying notes
41
<PAGE> 42
Olicom A/S
Notes to Consolidated Financial Statements
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company was a world-wide vendor of Asynchronous Transfer Mode,
Token Ring, Ethernet and multi-protocol routing products used in local area and
wide area networks. During 1999 the Company sold its Token Ring Business to
Madge Networks in August, and its development group and certain intellectual
properties to Intel in October. These transactions affected the valuation of the
inventory significantly as the value of the Token Ring inventory reflects the
purchase commitment included in the agreement with Madge Networks. The rest of
the inventory has been revalued to reflect the end of life decision of the
remainder of the Company's products as announced in January 20, 2000.
The disposal and discontinuation of most of the business at Olicom has
also affected the carrying value of fixed assets which has been reduced to
reflect the reduction in the scope of future business for Olicom. As of
beginning 2000 the expected useful lifetime of the remaining fixed assets has
been set to the end of 2000.
The prior year amounts have been reclassified to conform to the current
year presentation of the financial statements.
Prior year's financial statement presentation to disclose the sale of
the Company's 75% investment in Lasat A/S ("Lasat") as a discontinued operation
has been changed. The balance sheet, the statements of income and cash flows of
Lasat have now been consolidated through to the date of disposal.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities, in the normal course of business. As shown in the financial
statements during the years ended December 31, 1997, 1998 and 1999, the Company
incurred losses of $18 million, $23 million and $80 million, respectively.
Despite the losses, management is of the opinion that preparation of
the financial statements on a going concern basis is appropriate, because the
Company has sufficient future revenue and funds available to satisfy the
Company's liabilities as and when they fall due, and is considering alternative
strategies for the Company.
REPORTING CURRENCY
Although the Company and its subsidiaries maintain their books and
records in local currencies, as required by law, the Consolidated Financial
Statements have been prepared in U.S. dollars because the U.S. dollar is the
currency of the primary economic environment in which the Company and its
subsidiaries conduct their operations.
The majority of the Company's sales are billed and collected in U.S.
dollars, and the majority of the Company's purchases of raw materials and
finished goods inventories are invoiced and paid in U.S. dollars.
42
<PAGE> 43
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Olicom
A/S and its majority-owned subsidiaries (the Company). The Company's investments
in 20-50% owned companies are accounted for by the equity method of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, which affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company's inventories and capitalized technologies consist
primarily of items which are susceptible to technological obsolescence, a fact
which has been considered in determining asset valuation reserves as of December
31, 1999. However, in the event of certain circumstances, such as the emergence
of otherwise unforeseen new technologies and significant changes in anticipated
market requirements and conditions, additional reserves related to assets held
as of December 31, 1999 could be required in the future.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term deposits with
maturities of less than three months at the time of purchase.
INVENTORIES
Inventories are stated as the lower of cost or market with cost
determined on the basis of the first in, first out method. Raw materials
inventories are sold at the Company's cost to subcontractors who assemble
products to the Company's specifications. Finished goods inventories include
completed products purchased from subcontractors. Finished goods to be sold to
Madge Networks have been written down to net realizable value.
LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are carried at cost. Depreciation
is charged on a straight-line basis to costs and expenses over the expected
useful lives of the assets. Equipment is depreciated over the expected useful
life ending December 31, 2000. Leasehold improvements are amortized over the
shorter of their estimated lives or non-cancelable term of the lease.
GOODWILL
Cost in excess of net assets of businesses acquired (goodwill)
represents the unamortized excess of the cost of acquiring a business over the
fair value of the assets acquired at the date of acquisition. Amortization is
computed by the straight-line method over the estimated life of the benefit
received, which is five to seven years.
The Company applies the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed of", in evaluating its fixed and intangible assets.
ACCOUNTS RECEIVABLE
Accounts receivable are stated at nominal value less allowance for
losses on doubtful debtors, returned products in process and price-protection.
The allowance is based on an individual evaluation of each debtor. Should the
debtor end up with a negative balance (e.g., a liability) it is reclassified to
Accounts Payable.
43
<PAGE> 44
REVENUE RECOGNITION
Revenue is recognized when products are shipped. Service revenues are
deferred and recognized ratably over the contractual periods. Certain sales have
been made allowing a right of return and price protection, for which the Company
has made a provision.
ACCRUED PRODUCT WARRANTY EXPENSE
The Company provides for the estimated cost of warranty at the time of
product shipment.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs, including costs of developing software
products, are expensed as incurred. Application of Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed," has not had any material effect on the
Company's consolidated financial position or results of operations.
INCOME FROM SALE OF ACTIVITIES
Income from the sale of activities of the Company has been recognized
as an income reduced by expenses related to the transactions.
FOREIGN CURRENCY TRANSLATION
Gains and losses resulting from non-U.S. dollar transactions, and the
remeasurement of foreign currency balances and accounts denominated in
currencies other than the U.S. dollar, are included in the determination of net
income in the period in which they occur, in accordance with the requirements of
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation".
Gains and losses resulting from translation of the Company's equity
investments into U.S. dollars are included in other comprehensive income.
INCOME TAXES
The Company accounts for income taxes by the liability method, as
required by Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes".
ADVERTISING
Costs associated with advertising the Company's products and services
are expensed as incurred. Advertising costs for the years ended December 31,
1997, 1998 and 1999 approximated $1,485,000, $2,553,000 and $1,545,000,
respectively.
DERIVATIVES AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
Statement requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivatives are either offset against
the change in fair value of assets, liabilities or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective proportion of a derivative's change in
fair value will be immediately recognized in earnings. The adoption of Statement
No. 133 on January 1,1999 had no effect on the net income or other comprehensive
income.
44
<PAGE> 45
2. BUSINESS COMBINATIONS
In June 1997, the Company consummated its acquisition of CrossComm
Corporation, a provider of ATM and multi-protocol router technology for
mission-critical SNA/Token-Ring environments. The consideration, which was a
combination of $47.6 million in cash, 2,537,423 Common Shares and 1,022,771
three-year warrants to purchase Common Shares, totalled approximately $96.0
million.
The acquisition was accounted for as a purchase. Accordingly, the
results of operations of the acquired business and the fair market values of the
acquired assets and assumed liabilities were included in the Company's financial
statements as of the effective date. This accounting treatment resulted in
approximately $9.7 million of intangible assets that will be amortized over
their estimated period of benefit. Approximately $40.9 million of the
acquisition cost represented purchased in process research and development,
which was determined through known valuation techniques in the high-technology
communications industry and was immediately expensed in the period of
acquisition because technological feasibility had not been established and no
alternative commercial use had been identified.
The following summary, prepared on a pro forma basis, combines the
results of operations as if CrossComm had been acquired as of the beginning of
the periods presented. The summary includes the impact of certain adjustments
such as goodwill amortization and estimated changes in interest income because
of cash outlays associated with the transaction and the related income tax
effect:
The summary only includes 1997 as the impact on 1998 has already been
accounted for.
<TABLE>
<CAPTION>
DECEMBER 31,
1997
----
(In thousands,
except per share amounts)
(Unaudited)
<S> <C>
Net sales $ 283,025
Net income (loss) 18,832
Basic earnings (loss) per share 1.11
Diluted earnings (loss) per share 1.06
</TABLE>
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for all periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might or might not be achieved
from the combined operations.
In April 1999, the Company exercised a call option to acquire an
additional 31.9% interest in Digianswer A/S in which the Company already held a
35% interest. The acquisition was accounted for as a purchase at a cash
consideration of $2.3 million. The Company recorded goodwill of $1.6 million on
the acquisition. On October 26, 1999, the Company sold its 66.9% interest in
Digianswer A/S. The operations of Digianswer A/S were consolidated in the period
May 1 to October 30, 1999.
3. WARRANTS
In connection with the acquisition of CrossComm Corporation, the
Company's shareholders approved the issuance of three-year warrants, each whole
warrant being the right to acquire a Common Share at a
45
<PAGE> 46
price of $19.74 per each full Common Share. The holders of the remaining 922,388
outstanding warrants as of December 31, 1999, may exercise a warrant, at a price
of $19.74 per share, no later than June 12, 2000. In the event that all or any
part of the warrants are not exercised by June 12, 2000, then such warrants will
expire. The warrants are listed on the Nasdaq National Market (OLCWF).
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of December
31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
(In thousands)
<S> <C> <C>
Deferred tax liabilities
Tax over book depreciation $ 1,373 $ 0
Other 343 532
---------- ----------
1,716 532
---------- ----------
Deferred tax assets
Book over tax depreciation 2,314 2,271
Allowance for uncollectible receivables 316 3,071
Inventory valuations 4,467 10,927
Net operating losses carried forward (NOL) 12,936 23,227
Tax credit carryforwards 1,710 1,710
Other accruals 2,546 6,501
---------- ----------
Deferred tax assets, gross 24,289 47,707
---------- ----------
Net deferred tax liabilities (assets) before
valuation allowance $ (22,573) $ (47,175)
Valuation allowance $ 18,238 $ 47,175
---------- ----------
Net deferred tax liabilities (assets) $ (4,335) $ 0
========== ==========
</TABLE>
As of December 31, 1999, the Company had approximately $56.8 million of
federal net operating loss carryover. Of this amount approximately $25 million
is subject to limitation under Section 382 of the Internal Revenue Code. In
addition, the Company has approximately $31.4 million of U.S. state net
operating loss carryover at December 31, 1999.
The Company had approximately $1.2 million of U.S. research and
development credit carryover at December 31, 1999 subject to limitation under
Section 383 of the U.S. Internal Revenue Code.
In addition, at December 31, 1999, the Company had approximately $7.3
million of Danish net operating loss carryover, which expires in 2003.
The Company's valuation allowance is approximately $47.2 million
because it is more likely than not that the Company's net deferred tax assets
will not be realized.
46
<PAGE> 47
For financial reporting purposes, income before income taxes includes
the following components:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Pretax income:
Denmark $ (31,813) $ (23,242) $ (42,125)
United States 24,626 (284) (32,866)
---------- ---------- ----------
$ (7,187) $ (23,526) $ (74,991)
========== ========== ==========
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Current:
Denmark $ 1,090 $ 2,769 $ 90
United States 10,579 (1,115) 205
---------- ---------- ----------
11,669 1,654 295
---------- ---------- ----------
Deferred:
Denmark 1,312 (2,185) 0
United States (2,292) 0 4,361
---------- ---------- ----------
(980) (2,185) 4,361
---------- ---------- ----------
$ 10,689 $ (531) $ 4,656
========== ========== ==========
</TABLE>
The reconciliation of income tax computed at the Danish statutory tax rates to
income tax expense is:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
(In thousands)
% % %
<S> <C> <C> <C> <C> <C> <C>
Danish tax $ (2,444) (34) $ (7,999) (34) $(24,208) (32)
Goodwill amortization 411 6 2,003 9 284 0
Valuation allowance
on increase in deferred tax 0 0 3,337 15 28,937 39
Hereof expensed 0 0 0 0 (4,335) (5)
Acquisition-related expenses 12,827 179 0 0 0 0
Use of NOL's 0 0 0 0 1,840 1
Benefit of foreign tax relief (112) (2) 0 0 379 0
United States taxes net of credits 0 0 (304) (1) 513 1
Adjustments prior years 0 0 2,496 11 1,152 2
Other net 7 0 (64) 0 94 0
-------- -------- -------- -------- -------- --------
$ 10,689 149 $ (531) 0 $ 4,656 6
======== ======== ======== ======== ======== ========
</TABLE>
47
<PAGE> 48
Undistributed earnings of the Company's United States subsidiaries
amounted to $41.5 million in 1999. Those earnings are considered to be
indefinitely reinvested. Upon distribution of those earnings in the form of
dividends, the amount thereof would be subject only to withholding tax at a rate
of 5% in accordance with the provisions of the Denmark/United States double tax
treaty.
5. SPECIAL CHARGES AND RESTRUCTURING CHARGES
On September 9, 1998, the Company announced plans to discontinue its
U.S. based Research and Development activities and to consolidate all such
activities in Denmark and Poland. Also, the Company expanded its professional
service relationship with Vital Network Services. Vital has according to the
agreement assumed responsibility for certain of the Company's professional
services. As part of the agreement Vital purchased the resources and assets of
Olicom's North American professional service operations. The actions were part
of a global consolidation, which resulted in the release of approximately 50
employees in Administrative functions, Marketing, Research & Development and
Operations. As a consequence of these actions the Company has recorded special
charges of approximately $1 million, related to inventory write-offs, and
restructuring charges of $2.3 million, primarily related to staff reductions and
fixed asset write-offs.
On November 30, 1998, the Company announced its strategy for 1999 and
forward. This included a major corporate restructuring in the fourth quarter of
1998. The restructuring included a staff reduction of approximately 20 percent,
the closing of some offices and discontinuation of certain of products. The
Company recorded special charges of $2.5 million in connection with the
restructuring, related primarily to discontinued product write-offs.
Furthermore, restructuring charges of $5 million were recorded, primarily
related to the staff reduction and fixed asset write-offs.
The total restructuring charges and special charges are specified as
follows:
<TABLE>
<CAPTION>
Accrued
Total expenses Dec. 31, 1998
-------------- --------------
(In thousands)
<S> <C> <C>
Employee expenses $ 3,939 $ 1,207
Other expenses 3,388 2,727
-------------- --------------
Restructuring charges 7,327 3,934
Special charges related to inventories 3,463 1,001
-------------- --------------
$ 10,790 $ 4,935
============== ==============
</TABLE>
All amounts accrued at December 31, 1998, have been paid during 1999.
As a consequence of the sale of the Company's main activities, Olicom
has had very large restructuring charges and special charges in 1999. The
restructuring charges amounted to $36.7 million, while special charges totalled
$33.7 million.
The restructuring charges related to employee expenses of $7.1 million,
mainly salaries and bonus, while $29.6 million related to other expenses, such
as write-downs on fixed assets, write-down on the goodwill in CrossComm,
extraordinary write-down for bad debts, external assistance and facilities.
48
<PAGE> 49
In 1999 the accruals amounted to $8.7 million regarding restructuring
charges and $31.7 million regarding special charges related to inventories.
The total restructuring charges and special charges are specified as
follows:
<TABLE>
<CAPTION>
Accrued
Total expenses Dec. 31, 1999
-------------- --------------
(In thousands)
<S> <C> <C>
Employee expenses $ 7,091 $ 3,091
Other expenses 29,604 5,589
-------------- --------------
Restructuring charges 36,695 8,680
Special charges related to inventories 33,737 31,676
-------------- --------------
$ 70,432 $ 40,356
============== ==============
</TABLE>
Employees terminated during 1999 in connection with the reorganization
were distributed as follows:
<TABLE>
<S> <C>
Operations 47
Sales and marketing 162
Research and development 194
General and administrative 48
-----
Total number of employees terminated 451
=====
</TABLE>
The figures include the employees transferred to Madge or Intel, which
amount to approximately 241 employees.
6. EMPLOYEE STOCK OPTION PLANS
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation", requires use of
option valuation models that were not developed for use in valuing employee
stock options and warrants. Under APB 25, because the exercise price of the
Company's employee stock options equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
1994, 1996 AND 1997 SHARE INCENTIVE PLANS
The Company's 1994, 1996 and 1997 Share Incentive Plans have authorized
the grant of options to directors, executives and key employees for up to
425,000, 1,000,000 and 2,000,000 shares, respectively, of the Company's common
stock. The majority of options granted have 5 year terms and vest and become
fully exercisable at the end of 4 years of continued employment.
49
<PAGE> 50
CROSSCOMM STOCK OPTIONS EXCHANGED FOR OLICOM STOCK OPTIONS
At the acquisition of CrossComm approximately 1,500,000 CrossComm stock
options were exchanged for 905,511 Olicom stock options ("CrossComm options"),
with comparable exercise prices and terms.
PRO FORMA INFORMATION
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1997, 1998 and 1999: risk-free interest rates of 6.5%; dividend
yields of 0%; volatility factors of the expected market price of the Company's
common stock of 0.4, 0.4 and 1.188, respectively; 25% of these options granted
are expected to expire without being exercised; and weighted-average expected
life of the options of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
(In thousands, except earnings per share)
<S> <C> <C> <C>
Net income (loss) - as reported $ (18,121) $ (22,939) $ (80,307)
Net income (loss) - pro forma $ (20,307) $ (25,792) $ (83,660)
Basic and diluted earnings (loss) per share
- as reported $ (1.15) $ (1.28) $ (4.50)
Basic and diluted earnings (loss) per share
- pro forma $ (1.28) $ (1.44) $ (4.68)
</TABLE>
SUMMARY OF STOCK OPTION ACTIVITY
On December 10, 1998, the exercise prices of 482,300 outstanding
options issued in March 1998 (314,500 options) and August 1998 (167,800 options)
were reset with reference to the then prevailing market price for the Company's
Common Shares. The original exercise prices for the options reset were $26.25
and $19.50, respectively. The new exercise price for these options is $10.00.
The market price for the Company's Common Shares at the date of the reset was
$5.25.
A summary of the Company's stock option activity, and related
information for the three years ended December 31, 1999, follows:
50
<PAGE> 51
<TABLE>
<CAPTION>
Outstanding Exercisable Weighted-average Weighted-average
number of number of exercise fair value of
options options price option granted
---------- --------- -------------- --------------
<S> <C> <C> <C> <C>
January 1, 1997 665,725 77,875 10.74
CrossComm options 905,511 10.52
Granted 710,200 14.79 $ 6.36
Exercised (589,794) 9.98
Expired (170,814) 16,87
----------- ----------
December 31, 1997 1,520,828 326,699 12.11
Granted 1,001,605 12.24 $ 7.99
Exercised (608,910) 12.89
Expired (246,349) 15.48
------------ ----------
December 31, 1998 1,667,174 425,960 $ 11.53
Granted 483,400 3.98 $ 2.42
Exercised 0 0
Expired (1,599,833) 9.89
------------ ----------
December 31, 1999 550,741 182,119 $ 9.67
=========== ========== ==========
</TABLE>
The following table summarizes the status of the Company's stock options
outstanding and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Weighted-average Weighted-average Exercisable Weighted-average
Range of number of remaining exercise number of exercise
Exercise Prices shares contractual life price shares price
--------------- ---------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
$ 3.35 - $ 6.00 176,500 2.37 years $ 4.28 11,250 $ 5.31
$ 8.40 - $ 9.00 49,421 6.49 years $ 8.43 49,273 $ 8.43
$ 9.00 - $ 12.00 239,082 2.54 years $10.13 84,795 $10.26
$ 14.00 - $ 17.00 51,738 1.89 years $14.07 26,301 $14.07
$ 26.25 - $ 30.25 34,000 2.71 years $29.58 10,500 $29.71
--------- ---------
550,741 182,119
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company's subsidiaries in the U.S. have a 401(k) Plan. The Plan has
been in place since May 1, 1993. Effective January 1, 1997, the Plan allows for
both the Company and eligible employees to contribute. All employees over 21
years of age are eligible to participate. The Company's contribution equals 50%
of an employee's contribution that does not exceed 6% of compensation. The
Company's contribution expenses for 1997, 1998 and 1999, were $255,759, $398,106
and $ 98,961, respectively. The plan was terminated at the end of December 1999.
The Company does not provide its employees with other post-retirement
and post-employment benefits.
8. LEASE COMMITMENTS
The Company leases its headquarters and main warehouse facility under
noncancellable operating leases which expire during the period from 2006 to
2008. The leases contain escalation clauses. Additionally, the
51
<PAGE> 52
Company and its subsidiaries are lessees in other noncancellable lease
arrangements for office buildings and warehouses, expiring on different dates.
The total future minimum lease payments under the foregoing leases at
December 31, 1999, are:
<TABLE>
<CAPTION>
Headquarters Other Total
-----------------------------------------
(In thousands)
<S> <C> <C> <C>
2000 1,483 1,638 3,121
2001 1,410 1,562 2,972
2002 1,445 1,617 3,062
2003 1,305 973 2,278
2004 1,338 1,036 2,374
Remaining 3,423 4,860 8,283
-----------------------------------------
$ 10,404 $ 11,686 $ 22,090
=========================================
</TABLE>
Total lease amounts charged to expense are $3,594,000 in 1997 and
$4,018,000 in 1998 and $3,470,000 in 1999.
The Company has subleased most of these leased premises to Intel. Intel
has provided Olicom with a guarantee corresponding to the obligation Olicom has
to the landlord. The net lease commitments adjusted for this amount to
$1,219,000.
9. SEGMENT INFORMATION
The Company operated in 1997, 1998 and 1999 in the data networking
industry, primarily within the following technologies: Asynchronous Transfer
Mode, Token-Ring and Fast Ethernet. The Company considers its products being one
group of similar products.
The Company manages its business primarily in two separate geographical
areas: Americas, incorporating North and South America, and International,
incorporating Europe and Asia Pacific.
Information about the Company's operations by reportable segments is as
follows:
52
<PAGE> 53
<TABLE>
<CAPTION>
INTER- ELIMI- CONSO-
NATIONAL AMERICAS NATIONS LIDATED
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
1999
Net sales:
External customers $ 57,971 $ 13,320 $ 0 $ 71,291
Intercompany 17,277 22,861 (40,138) 0
---------- ---------- ---------- ----------
Total $ 75,248 $ 36,181 $ (40,138) $ 71,291
========== ========== ========== ==========
Depreciation, amortization and write-off $ 19,115 $ 3,879 $ 0 $ 22,994
========== ========== ========== ==========
Operating income (loss) $ (94,105) $ (36,614) $ 2,972 $ (127,747)
========== ========== ========== ==========
Investments in affiliated companies $ 0 $ 0 $ 0 $ 0
========== ========== ========== ==========
Total current assets $ 42,452 $ 55,314 $ (49,858) $ 47,908
========== ========== ========== ==========
Long-lived assets $ 530 $ 30 $ 0 $ 560
========== ========== ========== ==========
1998
Net sales:
External customers $ 121,613 $ 105,989 $ 0 $ 227,602
Intercompany 76,931 10,471 (87,402) 0
---------- ---------- ---------- ----------
Total $ 198,544 $ 116,460 $ (87,402) $ 227,602
========== ========== ========== ==========
Depreciation and amortization $ 6,937 $ 1,963 $ 0 $ 8,900
========== ========== ========== ==========
Operating income (loss) $ (21,081) $ (3,447) $ (1,781) $ (26,309)
========== ========== ========== ==========
Investments in affiliated companies $ 958 $ 0 $ 0 $ 958
========== ========== ========== ==========
Total current assets $ 80,004 $ 84,313 $ (42,881) $ 121,436
========== ========== ========== ==========
Long-lived assets $ 13,123 $ 6,327 $ 0 $ 19,450
========== ========== ========== ==========
1997
Net sales:
External customers $ 125,960 $ 112,269 $ 0 $ 238,229
Intercompany 63,128 6,076 (69,204) 0
---------- ---------- ---------- ----------
Total $ 189,088 $ 118,345 $ (69,204) $ 238,229
========== ========== ========== ==========
Depreciation and amortization $ 4,889 $ 1,327 $ 0 $ 6,216
========== ========== ========== ==========
Operating income (loss) $ (30,181) $ 22,955 $ (1,191) $ (8,417)
========== ========== ========== ==========
Investments in affiliated companies $ 733 $ 0 $ 0 $ 733
========== ========== ========== ==========
Total current assets $ 121,157 $ 57,397 $ (42,156) $ 136,398
========== ========== ========== ==========
Long-lived assets $ 12,543 $ 3,485 $ 0 $ 16,028
========== ========== ========== ==========
</TABLE>
53
<PAGE> 54
In the year 1997, sales to a single customer exceeded 10% of sales,
amounting to $ 24.7. In the year 1998, sales to one customer exceeded 10% of
sales, amounting to $37.1 million. In the year 1999, sales to one customer
exceeded 10% of sales, amounting to $11.0 million
11. FINANCIAL INSTRUMENTS
A. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
Short-term investments: The fair values for short-term
investments are based on quoted market prices.
Foreign currency exchange contracts: The fair value of the
Company's foreign currency exchange contracts are based on quoted
market prices.
The carrying amounts and fair values of the Company's financial instruments at
December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
------------------------ ---------------------
Carrying Fair Carrying Fair
amount value amount value
------------------------ ---------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 22,494 $ 22,494 $ 28,327 $ 28,327
Restricted cash 0 0 8,844 8,844
Foreign currency exchange contract 0 1,251 (387) (387)
</TABLE>
B. OFF-BALANCE SHEET RISK
The Company enters into forward currency exchange contracts and options
to hedge foreign currency transactions on a continuing basis for periods
consistent with its foreign currency exposures. The objective of this practice
is to reduce the impact of foreign exchange movements on the Company's operating
results. The Company's hedging activities do not create exchange rate risk
because gains and losses on these contracts generally offset losses and gains on
the assets, liabilities and transactions being hedged.
At December 31, 1998 and 1999 the stated or notional amounts of the
Company's forward currency exchange contracts amounted to $21.4 million and $4.5
million, respectively.
C. CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash and cash equivalents, short-term
investments and accounts receivable.
54
<PAGE> 55
Cash is maintained with major banks in Denmark and the United States.
Foreign currency exchange contracts and options are entered into with a major
bank in Denmark.
The Company markets its products principally to distributors, value
added resellers and original equipment manufacturers in the computer industry.
Concentrations of credit risk with respect to accounts receivable from
customers located outside Denmark are limited under the terms of an agreement
entered into with the company "EKR CreditInsurance A/S". This agreement
guarantees up to 90% of the amount of the related receivables. The amounts so
covered at December 31, 1998 and 1999 were $18,728,000 and $2,817,991,
respectively.
12. LITIGATION
From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. As of
December 31, 1999, the Company is not a party to any legal proceedings, the
adverse outcome of which, in management's opinion, would have a material adverse
effect on the Company's results of operations or financial position.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The following consolidated financial statements are filed as part
of this Annual Report:
<TABLE>
<CAPTION>
Page no
-------
<S> <C>
1. Consolidated Financial Statements
Report of Independent Auditors 34
Consolidated Balance Sheets at December 31, 1998 and 1999 35
Consolidated Statements of Income for the years
ended December 31, 1997, 1998 and 1999 37
Consolidated Statements of Comprehensive Income for the years
ended December 31, 1997, 1998 and 1999 38
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1997, 1998 and 1999 39
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1998 and 1999 40
Notes to Consolidated Financial Statements 42
</TABLE>
All other supplementary schedules relating to the Company are omitted
because they are not required or because the required information, where
material, is contained in the Consolidated Financial Statements or Notes
thereto.
(b) The following exhibits are filed as part of this Annual Report:
55
<PAGE> 56
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------ -----------------------
<S> <C>
1.1 -- Articles of Association of the Company, as amended (1).
1.2 -- Rules of Procedure for the Board of Directors (2).
2.1 -- 1994 Share Incentive Plan, as amended (3).
2.2 -- 1996 Share Incentive Plan (4).
2.3 -- 1997 Share Incentive Plan (4).
3.1 -- Agreement of Substitution (License Agreement) dated as of
September 1, 1990, between Willemijn Houdstermaatschappij BV
and the Company (5).+
3.2 -- Form of Indemnification Agreement between the Company
and/or Olicom, Inc.) and Jan Bech, Bo Vilstrup, Frank G. Petersen,
Michael Peytz, S0ren Bjerre-Nielsen, J0rgen H0g, Niels Christian
Furu, Lars Larsen and Mette R.L. Fogt (5).
3.3 -- Trademark Agreement effective as of December 11, 1998, between
the Company and Ing. C. Olivetti & C., S.p.A. (6)
3.4 -- License Agreement dated October 19, 1988, between the Company
and Texas Instruments France, as amended by Amendment to
License Agreement dated November 29, 1989, together with
Texas Instruments Program License Agreement dated October 11,
1989, between the Company and Texas Instruments A/S,
Amendment to License Agreements dated October 6, 1992,
between the Company and Texas Instruments France, and
Amendment to License Agreement(s) dated January 1, 1992,
between the Company and Texas Instruments Trade Corporation (5).+
3.5 -- Share Purchase Agreement dated January 23, 1996, between the Company
and Nilex Systems ApS.(1).
</TABLE>
56
<PAGE> 57
<TABLE>
<S> <C>
3.6 -- Agreement and Plan of Reorganization dated as of March
20, 1997, among the Company, PW Acquisition Corporation and
CrossComm Corporation (1).
3.7 -- Agreement re sale of shareholding in Lasat. (6)
3.8 -- Agreement for the Sale and Purchase of assets relating to
Olicom's Token Ring Business made on August 31, 1999,
between the Company and Madge Networks NV.
3.9 -- Umbrella Agreement relating to the Purchase and Sale of Certain
businesses and assets made on September 30, 1999, between the
Company, Intel Corporation and Olicom Poland Sp. Z O.O.
3.10 -- Stock Purchase Agreement dated October 26, 1999, by and
among the Company, Olicom Ventures A/S and Motorola, Inc.
</TABLE>
-------------
(1) Incorporated herein by reference to the Company's registration
statement on Form F-4, registration no. 333-24655.
(2) Incorporated herein by reference to the Company's Annual
Report on Form 20-F for the fiscal year ended December 31,
1997, file no. 0-20738.
(3) Incorporated herein by reference to the Company's registration
statement on Form S-8, registration no. 33-93684.
(4) Incorporated herein by reference to the Company's Annual
Report on Form 20-F for the fiscal year ended December 31,
1996, file no. 0-20738.
(5) Incorporated herein by reference to the Company's registration
statement on Form F-1, registration no. 33-51818.
(6) Incorporated herein by reference to the Company's Annual
Report on Form 20-F for the fiscal year ended December 31,
1999, file no. 0-20738.
+ Confidential treatment granted as to portions thereof.
57
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.
OLICOM A/S
By: /s/ Niels Christian Furu
----------------------------
Niels Christian Furu
President and Chief Executive Officer
February 25, 2000
58
<PAGE> 59
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------ -----------------------
<S> <C>
1.1 -- Articles of Association of the Company, as amended (1).
1.2 -- Rules of Procedure for the Board of Directors (2).
2.1 -- 1994 Share Incentive Plan, as amended (3).
2.2 -- 1996 Share Incentive Plan (4).
2.3 -- 1997 Share Incentive Plan (4).
3.1 -- Agreement of Substitution (License Agreement) dated as of
September 1, 1990, between Willemijn Houdstermaatschappij BV
and the Company (5).+
3.2 -- Form of Indemnification Agreement between the Company
and/or Olicom, Inc.) and Jan Bech, Bo Vilstrup, Frank G. Petersen,
Michael Peytz, S0ren Bjerre-Nielsen, J0rgen H0g, Niels Christian
Furu, Lars Larsen and Mette R.L. Fogt (5).
3.3 -- Trademark Agreement effective as of December 11, 1998, between
the Company and Ing. C. Olivetti & C., S.p.A. (6)
3.4 -- License Agreement dated October 19, 1988, between the Company
and Texas Instruments France, as amended by Amendment to
License Agreement dated November 29, 1989, together with
Texas Instruments Program License Agreement dated October 11,
1989, between the Company and Texas Instruments A/S,
Amendment to License Agreements dated October 6, 1992,
between the Company and Texas Instruments France, and
Amendment to License Agreement(s) dated January 1, 1992,
between the Company and Texas Instruments Trade Corporation (5).+
3.5 -- Share Purchase Agreement dated January 23, 1996, between the Company
and Nilex Systems ApS.(1).
</TABLE>
<PAGE> 60
<TABLE>
<S> <C>
3.6 -- Agreement and Plan of Reorganization dated as of March
20, 1997, among the Company, PW Acquisition Corporation and
CrossComm Corporation (1).
3.7 -- Agreement re sale of shareholding in Lasat. (6)
3.8 -- Agreement for the Sale and Purchase of assets relating to
Olicom's Token Ring Business made on August 31, 1999,
between the Company and Madge Networks NV.
3.9 -- Umbrella Agreement relating to the Purchase and Sale of Certain
businesses and assets made on September 30, 1999, between the
Company, Intel Corporation and Olicom Poland Sp. Z O.O.
3.10 -- Stock Purchase Agreement dated October 26, 1999, by and
among the Company, Olicom Ventures A/S and Motorola, Inc.
</TABLE>
- -------------
(1) Incorporated herein by reference to the Company's registration statement on
Form F-4, registration no. 333-24655.
(2) Incorporated herein by reference to the Company's Annual Report on Form
20-F for the fiscal year ended December 31, 1997, file no. 0-20738.
(3) Incorporated herein by reference to the Company's registration
statement on Form S-8, registration no. 33-93684.
(4) Incorporated herein by reference to the Company's Annual Report on Form
20-F for the fiscal year ended December 31, 1996, file no. 0-20738.
(5) Incorporated herein by reference to the Company's registration statement
on Form F-1, registration no. 33-51818.
(6) Incorporated herein by reference to the Company's Annual Report on Form
20-F for the fiscal year ended December 31, 1999, file no. 0-02738.
+ Confidential treatment granted as to portions thereof.
<PAGE> 1
EXHIBIT 3.8
DATED 31ST AUGUST 1999
MADGE NETWORKS N.V.
and
OLICOM A/S
----------------------------------------
Agreement for the Sale and Purchase
of assets relating to Olicom's token ring business
----------------------------------------
Bird & Bird
90 Fetter Lane
London EC4A 1JP
Tel: 0171-415 6000
Fax: 0171-415 6111
Ref: DXK/NXB/MADGE.5
<PAGE> 2
CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND INTERPRETATION..........................................................................1
2. SALE OF THE ASSETS.....................................................................................10
3. CONSIDERATION..........................................................................................12
4. .........................................................................................................
5. COMPLETION.............................................................................................13
6. TRANSFERRING EMPLOYEES.................................................................................14
7. APPORTIONMENT..........................................................................................15
8. WARRANTIES.............................................................................................16
9. COVENANTS BY THE SELLER................................................................................17
10. POST-COMPLETION OBLIGATIONS............................................................................19
11. TRANSITION.............................................................................................19
12. INTELLECTUAL PROPERTY RIGHTS...........................................................................20
13. ANNOUNCEMENTS AND CONFIDENTIALITY......................................................................23
14. COSTS..................................................................................................24
15. ASSIGNMENT.............................................................................................24
16. GENERAL................................................................................................25
17. APPLICABLE LAW AND JURISDICTION........................................................................26
18. NOTICES................................................................................................26
SCHEDULE 1
.........................................................................................................
SCHEDULE 2
.........................................................................................................
SCHEDULE 3
.........................................................................................................
SCHEDULE 4
.........................................................................................................
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SCHEDULE 5
.........................................................................................................
SCHEDULE 6
.........................................................................................................
SCHEDULE 7
.........................................................................................................
SCHEDULE 8
.........................................................................................................
SCHEDULE 9
.........................................................................................................
SCHEDULE 10
.........................................................................................................
SCHEDULE 11
.........................................................................................................
SCHEDULE 12
.........................................................................................................
SCHEDULE 13
.........................................................................................................
ANNEX 1
.........................................................................................................
ANNEX 2
.........................................................................................................
</TABLE>
<PAGE> 4
THIS AGREEMENT is made on 31st August 1999
BETWEEN
(1) MADGE NETWORKS NV a company organized under the laws of the Netherlands
whose registered office is at Transpolis Schipol Airport, Polaris
Avenue 23, 2132 JH Hoofdorp, the Netherlands (the "BUYER"); and
(2) OLICOM A/S, a company incorporated in Denmark, whose principal office
is at Nybrovej 114, DK-2800 Lyngby, Denmark (the "SELLER").
BACKGROUND
A. The Seller and its subsidiaries carry on the Business which involves
the use of the Assets.
B. The Seller wishes to sell and (as appropriate) will procure that its
subsidiaries will sell and the Buyer wishes to buy the Assets.
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules, the following terms shall have the
following meanings unless otherwise stated:
"ACCOUNTS" means the audited consolidated balance sheet of the Seller
and the audited profit and loss account of the Seller and its
subsidiaries for the year ended on the Accounts Date, together in each
case with the related notes, directors' report and auditor's report;
"ACCOUNTS DATE" means 31 December 1998;
"AGREED FORM" means in the form agreed between the Seller and the Buyer
and initialed by each of them or their representatives before execution
of this Agreement, with any amendments which they subsequently agree in
writing;
"ASSETS" means all the assets and rights owned by the Seller or other
members of the Seller's Group relating to the Business as described in
clause 2 and includes, where the context permits, each or any of them;
"ASSIGNED CONTRACTS" means the contracts listed in the Third Schedule
to the IPR Agreement and any Contracts which become Assigned Contracts
after the Completion Date pursuant to paragraph 2.1 of Schedule 6;
1
<PAGE> 5
"ASSUMED LIABILITIES" means:
(a) all liabilities of the Seller in respect of obligations
falling due for performance or satisfaction after the
Completion Date (or in respect of contracts assigned pursuant
to paragraph 2.1 of Schedule 6, after the date of assignment
of such contracts) in respect of contractual or other
obligations of the Seller relating to the Assets to the extent
disclosed or identifiable from the written terms of any of the
Disclosure Documents, but not including (i) any liabilities in
respect of express or implied warranties given by any member
of the Seller's Group if not included in the Assumed Warranty
Obligations and (ii) any liabilities specifically excluded
pursuant to the terms of this Agreement or the Intellectual
Property Rights Agreements and (iii) any liabilities relating
to the Distribution Contracts which are included solely for
the purpose of the Inventory Agreement;
(b) all liabilities of the Seller in respect of Assumed Warranty
Obligations; provided that the Seller shall indemnify the
Buyer's Group against all costs and liabilities incurred by
the Buyer's Group in connection with warranty claims
associated with any latent and material defects discovered
within a period of one year from the Completion Date in
products sold by the Seller before the Completion Date; and
(c) all liabilities of the Seller in relation to the Transferring
Employees to the extent that such liabilities relate to the
period after the Completion Date;
(d) all liabilities of the Seller in relation to the Call Off and
Scheduled Orders to the extent that performance falls due from
the sixth day after the Completion Date;
"ASSUMED WARRANTY OBLIGATIONS" means
(a) Warranty Obligations relating to Transferred Products other
than those liabilities retained by the Seller pursuant to
Schedule 10 (Technical Support) and other than Warranty
Obligations associated with latent and material product
defects in products sold by the Seller before the Completion
Date; and
(b) Warranty Obligations the Buyer has elected in writing to
perform in relation to Discontinued Products pursuant to
Paragraph 1.15 of Schedule 6 to the extent stated in that
clause and in relation to Discontinued RMA Stock pursuant to
paragraph 8 of Schedule 7 to the extent stated in that clause.
"BUSINESS" means the business of the Seller and other members of the
Seller's Group involving the design, manufacture, distribution and sale
of Token Ring Products as carried out by the Seller at Completion;
"BUSINESS DAY" means a day (excluding Saturday, Sunday, Christmas Day
or New Year's Day) which is also a day on which clearing banks in New
York and Copenhagen are open for the conduct of banking business;
2
<PAGE> 6
"BUSINESS INFORMATION" means:
(a) all information, know-how and techniques (whether or not
confidential and in whatever form held) owned by the Seller
and members of the Seller's Group (including correspondence
relating to the Contracts) and which relates to all or any
part of the Business or the Assets;
(b) all information held by the Seller relating to the supply of
CCU products to customers of the Seller including without
limitation, the names and addresses of customers, the
type/model of CCU product supplied and the date of supply);
(c) all information held by the Seller relating to the warranty
cards completed by Customers (including without limitation,
the names and addresses of' customers who have completed
warranty cards, the Token Ring Product supplied and the date
of supply.
"BUYER'S GROUP" means the Buyer and each of its subsidiaries, its
holding company and any subsidiaries of its holding company, including
any entity, which had it been formed and registered as a company in
England and Wales would have fallen within this definition;
"BUYER'S SOLICITORS" means Bird & Bird, 90 Fetter Lane, EC4A 1JP;
"BUYER'S YEAR 2000 STATEMENT" means the statements made on the Buyer's
website under the heading "Madge Networks Token Ring and ATM Year 2000
Compliance Test Room Report (Issues)" dated July 1999, a complete and
accurate copy of which is contained in Schedule 11;
"CALL OFF AND SCHEDULED ORDERS" means any order in the order book of
the Seller that has not been shipped by the end of the fifth day after
Completion
"CLAIM" means any claim for breach of Warranties;
"CLEARSIGHT" means OC8000 Clearsight for Open View v 10.3 (w/HP OV
D.03) and Clearsight for Open View NNM/NT v 10.3;
"COMPLETION" means completion of the sale and purchase of the Assets
pursuant to this Agreement and in accordance with Clause 5;
"COMPLETION DATE" means the date on which Completion occurs;
"CONTRACTS" means the End User Contracts, the Maintenance Contracts,
the Supplier Contracts and the OEM Contracts;
"CUSTOMER" means any person who has directly or indirectly purchased
Token Ring Products from any member of the Seller's Group at any time
on or before Completion;
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"DATABASE" means the database containing details of all Customers;
"DISCONTINUED PRODUCTS" means Token Ring Products manufactured or
supplied by the Seller prior to Completion which at the sole discretion
of the Seller have been discontinued prior to Completion as listed in
Part B of Schedule 8;
"DISCONTINUED RMA STOCK" means RMA Stock manufactured or supplied by
the Seller which at the sole discretion of the Seller has been
discontinued prior to Completion;
"DISTRIBUTION CONTRACTS" means those contracts between members of the
Seller's Group and distributors relating to the Business relating to
the supply of goods or equipment or the provision of maintenance or
other services which are listed in Part C of Schedule 1;
"DISCLOSURE DOCUMENTS" means the documents attached as annexure 1
initialed by or on behalf of the parties and listed in the index of
disclosure documents set out in Schedule l4;
"EMPLOYMENT REGULATIONS" means the Acquired Rights Directive
(77/187/EEC as it is applied in each member state of the European Union
in which employees employed in the Business are based including,
without limitation, the United Kingdom, Austria, Denmark, France,
Germany, Spain, Norway, Sweden or such analogous legislation in any
other country in which employees employed in the Business are based
including, without limitation the United States of America, Japan,
Poland;
"END USER CONTRACTS" means the contract dated 22 June 1999 between
Olicom Inc. and the State of Ohio and the contract dated 20 November
1995 between the Seller and State Farm Mutual Automobile Insurance
Company;
"EQUIPMENT" means all moveable equipment and tooling used for research
and development, manufacture and repair and maintenance services in
connection with the Business as described in Part A of Schedule 1;
"FINANCIAL INFORMATION" means the financial information contained in
the documents referred to in 9.1 and 9.2 of the Disclosure Documents;
"GOODWILL" means the goodwill associated with the Business with the
exclusive right to carry on the Business in succession to the Seller
and other members of the Seller's Group
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under the name "Olicom" (subject to license from Olivetti with regard
to the use of the wordmark and trademark "Olicom") and the right for
the Buyer to represent itself as carrying on business in succession to
the Seller provided that:
(a) the Seller and the Seller's Group shall retain the right to
use the wordmark and trademark "Olicom" in connection with any
part of any business other than the Business;
(b) the Buyer shall not be entitled to use the word "Olicom" as
any part of its corporate name;
"INTELLECTUAL PROPERTY RIGHTS AGREEMENTS" means the following
agreements in the Agreed Forms to be made between the Seller and the
Buyer at Completion relating to the transfer to the Buyer of certain
intellectual property rights and other know-how connected with the
Business owned by or licensed to the Seller or member of the Seller's
Group:
(a) IPR Agreement,
(b) Assignment of Trade Marks;
(c) Assignment of Patent Applications;
(d) Trade Mark License;
(e) Patent License;
"INTELLECTUAL PROPERTY RIGHTS" or "IPR" means patents, trademarks,
service marks. trade names, design rights, copyright (including rights
in computer software), rights in know-how and all other intellectual
property rights, in each case whether registered or unregistered and
including applications for the grant of such rights and all rights or
forms of protection having equivalent or similar effect anywhere in the
world provided such are in connection with the Business;
"INVENTORY" has the meaning given in the Inventory Agreement;
"INVENTORY AGREEMENT" means the agreement in the Agreed Form to be made
between the Seller and the Buyer at Completion relating to the
valuation of and the parties' rights and obligations with regard to the
product inventory of the Seller's Group relating to the Business;
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<PAGE> 9
"MADGE CLARIFY SYSTEM" means Madge's Oracle system database in which
Madge logs certain details relating to problems reported by Madge
customers relating to products it has supplied;
"MADGE DATABASE" means the database to be agreed between the parties
pursuant to clause 4 of Schedule 6 containing details of whom the
Seller exclusively supplied Token Ring Products on or before the
Completion Date;
"MAINTENANCE CONTRACTS" means those contracts between members of' the
Seller's Group and customers in connection with the Business for the
maintenance of the Seller's Token Ring Products which are listed in
Part C of Schedule 1;
"NON-TRANSFERRING EMPLOYEES" means those employees of the Seller and
other members of the Seller's Group employed (and any person who may
claim to be so employed) in connection with the Business but who are
not Transferring Employees;
"OEM CONTRACTS" means the contracts made between Olicom and certain
manufacturers listed in Part C of Schedule 1;
"OLICOM DATABASE" means the database to be agreed between the parties
pursuant to clause 4 of Schedule 6, containing details of any person to
whom the Seller supplied products other than Token Ring Products on or
before the Completion Date;
"OLICOM LOTUS NOTES SYSTEM" means the Seller's Lotus Notes system
database in which the Seller logs certain details relating to problems
reported by the Seller's customers relating to Token Ring Products it
has supplied;
"PARTIES" means the parties to this Agreement;
"PERIOD 1" shall bear the meaning given to it in paragraph 1 of the
Technical Support Schedule;
"PERIOD 2" shall bear the meaning given to it in paragraph 1 of the
Technical Support Schedule;
"PERMITS" means all licenses, consents, permits and authorizations
issued by any competent governmental or regulatory body and which are
held by any member of the Seller's Group in connection with the
Business and which are listed in Part A of Schedule 1;
"QUARTER" means each complete period of three months ending on 30
September, 31 December, 31 March and 30 June;
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<PAGE> 10
"RECORDS" means all lists of Customers, current reports, price lists,
cost records, catalogues, records relating to the Transferring
Employees and all other records. documents and files relating to the
Business or any of the Assets;
"RMA STOCK" means new or refurbished inventory suitable for shipment to
customers in replacement of Token Ring Products under warranty,
returned by customers as listed in Part C of Schedule 8;
"SELLER'S GROUP" means the Seller and each of its subsidiaries, its
holding company and any subsidiaries of its holding company, including
any entity which had it been formed and registered as a company in
England and Wales would have fallen within this definition;
"SELLER'S SOLICITORS" means Bech-Bruun & Trolle of Norre Farimagsgade
3, DK-1364 Copenhagen K, Denmark;
"SUPPLIER CONTRACTS" means those contracts entered into on or prior to
the Completion Date by or on behalf of the Seller or other members of
the Seller's Group for the supply or sale of components and other goods
to the Seller in connection with the Business which are listed in Part
C of Schedule 1;
"TAX" means all forms of taxation, duties, imposts, levies,
withholdings or liability imposed whether in the United Kingdom or
elsewhere and shall further include any penalty, fine or surcharge or
interest payable in addition to or in connection with it;
"TECHNICAL SUPPORT PERIOD" shall bear the meaning given to it in the
Technical Support Schedule;
"TECHNICAL SUPPORT SCHEDULE" means Schedule 10 to this Agreement;
"TECHNICAL SUPPORT SERVICES" means the technical support services which
the Seller will provide to the Buyer in respect of the Transferred
Products in accordance with the Technical Support Schedule;
"TOKEN RING INTERFACE" means a local area network interface
implementing and operating substantially in accordance with the IEEE
802.5 family of standards (including 100Mbit/s, and DTR functions)
including, without limitation, an interface implementing either token
ring end station or hub or switch functions;
"TOKEN RING PRODUCTS" means subject to clause 1.8;
(i) networking products (including, but not limited to, network
interface cards, local area network hubs, local area network
switches and routers) having one or more Token Ring
Interfaces; and
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(ii) network management software required to configure or control such
products,
provided that where a product is modular consisting of a number of
customer or field replaceable units then only the customer or field
replaceable unit within that product having a Token Ring Interface (and
associated network management software) shall be treated as a Token
Ring Product. (As an example, only the token ring interface module with
a combined Ethernet/token ring local area network switch shall be
treated as a Token Ring Product). However, an add-in module solely used
to extend the functions of a Token Ring Product shall also be
considered a Token Ring Product even if it does not implement a Token
Ring Interface (as an example, an ATM uplink module for a token ring
switch shall be treated as a Token Ring Product) and Token Ring Product
shall have a corresponding meaning;
"TOKEN RING SERVICES" means maintenance and support services relating
to Token Ring Products;
"TRANSFERRING EMPLOYEES" means those individuals employed by the Seller
and members of the Seller's Group and named in Part B of Schedule 1 or
any person transferred after the Completion Date pursuant to clause
6.4;
"TRANSFERRED PRODUCTS" means Token Ring Products manufactured or
supplied by the Seller prior to Completion and listed in Part A of
Schedule 8;
"TRANSITION SCHEDULE" means Schedule 9 to this Agreement;
"UNRELEASED PRODUCTS" means Token Ring Products developed or in the
process of, development by the Seller prior to Completion (whether or
not such development has resulted in a usable Token Ring Product) which
have not been manufactured or supplied on a commercial basis prior to
Completion;
"VAT" means value added tax;
"WARRANTIES" means the warranties on the part of the Seller contained
in Clause 8 and Schedule 3 of this Agreement and clause 8 of the IPR
Agreement;
"WARRANTY OBLIGATIONS" means those obligations of any member of the
Seller's Group in relation to:
(a) written warranties given to Customers, re-sellers or
distributors concerning products supplied to such persons in
connection with the Business to the extent that an accurate
copy of the document containing the relevant warranty is
contained in the Disclosure Documents; or
(b) warranties implied by any applicable law or by industry
practice to the extent that Token Ring Products designed,
manufactured, or supplied by the Buyer on or before the date
of' this Agreement are subject to substantially the same
implied warranties,
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<PAGE> 12
but does not include any liabilities in respect of claims for warranty
work to be performed which have been notified in writing by a Customer
or a reseller or distributor to any member of the Seller's Group on or
before the Completion Date or any liability arising from or in
connection with any express or implied warranty that a product is Year
2000 Compliant;
"YEAR 2000 COMPLIANT" shall have the meaning given in the statements
made on the Seller's website under the heading "The Year 2000
Challenge" as at 12 August 1999, a complete and accurate copy of which
is set out in the Disclosure Documents;
"YEAR 2000 CONFORMITY" shall have the meaning as set out in the Buyer's
Year 2000 Statement;
"YEAR 2000 REPORT" means the report by Century Technology Services Inc.
on evaluating the Year 2000 effects on the business of the Seller, a
complete and accurate copy of which is available in the Disclosure
Documents.
1.2 In this Agreement, unless expressly stated otherwise:
(a) a reference to a person or people includes a reference to any
entity which has legal personality by the law of any
applicable country or territory;
(b) a reference to a statute or ordinance or a provision of a
statute or ordinance includes a reference to any amendment, or
re-enactment of it, any subordinate legislation (as defined in
s.21(1) Interpretation Act 1978 or other applicable law) made
under it and any previous statute or provision re-enacted by
it, including, without limitation, orders in council, orders
and any subordinate legislation to such orders, in any case
before or after the date of this Agreement except to the
extent that any amendment, re-enactment or subordinate
legislation coming into force after the date of this Agreement
would increase or extend the liability of any party to this
Agreement to any other party under this Agreement;
(c) a reference to a clause, schedule or to the parties is to a
clause or schedule or the parties of or to this Agreement, and
a reference in any schedule to a paragraph is to a paragraph
of that schedule;
(d) a reference to any action, legal document, remedy,
proceedings, status or other legal concept shall, in respect
of any foreign jurisdiction, relate to whatever in that
jurisdiction most closely corresponds to the relevant English
term.
1.3 Headings shall be disregarded in construing this Agreement.
1.4 Any undertaking by a party not to do any act or thing includes an
undertaking not to allow, cause or assist the doing of that act or
thing.
1.5 The ejusdem generis rule shall not apply in the construction of this
Agreement, and accordingly general words shall not be given a
restrictive meaning by reason of their
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being followed or preceded by words indicating a particular class or
examples of acts or matters.
1.6 References to "$" or "dollars" are to the lawful currency of the United
States of America.
1.7 "Subsidiary" and "holding company" shall have the meanings given in
Section 736 of the Companies Act 1985.
1.8 For the avoidance of doubt:
(a) routers included under Token Ring Products are not Transferred
Products;
(b) IPR associated with routers are not assigned or licensed under
this Agreement by the Seller to the Buyer;
(c) the Seller shall keep all rights to manufacture, support and
enhance routers that support all other technologies than Token
Ring;
(d) the Seller commits to refrain from developing, manufacturing
and selling routers with Token Ring ports except for the 7052
TR-variant and the 8012 TR-variant;
(e) the 7052 TR-variant and the 8012 TR-variant are subject to
specific end-of-life provisions specified in the IPR
Agreement.
2. SALE OF THE ASSETS
2.1 On and subject to the terms of this Agreement and with effect from the
close of business on the Completion Date the Seller shall sell, and
shall procure the sale by each relevant member of the Seller's Group,
and the Buyer shall or shall procure that a member of the Buyer's Group
shall purchase the following Assets with full title guarantee free from
all Encumbrances and together with all rights and benefits attaching or
accruing to them:
(a) the Goodwill;
(b) the Equipment;
(c) the Business Information;
(d) the Records;
(e) all Intellectual Property Rights relating to the Business in
accordance with the terms of the Intellectual Property Rights
Agreements; and
(f) the Permits.
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2.2 On the Completion Date, the Seller shall and shall procure that each
member of the Seller's Group shall assign the Database to the Buyer.
2.3 The Buyer shall not be obliged to complete the purchase of' any of the
Assets unless the purchase of all of the Assets is completed
simultaneously.
2.4 The Buyer undertakes with effect from the Completion Date to assume and
perform the obligations of the Seller under the Assigned Contracts in
accordance with their terms to the extent that they are Assumed
Liabilities and shall become entitled to the benefits of the Seller
under the Assigned Contracts, provided that nothing in this Agreement
shall require the Buyer to perform any obligation or satisfy any
liability arising under the Assigned Contracts save to the extent that
such obligations or liabilities are as stated in the Assigned
Contracts, complete and accurate copies of which are contained in the
Disclosure Documents, provided that in respect of any Assigned
Contracts which are assigned pursuant to paragraph 2.1 of Schedule 6,
references in this clause to the Completion Date shall be deemed to be
a reference to the date of assignment of such Assigned Contract.
2.5 Following Completion the Buyer shall be responsible for discharging the
Assumed Liabilities and shall indemnify the Seller against all actions,
proceedings, costs, damages, claims or demands brought or made against
the Seller in connection with the Assumed Liabilities.
2.6 Nothing in this Agreement:
(a) shall require the Buyer to perform any obligation or satisfy
any liability save to the extent that such obligation or
liability is an Assumed Liability or is expressly stated in
this Agreement;
(b) without prejudice to the generality of 2.6(a), shall require
the Buyer to perform any obligation or satisfy any liability
of the Seller's Group:
(i) in respect of support for Discontinued Products;
(ii) in respect of liabilities relating to promotional or
marketing offers in effect on or before the
Completion Date whether or not applying to the supply
of products and services after the Completion Date;
(iii) in respect of liabilities relating to special
pricing, rebates, special cash incentives to
distributors or resellers and other similar incentive
payments in effect on or before the Completion Date
whether or not applying to the supply of products and
services after the Completion Date;
(c) shall make the Buyer liable for or impose any obligation oil
the Buyer in respect of any act, neglect, default or omission
of the Seller unless specifically stated in this Agreement.
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2.7 The Seller shall indemnify the Buyer against all costs, claims, demands
and liabilities in respect of all debts, liabilities and obligations
(including, without limitation, as described in clause 2.6) asserted
against the Buyer or any member of the Buyer's Group not included in
Assumed Liabilities. In relation to any Third Party Claim (as defined
in clause 3.5 of Schedule 4) for which the Buyer is entitled to seek an
indemnity from the Seller under this clause, the Seller shall be
entitled to take such action at its expense (including without
limitation, settle or compromise with the Third Party) in relation to
the Third Party, Claim as it shall in its absolute discretion decide.
2.8 The Seller shall indemnify the Buyer's Group against all costs, claims,
demands and liabilities in respect of all debts, liabilities and
obligations asserted against the Buyer or any member of Buyer's Group
arising in relation to:
(a) any products supplied by the Seller to any third party prior
to the Completion Date not being Year 2000 Compliant;
(b) Transferred Products manufactured by the Buyer after the
Completion Date to the specifications used by the Seller prior
to the Completion Date not having Year 2000 Conformity
provided that:
(i) the Seller shall not be liable under this clause
where such Transferred Products fail to have Year
2000 Conformity as a result of any modifications made
to such specifications by the Buyer; and
(ii) the Seller shall not be liable under this clause
unless written notice of any claim is given to the
Seller on or before 1 April 2000.
3. CONSIDERATION
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5. COMPLETION
5.1 Completion shall take place at the offices of the Buyer's Solicitors.
At Completion the Seller and the Buyer shall each perform their
respective obligations in relation to the sale and purchase of the
Assets in accordance with Parts A and B of Schedule 2.
5.2 The Seller shall continue to carry on the Business for its own benefit
and at its own risk up to the close of business on the Completion Date
at which time the Assets shall be transferred to the Buyer.
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5.3 If on the Completion Date the Seller fails to comply with any of the
provisions of' Schedule 2 but shall be able to comply with all of the
provisions of Schedule 2 within no more than twenty Business Days, the
Seller may by notice to the Buyer postpone Completion by up to twenty
Business Days provided that the Seller shall not be able to postpone
Completion more than once.
5.4 If on the postponed Completion Date either party fails to comply with
any of the provisions of Schedule 2, the other party may by notice to
the party in default:
(a) terminate this Agreement; or
(b) proceed to Completion, in which case the party in default
shall be obliged to fulfill those of its obligations under
Schedule 2 as it is then able and to fulfill any unfulfilled
obligations under Schedule 2 on any later date specified in
the notice.
5.5 Beneficial ownership and risk in respect of the Assets shall pass to
the Buyer from the close of business on the Completion Date at which
time the Assets shall be transferred to the Buyer.
5.6 Neither the Buyer nor the Seller shall be entitled to rescind or
repudiate this Agreement or any other agreement in the Agreed Form
referred to in Schedule 13 for any reason unless expressly stated or
for fraudulent misrepresentation whether before or after Completion.
6. TRANSFERRING EMPLOYEES
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7. APPORTIONMENT
7.2 All periodical sums receivable in respect of the Assets (including, but
not limited to, license fees and other similar sums) shall be
apportioned between the Seller and the Buyer on a time basis so that
such part of the relevant periodical sums as is attributable to the
period ending on and including the Completion Date shall be for the
benefit of the Seller and such part of the relevant periodical sums as
is attributable to the period commencing on the day following the
Completion Date shall be for the benefit of the Buyer. However, any
part of such license fees or other sums received by the Seller or
Buyer, which represent VAT chargeable on the amount received by the
Seller or Buyer shall (as relevant) be paid in full to or retained in
full by the party which is required to account to the relevant
authority for VAT on such.
7.3 The Seller and the Buyer shall indemnify each other from and against
any actions, proceedings, damages, costs, claims and demands arising
from or in connection with the
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charges or outgoings apportioned pursuant to clause 7.1 and any failure
to discharge them.
7.4 All payments due from one party to the other pursuant to this clause 7
shall be paid within five Business Days after the end of each month
after the Completion Date in respect of amounts accruing during that
month. Each party shall provide the other with appropriate evidence of
the calculation of such amounts.
8. WARRANTIES
8.1 SELLER'S WARRANTIES
(a) The Seller warrants to the Buyer in the terms of the
Warranties.
(b) The Warranties are given subject only to matters disclosed in
the Disclosure Documents meaning that the Seller shall not
have any liability for any Claim based on any fact, matter, or
circumstance having been disclosed in this Agreement or by the
Disclosure Documents.
(d) Each of the Warranties shall be separate and independent and,
save as expressly provided, shall not be limited by reference
to any other Warranty or any other provision in this
Agreement.
(e) The Seller agrees with the Buyer (for itself and as trustee
for each of the Transferring Employees):
(i) that the giving by any Transferring Employee to the
Seller or its respective agents or advisers of any
information or opinion in connection with the
Warranties or any of the other agreements to be
entered into pursuant to this agreement or other-wise
in relation to the Business shall not be deemed to be
a representation, warranty or guarantee to the Seller
of the accuracy of such information or opinion;
(ii) to waive any right or claim which it may have against
any Transferring Employee or for any error, omission
or misrepresentation in any such information or
opinion save for any such right or claim based on
gross negligence or willful conduct; and
(iii) that any such right or claim shall not constitute a
defense to any claim by the Seller under or in
relation to this agreement (including the Warranties)
or any of the other agreements to be entered into
pursuant to this
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agreement save for any such right or claim based on
gross negligence or willful conduct.
(f) Part A of Schedule 4 shall apply to limit or exclude in
accordance with its terms, any liability which the Seller
might otherwise have in respect of a breach of the Warranties,
provided that (a) the provisions of Part A of Schedule 4 shall
not apply to any such liability in circumstances of fraud by
or on behalf of the Seller; or (b) the provisions of paragraph
2 of Schedule 4 shall not apply in circumstances of willful
non-disclosure by or on behalf of the Seller. References in
Schedule 4 to the Buyer and the Seller shall (apart from
paragraph 3.15 of Part A and paragraph 10 of Part B) be deemed
to be references to the Buyer's Group and the Seller's Group
respectively.
(g) The Warranties shall continue in full force and effect
notwithstanding Completion.
8.2 BUYER'S WARRANTIES
(a) The Buyer warrants that:
(i) it has the requisite power and authority to enter
into and perform this Agreement and the agreements to
be entered into pursuant to it.
(ii) it does not require the consent, approval or
authority of any other person to enter into or
perform its obligations under this Agreement.
(iii) the execution and delivery of and the performance by
the Buyer of its obligations under this Agreement and
the agreements to be entered into pursuant to it will
not:
(A) be or result in a breach of, or constitute a
default under, any agreement, instrument or
arrangement to which the Buyer is a party or
by which the Buyer is bound; or
(B) be or result in a breach of any order,
judgement or decree of any court or
governmental agency to which the Buyer is a
party or by which the Buyer or the Business
is bound; or
(C) be or result in a breach of any of the
provisions of the memorandum or articles of
association of the Buyer.
9. COVENANTS BY THE SELLER
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9.2
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POST-COMPLETION OBLIGATIONS
10.1 The Seller shall, and shall procure that members of the Seller's Group
shall after Completion comply with Schedule 6 and the Technical Support
Schedule.
10.2 The Buyer shall, and shall procure that member's of the Buyer's Group
shall after Completion comply with Schedule 7 and the Technical Support
Schedule.
11. TRANSITION
11.1 GENERAL
(a) The Seller shall, and shall procure that members of the
Seller's Group shall after Completion use all reasonable
endeavours to comply with the Transition Schedule and to carry
into effect the matters referred to in it.
(b) The Buyer shall, and shall procure that members of the Buyer's
Group shall after Completion use all reasonable endeavors to
assist, make timely management and operational decisions, give
advice, answer queries, conduct any audits (as defined in the
Transition Schedule) as may be reasonably required by the
Seller and allocate relevant resources in order to carry into
effect the matters referred to in the Transition Schedule.
(c) The Seller agrees to provide at no cost to the Buyer a
translation of any Technical Documents (as defined in the IPR
Agreement) transferred in connection with this Agreement after
the Completion Date which are not in the English language
provided that where the Seller has any documents that are not
in the English language which are translations of documents
originally in the English language it shall not be obliged to
provide a translation.
(d) The Seller agrees to use its reasonable endeavours to transfer
or to make arrangements to transfer to the Buyer all rights
related to the electronic identity and address ranges (IEEE)
embedded in the Transferred Products.
(f) The Seller undertakes with the Buyer that it will not grant a
sub-lease relating to any sales offices occupied by it on or
before the Completion Date without (a) first giving the Buyer
written notice and allowing it 21 Business Days from the date
of service of such notice to state in writing whether it
wishes to take the sub-lease; and (b) if the Buyer wishes to
negotiate the terms of such sublease in good faith with the
Buyer provided that, if such terms have not been agreed within
a period of 30 Business Days after they commence, the Seller
shall be free to enter into a
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sub-lease relating to that office with any other person on no
more favorable terms to the sub-tenant.
12. INTELLECTUAL PROPERTY RIGHTS
12.1 GENERAL
(a) All intellectual property rights (including patents,
registered designs, unregistered designs, copyrights,
technical information or know how and similar rights
worldwide) arising in the course of or as a consequence of the
Seller undertaking development work under the Transition
Schedule shall belong to the Buyer. Without prejudice to the
above, the Seller shall have a non-exclusive license to use
any know-how developed in the course of or as a consequence of
the Seller undertaking such development work for purposes not
related to Token Ring Products or Token Ring Services.
(b) Such intellectual property shall be free of all third party
claims of ownership and all work undertaken by the Seller in
which Intellectual Property Rights might arise shall be its
own original work.
(c) The Seller shall (a) forthwith communicate to the Buyer any
designs, discoveries, inventions or other matters potentially
the subject to such Intellectual Property Rights, (b) shall
not disclose them (or any proposals communicated to it by the
Buyer, which proposals it shall retain in confidence) to any
third party without the prior written consent of the Buyer, to
which they shall belong and (c) deliver all documents,
drawings, models, samples. prototypes and the like prepared by
or for the Seller in each case to the extent that such matters
relate to the development work under the Transition Schedule;
(d) Further, to the extent that full legal title to any copyright
so arising shall fall automatically to belong to the Buyer by
virtue of the above provisions the Seller shall hold such
right on trust for the Buyer absolutely, and shall forthwith
at the request of the Buyer execute or procure the execution
of any document required by the Buyer to vest in it (or as it
shall direct) the full legal title to such copyright and to
enable it (or its nominee) to enjoy the benefit of such right.
(e) The Seller agrees that it shall (and shall procure that any
member of the Seller's Group shall) where it has agreed under
the Transition Schedule to provide Business Information and
any other information or documentation to the Buyer, provide
true and accurate copies of such information on or before any
date stipulated or where not stipulated as soon as reasonably
practicable.
(f) If there is any conflict between the provisions of this clause
12.1 and the provisions of the IPR Agreement, the provisions
of this Agreement shall prevail.
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<PAGE> 24
12.2 DISPUTES
(a) In the case of any disputes between the parties as to any
matter arising out of or in connection with the Transition
Schedule or any disputes relating to the failure of any party
to perform an obligation under the Transition Schedule the
parties shall procure that the operational directors of the
Buyer and Seller with responsibility for the relevant area in
dispute shall meet to attempt in good faith to resolve the
dispute. The meeting shall be held within 7 days of a written
request from one party to the other. This request must set out
full details of the dispute.
(b) If the dispute is not resolved as a result of the meeting
referred to in paragraph 11.3(a), the parties will procure
that a meeting between the relevant senior executive of the
Seller and a director of the Buyer shall be held within 7 days
of a written request from one party to the other.
(c) If the dispute is not resolved as a result of the director's
meeting referred to in clause 12.2(b), either party may
propose to the other at such meeting or subsequently in
writing that negotiations be entered into with the assistance
of a neutral adviser ("the NEUTRAL ADVISER").
(d) Unless the parties, within 5 Business Days of a proposal under
clause 11.3(c), agree on the appointment of the Neutral
Adviser, either party may apply to the Centre for Dispute
Resolution at 100 Fetter Lane, London EC4A 1DD ("CEDR") to
recommend a non-binding procedure for the resolution of the
dispute and to nominate the Neutral Adviser provided always
that any Neutral Adviser appointed shall be an expert or have
at least 5 years experience in the area of the dispute
referred.
(e) The parties shall within 14 days of the appointment of the
Neutral Adviser meet him in order to agree a programme for the
exchange of' any relevant information and the structure to be
adopted for the negotiating session(s). If considered
appropriate, the parties may seek assistance from CEDR to
provide guidance on a suitable procedure.
(f) All negotiations shall be conducted in confidence and without
prejudice to the rights of the parties in any future
proceedings.
(g) If the parties reach agreement on the resolution of the
dispute, such agreement, including agreement as to the costs
of the parties involved in the negotiations and the reference
to the Neutral Adviser, shall be reduced to writing and, once
it is signed by each party, it shall be binding on the
parties. Failing agreement. either of the parties may invite
the Neutral Adviser to provide a non-binding but informative
opinion in writing. Such opinion shall not be used in evidence
in any proceedings commenced pursuant to the terms of this
Agreement without the consent of both parties. In the event of
failure of agreement resulting from a reference to a Neutral
Adviser the fees of the Neutral Adviser and of CEDR will be
borne equally by the parties to the dispute and each party
will also bear its own costs of the reference.
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<PAGE> 25
(h) If:
(a) the parties do not agree to refer to dispute to a
Neutral Adviser pursuant to clause 12.3(c); or
(b) the parties fail to reach agreement in the
negotiations with the Neutral Adviser.
then any dispute or difference between them shall be subject to
resolution pursuant clause 17.
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<PAGE> 26
13. ANNOUNCEMENTS AND CONFIDENTIALITY
13.1 No announcement relating to the provisions of this Agreement or any
matter ancillary to this Agreement shall be made by or on behalf of the
Seller or the Buyer without the prior written approval (which shall not
be unreasonably withheld or delayed) of the other party save as may be
required by any legal or regulatory authority or securities exchange
(including, without limitation, Copenhagen Stock Exchange, NASDAQ, and
the Securities & Exchange Commission) to which the disclosing party or
any member of its group is subject.
13.2 Nothing in clause 13.1 shall prevent the Buyer from writing to the
customers, suppliers or employees of the Business after Completion, or
if earlier, the date of any public announcement made with the agreement
of the parties, notifying them of the acquisition by the Buyer of the
Business.
13.3 The Seller shall, and shall procure that each member of the Seller's
Group shall, keep confidential and not at any time after the date of
this Agreement disclose or make known in any way to anyone (other than
the Buyer) or use for its own or any other person's benefit any
Business Information or any other information which may have been
disclosed or otherwise known to the Seller or any member of the
Seller's Group or which may otherwise have come to the attention of the
Seller or any member of the Seller's Group (as relevant) and which
relates to the Business or Assets.
13.4 The Buyer shall, and shall procure that each member of the Buyer's
Group shall, keep confidential and not at any time after the date of
this Agreement disclose or make known in any way to anyone or use for
its own or any other person's benefit any confidential information
relating to the Seller or the Seller's Group which may during the
negotiations relating to this Agreement have been disclosed to the
Buyer or any member of the Buyer's Group or which during the
negotiations relating to this Agreement may otherwise have come to the
attention of the Buyer or any member of the Buyer's Group and which
does not relate to the Business or Assets.
13.5 The obligations imposed by the provisions of clauses 13.3 and 13.4
inclusive shall not apply:
(a) to the extent that the information in question is or comes
into the public domain without fault on the part of the
disclosing party or any member of its Group;
(b) to the extent that the information in question save, in the
case of Business Information, was already known to the
disclosing party or any member of its Group at the time the
same was disclosed to it or came to its attention;
(c) to the extent that the information in question (in the case of
Business Information, after Completion) has been lawfully
disclosed to the disclosing party or any member of its Group
by a third party; or
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<PAGE> 27
(d) to the extent that the information in question may be required
by any legal or regulatory authority or securities exchange
(including, without limitation, the Copenhagen Stock Exchange,
NASDAQ and the Securities & Exchange Commission) to which the
disclosing party or any member of its Group is subject.
13.6 The parties acknowledge that remedies at law may be inadequate to
protect against a breach of clauses 13.3 or 13.4 and the parties
therefore agree, in the event of any such breach, not to oppose the
granting of injunctive relief, specific performance or other equitable
relief in favor of the other part), or any member of its Group without
proof of actual damages.
14. COSTS
14.1 The parties shall pay their own costs and expenses in relation to the
preparation, execution and implementation of this Agreement and the
agreements referred to in it.
14.2 All stamp duty payable on the transactions effected by this Agreement
and fees for registration of transfers of the Intellectual Property
Rights are to be borne by the Buyer.
14.3 The obligation to adjust the value added tax accrued
("momsreguleringsforpligtelse") shall be taken over by the Buyer
without any separate consideration being payable herefore provided that
it shall not be greater than $25,000.
15. ASSIGNMENT
15.1 This Agreement shall be binding upon and inure for the benefit of the
successors of the parties but, save as provided in clause 15.2 or with
the written consent of the parties, shall not be assignable.
15.2 Each party's rights under this Agreement or any of the other documents
referred to in this Agreement may be assigned by that party to any
wholly-owned subsidiary of that party or any holding company of that
party or any wholly-owned subsidiary of such holding company provided
that:
(a) if such assignee company ceases to be a wholly-owned
subsidiary or holding company of that party or a wholly-owned
subsidiary of such holding company such rights shall be
promptly assigned to another wholly-owned subsidiary of the
assigning party or holding company of that party or a
wholly-owned subsidiary of such holding company;
(b) the assigning party shall continue to be liable to the other
party pursuant to this Agreement notwithstanding such
assignment.
15.3 Where, subsequent to Completion, the Buyer transfers the Business to
any member of the Buyer's Group (or any such member of the Buyer's
Group transfers the Business to any other member of the Buyer's Group
and so on and so forth) such transferee company shall be entitled (for
so long as it remains a wholly-owned subsidiary or holding company of
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<PAGE> 28
the Buyer or a wholly-owned subsidiary of such holding company) to
claim under the Warranties as if it were the Buyer under this
Agreement.
16. GENERAL
16.1 This Agreement, together with the agreements to be entered into by the
parties pursuant to it, constitutes the entire agreement between the
parties relating to the sale and purchase of the Assets and supersedes
all previous agreements, arrangements and understanding between the
parties in relation to it. Each of the parties acknowledges that in
entering into this Agreement it has not relied on any representation,
warranty or other assurance except those expressly contained in this
Agreement and the documents which the parties will enter into as
referred to in this Agreement. Each party waives all rights and
remedies which, but for this clause, might be available to it in
respect of such representation, warranty or assurance provided that
nothing in this clause shall limit or exclude any liability for
fraudulent misrepresentation.
16.2 No failure or delay by either party to exercise and no delay,
forbearance or indulgence given by it in or before exercising any
remedy or right under or in relation to this Agreement shall operate as
a waiver of that right, power or remedy or preclude its exercise at any
subsequent time or on any subsequent occasion. No single or partial
exercise of any remedy or right shall preclude any further exercise of
the same or the exercise of any other remedy or right. The remedies and
rights provided in this Agreement are cumulative and are not exclusive
of any remedies or rights provided by law or otherwise.
16.3 This Agreement may be executed in two or more counterparts and
execution by each of the parties of any one of such counterparts will
constitute due execution of this Agreement.
16.4 The Seller shall and shall procure that any third party shall (so far
as is within its power so to do) do, execute and perform all such
further deeds, documents, assurances, acts and things as the Buyer may
reasonably require to effectively vest in the Buyer the benefit of this
Agreement.
16.5 The provisions of this Agreement shall remain in full force and effect
after Completion so far as they then remain to be observed and
performed.
16.6 No variation of this Agreement shall be effective unless made in
writing and signed by or on behalf of each of the parties.
16.7 If any provision of this Agreement shall be held to be illegal, void,
invalid or unenforceable under the laws of any jurisdiction, the
legality, validity and enforceability of the remainder of this
Agreement in that jurisdiction shall not be affected, and the legality,
validity and enforceability of the whole of this Agreement in any other
jurisdiction shall not be affected.
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<PAGE> 29
17. APPLICABLE LAW AND JURISDICTION
17.1 This Agreement shall be governed by and construed in accordance with
English law. Each of the parties irrevocably submit to the
non-exclusive jurisdiction of the courts of England and Wales in
respect of any claim, dispute or difference arising out of or in
connection with this Agreement.
17.2 The Seller and Buyer each agree to appoint and maintain the appointment
of an authorized agent to receive on their behalf service of process in
England.
17.3 The Seller hereby appoints Bird & Bird of 90 Fetter Lane, London, EC4A
1JP (Ref: DXK/NXB) as its authorized agent to receive service of
process in England on its behalf and the Buyer hereby appoints Law
Debenture Corporate Services Limited of Princes House, 95 Gresham
Street, London, EC2V 7LY)(telephone number: 0171 696 5213, fax 0171 696
5262) as its authorized agent to receive service of process in England
on its behalf.
18. NOTICES
Any notice or other communication required or permitted under this
Agreement shall be in writing and shall be delivered personally, sent
by facsimile transmission (with confirmation or receipt) or sent by
nationally recognized courier service, postage prepaid. Any such notice
shall be deemed given when so delivered personally or, if sent by
facsimile, at the time of receipt of a legible copy thereof or, if sent
by internationally recognized courier service, three days after the
date of deposit with the courier service, postage prepaid, and shall be
sent to the registered office of the party addressed for the attention
of "the Secretary".
THIS AGREEMENT has been signed by or on behalf of the parties on the date
appearing on page 1.
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SIGNED by )
MADGE NETWORKS NV ) /s/
Acting by: )
SIGNED by )
OLICOM A/S ) /s/
Acting by: )
<PAGE> 1
Exhibit 3.9
UMBRELLA AGREEMENT
RELATING TO THE PURCHASE AND SALE
OF CERTAIN BUSINESSES AND ASSETS
between
(1) INTEL CORPORATION;
and
(2) OLICOM A/S;
INTEL CORPORATION-OLICOM A/S - Umbrella Agreement
<PAGE> 2
THIS AGREEMENT is made the 30th day of September 1999
BETWEEN:
(1) INTEL CORPORATION OF 2200 MISSION COLLEGE BOULEVARD, CA 95052, U.S.A.
(the "PRINCIPAL PURCHASER"); and
(2) OLICOM A/S, REG.NO. A/S 101.733, NYBROVEJ 114, 2800 LYNGBY, DENMARK
(the "DANISH SELLER"); with the adherence of
(3) OLICOM POLAND SP. Z O.O., STOWACKIEGO 173, GDANSK - WRZESZCZ, POland
(the "POLISH SELLER");
(each a "PARTY" and together, the "PARTIES")
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 All terms defined in Schedule A shall have the meaning specified
therein when used in this Umbrella Agreement or in any of the
Transaction Agreements unless a specific separate definition is
contained therein.
1.2 Unless the context requires otherwise words in the singular include the
plural and vice versa and words for any gender shall include all
genders. Reference to persons includes a body corporate.
1.3 Other than in the case of any warranties, reference to any legislation
includes a reference to any amending legislation, directives or orders
made further to it and includes consolidations or amendments or
modifications or re-enactments.
1.4 The headings are inserted for convenience only and shall not affect the
construction of this Umbrella Agreement.
1.5 Unless otherwise stated a reference to a clause or a schedule or a
party is a reference to a clause in or a schedule or a party to this
Umbrella Agreement.
1.6 Reference to writing includes any method of reproducing words in a
legible and non-transitory form.
1.7 Unless the context requires otherwise any period of time from a
specified date or day shall be calculated exclusive of that date or
day.
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<PAGE> 3
1.8 The Parties have participated jointly in the negotiation and drafting
of this Umbrella Agreement and the schedules and exhibits hereto. In
the event of any ambiguity or question of intent or interpretation
arises, this Umbrella Agreement or any schedule or exhibit hereto shall
be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any of the provisions of this Umbrella Agreement
or any schedule or exhibit hereto.
1.9 Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including"
shall mean including without limitation.
1.10 Any reference to this Umbrella Agreement and to the Transaction
Agreements shall be deemed to include a reference to all schedules and
exhibits hereto and thereto.
1.11 Anything reasonably identified in the Disclosure Volume shall be deemed
adequate to disclose an exception to a representation or warranty made
herein or in any of the Transaction Agreements.
1.12 The Principal Purchaser acknowledges the existence of an agreement
between the Danish Seller and Madge Networks N.V. relating inter alia
to the grant by the Danish Seller of a non-exclusive license to Madge
Networks N.V. relating to certain parts of the Base IP and to one
assigned provisional patent application,
1.13 Any statement in this Umbrella Agreement and in the Transaction
Agreements which is qualified by the expression "to the best of
knowledge" or "as far as the Danish Seller is aware" or any similar
expression shall mean the actual knowledge, information, and belief of
the following executives of Niels Christan Furu, Chief Executive
Officer; Per Larsen, Executive Vice President Global Sales and
Marketing and Chief Executive Officer, Olicom lnc.: Niels Jorgensen,
Former Chief Technical Officer; Lars Larsen, Chief Financial Officer:
Per Friis, Vice President of Operations; Niels Christian Gjellerup,
Vice President Business Operations; Mette Fogt, Director of Legal
Affairs; and Mr. Pankiewicz, CEO of the Polish Seller, provided that
the knowledge of Mr. Pankiewicz shall only be deemed relevant up to the
Polish Completion.
2. SCOPE OF AGREEMENT
2.1 This Umbrella Agreement governs and sets out the principal terms and
conditions relating to the Sellers' sale and transfer of the Businesses
to the Purchasers. The detailed terms and conditions of the sale and
transfer of the individual parts of the Businesses are set out in the
Transaction Agreements. In the event of a conflict between the terms
and conditions in this Umbrella Agreement and the terms and conditions
in any of the Transaction Agreements, the Umbrella Agreement shall
prevail.
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<PAGE> 4
2.2 It is the mutual intention of the Parties, that upon the consummation
of the transactions contemplated by this Umbrella Agreement and by each
of the Transaction Agreements, the Purchasers shall have become the
sole and unrestricted proprietor of the Businesses, the FE Patents and
the Remaining FE IP and a non-exclusive licensee of the Base IP.
2.3 Unless expressly stated in this Umbrella Agreement or in any of the
Transaction Agreements the Purchasers shall not assume any of the
Liabilities. The Danish Seller agrees to indemnify and keep the
Purchasers harmless from and against any and all loss, cost and expense
relating to or arising out of any of the Liabilities not expressly
assumed by any of the Purchasers. For the avoidance of doubt, the
mention of or reference to any Liability in this Umbrella Agreement, or
any of the Transaction Agreements (including without limitation the
representations and warranties herein or thereto or any of the
Disclosure Volume) shall not be construed as an agreement by any
Purchaser to assume and/or discharge any such Liability unless
otherwise expressly stated herein or therein.
2.4 In the event of any inconsistency between any of the Agreements or in
the event of any dispute among the Parties to this Umbrella Agreement
or any of the Transaction Agreements, it is the intention of the
Parties that any such inconsistency or dispute shall be resolved
consistently with the main objects and principles expressed in Clauses
2.1, 2.2 and 2.3 of this Umbrella Agreement. Simultaneously with the
execution of this Umbrella Agreement, the Parties indicated below have
executed the agreements specified:
2.5.1 The Danish Business Agreement between the Danish Seller and
the Danish Purchaser, relating to the sale and transfer of the
Danish Business, Schedule B.
2.5.2 The Danish FE Patents Agreement between the Danish Seller and
Dialogic relating to the sale and transfer of the Danish FE
Patents, Schedule C.
2.5.3 The Danish Remaining FE IP Agreement between the Danish Seller
and the Principal Purchaser, Schedule D.
2.5.4. The Danish Base IP Agreement between the Danish Seller and the
Principal Purchaser, Schedule E.
2.5.5 The Polish FE Patents Agreement between the Polish Seller and
Dialogic relating to the sale and transfer of the Polish FE
Patents, Schedule G.
2.5.6. The Polish Remaining FE IP Agreement between the Polish Seller
and the Principal Purchaser, Schedule H.
2.5.7 The Polish Base IP Agreement between the Polish Seller and the
Principal Purchaser, Schedule 1.
2.5.8 The FE IP Grant Back License Agreement between Principal
Purchaser and the Danish Seller, Schedule J.
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<PAGE> 5
2.5.9 The Warranty Support Services Agreement between the Danish
Purchaser and the Danish Seller, Schedule K.
2.5.10 The First Danish Hold Back Escrow Agreement between the Danish
Purchaser and the Danish Seller, Schedule B.1.
2.5.11 The Second Danish Hold Back Escrow Agreement between the
Danish Purchaser and the Danish Seller, Schedule B.2.
2.5.12 The First Danish Conditional Escrow Agreement between the
Danish Purchaser and the Danish Seller, Schedule B.3.
2.5.13 The Second Danish Conditional Escrow Agreement between the
Danish Purchaser and the Danish Seller, Schedule B.4.
2.5.14 The Sublease Agreement between the Danish Purchaser and the
Danish Seller. Schedule B.10.
2.5.15 The Service Agreement between the Danish Purchaser and the
Danish Seller, Schedule B.6.
2.5.16 The Polish Hold-Back Escrow Agreement between the Principal
Purchaser and the Polish Seller, Schedule F.1.
2.5.17 The Intel Guaranty issued by the Principal Purchaser, Schedule
B.11.
2.6 The Principal Purchaser agrees to procure the incorporation of the
Polish Purchaser without undue delay and pursuant hereto to procure the
execution by the Polish Purchaser of the Polish Business Agreement
between the Polish Seller and the Polish Purchaser, relating to the
sale and transfer of the Polish Business in the same or substantially
the same form as Schedule F. Furthermore, the Principal Purchaser
agrees to use reasonable commercial efforts to procure the consummation
by the Polish Purchaser of the transactions contemplated by the Polish
Business Agreement without undue delay.
2.7 The Danish Seller agrees to procure the execution by the Polish Seller
of the Polish Business Agreement between the Polish Seller and the
Polish Purchaser, relating to the sale and transfer of the Polish
Business in the same or substantially the same form as Schedule F.
Furthermore, the Danish Seller agrees to use reasonable commercial
efforts to procure the consummation by the Polish Seller of the
transactions contemplated by the Polish Business Agreement without
undue delay.
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3. COMPLETION
3.1 The completion of the transactions contemplated by this Umbrella
Agreement shall be governed by the relevant Transaction Agreements.
3.2 In the event that (a) the Polish Business Agreement cannot be executed
by any of the respective parties thereto or (b) any of the transactions
contemplated by the Polish Business Agreement cannot be consummated on
or before 31 December 1999, then the Danish Seller and the Principal
Purchaser undertake to use all reasonable efforts to procure either (i)
that such execution and consummation is accomplished without undue
delay or (ii) that the transactions contemplated by the Danish Business
Agreement shall be replaced by one or more other transactions capable
of facilitating the same or substantially the same results, such other
transaction(s) to be consummated by the Danish Seller and the Principal
Purchaser, or their respective affiliates, without undue delay. The
foregoing sentence shall not apply, however, in case of a material
breach for the whole transaction by a Party to the Umbrella Agreement
or its affiliate of any of the representations, warranties, agreements
and undertakings in this Umbrella Agreement or in any of the
Transaction Agreements.
3.3 Each Purchaser may waive any requirement or condition contained in this
Umbrella Agreement or in any of the respective Transaction Agreements
or may waive such requirement or condition on condition that the
relevant Sellers give on the relevant date of completion a written
undertaking to the relevant Purchaser in a form reasonably required by
such Purchaser.
3.4 The Parties agree to use all reasonable efforts to take, or cause to be
taken all actions and to do, or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate
and make effective the transactions contemplated by this Umbrella
Agreement and by each of the Transaction Agreements.
4. CONDITIONS FOR COMPLETION
4.1 The obligations of the Principal Purchaser to perform its obligations
pursuant to this Umbrella Agreement and/or any of the Transaction
Agreements is subject to satisfaction of each of the following
conditions:
(1) No unfavorable injunction, judgement, order, decree, ruling,
or charge by any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator would: (A) prevent to any material
extent the consummation of any of the transactions
contemplated by this Umbrella Agreement; or (B) save for
clause 7.7, cause any of the transactions contemplated by this
Umbrella Agreement to be rescinded to any material extent
following consummation.
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<PAGE> 7
(2) The Danish Seller and/or the Polish Seller shall have taken
all of the following action required or reasonably advisable
for them to take in connection with the consummation of the
transactions contemplated hereby:
(i) Approval of this Umbrella Agreement and each of the
Transaction Agreements by the Danish Seller's board
of directors and, if decided by the Danish Seller, by
a shareholders' meeting;
(ii) Approval of the Polish Transaction Agreements by the
Polish Seller's board of directors.
4.2 The obligations of the Purchasers to perform their respective
obligations pursuant to the Danish Transaction Agreements and the
Polish Transaction Agreements (with the exception of the Polish
Business Agreement) shall be subject to the simultaneous consummation
of all transactions contemplated thereby.
4.3 The obligations of the Polish Purchaser to perform its obligations
pursuant to the Polish Business Agreement (and of the Principal
Purchaser pursuant to Clause 3.2 herein) shall be subject to the prior
fulfillment of the condition precedent in Clause 4.2 herein.
4.4 The obligations of the respective Purchasers to consummate the
transactions contemplated by the respective Transaction Agreements
shall be subject to the conditions precedent specified in each such
Transaction Agreement.
5. GENERAL COVENANTS
5.1 Further Assurances
Each Party shall, and shall procure that its respective affiliates
shall, at the other Party's request, from time to time execute and
deliver such further instruments of conveyance, assignment and transfer
in addition to those specified in this Umbrella Agreement and/or in any
of the Transaction Agreements, which are necessary to consummate and
make effective the transactions contemplated by this Umbrella Agreement
and by the Transaction Agreements, and each Party shall take, or cause
or procure to be taken by it or by its affiliates, such other actions
as either Party may reasonably request for more effective conveyance,
assignment and transfer of the Businesses to the Purchasers.
5.2 Reasonable Efforts.
Each of the Parties shall (and shall use reasonable commercial efforts
to procure that their affiliates shall) co-operate and use their
respective reasonable efforts to take, or cause to be taken, all
appropriate actions, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Umbrella Agreement and by the Transaction Agreements.
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5.3 Books and Records.
To the extent not included in the Assets, the Principal Seller shall
(and shall use reasonable commercial efforts to procure that their
affiliates shall) maintain the books and records relating to the
Businesses not delivered to the Purchasers at the First Completion or
the Second Completion for the period during which a legal duty to do so
exists according to statutory law and whenever reasonably required by
the Principal Purchaser shall allow the Principal Purchaser and/or its
affiliates and their respective auditors and counsel access to such
books and records during normal business hours provided that the
Principal Purchaser shall give the relevant Seller reasonable notice.
Copies shall be provided at the Principal Purchaser's expense.
5.4
6. MUTUAL REPRESENTATIONS AND WARRANTIES
Each of the Principal Purchaser, the Danish Seller and the Polish
Seller (who adheres to this Umbrella Agreement for the purpose of this
Clause 6) makes the following representations and warranties:
6.1 Corporate Existence/Authority
The Danish Seller is a corporation duly organized and validly existing
under the laws of Denmark, and has the corporate power and authority to
enter into this Umbrella Agreement and each of the Transaction
Agreements to which it is a party and to consummate - or procure the
consummation of - the transactions contemplated hereby or thereby.
The Polish Seller is a corporation duly organized and validly existing
under the laws of Poland, and has the corporate power and authority to
enter into this Umbrella Agreement and each of the Transaction
Agreements to which it is a Party and to consummate - or procure the
consummation of - the transactions contemplated hereby or thereby.
The Principal Purchaser is a corporation duly organized and validly
existing under the laws of the State of Delaware, U.S.A., and has the
corporate power and authority to enter into this Umbrella Agreement and
each of the Transaction Agreements to which it is a Party and to
consummate the transactions contemplated hereby or thereby or to
procure that such transactions are consummated.
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6.2 Authorisation.
The execution and delivery by the Danish Seller and the Polish Seller
of this Umbrella Agreement and each of the Transaction Agreements to
which it is a party and the performance by the Danish Seller hereunder
and thereunder has been duly authorised by the Danish Seller, and this
Umbrella Agreement and each of the Transaction Agreements to which it
is a party is valid and binding on the Danish Seller and the Polish
Seller and enforceable against the Danish Seller and the Polish Seller
in accordance with their respective terms except when such
enforceability may be limited by applicable bankruptcy, insolvency or
similar laws from time to time in effect which affect creditors' rights
generally. The Danish Seller and the Polish Seller are not insolvent
nor are any of the Danish Seller's and the Polish Seller's assets
subject to attachment or seizure (in Danish: udlae eller arrest).
The execution and delivery by the Principal Purchaser of this Umbrella
Agreement and each of the Transaction Agreements to which it is a party
and the performance by the Principal Purchaser hereunder and thereunder
has been duly authorized by the Principal Purchaser, and this Umbrella
Agreement and each of the Transaction Agreements to which it is a party
is valid and binding on the Principal Purchaser and enforceable against
the Principal Purchaser in accordance with their respective terms
except when such enforceability may be limited by applicable
bankruptcy, insolvency or similar laws from time to time in effect
which affect creditors' rights generally.
6.3 No Conflict.
Neither the execution and delivery of this Umbrella Agreement and each
of the Transaction Agreements to which it is a party, nor the
performance by the Danish Seller and the Polish Seller hereunder or
thereunder does or will (i) violate, conflict with or constitute a
default under any provision of the Danish Seller's or the Polish
Seller's, respectively constitutional documents or applicable law, (ii)
conflict with or result in a breach of any agreement to which the
Danish Seller or the Polish Seller, respectively is a party or by which
its properties are bound other than such covenants and agreements with
respect to which failure to perform would not have a material adverse
effect on the transactions contemplated by this Umbrella Agreement
and/or by any Transaction Agreement, (iii) violate any judgement,
order, injunction, decree or award of any court, administrative agency
or governmental body against, or binding upon, the Danish Seller or the
Polish Seller, respectively or its properties or (iv) constitute a
violation by the Danish Seller or the Polish Seller, respectively of
any law or regulation applicable to the Danish Seller or the Polish
Seller, respectively or its properties.
Neither the execution and delivery of this Umbrella Agreement and/or by
any Transaction Agreement, nor the performance by the Principal
Purchaser hereunder or thereunder does or will (i) violate, conflict
with or constitute a default under any provision of the Principal
Purchaser's constitutional documents or applicable law, (ii) conflict
with or result in a
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breach of any agreement to which the Principal Purchaser is a party or
by which its properties are bound other than such covenants and
agreements with respect- to which failure to perform would not have a
material adverse effect on the transactions contemplated by this
Umbrella Agreement and/or by any Transaction Agreement,, (iii) violate
any judgement, order, injunction, decree or award of any court,
administrative agency or governmental body against, or binding upon,
the Principal Purchaser or its properties or (iv) constitute a
violation by any the Principal Purchaser of any law or regulation
applicable to the Principal Purchaser or its properties.
6.4 No Consents.
The execution, delivery and performance by the Danish Seller and the
Polish Seller respectively of and the consummation of the transactions
contemplated by this Umbrella Agreement and/or by any Transaction
Agreement do not require approval from any shareholder, any holder of
any indebtedness or obligation of any the Danish Seller and the Polish
Seller respectively, or any other person, or any notice to or filing or
recording with, or any consent or approval of, any governmental body
except as specified in the conditions precedent of this Umbrella
Agreement and/or by any Transaction Agreement, which consents shall
have been obtained and shall be in full force and effect as of the
First Completion Date. The Danish Seller and the Polish Seller
respectively has received written advice from its legal counsel which
support the aforesaid representation with regard to company law
matters.
The execution, delivery and performance by the Principal Purchaser of
and the consummation of the transactions contemplated by this Umbrella
Agreement and/or by any Transaction Agreement do not require approval
from any shareholder, any holder of any indebtedness or obligation of
any the Principal Purchaser, or any other person, or any notice to or
filing or recording with, or any consent or approval of, any
governmental body except as specified in the conditions precedent of
this Umbrella Agreement and/or by any Transaction Agreement, which
consents shall have been obtained and shall be in full force and effect
as of the First Completion Date.
6.5 Legal proceedings.
There are no actions, suits or proceedings pending, or to the Danish
Seller's and the Polish Seller's respectively knowledge threatened
against the Danish Seller and the Polish Seller respectively or its
properties before any court, arbitrator, administrative or governmental
body that, if adversely determined, would hinder or prevent the Danish
Seller's and the Polish Seller's respectively ability to carry out the
transactions contemplated by this Umbrella Agreement and/or by any
Transaction Agreement, or affect the right, title or interest of any of
the Purchasers in the Businesses or any part thereof and, as far as the
Danish Seller and the Polish Seller respectively is aware, there is no
basis for any such suits or proceedings.
There are no actions, suits or proceedings pending, or to the Principal
Purchaser's knowledge threatened against the Principal Purchaser or its
properties before any court, arbitrator, administrative or governmental
body that, if adversely determined, would
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hinder or prevent the Principal Purchaser's ability to carry out the
transactions contemplated by this Umbrella Agreement or by any
Transaction Agreement, or affect the right, title or interest of any of
the Purchasers in the Businesses or any part thereof and, as far as the
Principal Purchaser is aware, there is no basis for any such suits or
proceedings.
6.6
the Sellers nor any affiliate of a Seller has during the period of 12
months immediately preceding the First Completion or the Second
Completion respectively transferred, assigned or licensed any part of
the fixed and loose assets (with regard to fixed and loose assets, to
any material extent), the employees, the leases or the intellectual
property rights pertaining to the Businesses, to any affiliate of a
Seller or to any third party other than (i) in the ordinary course of
business and (ii) the grant of a non-exclusive license to Madge
Networks N.V. as reflected in the Transaction Agreements.
6.7 Each of the representations and warranties made by the Sellers in this
Umbrella Agreement and/or in any of the Transaction Agreements
(including without limitation the schedules and exhibits thereto) shall
be incorporated by reference in this Umbrella Agreement. Any breach by
any Seller of any of the representations and warranties made by any
Seller in any of the Transaction Agreements (including any schedule or
exhibit thereto) shall be deemed to constitute a breach of the
representations and warranties made by the Danish Seller in this
Umbrella Agreement.
7. INDEMNIFICATION
7.1 The Danish Seller and the Polish Seller (who shall adhere to this
Umbrella Agreement) shall indemnify and hold harmless each of the
Purchasers from and against any and all loss, damage, cost or expense
(including legal fees and expenses), judgements and fines
(collectively, "Damages") (i) caused by any misrepresentation, breach
of warranty or failure to fulfil any covenant, undertaking or agreement
of any of the Sellers contained herein or in any of the Transaction
Agreements or in any schedule or exhibit hereto or thereto or in any
agreement or document delivered or to be delivered pursuant to this
Umbrella Agreement or any of the Transaction Agreements, or (it)
arising from any action or inaction of the Danish Seller and/or the
Polish Seller after the First Completion or the Second Completion
respectively, other than in accordance with the terms of this Umbrella
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Agreement and/or any Transaction Agreement or any schedule or exhibit
hereto or thereto or any agreement or document delivered or to be
delivered pursuant to this Umbrella Agreement or any of the Transaction
Agreements.
The Danish Seller acknowledges that the Purchasers have relied on the
representations and warranties given by the Sellers in this Umbrella
Agreement and the Transaction Agreements and in any schedule or exhibit
hereto or thereto.
The Parties agree that the Sellers' representations and warranties,
agreements, indemnities and covenants in this Umbrella Agreement and
any Transaction Agreement or any schedule or exhibit hereto or thereto
shall not operate to relieve any of the Sellers from any liability
which would otherwise apply under general principles of Danish law.
7.2
7.3 In the event that any third party forwards a claim against any
Purchaser relating to any event or circumstance prior to the relevant
Completion and/or any act or omission of a Seller (a "THIRD PARTY
CLAIM"), such Purchaser must give prompt notice to the relevant Seller
of the Third Party Claim. The relevant Seller may, at its sole cost and
expense, upon notice to the relevant Purchaser within thirty (30) days
after the relevant Seller receives notice of the Third Party Claim,
assume the defense of the Third Parry Claim, with counsel of its
choice. The relevant Seller shall not consent to a settlement of, or
the entry of any judgement arising from any Third Party Claim, unless;
(i) the settlement or judgement is solely for money damages and the
relevant Seller shall have provided unconditional and irrevocable
security for the fulfillment of such settlement or judgement, including
any costs awarded to the relevant third party or; (ii) the relevant
Purchaser consents thereto, which consent shall not be unreasonably
withheld. The relevant Seller shall provide the relevant Purchaser with
thirty (30) days prior notice before it consents to a settlement of, or
the entry of a judgement arising from, any Third Party Claim. The
Purchasers shall be entitled to participate in the defense of (but not
control) any Third Party Claim, the defense of which is assumed by the
relevant Seller, with its own counsel and at its own expense. The
relevant Seller and the relevant Purchaser shall co-operate in the
defense of any Third Party Claim and the relevant records of each party
shall be made available on a timely basis. If the relevant Seller does
not assume the defense of any such claim or proceeding resulting
therefrom in accordance with the terms hereof, the relevant Purchaser
may defend such claim or proceeding in a reasonable manner, including
settling such claim or
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proceeding on such terms as the relevant Purchaser may deem appropriate
after giving thirty (30) days' notice of the same to the relevant
Seller.
7.4 The Principal Purchaser shall procure that on service of any notice to
the Danish Seller of any claim for breach of this Umbrella Agreement or
any Transaction Agreement or any of the schedules or exhibits hereto or
thereto, the relevant Purchaser shall:
7.4.1 take any action the Sellers may reasonably request to avoid or
dispute or resist or appeal or compromise or defend a claim in
relation to a third party subject to the relevant Purchaser
being indemnified by the Danish Seller against all losses,
costs, damages and expenses incurred by that action;
7.4.2 allow the Sellers and their agents access at all reasonable
times to and to inspect and take copies of all necessary books
and records of the relevant Purchaser-,
7.4.3 require the personnel of the relevant Purchaser to provide
statements and proof of evidence and, as commercially
reasonable, to attend any trial or hearing to give evidence or
otherwise and to provide similar assistance to enable the
Sellers to avoid or dispute or resist or appeal or compromise
or defend any claim;
7.4.4 take or procure that any relevant subsidiary shall take all
reasonable steps necessary to mitigate any loss in relation to
any action or claim.
7.5 The provisions in Clause 7.3 shall apply mutatis mutandis in the event
that any third party forwards a claim against any Seller relating to
any event or circumstance prior to Completion of any transaction
contemplated by this Umbrella Agreement or any Transaction Agreement or
any schedule or exhibit hereto or thereto; and/or any act or omission
of a Purchaser.
7.6 To the extent that a Seller discharges any claim by a Purchaser for
indemnification pursuant to this Umbrella Agreement or any of the
Transaction Agreements or any schedule or exhibit hereto or thereto,
the relevant Seller shall be subrogated to all rights of such Purchaser
against third parties.
7.7 Exclusion of Remedies.
The Parties agree that following completion of any transaction
contemplated by this Umbrella Agreement or any Transaction Agreement or
any schedule or exhibit hereto or thereto, no Party to this Umbrella
Agreement shall be entitled to rescind (in Danish: "haeve aftalen")
this Umbrella Agreement or the respective Transaction Agreement or any
schedule or exhibit hereto or thereto in respect of any such
transaction except as stipulated in Clause 9.
For the avoidance of doubt, any other remedies available to the
Purchasers under the law or in equity, including without limitation the
right to claim specific performance and/or injunctive relief, shall not
be excluded.
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7.8 Specific Performance
Each of the Parties acknowledges and agrees that the other Parties
would be damaged irreparably in the event that any of the provisions of
this Umbrella Agreement and/or in any of the Transaction Agreements are
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that each other Party
shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Umbrella Agreement and to enforce
specifically this Umbrella Agreement and the terms and provisions
hereof in any action instituted in any court in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Claims against the Escrow Accounts.
In the event that any Purchaser has a claim for indemnification
hereunder or under any Transaction Agreement or any schedule or exhibit
hereto or thereto, such Purchaser shall be entitled to notify the claim
to the Danish Escrow Bank in accordance with the terms and conditions
of the Escrow Agreements. For the avoidance of doubt, all of the Escrow
Accounts established pursuant to the terms of any Transaction Agreement
or any schedule or exhibit thereto shall, subject to Clause 8 of this
Umbrella Agreement, serve as collateral for any claim by any Purchaser
hereunder or under any Transaction Agreement or any schedule or exhibit
hereto or thereto.
7.10 Right of Set 0ff
Subject to Clause 8 of this Umbrella Agreement, each Purchaser shall be
entitled to set off the amount of any claim against any Seller against
any amount due and owing by any Purchaser to any Seller or its
assignee.
8. LIMITATIONS OF SELLERS' LIABILITY
8.1 The liability of the Sellers under this Umbrella Agreement and the
Transaction Agreements and any schedules or exhibits hereto or thereto
shall be limited in accordance with the provisions of Clauses 8.2 to
8.15 of this Umbrella Agreement (inclusive).
8.2 The liability of the Sellers under this Umbrella Agreement and the
Transaction Agreements and any schedules or exhibits hereto or thereto
shall cease on the first anniversary of the First Completion except as
regards any alleged specific breach in respect of which notice in
writing (containing reasonable details of the event or circumstances
giving rise to the breach and a reasonable estimate of the amount of
the liability in question or if such amount is not possible to
determine the Purchasers best estimate of such amount).
Notwithstanding the foregoing, the representations and warranties in
Clauses 6.1 to 6.5 herein shall survive indefinitely,
8.3 Where in relation to a claim for damages under this Umbrella Agreement
and the Transaction Agreements and the schedule and exhibits hereto and
thereto, a notice has
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been served in accordance with Clause 14 of this Umbrella Agreement
then unless proceedings are commenced in respect of that claim by the
issue and service of legal process (which are not satisfied or
withdrawn or settled) within two (2) months of the date of the notice
the Sellers shall cease to be under any liability in respect of that
claim.
8.4 The Sellers shall not be liable for breach of this Umbrella Agreement
and the Transaction Agreements and the schedules and exhibits hereto
and thereto unless:
(a)
(b)
8.5
8.6 The Sellers shall not be liable in respect of any claim for whatever
reason, if the claim:
8.6.1 occurs or arises as a result of any change or changes in
legislation made after the Completion;
8.6.2 occurs or arises wholly or parity out of or as a result of or
in connection with:
8.6.2.1 any change in the nature of the Businesses or in the
manner of conducting the Businesses after the
Completion;
8.6.2.2 any asset acquired by the Purchasers or any of its
affiliates after the date of Completion; or
8.6.2.3 any matter or thing that has been or is made good or
otherwise compensated for at no expense to the
Purchasers.
8.7 Any payment made in respect of any claim by the Sellers shall be deemed
(as between the Sellers and the Purchasers) to be a reduction in the
Danish Purchase Price and the Polish Purchase Price, as applicable,
payable by the Sellers to the Purchasers under this Umbrella Agreement
and the Transaction Agreements.
8.8 The Parties each agree that they have not entered into this Umbrella
Agreement and Transaction Agreements in reliance upon any
representation or promise other than those incorporated herein or
therein and acknowledge that they have not relied upon, and will make
no claim hereafter in respect of any such representation or promise
made by or on behalf of the Sellers.
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8.9 The Sellers shall not be liable in respect of any breach of any of the
representation and warranty if and to the extent that the loss
occasioned thereby has been recovered under the same or any other
representation and warranty,
8.10 Subject to clause 12, the representation and warranty and any
indemnities or undertakings given or made by the Sellers in this
Umbrella Agreement and the Transaction Agreements and the schedules or
the exhibits hereto and thereto shall be actionable only by the
Purchasers or any of them and no other party, shall be entitled to make
any claim or to take any action whatsoever against the Sellers under or
arising out of or in connection therewith.
8.11 The Purchasers shall not be entitled to claim that any fact, matter, or
circumstance constitutes a breach of this Umbrella Agreement or the
Transaction Agreements or the schedules or the exhibits hereto or
thereto or gives rise to a claim hereunder or thereunder if or to the
extent that such fact, matter, or circumstance has been reasonably
disclosed in the Disclosure Volume.
8.12 If any of the Sellers pays to any of the Purchasers an amount in
respect of any claim under this Umbrella Agreement or the Transaction
Agreements or the schedules or the exhibits hereto or thereto and any
of the Purchasers subsequently recovers from a third party (including
any insurer or tax authority) a sum which is referable to that claim
(including any tax saving), such Purchaser shall forthwith repay to
such Seller so much of the amount paid by such Seller does not exceed
the sum recovered from the third party less all reasonable costs,
charges, and expenses incurred by such Purchaser in obtaining that
payment and in recovering that sum from the third party.
8.13 To the extent that any representation and warranty is made in respect
of a corresponding liability, the Sellers shall not be liable to make
any payment in respect of any breach of any of the representations and
warranties unless and until one of the Purchasers has become finally
liable to make payment in respect of any corresponding liability.
8.14 Exclusion of limitations.
None of the limitations set out in Clause 8 or anywhere else in this
Umbrella Agreement and the Transaction Agreements and any schedules or
exhibits hereto or thereto shall apply in any circumstances where the
breach of a representation, warranty or covenant made by a Seller
arises out of or as a result of fraud or willful or grossly negligent
(in Danish: "forsaet eller grov uagtsomhed") misrepresentation,
concealment, mis-statement or other similar willful or grossly
negligent conduct of such Seller or any of its respective directors,
officers or employees.
8.15 The Sellers shall not be liable for loss of profits, revenues and
savings.
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9. TERMINATION OF THE UMBRELLA AGREEMENT
9.1 The Principal Purchaser may terminate this Umbrella Agreement and any
of the Transaction Agreements by giving written notice to the Danish
Seller at any time prior to the completion of all of the Transaction
Agreements (provided that if termination occurs after the completion of
some - but not all - of the transactions contemplated by the
Transaction Agreements, such termination shall take effect only in
respect of such transactions which remain uncompleted at the time of
such termination) in the following events:
A. in the event that any Seller has breached in any material
respect any material representation, warranty, or covenant
contained in this Umbrella Agreement or in any of the
Transaction Agreements or in any schedule or exhibit hereto or
thereto and the Principal Purchaser has notified the Danish
Seller of such breach, and the breach has continued without
cure for a period of 14 days after the notice of breach. The
Parties agree: that for the purpose of this Clause 9.1 a
"breach in any material respect" shall be construed in the
context of the transactions contemplated by the Umbrella
Agreement and the Transaction Agreements as a whole, provided
that for the purposes solely for determining the Purchaser's
right to terminate under this Clause any breach by any Seller
of its representations and warranties in respect of Clauses
6.1 (corporate existence/authority), 6.2 (authorization), 6.3
(no conflict), 6.4 (no consents) or 6.5 (legal proceedings)
(or similar representations made in respect of any of the
Transaction Agreements shall be considered "a breach in any
material respect"; or
B. if on or before 31 December 1999, any transaction contemplated
by this Umbrella Agreement or any Transaction Agreement has
not been completed provided, that such non-completion is
attributable to events and/or circumstances for which any of
the Sellers bears the risk.
9.2 If any Party terminates this Umbrella Agreement pursuant to this clause
9, all rights and obligations of the Parties under this Umbrella
Agreement and under any Transaction Agreement which has not been
completed shall terminate without any liability of any party thereto or
hereto (except for any liability of any party hereto or thereto then in
breach of this Umbrella Agreement or any uncompleted transaction under
any Transaction Agreement).
For the avoidance of doubt, the termination of this Umbrella Agreement
and any uncompleted Transaction Agreement shall be without prejudice to
the rights and obligations of any Seller and any Purchaser under any
Transaction Agreement which has been completed and under this Umbrella
Agreement in respect of any such completed Transaction Agreements.
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10. CONFIDENTIALITY PRESS RELEASES AND PUBLIC ANNOUNCEMENTS
10.1 The terms and conditions of this Umbrella Agreement and all of the
Transaction Agreements, including their existence, shall be considered
confidential information and shall not be disclosed by any party hereto
or thereto to any third party except in accordance with the provisions
set forth below.
10.2 No party shall issue any press release or make any public announcement
relating to the subject matter of this Umbrella Agreement or any of the
Transaction Agreements without the prior written approval of the other
Parties. No other announcements regarding this Umbrella Agreement or
any of the Transaction Agreements in any press release, conference,
advertisement, announcement, professional or trade publication, mass
marketing materials or otherwise to any third party may be made without
such prior written consent.
10.3 Notwithstanding the foregoing, any Party may disclose any element of
this Umbrella Agreement or any of the Transaction Agreements to its
current employees on a 'necessity to know' basis, investment bankers,
lenders, accountants and legal advisors, in each case only where such
persons or entities are under appropriate nondisclosure obligations.
10.4 In the event that any Party is requested or becomes legally compelled
(including without limitation, pursuant to securities laws and
regulations (which shall include the applicable rules governing
securities listed on Kobenhavns Fondsbors and Nasdaq)) to
disclose the existence or contents of this Umbrella Agreement or any of
the Transaction Agreements in contravention of the provisions of this
clause, such Party (the "Disclosing Party") shall provide the other
Parties (the "Non-Disclosing Parties") with prompt written notice of
that fact so that the appropriate party may seek (with the co-operation
and reasonable efforts of the other Parties) a protective order,
confidential treatment or other appropriate remedy. In such event, the
Disclosing Party shall furnish only that portion of the information
which is legally required and shall exercise reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded
such information to the extent reasonably requested by any
Non-Disclosing Party.
10.5 The provisions of this Clause 10 shall be in addition to, and not in
substitution for, the provisions of any separate non-disclosure
agreement executed by any of the Parties hereto with respect to the
transactions contemplated hereby. Additional disclosures and exchange
of confidential information between the Danish Seller and the Principal
Purchaser shall be governed by the terms of the corporate
non-disclosure agreement number 102755, dated 6th August 1999, executed
by the Danish Seller and the Principal Purchaser, and any confidential
information transmittal records provided in connection therewith.
10.6 All notices required under this clause shall be made pursuant to Clause
14 of this Umbrella Agreement. The foregoing duty to provide notice
shall not prevent or restrict a party from disclosing facts, if legal
requirements do not permit a party to give such notice before
disclosing.
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11. ENTIRE AGREEMENT
This Umbrella Agreement and the Transaction Agreements (including the
documents referred to and the Schedules attached hereto and thereto)
constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements or representations by or between the
Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
12. SUCCESSION AND ASSIGNMENT
This Umbrella Agreement shall be binding upon and inure to the benefit
of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Umbrella Agreement
or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties; provided, however, that
each Purchaser may (i) assign any or all of its rights and interests
hereunder or under any of the Transaction Agreements to one or more of
its affiliates and (ii) designate one or more of its affiliates to
perform its obligations hereunder or under any of the Transaction
Agreements (in any or all of which cases such Purchaser nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
13. COUNTERPARTS
This Umbrella Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together
will constitute one and the same instrument.
14. NOTICES
All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or
other communication hereunder shall be deemed duly given if delivered
solely in accordance with the following alternative methods of
delivery, and shall be deemed to be given: (a) following receipt on the
next business day in the place of receipt after delivery, if delivered
by hand; (b) two (2) business days after delivery, if delivered by
Federal Express or similar internationally recognized overnight
courier, freight prepaid; or (c) two (2) business days after delivery,
if delivered by confirmed facsimile transmission. Any such notice,
request, demand, claim or other communication shall be addressed:
if to the Principal Purchaser, at:
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Intel Corporation
2200 Mission College Boulevard
Santa Clara CA 95052
USA
Attn.: M&A Portfolio Manager
(MIS RN6-46)
Fax: + 1 (408) 765 6038
with a copy to:
Intel Corporation
2200 Mission College Boulevard
Santa Clara CA 95052
USA
Attn.: General Counsel
(M/S SC4-203)
Fax: + 1 (408) 765 7056
if to the Danish Seller at:
Olicom A/S
Nybrovej 114
2800 Lyngby
Denmark
Attn.: Legal Affairs
Fax: +45 45 27 01 01
or at such other address as a party may designate by ten (10) days'
advance written notice to the other parties pursuant to the provisions
above.
15. AMENDMENTS AND WAIVERS
No amendment of any provision of this Umbrella Agreement and/or any of
the Transaction Agreements and/or any schedule or exhibit hereto or
thereto shall be valid unless the same shall be in writing and signed
by each Party to the relevant Agreement. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty
or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
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16. SEVERABILITY
Any term or provision of this Umbrella Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof
or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
17. EXPENSES
Each of the Parties will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Umbrella Agreement and the transactions contemplated hereby.
The Sellers shall carry all costs and expenses in relation to stamp
duty, value added tax or other levies arising out of or as a result of
this Umbrella Agreement, the Transaction Agreements, any schedule and
exhibit hereto or thereto and the transactions contemplated hereby and
thereby.
18. PROPER LAW AND JURISDICTION
Save for the enforcement of any Intellectual Property outside of
Denmark and subject to specific election of a different system of law
and/or dispute resolution venue in any of the Transaction Agreements
the construction and validity and performance of' this Umbrella
Agreement and any of the schedules and exhibits hereto shall be
governed by the laws of Denmark: and each Party submits to the
exclusive jurisdiction of the Danish courts for the purposes of
determining any dispute arising out of this Umbrella Agreement.
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SCHEDULE A
DEFINITIONS
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SCHEDULE B
DANISH BUSINESS AGREEMENT
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SCHEDULE C
DANISH FE PATENTS AGREEMENT
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SCHEDULE D
DANISH REMAINING FE IP AGREEMENT
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SCHEDULE E
DANISH BASE IP AGREEMENT
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SCHEDULE F
POLISH BUSINESS AGREEMENT
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SCHEDULE G
POLISH FE PATENTS AGREEMENT
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SCHEDULE H
POLISH REMAINING FE IP AGREEMENT
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SCHEDULE I
POLISH BASE IP AGREEMENT
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SCHEDULE J
FE IP GRANT BACK LICENCE AGREEMENT
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SCHEDULE K
WARRANTY SUPPORT AGREEMENT
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THIS UMBRELLA AGREEMENT IS SIGNED BY:
FOR THE PRINCIPAL PURCHASER
INTEL CORPORATION
By: /s/ C. L. Turner
Name: C. L. Turner
Title: Attorney-In-Fact
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THIS UMBRELLA AGREEMENT IS SIGNED BY:
FOR THE DANISH SELLER
OLICOM A/S
By: /s/ N. C. Furu
Name: N. C. Furu
Title: CEO
In adherence by Polish Seller
OLICOM POLAND Sp. z.o.o.
By: /s/ Lars Larsen
Name: Lars Larsen
Title: Vice President
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Exhibit 3.10
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 26, 1999, by and among Olicom A/S (Reg. No. A/S 101.733), a
corporation organized and existing under the laws of the Kingdom of Denmark
("Olicom"), Olicom Ventures A/S (Reg. No. A/S 205.748), a corporation organized
and existing under the laws of the Kingdom of Denmark and a subsidiary of Olicom
("Seller") and Motorola, Inc., a Delaware corporation ("Buyer").
R E C I T A L S
A. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer shares (the "Shares") of common stock of Digianswer A/S (Reg. No. A/S
151.570), a corporation organized and existing under the laws of the Kingdom of
Denmark ("Digianswer") with a nominal value of 2,017,000 DKK (the "Shares")
representing sixty-six and 85/100 percent (66.85%) of the issued and outstanding
shares of Digianswer and owned by Seller (the "Common Stock"), in consideration
of __________________ (the "Purchase Price"), upon the terms and subject to the
conditions set forth herein (the "Purchase").
B. Unless the context otherwise so requires the term the "Company"
shall include a reference to each of Digianswer and Digianswer Ireland, Ltd.
(the "Subsidiary").
C. In connection with the Purchase, Buyer, Olicom, the Company, Ole
Jensen ("OJ") and Seller desire to enter into certain other agreements, upon the
terms and subject to the conditions set forth herein.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the respective representations,
warranties, agreements and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF THE SHARES
1.1 Purchase and Sale of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as hereinafter defined)
Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Shares,
free and clear of all liens, security interests, claims, charges, rights of
another, defects in title and encumbrances of any kind or character ("Liens")
and restrictions on transfers imposed by the Shareholders' Agreement (as
hereinafter defined) and all applicable Danish law. Seller shall deliver the
Shares to Buyer at the Closing by delivering to Buyer one or more share
certificates representing the Shares to be purchased by Buyer hereunder,
executed by a duly authorized officer of Seller duly endorsed in blank or
accompanied by assignment(s) separate from certificate(s).
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ARTICLE 2
MANNER OF PAYMENT
ARTICLE 3
CLOSING
3.1 Purchase Closing. The closing of the Purchase (the "Closing") will
take place at the offices of Holleb & Coff, 55 East Monroe, Suite 400, Chicago,
Illinois as soon as practicable, but in no event later than ten (10) days from
the date of this Agreement or such other date as may be agreed to by the parties
hereto (the "Closing Date"). For purposes of this Agreement, each and every
event referred to in this Section 3.1 that is to occur at the Closing shall be
deemed to have occurred contemporaneously.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OLICOM AND SELLER
Olicom and Seller hereby jointly and severally represent and warrant to
Buyer as follows (with the understanding that Buyer is relying on such
representations and warranties in entering into and performing this Agreement):
4.1 Organization, Good Standing, Etc. Each of the Company, Olicom and
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the Kingdom of Denmark and Ireland, as applicable, has all
requisite corporate power and authority to own, lease and operate its respective
properties and to carry on its respective business as now being conducted and is
duly qualified and in good standing to do business, except where the failure to
so qualify or be in good standing has not had, or could not be reasonably
expected to have, a material adverse effect on the business, operations,
properties, condition (financial or otherwise), results of operations, assets or
liabilities of the Company (a "Material Adverse Effect"). Attached as Exhibit E1
to this Agreement are (i) true and complete copies of the resume of Danish
Commerce and Companies Agency ("DCAA") which reflects Digianswer's current
Articles of Association; and (ii) true and complete copies of the Subsidiary's
Memorandum and Articles of Association, attached hereto as Exhibit E2, which
copies set out in full the rights and restrictions attaching to each class of
share capital in the Subsidiary. The Company is not in violation of any
provisions of its Articles of Association or, to the Seller's knowledge, the
Rules of Procedure for the Board of Directors. Except for the Subsidiary, the
Company does not own, directly or indirectly, any subsidiaries (as defined in
Section 14.13) or own, or have the right, pursuant to a contract or otherwise,
to acquire any capital stock, equity interest or other similar investment in any
corporation, partnership, joint venture, association, limited liability company,
trust or other entity.
4.2 Capital Structure.
(a) The authorized share capital of the Company consists of DKK
3,017,000 represented by share certificate numbers 1 through 9 and 11 through
26, which represent all of the Common Stock issued and outstanding. Attached
hereto as Schedule 4.2(a) is a true, complete and accurate list of each record
holder of capital stock of Digianswer and the number of shares of Common Stock
held by each such holder. Seller owns twelve (12) shares of Digianswer which
represent a total of sixty-six and 85/100ths (66.85%) of the economic interest
in Digianswer.
(b) The authorized share capital of the Subsidiary is EUR100,000
divided into 100,000 shares having a nominal value of EUR1 each. There are 2
shares of EUR1 in issue. The issued share capital is beneficially owned by
Digianswer free of any Liens. No shares of Common Stock are held by the Company
in its treasury. No shares of capital stock of the Company are reserved for
issuance for any purpose. There are no bonds, debentures, notes or other
indebtedness issued or outstanding having the right to vote ("Voting Debt") on
any matters on which holders of Common Stock may vote. All of the issued and
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable and have not been issued in violation of
any preemptive or similar rights. Except as set forth on Schedule 4.2(b), there
are no options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or any Voting Debt of the Company, or
obligating the Company to grant, extend or enter into any
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such option, warrant, call, right, commitment or agreement. Except as set forth
on Schedule 4.2(c), there are no outstanding contractual obligations of the
Company to sell, dispose of, repurchase, redeem or otherwise acquire any shares
of Common Stock or other capital stock of the Company.
4.3 Authority. Olicom and Seller each has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby and Olicom, Seller and the Company have all requisite
corporate power and authority to enter into each other agreement, document and
instrument required to be executed in accordance herewith, including, without
limitation, each of the documents the forms of which are attached as Exhibits
hereto (collectively, and including this Agreement, the "Transaction Documents")
and to consummate the transactions contemplated thereby. The execution and
delivery of the Transaction Documents by the Company, Olicom and Seller, as
applicable, and the consummation by the Company, Olicom and Seller of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company, Olicom and Seller. This Agreement
and each of the other Transaction Documents have been duly executed and
delivered by the Company, Olicom and Seller, as applicable, and constitute the
valid and binding obligations of the Company, Olicom and Seller, enforceable
against each of them, as applicable, in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and as provided for under The Securities Trading Act (Act N. 1072 of
20 December 1995 with amendments).
4.4 No Conflict; Required Filings and Consents. The execution and
delivery of the Transaction Documents by the Company, Olicom and Seller, as
applicable, do not, and the performance by the Company, Olicom and Seller, as
applicable, of the transactions contemplated hereby or thereby will not, subject
to making the filings and obtaining the consents, approvals and authorizations
described in Schedule 4.4, violate, conflict with, or result in any breach of
any provision of the Articles of Association or Rules of Procedure for the Board
of Directors, as amended or restated, of the Company, Olicom or Seller, violate,
conflict with, or result in a violation or breach of, or constitute a default
(with or without due notice or lapse of time or both) under, or permit the
termination of, or result in the acceleration of, or entitle any party to
accelerate (whether as a result of a change in control of the Company or
otherwise) any obligation, or result in the loss of any benefit, or give any
person the right to require any security to be repurchased, or give rise to the
creation of any lien, charge, security interest or encumbrance upon any of the
properties or assets of the Company under any of the terms, conditions, or
provisions of, any loan or credit agreement, note, bond, mortgage, indenture or
deed of trust, or any license, lease, agreement or other instrument or
obligation to which the Company, Olicom or Seller is a party or by which the
Company, Olicom or Seller or any of their respective properties or assets may be
bound or subject, except for such violations, conflicts, breaches, defaults,
terminations, accelerations, losses or other such events as have not had, or
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, or violate any order, writ, judgment, injunction,
decree, statute, rule or regulation of any court or any federal, state or local
administrative agency or commission or other United States or foreign
governmental authority or instrumentality (a "Governmental Entity") applicable
to the
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Company, Olicom or Seller or by which or to which any of their properties or
assets are bound or subject ("Applicable Laws"), except for such violations as
have not had, or could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. No consent, approval, order, or
authorization of, or registration, declaration, or filing with, any Governmental
Entity is required by or with respect to the Company, Olicom or Seller in
connection with the execution and delivery of the Transaction Documents by the
Company, Olicom or Seller or the consummation of the transactions contemplated
hereby or thereby, except for applicable requirements, if any, of the Danish
securities law or the Danish Corporation law.
4.5 Financial Statements. Attached hereto as Schedule 4.5 is a copy of
the Company's audited balance sheets as of April 30, 1999, April 30, 1998 and
April 30, 1997, and the income statements for each of such 12-month periods then
ended and the Company's unaudited balance sheet as of September 30, 1999 and the
related income statement for that period then ended (collectively, the
"Financial Statements"). The Financial Statements are complete and correct, have
been prepared in accordance with Danish GAAP consistently applied and present
fairly the financial position of the Company as at their respective dates and
the profits and losses of the Company for the periods then ended. The financial
books and records of the Company have been maintained in accordance with
reasonable business practices. The information provided in the Financial
Statements as of September 30, 1999 (the "Most Recent Balance Sheet Date") was
not misleading, and since the Most Recent Balance Sheet Date no event has
occurred which has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. The Company has no liabilities,
contingent or otherwise, other than: (i) liabilities disclosed in the Financial
Statements; (ii) liabilities incurred since the Most Recent Balance Sheet Date
in the ordinary course of business, none of which individually or in the
aggregate are material; (iii) obligations under contracts and commitments
incurred in the ordinary course of business, which, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company; and (iv) liabilities and obligations set forth on Schedule 4.5.
Since the Most Recent Balance Sheet Date, the Company has conducted its business
only in the ordinary course consistent with pat practice.
4.6 Net Worth. Olicom and the Seller represent and warrant that as of
the date of execution of this Agreement and as of the Closing Date the Net Worth
of the Company shall be at least Three Million (3,000,000) DKK more than the Net
Worth of the Company as of April 30, 1999. At the Closing, Olicom and Seller
shall deliver to Buyer a certificate representing the foregoing.
4.7 Compliance with Applicable Laws; Licenses and Permits.
(a) The business of the Company has been conducted in compliance
with each law, ordinance, regulation, judgment, decree, injunction, rule or
order of any Governmental Entity binding on the Company or any of its properties
or assets ("Applicable Laws"), except for such failures to comply which have not
had, or could not reasonably be expected to have, a Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to the Company
is pending or, to the Knowledge of Olicom or Seller, threatened. To the
Knowledge of Olicom and Seller, none of the Company, its directors and officers,
or any person acting with their knowledge, has made any payment to, or conferred
any benefit, directly or indirectly, on suppliers, customers, employees, or
agents of suppliers or customers, or officials or
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employees of any government or agency or instrumentality of any government
(domestic or foreign) or any political parties or candidates for office, which
is or was unlawful under any applicable law. The Company filed all forms,
reports, statements, and other documents required to be filed with any
Governmental Entities, except where the failure to file such forms, reports,
statements or other documents under this Section 4.7(a) would not have a
Material Adverse Effect.
(b) The Company has all licenses, permits, approvals,
authorizations and consents of all Governmental Entities and all certification
organizations required for the conduct of its businesses (as presently
conducted) and operation of its facilities. All such licenses, permits,
approvals, authorizations and consents, if any, are described in Schedule
4.7(b), and copies of such documents have been delivered to Buyer, are in full
force and effect and will not be affected or made subject to loss, limitation
or, except as set forth on Schedule 4.7(b)(i), any obligation to reapply as a
result of the transactions contemplated hereby. Except as set forth in Schedule
4.7(b) and for such incidental infractions as mentioned above, the Company
(including its operations, properties and assets) are and have been in
compliance with all such permits and licenses, approvals, authorizations and
consents.
4.8 Absence of Litigation. The Company is not a party to and there is
no claim, action, suit, inquiry, judicial or administrative proceeding,
grievance or arbitration pending, or to the Knowledge of Seller and Olicom,
threatened against the Company, any of its officers or directors or any of its
respective properties or assets by or before any arbitrator or Governmental
Entity and, to the Knowledge of Olicom and Seller, there are no facts likely to
give rise thereto. Nor to the Knowledge of Seller and Olicom are there any
investigations relating to the Company, any of its officers or directors or any
of its properties or assets pending or threatened by or before any arbitrator or
Governmental Entity. There is no judgment, decree, injunction, order,
determination, award, finding or letter of deficiency of any Governmental Entity
or arbitrator outstanding against the Company or any of its properties or assets
or to the Knowledge of Seller and Olicom, any of its officers or directors.
There is no action, suit, inquiry, judicial or administrative proceeding pending
or, to the Knowledge of Seller and Olicom, threatened against the Company,
Olicom or Seller relating to the transactions contemplated by this Agreement or
the other Transaction Documents. There are no unfunded settlements or other
settlements or letters of commitment or conciliation agreements that the Company
or any of its officers or directors has entered into with any party, including
any Governmental Entity.
4.9 Insurance Matters. Schedule 4.9(a) lists the current insurance
policies (including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) to which the
Company is a party, a named insured, or otherwise the beneficiary of coverage.
With respect to each such insurance policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect; (ii) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) the Company is not in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default, or permit termination, modification or acceleration, under the policy;
and (iv) no third party to the policy has repudiated any provision thereof to
the Knowledge of Seller and Olicom. The Company is covered by insurance in scope
and amount customary and reasonable for the businesses in which
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it is or has been engaged and the business environment in which it is operating.
To Seller's and Olicom's Knowledge, they have caused the Company to deliver to
Buyer all insurance policies within the Company's or OJ's possession. Schedule
4.9(b) describes any self-insurance arrangements affecting the Company.
4.10 Title and Related Matters.
(a) The Company has, under all applicable laws, good and
marketable title to all the properties, interests in properties and assets, real
and personal, reflected in the Financial Statements or acquired after the date
of the Financial Statements (except properties, interests in properties and
assets sold or otherwise disposed of since the date of the Financial Statements
in the ordinary course of business), free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except the lien of
current taxes not yet due and payable. The equipment of the Company used in the
operation of its business is in good operating condition and repair, normal wear
and tear excepted. Schedule 4.10(a) contains a description of all real property
and personal property with a value in excess of $50,000 leased, subleased or
owned by the Company.
(b) All of the buildings, structures and appurtenances situated on
the real property, reflected in the Financial Statements or acquired after the
date of the Financial Statements, except those disposed of since the date of the
Financial Statements and the other real property leased by the Company are in
good operating condition and in a state of maintenance and repair deemed
adequate and suitable by the Company for the purposes for which such buildings,
structures and appurtenances are presently being used. With respect to each such
building, structure and appurtenance, the Company has adequate rights of ingress
and egress for operating its business in the ordinary course. To the Knowledge
of the Seller and Olicom, the Company has not received any notice that any such
building, structure or appurtenance: (i) violates any restrictive covenant or
any provision of any applicable law; or (ii) encroaches on any property owned by
others.
(c) The Company has delivered to Buyer correct and complete copies
of the leases and subleases listed in Schedule 4.10(c) (as amended to date).
With respect to each lease and sublease listed in Schedule 4.10(c):
(i) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) The lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the Closing;
(iii) No party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) No party to the lease or sublease has repudiated any
provision thereof;
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(v) There are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) With respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and correct
with respect to the underlying leases;
(vii) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(viii) All facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules and
regulations;
(ix) All facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities;
(x) There are no parties (other than the Company) in
possession of such leased property, other than tenants under any leases
disclosed in Schedule 4.10(c) who are in possession of space to which they are
entitled; and
(xi) There are no pending or, to the Knowledge of Seller and
Olicom threatened condemnation proceedings, lawsuits or administrative actions
relating to the properties or other matters affecting materially and adversely
the current use, occupancy, or value thereof.
4.11 Accounts Receivable. Except for the Company's accounts receivable
from Buyer and its affiliate, all accounts receivable of the Company reflected
on the Financial Statements, and as incurred in the normal course of business
since the date thereof (the "Accounts Receivable"), represent arm's length sales
actually made in the ordinary course of business; are collectible (net of the
reserve for doubtful accounts reflected on the Most Recent Balance Sheet which
shall be consistent with prior practices and in accordance with Danish GAAP) in
the ordinary course of business without the necessity of commencing legal
proceedings; are not subject to counterclaim or setoff; and are not in dispute.
The Company has previously delivered to Buyer an aged schedule of Accounts
Receivable included in the Financial Statements.
4.12 Inventory. All inventory of the Company reflected on the Financial
Statements consists of a quality and quantity useable and saleable in the
ordinary course of business and at normal profit levels; had a commercial value
at least equal to the value shown on the Financial Statements; and is valued in
accordance with Danish GAAP at the lower of average cost (on a LIFO basis); was
not slow-moving as determined in accordance with past practices; obsolete or
damaged. All inventory purchased since the date of the Financial Statements
consists of a quality and quantity useable and saleable in the ordinary course
of business.
4.13 Absence of Certain Change. Since April 30, 1999, there has not
been any adverse change in the business, financial condition, operations,
results of operations or future prospects
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of the Company. Without limiting the generality of the foregoing, except as set
forth in Schedule 4.13, since April 30, 1999:
(a) The Company has not sold, leased, transferred, assigned or
otherwise disposed of any of its assets, tangible or intangible, other than for
a fair consideration in the ordinary course of business;
(b) The Company has not entered into any agreement, contract,
lease or license (or series of related agreements, contracts, leases and
licenses) either involving more than Twenty-Five Thousand U.S. Dollars ($25,000)
or outside the ordinary course of business or other than as listed on Schedule
4.l5(c) or Schedule 4.24;
(c) No person (including the Company) has accelerated, terminated,
modified or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, teases and licenses) involving more than
Twenty-Five Thousand U.S. Dollars ($25,000) to which the Company is a party or
by which it is bound except in the ordinary course of business;
(d) The Company has not imposed any security interest upon any of
its assets, tangible or intangible;
(e) The Company has not made any capital expenditure (or series of
related capital expenditures) outside the ordinary course of business;
(f) The Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other person (or
series of related capital investments, loans and acquisitions) outside the
ordinary course of business;
(g) The Company has not issued any note, bond or other debt
security or created, incurred, assumed or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
Twenty-Five Thousand U.S. Dollars ($25,000) singly or Fifty Thousand U.S.
Dollars ($50,000) in the aggregate;
(h) The Company has not delayed or postponed the payment of
accounts payable or other liabilities outside the ordinary course of business;
(i) The Company has not canceled, compromised, waived or released
any right or claim (or series of related rights and claims) outside the ordinary
course of business;
(j) The Company has not granted any license or sublicense of any
rights under or with respect to any intellectual property except as set forth on
Schedule 4.15(c) or Schedule 4.24;
(k) The Company has not made or authorized any change in its
Articles of Association or Rules of Procedure for the Board of Directors;
(l) The Company has not issued, sold or otherwise disposed of any
of its capital stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise) any of its
capital stock;
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(m) The Company has not declared, set aside or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased or otherwise acquired any of its capital stock;
(n) The Company has not experienced any damage, destruction or
loss (whether or not covered by insurance) to its property in excess of Ten
Thousand U.S. Dollars ($10,000);
(o) The Company has not made any loan to, or entered into any
other transaction with, any of its affiliates, directors, officers, employees or
Olicom or any affiliate thereof outside the ordinary course of business;
(p) The Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement outside the ordinary course of business;
(q) The Company has not granted or agreed to make any increase in
the base compensation of any of its directors, officers and employees outside
the ordinary course of business except as specifically described in Section
8.1(j) and Section 8.1(k) below;
(r) The Company has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract or
commitment for the benefit of any of its directors, officers and employees (or
taken any such action with respect to any other employee benefit plan), except
as specifically described in Section 8.1(j) and Section 8.1(k) below;
(s) The Company has not made any other change in employment terms
for any of its directors, officers or employees, or otherwise terminated any
such person and no such person has resigned from the Company, in each case,
outside the ordinary course of business;
(t) The Company has not incurred any liability to taxation (other
than in respect of trading profits arising or transactions entered into in the
ordinary course of business or except as provided for in the Financial
Statements);
(u) The Company has not made or pledged to make any charitable or
other capital contribution outside the ordinary course of business;
(v) There has not been any other occurrence, event, incident,
action, failure to act or transaction outside the ordinary course of business
involving the Company; and
(w) The Company has not committed to any of the foregoing.
4.14 Undisclosed Liabilities. The Company does not have any liability
(and there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against any of them
giving rise to any liability), except for: (a) liabilities included in the most
recent Financial Statements including the notes thereto; and (b) liabilities
which have arisen after the Financial Statements in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of or was caused by any breach of
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contract, breach of warranty, tort, infringement or violation of law, all of
which are usual and normal in amount both individually and in the aggregate).
4.15 Intellectual Property.
(a) Schedule 4.15(a) lists all of the Company's foreign and United
States: (i) patents and patent applications (including provisional
applications); (ii) registered or unregistered trademarks, applications to
register trademarks, intent to use applications or other registrations related
to trademarks; (iii) registered copyrights and applications for copyright
registration; (iv) mask work registrations and applications to register mask
works; and (v) any other Intellectual Property of the Company that is the
subject of an application, certificate or registration filed with, issued by or
recorded by, any state, government or other public legal authority (and all
trade secrets and unregistered copyrights, whether or not listed on Schedule
4.15(a)) (the "Intellectual Property").
(b) Each patent, registered trademark, registered copyright and
mask work registration which is an item of Intellectual Property is valid and
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Intellectual Property have been made and all necessary
documents and certificates in connection with such Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Intellectual Property.
(c) The contracts, licenses and agreements listed on Schedule
4.15(c) include all contracts, licenses and agreements currently in effect
relating to any Intellectual Property arising from or relating to Bluetooth or
Mobile Hands Free Solutions to which the Company is a party other than: (i)
"shrink wrap" software; (ii) rights to use Intellectual Property granted by the
Company in the ordinary course of the Company's business in connection with
sales of products or services; (iii) third party software (including software
development tools) generally available to the public at a cost to the Company of
less than Twenty-Five Thousand U.S. Dollars ($25,000); and (iv) contracts,
licenses or agreements which the Company has no continuing obligations (other
than customary provisions for infringement) or for which liability is
contractually limited to less than Twenty-Five Thousand U.S. Dollars ($25,000)
(collectively, such exceptions being referred to as "Excluded Licenses").
(d) With respect to Bluetooth and Mobile Hands Free Solutions,
except as disclosed on Schedule 4.15(d), the contracts, licenses and agreements
listed on Schedule 4.15(c) are in full force and effect. Except as disclosed on
Schedule 4.15(d), the consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of any term of any contracts, licenses
and agreements listed on Schedule 4.15(c). Except as disclosed in Schedule
4.15(d), the Company is in compliance in all material respects with and has not
breached any material term of the contracts, licenses and agreements listed on
Schedule 4.15(c) and, to the Knowledge of Seller and Olicom, all other parties
to the contracts, licenses and agreements listed on Schedule 4.15(c) are in
compliance with and have not breached any term of the contracts, licenses and
agreements. Except as disclosed in Schedule 4.15(d), following the Closing Date,
the Company will be permitted to exercise all of its rights under the contracts,
licenses and agreements listed in
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Schedule 4.15(c) without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which the Company would otherwise
be required to pay.
(e) Except as set forth in Schedule 4.15(e) and other than
Excluded Licenses or other agreements which are not currently in effect: (i) no
Person other than the Company has any rights to use the Intellectual Property
other than immaterial rights granted from time to time in the ordinary course of
business which do not individually or in aggregate materially affect the value
of the Intellectual Property in question; and (ii) the Company has not granted
to any Person, nor authorized any Person to retain any rights or interests of
any nature in or with respect to the Intellectual Property.
(f) Except as set forth in Schedule 4.15(f): (i) the Company owns
and has good and exclusive title to each item of the Intellectual Property of
the Company listed on Schedule 4.15(a), free and clear of any encumbrance; and
(ii) the Company owns, or has the right pursuant to a valid contract, to use,
transfer, license, sublicense or operate under, all other Intellectual Property
of the Company.
(g) Except as set forth on Schedule 4.15(g), the operation of the
Company's business, to the Knowledge of Seller and Olicom, including the design,
development, manufacture and sale of its products (including with respect to
products currently under development) and provision of services, does not
infringe or misappropriate the Intellectual Property of any other person,
violate the rights of any Person (including rights to privacy or publicity) or
constitute unfair competition.
(h) In the last three (3) years, except as set forth on Schedule
4.15(h), the Company has not received notice from any Person that the operation
of the business of the Company, including its design, development, manufacture
and sale of its products (including with respect to products currently under
development) and provision of its services, infringes or misappropriates the
Intellectual Property of any person, violates the rights of any person
(including rights to privacy or publicity) or constitutes unfair competition.
(i) With respect to Bluetooth and Mobile Hands Free Solutions,
except as disclosed in Schedule 4.15(i), the Company owns or has the right to
all material Intellectual Property necessary to the conduct of the business of
the Company as it currently is conducted, including its design, development,
manufacture and sale of its products, including with respect to products
currently under development and provision of services.
(j) To the Knowledge of Olicom and Seller, the Company has
provided true and accurate copies of all contracts, licenses and agreements
between the Company and any other person, which involve the annual payment or
receipt of funds in excess of Twenty-Five Thousand U.S. Dollars $25,000) per
year, and wherein or whereby the Company has agreed to, or assumed, any
obligation or duty to indemnify, hold harmless or otherwise assume or incur any
obligation or liability with respect to the infringement by the Company or such
other person of the Intellectual Property rights of any other person; provided
that the foregoing only applies to agreements for which the Company's
obligations are continuing as of the date of this Agreement and does not apply
to contracts, licenses or agreements for which liability of the Company is
contractually limited to less than Twenty-Five Thousand U.S. Dollars ($25,000).
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(k) Except as listed on Schedule 4.15(k), there are no contracts,
licenses and agreements between the Company and any other person with respect to
the Company's Intellectual Property with respect to which the Company has
received notice of any dispute which could be reasonably considered to be a
material dispute regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or received by
the Company thereunder.
(l) Except as listed on Schedule 4.15(l), to the Knowledge of,
Seller and Olicom, no person is infringing or misappropriating any the
Intellectual Property.
(m) Except as listed on Schedule 4.15(m), there are no claims
asserted against the Company, or to the Knowledge of Seller and Olicom, against
any customer of the Company, related to any product or service of the Company.
(n) No Intellectual Property or product or service of the Company,
is subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the use or licensing thereof by the Company.
(o) With respect to Bluetooth and Mobile Hands Free Solutions,
except for software to the extent that it is considered proprietary information
of the Company and which is protected as such under applicable Danish law, or
except as disclosed in Schedule 4.15(o), the Company has, and enforces, a policy
requiring each contractor and third party to execute proprietary information and
confidentiality agreements previously delivered to Buyer, and all current and
former contractors and third parties of the Company have executed such an
agreement.
(p) To the Knowledge of Seller and Olicom, no: (i) product,
service or publication of the Company; (ii) material published or distributed by
the Company; or (iii) conduct or statement of the Company, violates the Danish
Markedsfocringslov or any other Danish law concerning proper business conduct.
(q) Schedule 4.15(g) lists all the Software Authors (as
hereinafter defined) with respect to Bluetooth and Mobile Hands Free Solutions
who were not employees of the Company. Each Software Author made his or her
contribution to the Bluetooth and Mobile Hands Free Solutions within the scope
of employment with the Company as an employee or independent contractor, as a
"work made for hire," and was directed by the Company to work on the Bluetooth
and Mobile Hands Free Solutions. In addition, any other Intellectual Property
created by such Software Authors with respect to Bluetooth and Mobile Hands Free
Solutions is owned by the Company.
(r) To the Knowledge of Seller and Olicom, the Company has not, by
any of its acts or omissions, or by acts or omissions of its directors,
officers, employees, agents or representatives caused any of its proprietary
rights in the Bluetooth and Mobile Hands Free Solutions, including copyrights,
trademarks, patents and trade secrets to be diminished or adversely affected to
any material extent.
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(s) Except as set forth in Schedule 4.15(s) and with respect to
(i), (ii) and (iii) as the same shall be limited to Bluetooth and Mobile Hands
Free Solutions and third party warranty claims:
(i) to the Knowledge of Seller and Olicom, there are no
defects in the Bluetooth and Mobile Hands Free Solutions, and there are no
errors in any accompanying design documentation, which defects or errors would
in any material respect affect Buyer's or its licensees' use of the Bluetooth
and Mobile Hands Free Solutions or the functioning of the Bluetooth and Mobile
Hands Free Solutions in accordance with the specification for the Bluetooth and
Mobile Hands Free Solutions published by the Company; to the Knowledge of Seller
and Olicom, the Bluetooth and Mobile Hands Free Solutions have all the material
features described in the user manuals made available to the Company's
customers;
(ii) each of the Bluetooth and Mobile Hands Free Solutions
does not contain any "back door," "time bomb," "Trojan horse," "worm," "drop
dead device," "virus" (as these terms are commonly used in the computer software
industry) or other software routines or hardware components designed to permit
unauthorized access, to disable or erase software, hardware, or data or to
perform any other similar type of functions;
(iii) each of the Bluetooth and Mobile Hands Free Solutions:
(A) shall not fail to perform any function specified in the product
specifications therefor or otherwise be adversely affected in any material
respect as a result of the date change from December 31, 1999 to January 1,
2000; and (B) to ensure Year 2000 compatibility includes, without limitation,
date data century recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface values which
reflect the correct century,
(iv) no government funding or university or college facilities
were used in the development of the Bluetooth and Mobile Hands Free Solutions;
and the Bluetooth and Mobile Hands Free Solutions were not developed pursuant to
a contract with any Person or entity, and no situation, matter, or agreement
exists that would preclude Buyer from making any change to the Bluetooth and
Mobile Hands Free Solutions or combining either of them with other software in
any lawful manner; and
(v) except for technology supplied by third party vendors
disclosed in Schedule 4.15(r), no third party has any interest in, or right to
compensation from the Company by reason of, the use, exploitation or sale of the
Bluetooth and Mobile Hands Free Solutions, there are no restrictions on the
ability of the Company (or any successor or assignee of the Company) to use or
otherwise exploit the Bluetooth and Mobile Hands Free Solutions, and such use or
exploitation does not and will not obligate the Company (or any successor or
assign of the Company) to pay any royalty, fee or other compensation to any
person or entity; and the Company has not received any notice and does not have
any knowledge of any complaint, assertion, threat or allegation inconsistent
with the preceding statements in this paragraph.
(t) (i) No Person employed with or previously employed with the
Company has notified the Company since the day of the Company's formation
orally, in writing or in any other way, that any Person alone or together with
others has made an invention, which
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is patentable or registerable, cf. Section 6 and 7 of Executive Act no. 131 of
18 March 1986 of the Kingdom of Denmark;
(ii) Excluding the Company's Intellectual Property, no Person
employed with or previously employed with the Company has filed an application
for a patent or a utility model related to Bluetooth or Mobile Hands Free
Solutions, alone or together with others indicating to be an inventor and/or
applicant/proprietor of the rights in said application and no Person has
indicated that they intend to do so and,
(iii) No Person has registered as his or its own any other
intellectual property rights of the Company,
4.16 Taxes.
(a) The Company has properly completed and timely filed all Tax
Returns (as herein after defined) required to be filed by it and has paid all
Taxes (as herein after defined) shown thereon to be due. The Company's Financial
Statements reflect any accrued Taxes that have not been paid through the dates
thereof. The Company has no material liability for unpaid Taxes accruing after
the date of the latest Company Financial Statements, other than Taxes arising in
the ordinary course of its business. There is no material claim for Taxes that
is a lien against the property of the Company or is being asserted against the
Company. The Company has not been notified and the Seller or Olicom have no
other Knowledge that any audit of any Tax Return of the Company is being
conducted by a Tax Authority (as hereinafter defined). The Company has not been
and will, to the Knowledge of Seller and Olicom, not be required to include any
material adjustment in Taxable income for any Tax period (or portion thereof)
under any applicable Tax laws as a result of transactions, events or accounting
methods employed prior to this Agreement. The Company has not filed any
correspondence to prevent the imposition of penalties with respect to any Tax
reporting position taken on any Tax Return. The Company has in its possession
receipts for any Taxes paid to Tax authorities. There are no pending or, to the
Knowledge of Seller and Olicom, threatened actions or proceedings for the
assessment or collection of Taxes against the Company or, to the Knowledge of
Seller and Olicom, any corporation that was included in the filing of a Return
with the Company on a consolidated, combined or unitary basis with respect to
any period for which such corporation was so included. For purposes of this
Agreement, the following terms have the following meanings: "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means: (i) any net income,
alternative or add-on tax, gross income, gross receipts, sales, use, transfer,
franchise, profits, license, withholding (including social security
contributions to labour market fund), payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or any penalty, in addition
to tax or additional amount imposed by any governmental entity (a "Tax
Authority") responsible for the imposition of any such Tax (domestic or
foreign); (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any Taxable period; and (iii) any liability for
the payment of any amounts of the type described in (i) or (ii) as a result of
being a transferee of or successor to any person or as a result of any express
or implied obligation to indemnify any other person. As used herein, "Tax
Return" shall mean any return, statement, report or form (including without
limitation, estimated tax returns and
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reports, withholding tax returns and reports and information reports and
returns) required to be filed with respect to Taxes.
(b) (i) Schedule 4.16(b) indicates the most recent Danish income
Tax Return for which a review has been conducted and indicates all such Danish
income Tax Returns that currently to the Knowledge of Seller and Olicom are the
subject of review; and (ii) the Company has provided Buyer with an accurate
description of any tax allocation arrangement to which the Company is a party.
4.17 Customers. Seller and Olicom do not have Knowledge that any of the
ten (10) largest customers and suppliers of the Company (based on annual sales
volume) for the last two (2) full fiscal years and the Most Recent Balance Sheet
Date will cease to do business with the Company after the consummation of the
transactions contemplated hereby in the same manner as previously conducted with
the Company. The Seller and Olicom do not have Knowledge that the Company has
received any notice of any disruption (including delayed deliveries or
allocations by suppliers) in the availability of the materials or products used
by the Company nor is any Company aware of any facts which could lead it to
believe that the business of any Company will be subject to any such disruption
which would cause a Material Adverse Effect.
4.18 Certain Business Practices and Regulations. Neither the Company
nor any of its officers, directors, stockholders, employees or agents has, on
behalf of or for the benefit of the Company: (i) established or maintained any
unrecorded fund or asset for any purpose or made any false entries on its books
and records for any reason; or (ii) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by violation of any Law, In
addition, the Company has: (a) complied with all applicable Laws relation to
employee and civil rights and relating the employment opportunities; and (b)
filed in a timely manner all reports and documents required to be filed with
Governmental Entities (and the information contained therein was correct and
complete in all material respects) under such laws, except (in either case)
where the failure to so comply or file would not have a Material Adverse Effect.
4.19 Product Warranty. Each product manufactured, sold, leased,
supplied or delivered by the Company has been in conformity with all applicable
contractual commitments and all express and implied warranties and all
applicable regulations in respect thereof, and the Company does not have any
liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Company giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims included in the Financial Statements and the notes thereto as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company and an additional expense of up to Fifty
Thousand U.S. Dollars ($50,000) for all such contracts, commitments and
warranties relating to products and services sold or performed prior to the
Closing Date. Except as set forth on Schedule 4.19, no product manufactured,
sold, leased, supplied or delivered by the Company is subject to any guaranty,
warranty or other indemnity beyond the general terms and conditions of sale or
lease described on Schedule 4.19. Without prejudice to the above, the Company
has incurred no liability in excess of Fifty Thousand U.S. Dollars ($50,000)
(when aggregated with all other warranty claims described above) under the
Liability for Defective Products Act 1991 of Ireland.
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4.20 Environmental, Health and Safety Matters.
(a) The Company has at all times complied and is in compliance
with all environmental, health and safety requirements of all Governmental
Entities.
(b) Without limiting the generality of the foregoing, the Company
and its respective affiliates have obtained and complied with, and are in
compliance with, all permits, licenses and other authorizations that are
required pursuant to environmental, health and safety requirements for the
occupation of their facilities and the operation of their business. A list of
all such permits, licenses and other authorizations is set forth on Schedule
4.20.
(c) The Company has not received any written or oral notice,
report or other information regarding any actual or alleged violation of
environmental, health and safety requirements, or any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to any
of them or their facilities arising under environmental, health and safety
requirements.
(d) None of the following exists at any property or facility owned
or operated by the Company: (i) underground storage tanks; (ii)
asbestos-containing material in any form or condition that might require
remediation or other corrective action under applicable law; (iii) materials or
equipment containing polychlorinated biphenyls that might require remediation or
other corrective action under applicable law; or (iv) landfills, surface
impoundments or disposal areas.
(e) The Company, its affiliates and its corporate predecessors
have not treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled or released any substance, including without limitation
an), hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees.
(f) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent of
Governmental Entities or third parties, pursuant to any Applicable Laws.
(g) The Company has not, either expressly or by operation of law,
assumed or undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other person relating to
environmental, health and safety requirements.
(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of the Company will prevent, hinder or
limit continued compliance with environmental, health and safety requirements,
give rise to any investigatory, remedial or corrective obligations pursuant to
environmental, health and safety requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to environmental, health and safety requirements, including without
limitation any relating to
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onsite or offsite releases or threatened releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage.
4.21 Loan Agreements. The Company is not obligated under any loan
agreement, promissory note, letter of credit or other evidence of indebtedness
as a signatory, guarantor or otherwise and there is no prohibition on repayment
or any penalty, premium or fee that would become payable upon prepayment of any
such indebtedness. The Company has not guaranteed the payment or performance of
any person, firm or corporation, or agreed to indemnify any person or act as a
surety or otherwise agreed to be continently or secondarily liable for the
obligations of any person. To the Knowledge of Seller and Olicom, no third party
is in default under any lease, contract or commitment to which the Company is a
party, nor has any event or omission occurred which, through the passage of time
or the giving of notice, or both, would constitute a default thereunder or give
rise to an automatic termination, or the right of discretionary termination,
thereof.
4.22 Burdensome or Restrictive Agreements. With respect to Bluetooth
and Mobile Hands Free Solutions, except as disclosed in Schedule 4.22, the
Company is not a party to or is not bound by any agreement requiring the Company
to assign any interest in any trade secret or proprietary information, or
prohibiting or to the Knowledge of Seller or Olicom, restricting the Company
from competing in any business or geographical area or soliciting customers or
otherwise restricting the Company from carrying on its businesses anywhere in
the world.
4.23 Bank Accounts. Seller and Olicom have provided Buyer with a
complete and accurate listing of the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which the Company maintains a safe deposit box. lock box or checking, savings,
custodial or other account of any nature, the type and number of each such
account and a description of any compensating balance arrangements.
4.24 Contracts. To the Knowledge of Seller, Schedule 4.24 lists all
material contracts, licenses and other Agreements to which the Company is a
party (collectively, "agreements").
(a) The Company has delivered to Buyer a correct and complete copy
of each written agreement listed in Schedule 4.24 (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Schedule 4.24.
(b) With respect to each such agreement other than the
____________ Agreement (as described below):
(i) the agreement is legal, valid, binding, enforceable and in
full force and effect,
(ii) the agreement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the Agreement;
(iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default,
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(iv) except at the option of either party or upon expiration,
as provided in any agreement, no party may terminate, modify or accelerate any
agreement; and
(v) no party has repudiated any provision of the agreement.
(c)
(i)
(ii)
(iii)
(iv)
(v)
4.25 Employee Benefit Matters.
(a) Copies of all material and general employee benefit plans and
arrangements have been delivered to Buyer.
(b) Each loan to non-officer employee, consultant, executive
officer or director, and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, surplus sabbatical,
employees relocation, dental, vision care, disability, employee relocation or
dependent care, life insurance or accident insurance plans, programs or other
arrangements have been delivered to Buyer.
(c) All bonus, Company paid pension, profit sharing, savings,
deferred compensation or incentive plans (including stock incentive plans),
programs or arrangements have been delivered to Buyer.
(d) All other fringe or employee benefit plans, programs or
arrangements that apply to executive officers of the Company and that do not
generally apply to all employees have been delivered to Buyer in the form of the
executive officers' employment contract.
(e) Any current employment or executive compensation or severance
agreements, written or otherwise, relating to any present employee, consultant
or executive
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officer of the Company and a list of all employees and executive officers are
set forth in Schedule 4.25(c), and there are no claims or unfulfilled severance
or compensation agreement towards former employees or consultants of the
Company.
(f) None of the Employment Contracts promises or provides retiree
medical or other retiree welfare benefits to any person, except as required by
applicable law.
(g) With respect to the laws of Ireland:
(i) There are no subsisting contracts of service to which the
Subsidiary is a party which are not terminable without giving rise to any claim
for damages or compensation or other redress (other than a statutory redundancy
payment or compensation for unfair dismissal under the Unfair Dismissals Act
1977 to 1993) by twelve weeks notice or less. And there are no claims whatsoever
against the Subsidiary arising out of any contract of service to which the
Subsidiary was a party.
(ii) The Subsidiary is not and has never been liable to make
any payment to any person under the Redundancy Payments Acts 1967 to 1991 or
pursuant to the Protection of Employees (Employers Insolvency) Acts 1984 to
1991.
(iii) No employment regulation order affecting the terms of
employment of any employees or former employees of the Subsidiary has been made
by the Labour Court under the Industrial Relations Acts 1946 to 1990.
(iv) The Subsidiary has not entered into any recognition
agreement with a trade union nor has it done any act which might be construed as
recognition.
4.26 Affiliate Relationships and Conflicts of Interest. There are no
contracts or other arrangements involving the Company (or any firm or entity
with which the Company has a business relationship) in which any of the
Company's officers, directors, stockholders or affiliates, or any member of
their respective immediate families, have a financial interest, including
indebtedness owed to the Company or by the Company. To the Knowledge of Seller
and Olicom, none of the officers or directors of the Company, or any members of
their immediate families, have any direct or indirect ownership interest in any
firm or corporation which competes with the Company, except that officers and
directors of the Company may own less than one percent (1%) of the outstanding
capital stock of publicly traded companies which may compete with the Company.
The Company is not a guarantor or Indemnitor of any indebtedness of any other
person, firm or corporation.
4.27 Status of Shares. The sale of the Shares has been duly authorized
by all necessary corporate action on the part of the Seller. The Shares, when
delivered to Buyer at the Closing in exchange for the Purchase Price (less any
portion of the Escrow Amount), all as described herein, will be validly issued,
fully paid and non-assessable. The sale of the Shares is not, and will not be,
subject to any preemptive rights or any rights of first refusal of any other
holder of capital stock of the Company except as set forth in Schedule 4.27, and
will be free from any restrictions on transfer, except for restrictions on
transfer imposed by the Shareholders' Agreement. Upon the sale and delivery of
the Shares to Buyer at Closing, the Shares will
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represent at least 66.85% of the outstanding capital stock of the Company, on a
fully-diluted basis.
4.28 Year 2000 Compliance. All of the property, equipment or assets
owned or utilized by the Company, including but not limited to computer
software, databases, hardware, controls and peripherals, will, on or prior to
December 31, 1999: (i) perform in all material respects in accordance with their
specification and documentation regardless of which century or century dates are
encountered in the use of such equipment or software; (ii) accurately and
correctly manage and manipulate data in accordance with their intended use
involving all dates, whether single century or multi-century, regardless of the
format in which such dates are expressed; and (iii) not require any repair,
rewrite, conversion or other adaptation with an expense paid or incurred by
Buyer because of or due in any way to the use of century dates. The Company has
taken adequate steps to verify that all computer hardware and software of the
Company's suppliers, customers and other persons or entities whose internal
computer failures may reasonably be expected to have a Material Adverse Effect
on the Company, will comply with the representations and warranties stated in
this Section on or prior to December 31, 1999.
4.29 Books and Records. All the books and records of the Company are
true, correct and complete in all material respects, have been maintained in
accordance with good business practice and in accordance with all laws,
regulations and other requirements applicable to the Company and its operations
and accurately reflect the basis for the financial condition and results of
operations set forth in the Financial Statements.
4.30 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
4.31 Private Offering. Assuming the accuracy of the representations and
warranties of Buyer contained in Article 5 hereof, the offer and sale of the
Shares in accordance with the terms of this Agreement, have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable securities
laws.
4.32 Brokers or Finders. Neither the Company nor the Buyer have
incurred, and will not incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or the other Transaction Documents or any
transaction contemplated hereby or thereby with respect to fees, commissions or
charges to any broker or finder engaged by or on behalf of Seller or Olicom.
4.33 Disclosure. No representation or warranty by Olicom or the Seller
contained in this Agreement or in any certificate furnished pursuant to this
Agreement contains any untrue statement of a material fact, or omits to state
any material fact necessary, in light of the circumstances under which it is
made, in order to make the statements herein or therein not misleading.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Seller and Olicom as follows (with
the understanding that the Seller and Olicom are relying on such representations
and warranties in entering into and performing this Agreement):
5.1 Organization, Standing and Power. Buyer is a corporation duty
organized, validly existing and in good standing under the laws of Delaware and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
5.2 Authority. Buyer has all requisite corporate power and authority to
enter into this Agreement and the other Transaction Documents to which Buyer is
to be a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Buyer of this Agreement and the other
Transaction Documents to which Buyer is to be a party and the consummation by
Buyer of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered and constitutes, and when duly
executed and delivered by Buyer the other Transaction Documents to which Buyer
is to be a party will constitute, the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.3 No Conflicts. The execution and delivery of this Agreement and the
other Transaction Documents to which Buyer is to be a party does not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to a loss of a material benefit under, any provision
of any loan or credit agreement, note, bond, mortgage, indenture, lease, or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Buyer
or its properties or assets, except for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which individually or in
the aggregate do not have a material adverse effect on Buyer's ability to
perform its obligations hereunder.
5.4 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Buyer in connection with the execution and delivery by Buyer
of this Agreement and the other Transaction Documents to which Buyer is to be a
party or the consummation by it of the transactions contemplated hereby, except
for applicable requirements, if any, of the Securities Act and the rules and
regulations thereunder and state securities or blue sky laws.
5.5 Litigation. As of the date hereof, there is no action, suit,
inquiry, judicial or administrative proceeding pending or, to the knowledge of
Buyer, threatened against the Buyer relating to the transactions contemplated by
this Agreement or by the other Transaction Documents.
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5.6 Brokers or Finders. Neither Seller nor Olicom will incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or the
other Transaction Documents or any transaction contemplated hereby or thereby
with respect to fees, commissions or charges to any broker or finder engaged by
or on behalf of Buyer.
ARTICLE 6
PRE-CLOSING COVENANTS
The parties to this Agreement agree as follows with respect to the
period between the execution of this Agreement and the Closing.
6.1 General. Each of the parties will use its reasonable best efforts
to take all action and to do all things necessary, proper or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article 8 below).
6.2 Notices and Consents. The Seller shall cause the Company to give
ally notices to third parties, and will use commercially reasonable efforts to
obtain any third party consents that are necessary to vest all rights, title and
interest of the Company or that Buyer may reasonably request in connection with
the matters referred to herein. The Seller shall cause the Company to give any
notices to, make any filings with and use commercially reasonable efforts to
obtain any authorizations, consents and approvals of Government Entities
necessary or desirable in connection with the matters referred to herein.
6.3 Operation of Business. The Seller shall not permit the Company to
engage in any practice, take any action or enter into any transaction outside
the ordinary course of business. Without limiting the generality of the
foregoing, the Seller shall use reasonable efforts not to permit the Company to:
(a) enter into any material contract or transaction outside the ordinary course
of business; (b) lease, mortgage or encumber or otherwise grant any interest in
any of its assets or properties or any contract with an affiliate; (c) sell,
license or otherwise dispose of any assets of the Company having a value greater
than Twenty-Five Thousand U.S. Dollars ($25,000) or an aggregate book value
greater than Twenty-Five Thousand U.S. Dollars ($25,000) (other than any such
disposition which is in the ordinary course of business); (d) issue any capital
stock or grant any additional options, warrants or rights to acquire any capital
stock of the Company; (e) take any action to declare or pay a dividend or other
distribution upon or redeem or purchase any shares of capital stock of the
Company, or change or affect the voting powers, designations, preferences,
rights, qualifications, limitations or restrictions of any class or series of
capital stock of the Company; (f) propose or adopt any amendments to the
Company's Articles of Association and Rules of Procedure or any other governing
document; (g) enter into any employment, termination or severance pay agreement
with any director, officer, consultant or employee; (h) waive any rights or
forgive or cancel any debts or claims of value; or (i) maintain the Company's
books or records other than in the ordinary course,
6.4 Preservation of Business. Seller will use reasonable efforts to
cause the Company to keep its business and properties substantially intact,
including its present operations, physical
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facilities, working conditions and relationships with lessors, licensors,
suppliers, customers and employees.
6.5 Full Access. Seller will permit representatives of Buyer to have
full access to the Company upon reasonable notice and during normal working
hours to all premises, properties, personnel, books, records (including tax
records), contracts and documents of or pertaining to the Company. The Company
will cause its accountants to cooperate with Buyer and its agents in making
available all financial information requested.
6.6 Notice of Developments. Seller will give prompt written notice to
Buyer of: (a) any material adverse development which would render any
representation or warranty of Seller or Olicom in this Agreement, if made on or
as of the date of such event, untrue or inaccurate in any material respect; and
(b) any material adverse effect with respect to the Company. No disclosure by
any party pursuant to this Section 6.6, however, shall be deemed to amend or
supplement the schedules of disclosure or to prevent or cure any
misrepresentation. breach of warranty or breach of covenant.
6.7 Publicity. No party hereto shall make any news release or any other
public disclosure (including disclosure to public officials) pertaining to this
Agreement or the transactions contemplated hereunder without the prior approval
of the other parties hereto, which approval shall not be unreasonably withheld;
provided that Buyer and Olicom may, if considered necessary by its counsel to
fulfill their obligations as publicly traded corporations, respond to inquiries
and make such releases as they consider appropriate upon giving the other
parties hereto such notice as is reasonable in the circumstances.
6.8 Exclusivity. Between the date hereof and the date this Agreement is
terminated pursuant to Article 11 hereof, Seller and Olicom shall not, directly
or indirectly, through any officer, director, employee, representative or
otherwise, solicit, or entertain offers from, negotiate with, or in any manner
encourage, discuss, accept or consider any acquisition proposal of any person or
entity, other than Buyer. Seller and Olicom will promptly notify Buyer regarding
any contact between Seller and one of its respective officers, directors,
employees or representatives and any other person regarding any acquisition
proposal.
ARTICLE 7
POST-CLOSING COVENANTS
The parties hereto agree as follows with respect to the period
following the Closing:
7.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the parties hereto will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Article 9 below).
7.2 Litigation Support. In the event and for so long as any party is
actively contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with: (a) any
transaction contemplated under this Agreement; or (b) any
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fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving the Company, each of the other parties hereto will
cooperate with it and its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor under
Article 9 below).
7.3 Transition. The Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing.
7.4 Confidentiality. Olicom, Seller and Buyer will comply with the
terms of the Confidentiality Undertaking described in Section 14.7. In addition,
Olicom, Seller and the Company will treat and hold as such all of the
confidential information, refrain from using any of the confidential information
except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of the confidential information which are in its possession. In the
event that Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process) to disclose any confidential
information, it will notify Buyer promptly of the request or requirement so that
Buyer may seek an appropriate protective order or waive compliance with the
provisions of this Section 7.4. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Seller or Olicom is, on the advice of
counsel, compelled to disclose any confidential information to any tribunal or
else stand liable for contempt, it may disclose the confidential information to
the tribunal; provided, however, that the disclosing part), shall use its best
efforts to obtain, at the reasonable request the other party, an order or other
assurance that confidential treatment will be accorded to such portion of the
confidential information required to be disclosed as Buyer shall designate. The
foregoing provisions shall not apply to any confidential information that is
generally available to the public immediately prior to the time of disclosure.
7.5
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ARTICLE 8
CLOSING CONDITIONS
8.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
are subject to satisfaction of the following conditions:
(a) Representations True at Closing. The representations and
warranties set forth in Article 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(b) Covenants Performed. Each of Olicom and Seller shall have
performed or caused the Company to perform and complied with all of their
covenants hereunder in all material respects through the Closing;
(c) Third Party Consents. Seller shall have caused the Company to
have procured all of the third party consents specified in Section 4.4 (except
the _________ Agreement) above;
(d) No Litigation. No action, suit, or proceeding shall be pending
or threatened before any court or quasi judicial or administrative agency of any
federal, state, local, provincial or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling,
or charge would: (i) prevent consummation of any of the transactions
contemplated by this Agreement; (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation; (iii) affect adversely
the right of Buyer to own the Shares and to control the Company; or (iv) affect
adversely the right of the Company to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect);
(e) Material Adverse Effect. Since the execution of this Agreement,
no Material Adverse Effect on the Company shall have occurred;
(f) Closing Certificate. Each of Seller and Olicom shall have
delivered to Buyer a certificate to the effect that each of the conditions
specified above in Section 8.1 (a)-(e) is satisfied in all respects;
(g) Put and Call Option Agreement. The Buyer and OJ shall have
entered into a Put and Call Option Agreement on terms and conditions
satisfactory to Buyer;
(h) Resignations of Directors. Buyer shall have received the
resignations, effective as of the Closing, of each director of Digianswer other
than Ole Jensen;
(i) Delivery of Certificates. Seller will surrender to Buyer at the
Closing any and all original certificates representing the Shares duly endorsed
in blank or with appropriate assignments separate from certificate;
(j) Agreements of Employment. Each of the employees set forth on
Schedule 8.1(j) shall have entered into an agreement of employment with the
Company in form and substance acceptable to Buyer;
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(k) Contract of Employment with OJ. Buyer and OJ shall have entered
into a Contract of Employment on terms and conditions satisfactory to Buyer;
(l) Transfer of Title. Seller and Olicom shall procure that the
Company has, good and marketable title, free from Liens to the properties it
occupies;
(m) Shareholders' Agreement. Buyer and OJ shall have entered into a
Shareholders' Agreement, all on terms and conditions satisfactory to Buyer;
(n) Termination of Right. OJ and Olicom, shall have each terminated
all rights under each of the Shareholders' Agreement, dated June 17, 1999,
between OJ and Seller and the Put and Call Option Agreement, dated June 15,
1999, between OJ, Seller and Olicom;
(o) Intellectual Property and Technology License Agreement. Buyer
and the Company shall have entered into an Intellectual Property and Technology
License Agreement and other documents related thereto on terms and conditions
satisfactory to Buyer related to the "Bluetooth" technology;
(p) Director Approval. Seller's and Olicom's board of directors
shall have approved this Agreement and the transactions contemplated thereby and
in the Transaction Documents; and
(q) General Satisfaction of Closing Conditions. All actions to be
taken by the Seller and the Company in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Buyer.
8.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) Representations True at Closing. The representations and
warranties set forth in Article 5 above shall be true and correct in all
material respects at and as of the Closing Date;
(b) Performance of Covenants. Buyer shall have performed and
complied with all of its covenants hereunder in all material respects through
the Closing;
(c) No Litigation. No action, suit, or proceeding shall be pending
or threatened before any court or quasi judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling or charge would: (i)
prevent consummation of any of the transactions contemplated by this Agreement;
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
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(d) Closing Certificate. Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in Section
8.2(a)-(c) has been satisfied; and
(e) General Satisfaction of Closing Conditions. All actions to be
taken by Buyer in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Seller.
ARTICLE 9
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 Survival of Representations and Warranties. All of the
representations and warranties and agreements of the parties contained in this
Agreement (including, without limitation, the representations and warranties of
the Seller and Olicom contained in Article 4 above and the indemnification
obligations of the parties set forth in Sections 9.2 and 9.3 below) shall
survive the Closing and continue in full force and effect for a period of two
(2) years thereafter (even if the damaged party knew or had reason to know of
any misrepresentation or breach of warranty at the time of the Closing) (except
to the extent that any such agreement is limited by its terms to a different
period and except to the extent a claim for indemnity is then pending). The
foregoing sentence notwithstanding, any liability which results: (a) from any
liability of Buyer or its subsidiaries, Buyer's successors or assigns to any
taxing authorities which will survive the Closing as provided in (b) below; (b)
under Section 4.1 (organization), Section 4.2 (capitalization), Section 4.10
(title to assets), Section 4.16 (taxes), Section 4.20 (environmental) and
Section 4.27 (status of shares) of Article 4, will survive the Closing for the
applicable statute of limitations (including any extensions or waivers thereof);
(c) from a breach of any covenant or agreement, will survive the Closing for the
term of such covenant or agreement; or (d) from fraud on the part of the other
party, for which indemnity would otherwise be available under Section 9.2 may be
asserted at any time subject to the other provisions of Article 9. The
representations, warranties, covenants and obligations of the Seller and the
rights and remedies of Buyer shall not be limited or otherwise affected by or as
a result of any information furnished to, or any investigation made by or
knowledge of Buyer or any of its representatives.
9.2 Indemnification Provisions for Benefit of Buyer and the Company.
(a) In the event Seller or Olicom breach (or in the event any third
party alleges facts that, if true, would mean either Seller or Olicom has
breached) any of its representations, warranties and covenants contained herein
(including without limitation the representations and warranties set forth in
Article 4 and the covenants set forth in Articles 6 and 7) and, provided that
Buyer makes a written claim for indemnification against Seller or Olicom
pursuant to Section 9.5 below within the survival period set forth in Section
9.1, then each of Seller or Olicom shall jointly and severally indemnify Buyer
from and against 66.85% of the entirety of any Adverse Consequences that Buyer
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences Buyer may suffer after the end
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of the survival period) resulting from, arising out of, relating to, in the
nature of or caused by the breach (or the alleged breach).
(b) In addition, Seller and Olicom shall jointly and severally
indemnify Buyer from and against 66.85% of the entirety of any Adverse
Consequences Buyer may suffer resulting from, arising out of, relating to, in
the nature of or caused by any liability of the Company for any current or past
indebtedness, penalties or other obligations in connection with any of the
Company's borrowings from the Business Development Finance (Vaekstfonden),
9.3 Indemnification Provisions for Benefit of Setter and Olicom. In the
event Buyer breaches (or in the event any third party alleges facts that, if
true, would mean Buyer has breached) any of its representations, warranties and
covenants contained herein, and provided that Seller or Olicom makes a written
claim for indemnification against Buyer pursuant to Section 9.5 below within the
survival period set forth in Section 9.1, then Buyer agrees to indemnify the
Seller and Olicom from and against the entirety of any Adverse Consequences
Seller or Olicom may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences Seller or Olicom may suffer
after the end of ally applicable survival period) resulting from, arising out
of, relating to, in the nature of or caused by the breach (or the alleged
breach).
9.4 Matters Involving Third Parties.
(a) If any third party shall notify any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party (the "Indemnifying
Party") under this Article 9, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay an
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as: (i) the
Indemnifying Party notifies the Indemnified Party in writing within thirty (30)
days after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of or caused by the Third Party
Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party will
have the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder; (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief;
(iv) settlement of, or all adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party; and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
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(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.4(b) above: (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim; (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld); and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be unreasonably withheld).
(d) In the event any of the conditions in Section 9.4(b) above is
or becomes unsatisfied, however: (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith); (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses); and (iii) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of or caused
by the Third Party Claim to the fullest extent provided in this Article 9.
9.5 Determination of Adverse Consequences and Claims Process.
(a) All Adverse Consequences hereunder shall be payable in U.S.
Dollars.
(b) In the event that Buyer shall have incurred any Adverse
Consequences for which it wishes to seek adjustment to the Escrow Amount
pursuant to this Section 9.5, Buyer shall deliver to the Seller an officer's
certificate: (i) stating that Buyer has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Adverse Consequences, (ii)
specifying in reasonable detail the individual items of Adverse Consequences
included in the amount so stated, the date each such item was paid or properly
accrued or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant or other adjustment to the
Escrow Amount to which such item is related; and (iii) indicating that Buyer is
seeking adjustment to the Escrow Amount under this Article 9.
(c) In the event that Buyer has elected to pursue an adjustment to
the Escrow Amount under this Article 9, the Escrow Amount shall be reduced by
the amount stated in the officer's certificate unless Seller contests such
claim.
9.6 Damage Claim Amounts.
(a)
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(i)
(ii)
(b)
(c)
(d)
(e)
9.7
9.8
ARTICLE 10
CLOSING DELIVERIES
10.1 Olicom and Seller Deliveries. At the Closing, Olicom and Seller
shall cause the Company to deliver to Buyer the following:
(a) [Intentionally Reserved];
(b) Agreements of Employment. At the Closing, the Company and the
individuals listed on Schedule 8.1(j) shall execute, deliver and enter into the
Agreements of Employment referenced in Section 8.1(j);
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(c) Contract of Employment. At the Closing, the Company and OJ
shall execute, deliver and enter into the Contract of Employment referenced in
Section 8.1(j).
(d) September 30, 1999 Balance Sheet. Seller shall have delivered
the Most Recent Financial Statements three (3) days prior to the Closing Date;
(e) Third Party Consents. All third party consents referenced in
Section 8.1(c).
(f) Certificate. The certificate referenced in Section 8.1(f);
(g) Resignation. Resignations referenced in Section 8.1(h);
(h) Shares. The Certificates for the Shares; and
(i) Other. Such other documents, certificates and instruments as
listed on the closing agenda delivered to Seller and Olicom as of date of
execution of this Agreement (the "Closing Agenda").
10.2 Buyer Deliveries. At the Closing, Buyer shall deliver the
following to Seller:
(a) Purchase Price. The Purchase Price (less the Escrow Amount);
(b) Certificate. The Certificate referenced in Section 8.2(d); and
(c) Other. Such other documents, certificates and instruments as
listed on the Closing Agenda.
ARTICLE 11
TERMINATION
11.1 Termination of Agreement. This Agreement may not be terminated by
the parties except as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing: (i) in the event Seller has breached
any representation, warranty or covenant contained in this Agreement in any
material respect, Buyer has notified Seller of the breach, and the breach has
continued without cure for a period of thirty (30) days after the notice of
breach; or (ii) if the Closing shall not have occurred ten (10) days after the
date of this Agreement, by reason of the failure of any condition precedent
under Section 8.1 hereof (unless the failure results primarily from Buyer itself
breaching any representation, warranty or covenant contained in this Agreement),
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(c) Seller may terminate this Agreement by giving written notice
to Buyer at any time prior to the Closing: (i) in the event Buyer has breached
any representation, warranty or covenant contained in this Agreement in any
material respect, Seller has notified Buyer of the breach, and the breach has
continued without cure for a period of thirty (30) days after the notice of
breach; or (ii) if the Closing shall not have occurred ten (10) days after the
date of this Agreement, by reason of the failure of any condition precedent
under Section 8.2 hereof (unless the failure results primarily from any of
Seller itself breaching any representation, warranty or covenant contained in
this Agreement); and
(d) By either Buyer or Seller if any governmental entity shall
have issued an order, injunction, decree or ruling or taken any other action
permanently or temporarily restraining or otherwise prohibiting the transactions
contemplated hereby, which shall have become final and non-appealable.
11.2 Effect of Termination. If any party terminates this Agreement
pursuant to Section 11.1 above, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party
(except for any liability of any party then in breach); provided, however, that
notwithstanding anything to the contrary in this Agreement or otherwise, the
provisions of Section 7.4 of the Agreement shall survive any termination of this
Agreement.
11.3 Certain Effects of Termination. In the event of the termination of
this Agreement by either Buyer or Seller as provided in Section 11.1 hereof,
each party, if so requested by the other party, will: (i) return promptly every
document (other than documents publicly available and other than one copy
thereof to be retained by counsel for such party) furnished to it by the other
party (or any subsidiary, division, associate or affiliate of such other party)
in connection with the transactions contemplated hereby, whether so obtained
before or after the execution of this Agreement, and any copies thereof which
may have been made, and will cause its representatives and any representatives
of financial institutions and investors and others to whom such documents were
furnished promptly to return such documents and any copies thereof any of them
may have made; or (ii) destroy such documents and cause its representatives and
such other representatives to destroy such documents, and such party shall
deliver a certificate executed by its president or vice president stating to
such effect.
ARTICLE 12
TAX COVENANTS
12.1 Cooperation on Tax Matters.
(a) The Company, Buyer and Seller shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
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(b) Buyer and Seller further agree, upon request, to use their
reasonable efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(c) Buyer and Seller further agree, upon request, to provide the
other party with all information that either party may be required to report
pursuant to Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder and relevant Danish tax statutory law.
ARTICLE 13
DISPUTES
13.1 Amicable Resolution. The parties mutually desire that friendly
collaboration will develop between themselves. Accordingly, they shall try to
resolve in a friendly manner all disagreements and misunderstandings connected
with their respective rights and obligations under this Agreement, including any
amendments hereof.
13.2 Mediation and Alternative Dispute Resolution.
(a) Excluding Intellectual Property disputes which must be brought
before a court of competent jurisdiction, to the extent that any
misunderstanding or dispute cannot be resolved agreeably in a friendly manner,
the dispute will be mediated by a mutually acceptable mediator to be chosen by
Buyer and Seller within forty-five (45) days after written notice by one of the
parties demanding mediation. Neither party may unreasonably withhold consent to
the selection of a mediator, however, by mutual agreement Buyer and Seller may
postpone mediation until each has completed specified but limited discovery with
respect to a dispute. The parties may also agree to attempt some other form of
alternative dispute resolution ("ADR") in lieu of mediation, including by way of
example and without limitation neutral fact-finding or a mini-trial.
(b) Any dispute which the parties cannot resolve through
negotiation, mediation or other form of ADR within six (6) months of the date of
the initial demand for it by one of the parties may then be submitted to the
courts for resolution. The use of any ADR procedures will not be construed under
the doctrines of laches, waiver or estoppel to affect adversely the rights of
either party. Nothing in this Article 13 will prevent either party from
resorting to judicial proceedings if: (i) good faith efforts to resolve the
dispute under these procedures have been unsuccessful; or (ii) interim relief
from a court is necessary to prevent serious and irreparable injury to one party
or to others.
13.3 Costs. Each of the parties shall bear its costs of mediation, but
Buyer and Seller agree to share the costs of the mediator equally.
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ARTICLE 14
MISCELLANEOUS
14.1 Expenses and Obligations. Except as otherwise expressly provided
in this Agreement or as provided by law, all costs and expenses incurred by the
parties hereto in connection with the transactions contemplated in this
Agreement or in the other Transaction Documents shall be borne solely and
entirely by the party which has incurred such expenses.
14.2 Expenses to be Paid by Seller. The Seller and Olicom shall pay,
and shall indemnify, defend and hold the Buyer and the Company harmless from and
against, each of the following:
(a) Transfer Taxes. Any sales, use, excise, transfer or other
similar tax imposed by Irish and Danish authorities with respect to the
transactions provided for in this Agreement, and any interest or penalties
related thereto.
(b) Professional Fees. All fees and expenses of the Seller's and
Olicom's legal, accounting, investment banking and other professional counsel in
connection with the transactions contemplated hereby.
14.3 Parties in Interest. This Agreement shall be binding upon and,
except as provided below, inure solely to the benefit of each party hereto and
their successors and assigns, and nothing in this Agreement, except as set forth
below, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
14.4 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given: (i) when delivered,
if delivered in person or by commercial messenger service; or (ii) two days
following deposit with a recognized overnight courier service, provided that
such deposit occurs prior to such deadline as has been imposed by such service
for overnight delivery; or (iii) when transmitted, if sent by telefacsimile
copy, provided confirmation of receipt is received by the sender, in each case
provided that such communication is addressed to the intended recipient thereof
as set forth below:
If to Buyer, to: Motorola, Inc.
5401 W. Beach Street
Ft. Worth, Texas 76137-2794
Attn: John E. Steadman
Facsimile: (817) 245-2702
with a copy to:
Motorola, Inc.
1303 East Algonquin
Schaumburg, IL 60196
Attn: Donald F. McLellan, Esq.
Facsimile: (847) 576-3628
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<PAGE> 36
If to Seller, to: Olicom Ventures A/S
Nybrovej 110
DK-2800 Lyngby
Denmark
with a copy to:
Olicom A/S
Nybrovej 110
DK-2800 Lyngby
Denmark
Attn: CEO
Facsimile: 45 45 27 01 80
Any party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
14.5 Interpretation. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections or other
subdivision of this Agreement are for convenience only, do not constitute any
part of such Articles, Sections, subsections or other subdivisions, and shall be
disregarded in construing the language contained therein. The words "this
Agreement," "herein," "hereby," "hereunder," and "hereof" and words of similar
import, refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The words "this Section" and "this subsection" and
words of similar import, refer only to the Sections or subsections hereof in
which such words occur. The word "or" is not exclusive, and the word "including"
(in its various forms) means "including without limitation." Pronouns in
masculine, feminine or neuter genders shall be construed to state and include
any other gender and words, terms and titles (including terms defined herein) in
the singular form shall be construed to include the plural and vice versa,
unless the context otherwise expressly requires. Unless the context otherwise
requires, all defined terms contained herein shall include the singular and
plural and the conjunctive and disjunctive forms of such defined terms. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Unless indicated otherwise in this Agreement, all dollar amounts
shall be in United States Dollars.
14.6 Counterparts and Facsimile Signatures. This Agreement may be
executed and delivered (including by facsimile transmission) in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being
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<PAGE> 37
understood that all parties need not sign the same counterpart. Notwithstanding
the laws of any jurisdiction in which this Agreement is executed or delivered, a
facsimile signature shall for all purposes be deemed an original and shall bind
the signor as if such facsimile were an original. Each party hereto undertakes
to deliver to each of the other parties hereto original copies of any facsimile
signature by overnight courier to the addresses set forth in Section 14.4 above.
14.7 Entire Agreement. This Agreement (which term shall be deemed to
include the Exhibits and Schedules hereto and the other certificates, documents
and instruments delivered hereunder) constitutes the entire agreement of the
parties hereto and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
other than the Confidentiality Undertaking between Buyer, Olicom and OJ dated
July 9, 1999, including but not limited to the Letter of Intent and Exclusivity
Agreement by Seller, Enskilda Securities and OJ dated September 3, 1999. There
are no representations or warranties, agreements or covenants relating to the
matters contemplated in this Agreement and in the other Transaction Documents
other than those expressly set forth in this Agreement and the other Transaction
Documents.
14.8 WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON-CONENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 14.8. EACH OF THE PARTIES
HERETO WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. EACH OF THE PARTIES HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
CONFLICT OF LAW PRINCIPLES. ANY SUIT OR PROCEEDING BROUGHT HEREUNDER SHALL BE
SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COURTS LOCATED IN NEW YORK.
14.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by Seller or Buyer, whether
by operation of law or otherwise, without the prior written consent of Buyer.
Buyer may assign this Agreement to an "affiliate," as defined in the Securities
Act of 1933, as amended.
14.11 Further Assurances. From time to time following the Closing, the
parties hereto shall execute and deliver such other instruments of assignment,
transfer and delivery and shall take such other actions as the other reasonably
may request in order to consummate, complete and carry out the transactions
contemplated by this Agreement.
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<PAGE> 38
14.12 Certain Definitions. For purposes of this Agreement, the term:
(a) "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, Taxes, liens, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses,
(b) "Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that forms or could form the
basis for any specified consequence.
(c) "Bluetooth" means all hardware, Software, other technology or
any combination thereof in or relating to the "Bluetooth" industry standard as
the same may be enhanced, supplemented or modified from time to time and such
other hardware Software or technology used or useful in connection therewith.
(d) "Company Intellectual Property" shall mean any Intellectual
Property that is owned by or exclusively licensed the Company.
(e) "Mobile Hands Free Solutions" means all technology, hardware,
Software and other technology generally referenced by the company as Mobile
Hands Free Solutions.
(f) "Knowledge of Seller and Olicom" or "Knowledge" means: (a)
actual knowledge of Seller and Olicom after due inquiry of those persons set
forth on Schedule l4.12(d) as specified by Buyer; and (b) that which a
reasonably prudent person could be expected to discover or otherwise become
aware of in the course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.
(g) "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (i) all
United States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisional, continuations and continuations in
part thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists and all documentation relating to
any of the foregoing; (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout the
world; (iv) all mask works, mask work registrations and applications therefor,
and all other rights corresponding thereto throughout the world; (v) all
industrial designs and any registrations and applications therefor throughout
the world; (vi) all trade names, logos, common law trademarks and service marks
trademark and service mark registrations and applications therefor throughout
the world; (vii) all databases and data collections and all rights therein
throughout the world; and (viii) all computer software including all source
code, object code, firmware, development tools, files, records and data, all
media on which any of the foregoing is recorded and all documentation related to
any of the foregoing throughout the world;
(h) "Person" means an individual, corporation, limited liability
company, partnership, limited partnership, syndicate, person (including, without
limitation, a "person" as
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<PAGE> 39
defined in Section 13(d)(3) of the Securities Exchange Act of 1934), trust,
association or other legal entity or government, political subdivision, agency
or instrumentality of a government;
(i) "Software" shall mean all computer code and data in source
code, object code or other form incorporated in the products created or used by
the Company in the preparation or support of its products;
(j) "Software Authors" shall mean all authors of the Software, or
any other Person or entity who participated in the development of the Software
or any portion thereof or performed any work related to the Software; provided,
however, that Software Authors shall not include any Persons who are not
involved in the development or modification of Software source code; and
(k) "Subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns or
has rights to acquire, directly or indirectly, fifty percent (50%) or more of
the capital stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
[REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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<PAGE> 40
IN WITNESS WHEREOF, Buyer, Seller and Olicom have each caused this
Agreement to be executed on their behalf by their respective duly authorized
officers as of the date first written above.
BUYER:
MOTOROLA, INC.
By: /s/ John Steadman
---------------------------------------------
Name: John Steadman
Title: Vice President and Director, Licensing and
Strategic Alliances, Personal Network
Group, PCS, CE
SELLER:
OLICOM VENTURES A/S
By: /s/ Boje Rinhart
---------------------------------------------
Name: Boje Rinhart by Power of Attorney
Title:
------------------------------------------
OLICOM:
OLICOM A/S
By: /s/ Boje Rinhart
---------------------------------------------
Name: Boje Rinhart by Power of Attorney
Title:
------------------------------------------
40
<PAGE> 41
Exhibit 2.2
FORM OF ESCROW AGREEMENT
<PAGE> 42
ESCROW AGREEMENT
This Escrow Agreement ( this "Escrow Agreement") dated as of October
___, 1999 is made and entered into by and among Motorola, Inc., a Delaware
corporation (the "Buyer"), Olicom Ventures A/S, a corporation organized and
existing under the laws of the Kingdom of Denmark (the "Seller"); Olicom A/S, a
corporation organized and existing under the laws of the Kingdom of Denmark
("Olicom"); and Unibank A/S, as Escrow Agent (the "Escrow Agent"). All
capitalized terms used and not defined herein shall have the meanings contained
in that certain Stock Purchase Agreement dated October 26, 1999 by and among the
Buyer, Seller and Olicom (the "Purchase Agreement").
RECITALS:
WHEREAS, pursuant to the Purchase Agreement, the Buyer, the Seller and
Olicom have agreed to the terms of the Purchase Agreement providing for the sale
by the Seller to the Buyer of the Shares;
WHEREAS, Section 2.2 of the Purchase Agreement provides for the
execution and delivery of an escrow agreement, and the Buyer and the Seller have
agreed that the execution and delivery of this Escrow Agreement shall satisfy
the obligations of the parties hereto to execute and deliver such an escrow
agreement; and
WHEREAS, Section 2.2 of the Purchase Agreement further provides that
the Buyer shall pay 10% of the Purchase Price to the Escrow Agent for release as
set forth herein and in the Purchase Agreement.
NOW, THEREFORE, in consideration of the consummation of the
transactions contemplated by the Purchase Agreement, the covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Appointment and Agreement of the Escrow Agent. The Buyer, the Seller
and Olicom hereby appoint and designate the Escrow Agent as the escrow agent for
the purposes set forth herein, and the Escrow Agent hereby accepts such
appointment under the terms and subject to the conditions set forth herein.
2. Deposit of the Escrow Funds. Pursuant to Section 2.2 of the Purchase
Agreement, at the Closing, the Buyer shall withhold and deliver to the Escrow
Agent cash in the original principal amount of ten percent (10%) of the Purchase
Price by wire transfer of immediately available funds (the "Escrow Funds") to be
held in an interest bearing trust account number 5005905135 (the "Escrow
Account"). The cost of establishing the Escrow Account (which shall be
approximately 20,000 DKK) shall be borne by the Buyer. The ongoing expenses
related to such Escrow Account, if any, shall be split equally between the Buyer
and the Seller. Except as otherwise specifically set forth herein, each party
hereto shall bear its own legal fees and other expenses in connection with the
Escrow Account and this Escrow Agreement. The funds deposited in the Escrow
Account shall be held and invested as set forth in Section 5 hereof.
<PAGE> 43
3. Establishment of Escrow.
3.1 Escrow Funds. The Escrow Agent shall establish and hold in
escrow the Escrow Funds.
3.2 Use of Escrow Funds. The Escrow Funds shall be held and
disbursed for the purposes of satisfying the Buyer's remedies for breaches of
the Purchase Agreement under Article 9 of the Purchase Agreement, as set forth
in Section 4 hereof.
4. Disbursements from the Escrow Funds.
4.1 If the Buyer believes in good faith that it has a claim for
indemnification under Article 9 of the Purchase Agreement, the Buyer shall
deliver to the Escrow Agent and the Seller an officer's certificate setting
forth the facts and basis for such claim as provided in Section 9.5 of the
Purchase Agreement (a "Claim"). Within thirty-five (35) calendar days of receipt
of such certificate by the Escrow Agent and without any further inquiry by the
Escrow Agent or further instruction to the Escrow Agent, the Escrow Agent shall
pay to the Buyer the amount of each such Claim as indicated in such officer's
certificate and the accrued interest thereon from the Escrow Funds unless the
Seller shall have delivered to the Escrow Agent a notice of the Seller's
objection to such Claim within thirty (30) calendar days of the Seller's receipt
of such Claim. If the Seller does not deliver such notice of objection to the
Buyer's Claim within sixty (60) calendar days of receiving the Claim, the Seller
shall have approved such Claim and shall waive any objection at a later date. If
it is subsequently determined that the Buyer is not entitled to any portion of
the Escrow Account which has been paid out pursuant to a Claim, then within five
(5) calendar days of such determination, the Buyer shall promptly return to the
Escrow Agent the excess amount withdrawn from the Escrow Account plus accrued
interest thereon. In the event that the parties hereto dispute such Claim, the
parties shall endeavor to resolve any dispute regarding disbursement of the
Escrow Funds in the manner provided by Article 13 of the Purchase Agreement.
4.2 If the Escrow Funds are insufficient to fully satisfy claims for
indemnification, the Buyer shall have a right to pursue such claims against the
Seller and Olicom pursuant to Article 9 of the Purchase Agreement, subject to
the limitation of indemnification of the Seller and Olicom contained in Section
9.6 of the Purchase Agreement.
4.3 Unless there has been a Claim made for such funds in the Escrow
Account by the Buyer, the balance of all remaining funds, if any, in the Escrow
Account plus all accrued interest thereon (the "Balance") will be released from
the Escrow Account to the Seller without further inquiry or instruction eighteen
(18) months from Closing.
5. Investment of Funds. Subject to the terms and conditions set forth
herein, the Escrow Agent shall invest the Escrow Funds as shall be directed, in
a writing signed by the Buyer and the Seller to be delivered to the Escrow Agent
from time to time, in any of the following investments (the "Permitted
Investments"):
(i) marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any agency
thereof and backed by the full
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<PAGE> 44
faith and credit of the United States of America, in each case maturing
within three (3) months from the date of acquisition thereof; and
(ii) certificates of deposit, other time deposits, and
bankers' acceptances maturing within three (3) months from the date of
acquisition thereof issued by the Escrow Agent or any bank operating
under the laws of the United States of America or any state thereof or
the District of Columbia which has combined capital and surplus of not
less than $500,000,000.
If the Escrow Agent has not received written direction from time to
time that an investment decision has been made. The Escrow Agent shall invest
the Escrow Funds, or such portion thereof, as to which no written direction has
been received, in investments described in clause (ii) above. Each of the
foregoing investments shall be made in the name of Olicom Ventures A/S for the
benefit of the parties hereto. No investment shall be made in any instrument or
security that has a maturity of greater than six (6) months from the date of
investment. Notwithstanding anything to the contrary contained herein, the
Escrow Agent may, without notice to the Buyer or the Seller, sell or liquidate
any of the foregoing investments at any time if the proceeds thereof are
required for any release of funds permitted or required hereunder, and the
Escrow Agent shall not be liable or responsible for any loss, cost or penalty
resulting from any such sale or liquidation, except to the extent of the Escrow
Agent's gross negligence or willful misconduct. With respect to any funds
received by the Escrow Agent for deposit into the Escrow Account or a written
direction received by the Escrow Agent with respect to investment of any funds
in the Escrow Account, the Escrow Agent shall not be required to invest such
funds or to effect such investment instruction until the next day upon which
financial institutions in the Kingdom of Denmark are open for business.
This Escrow Agreement shall treat the Escrow Funds as a trust fund in
accordance with the terms hereof. In no event shall any part of the Escrow
Account be commingled with any other funds held by the Escrow Agent or any of
its affiliates. It is expressly agreed that any Permitted Investments may be
purchased by the Escrow Agent notwithstanding that an affiliate of the Escrow
Agent has underwritten, privately placed or made a market for, any such
Permitted Investments, or may in the future underwrite, privately place or make
a market in any such Permitted Investments. Any income that accrues to the
Escrow Funds and is received by the Escrow Agent as a result of the Permitted
Investments shall be deposited into the Escrow Account and shall be available
for the uses and purposes for which the Escrow Account has been established. The
party entitled to the receipt of any portion of the funds in the Escrow Account
shall receive the accrued interest allocable to that portion of the funds. The
Escrow Agent shall have no authority or duty to invest the funds in the Escrow
Account in any other obligations except as provided in this Section. The Escrow
Agent shall, promptly following the end of each calendar month, send the Buyer
and the Seller a statement of holdings and transactions with respect to the
Escrow Account in form and substance customarily provided to clients, which
statement shall include, without limitation, interest or other income received
during such calendar month in respect of the Escrow Account and shall identify
the type(s) and source(s) of such income.
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<PAGE> 45
6. Termination of Escrow.
6.1 Subject to disbursements from time to time in accordance with
the terms and subject to the conditions hereof, unless the Buyer shall have
notified the Escrow Agent of a dispute in accordance with Section 1.3 of the
Purchase Agreement, the Escrow Agent shall deliver the Balance (as defined in
Section 4 hereof) to the Seller, without further inquiry by the Escrow Agent or
further instruction to the Escrow Agent eighteen (18) months from Closing.
6.2 This Escrow Agreement shall automatically terminate if and when
the entire Escrow Funds shall have been released by the Escrow Agent in
accordance with the terms and subject to the conditions of this Escrow
Agreement. Thereafter. The Escrow Agent shall be deemed to have discharged all
of its obligations hereunder.
7. Matters Affecting the Escrow Agent.
7.1 Indemnification of the Escrow Agent. From and at all times after
the date of this Escrow Agreement, the Buyer and the Seller shall, to the
fullest extent permitted by law and to the extent provided herein, indemnify and
hold harmless the Escrow Agent and each director, officer, employee, attorney,
agent and affiliate of the Escrow Agent (collectively, the "Indemnified Panics")
against any and all actions, claims (whether or not valid), losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys' fees, costs and expenses actually
incurred) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a
result of or arising from or in any way relating to any claim, demand, suit,
action or proceeding (including any inquiry or investigation) by any person,
including, without limitation, the Buyer or the Seller, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
person under any statute or regulation, including, but not limited to, any
applicable securities laws, or under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation, preparation,
execution, performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnified Party is a
party to any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the right
to be indemnified hereunder for any liability finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Indemnified Party. If any such action or claim shall
be brought or asserted against any Indemnified Party, such Indemnified Party
shall promptly notify the Buyer and the Seller in writing, and the Buyer and the
Seller shall assume the defense thereof, including the employment of counsel and
the payment of all expenses. Such Indemnified Party shall, in its sole
discretion, have the right to employ separate counsel (who may be selected by
such Indemnified Party in its sole discretion) in any such action and to
participate in the defense thereof, and the fees and expenses of such counsel
shall be paid by such Indemnified Party, except that the Buyer and the Seller
shall be required to pay such fees and expenses if: (a) the Buyer and the Seller
agree to pay such fees and expenses; (b) the Buyer and the Seller shall fail to
assume the defense of such action or proceeding or shall fail to employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding; or (c) the Indemnified Party, the Buyer and the Seller are the
plaintiffs in any such action or proceeding (including any potentially impleaded
parties), and the Indemnified Party shall have been advised by counsel that
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<PAGE> 46
there may be one or more legal defenses available to it which are different from
or additional to those available to the Buyer or the Seller. Each of the Buyer,
on the one hand, and the Seller. on the other hand, shall be responsible for
one-half (1/2) of each such indemnification responsibility. All such reasonable
fees and expenses payable by the Buyer and/or the Seller pursuant to the
foregoing sentence shall be paid from time to time as incurred, both in advance
of and after the final disposition of such action or claim. The obligations of
the Buyer and the Seller under this Section 7.1 shall survive any termination of
this Escrow Agreement and the resignation or removal of the Escrow Agent shall
be independent of any obligation of the Escrow Agent. The parties agree that
neither the payment by the Buyer or the Seller of any claim by the Escrow Agent
for indemnification hereunder nor the disbursement of any amounts to the Escrow
Agent from the Escrow Account in respect of a claim by the Escrow Agent for
identification shall impair, limit, modify or affect, as between the Buyer and
the Seller, the respective rights and obligations of the Buyer, on the one hand,
and the Seller, on the other hand, under the Purchase Agreement.
7.2 Duties and Liability of the Escrow Agent. The Escrow Agent's sole
responsibility shall be for the safekeeping, investment, and disbursement of the
Escrow Funds in accordance with the terms of this Escrow Agreement. The Escrow
Agent shall have no implied duties or obligations and shall not be charged with
knowledge or notice of any fact not specifically set forth herein. The Escrow
Agent may rely upon any instrument, not only as to its due execution, validity
and effectiveness. but also as to the truth and accuracy of any information
contained therein, which the Escrow Agent shall in good faith believe to be
genuine, to have been signed or presented by the person or parties purporting to
sign the same and to conform to the provisions of this Escrow Agreement. Except
to the extent of gross negligence or willful misconduct, in no event shall the
Escrow Agent be liable for incidental, indirect, special, consequential or
punitive damages. The Escrow Agent shall not be obligated to take any legal
action or commence any proceeding in connection with the Escrow Account, any
account in which the Escrow Funds are deposited, this Escrow Agreement or the
Purchase Agreement, or to appear in, prosecute or defend any such legal action
or proceeding. The Escrow Agent may consult legal counsel selected by it in the
event of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, or relating to any
dispute involving any party hereto. The Buyer and the Seller, jointly and
severally, shall promptly pay, upon demand, the reasonable fees and expenses
actually incurred of any such counsel.
7.3 Fees. The Buyer, on the one hand, and the Seller, on the other hand
shall equally reimburse the Escrow Agent For all of its reasonable out-of-pocket
expenses actually incurred, including reasonable attorneys' fees, travel
expenses, telephone and facsimile transmission costs, postage (including express
mail and overnight delivery charges), copying charges and the like.
Notwithstanding the above, any expenses in an amount greater than 3,500 DKK must
be preapproved by the Buyer and the Seller upon submission of a detailed invoice
by the Escrow Agent to the Buyer and the Seller or such expenses will not be the
responsibility of either the Buyer or the Seller. All of the compensation and
reimbursement obligations set forth in this Section 7.3 shall be payable by the
Buyer and the Seller, in equal amounts, upon demand by the Escrow Agent. The
obligations of the Buyer and the Seller under this Section 7.3 shall survive any
termination of this Escrow Agreement and the resignation or removal of the
Escrow
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<PAGE> 47
Agent. The Buyer and the Seller shall promptly pay such amounts to the Escrow
Agent or any Indemnified Party upon receipt of an itemized invoice.
7.4 Escrow Agent to Follow Instructions of the Buyer and the Seller.
Except for matters covered by Section 4 hereof, the Escrow Agent shall at any
time and from time to time take such action hereunder with respect to the Escrow
Funds as shall be agreed to in writing by the Buyer and the Seller.
7.5 Removal and Resignation Of the Escrow Agent. The Buyer and the
Seller, acting jointly, may remove the Escrow Agent at any time upon thirty (30)
calendar days' prior written notice, signed by both the Buyer and the Seller, to
the Escrow Agent. The Escrow Agent may resign at any time upon thirty (30)
calendar days prior written notice (unless waived) to the Buyer and the Seller.
Within thirty (30) calendar days after giving the foregoing notice of
resignation from the Escrow Agent, the Buyer and the Seller shall jointly agree
on and appoint a successor escrow agent. The successor escrow agent shall be a
bank having combined capital and surplus of at least 3,500.000,000 DKK as shall
be mutually selected by the Buyer and the Seller. Any such successor escrow
agent shall be appointed by a written instrument mutually satisfactory to and
executed by the Buyer and the Seller, the Escrow Agent and the successor escrow
agent.
If a successor escrow agent has not accepted such appointment by the
end of such thirty (30) calendar day period, the Escrow Agent may apply to a
court of competent jurisdiction for the appointment of a successor escrow agent
or for other appropriate relief. The reasonable costs and expenses (including
reasonable attorneys' fees and expenses actually incurred) incurred by the
Escrow Agent in connection with such proceeding shall be paid by, and be deemed
a joint and several obligation of, the Buyer, on the one hand, and the Seller,
on the other hand.
Any successor escrow agent appointed under the provisions of this
Escrow Agreement shall have all of the same rights, powers, privileges,
immunities and authority with respect to the matters contemplated herein as are
granted herein to the original Escrow Agent. It is understood and agreed that no
resignation of the Escrow Agent shall be effective until a successor escrow
agent agrees to act hereunder. If the Escrow Agent submits a notice of
resignation, its only duty, until a successor escrow agent shall have been
appointed and shall have accepted such appointment, shall be to hold, invest and
dispose of the Escrow Funds in accordance with this Escrow Agreement, but
without regard to any notices, requests, instructions, demands or the like
received by it from the other parties hereto after such notice of resignation
shall have been given, unless the same is a direction that the Escrow Funds be
paid or delivered in its entirety to one of the other parties hereto.
8. Other Provisions.
8.1 Security Interest.
(a) The Seller hereby grants to the Buyer a first priority perfected
security interest in the Escrow Funds and all other amounts from time
to time in the Escrow Account (including all interest accrued thereon
and all proceeds thereof) to secure the
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Buyer's fights to indemnification under Article 9 of the Purchase
Agreement. This Escrow Agreement shall constitute a security agreement
under applicable law.
(b) The parties agree that this security interest shall attach as of
the execution of this Escrow Agreement. The parties further agree that,
for the purpose of perfecting the Buyer's security interest in the
Escrow Funds held by the Escrow Agent pursuant to this Escrow
Agreement, the Buyer designates the Escrow Agent to acquire and
maintain possession of the Escrow Funds. The Seller and Olicom shall
take ail other actions requested by the Buyer to maintain the
perfection and priority of the security interest in the Escrow Funds.
(c) The Buyer's security interest herein granted shall be
automatically terminated to the extent of any adjustment. offset or
disbursement of the Escrow Funds hereunder by the Escrow Agent in
accordance with the terms of this Escrow Agreement. Upon final
disbursement of the Escrow Funds to the Seller or to the Buyer, the
Buyer shall do all acts and things reasonably necessary to release and
extinguish such security interest.
8.2 Amendment and Waiver. This Escrow Agreement may not be amended
or waived except in a writing executed by the party against which such amendment
or waiver is sought to be enforced. No course of dealing between or among any
persons having any interest in this Escrow Agreement will be deemed effective to
modify or amend any part of this Escrow Agreement or any rights or obligations
of any person under or by reason of this Escrow Agreement.
8.3 Notices. All notices. requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given: (i) when delivered,
if delivered in person or by commercial messenger service; or (ii) two days
following deposit with a recognized overnight courier service, provided that
such deposit occurs prior to such deadline as has been imposed by such service
for overnight delivery; or (iii) when transmitted. If sent by telefacsimile
copy, provided confirmation of receipt is received by the sender, in each case
provided that such communication is addressed to the intended recipient thereof
as set forth below:
If to Buyer, to: Motorola, Inc.
5401 W. Beach Street
Ft. Worth, Texas 76137-2794
Attn: John E. Steadman
Facsimile: (817) 245-2702
with a copy to:
Motorola, Inc.
1301 East Algonquin
Schaumburg, IL 60196
Attn: Donald F. McLellan. Esq.
Facsimile: (847) 576-3628
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If to Seller, to: Olicom Ventures AJS
Nybrovej 110
DK-2800 Lyngby
Denmark
Attn: Lars Larsen & Mette Fogt
Facsimile: 011-45-45-27-0180
If to Olicom, to: Olicom A/S
Nybrovej 110
DK-2800 Lyngby
Denmark
Attn: CFO
Facsimile: 011-45-45-27-0180
If to Escrow Agent, To: Unibank A/S
Niels Hemmingsens Gade 24
DK-1001 Copenhagen K
Denmark
Attn: Lars Hilstroem
Facsimile: 011-45-33-13-1959
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery or electronic mail), but no such
notice, request, demand, claim or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
8.4 Binding Effect and Assignment. This Escrow Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Escrow Agreement nor any of the rights, interests or obligations hereunder
may be assigned by the Seller, Olicom or the Escrow Agent without the prior
written consent of the Buyer.
8.5 Severability. Whenever possible, each provision of this Escrow
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Escrow Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Escrow Agreement.
8.6 Complete Agreement; No Third Party Beneficiaries. Subject to the
terms of the Purchase Agreement, this Escrow Agreement contains the complete
agreement between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way. Nothing in this Escrow
Agreement, expressed or implied, is intended to confer upon any person
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or entity, other than the parties hereto and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Escrow Agreement.
8.7 Governing Law. This Escrow Agreement shall be construed,
governed and enforced according to the internal laws of the Kingdom of Denmark,
without regard to conflicts of law principles. Any suit or proceeding brought
hereunder shall be subject to the exclusive jurisdiction of the courts located
in the Kingdom of Denmark.
9. Mediation and Alternative Dispute Resolution.
(a) To the extent that any misunderstanding or dispute cannot be
resolved agreeably in a friendly mariner, the dispute will be mediated by a
mutually acceptable mediator to be chosen by Buyer, Seller, and if applicable,
the Escrow Agent within forty-five (45) days after written notice by one of the
parties demanding mediation. Neither party may unreasonably withhold consent to
the selection of a mediator, however, by mutual agreement Buyer, Seller, and if
applicable. The Escrow Agent may postpone mediation until each has completed
specified but limited discovery with respect to a dispute. The parties may also
agree to attempt some other form of alternative dispute resolution ("ADR") in
lieu of mediation, including by way of example and without limitation neutral
fact-finding or a mini-trial.
(b) Any dispute which the parties cannot resolve through
negotiation, mediation or other form of ADR within six (6) months of the date of
the initial demand for it by one of the parties may then be submitted to the
courts for resolution. The use of any ADR procedures will not be construed under
the doctrines of laches, waiver or estoppel to affect adversely the rights of
either party. Nothing in this Section 9 will prevent either party from resorting
to judicial proceedings if: (i) good faith efforts to resolve the dispute under
these procedures have been unsuccessful; or (ii) interim relief from a court is
necessary to prevent serious and irreparable injury to one party or to others.
10. Attorneys' Fees. Should any litigation be commenced between the
Buyer, on one hand, and either the Seller or Olicom, on the other hand,
concerning this Escrow Agreement or the rights and duties of any party in
relation thereto, the party prevailing in such litigation shall be entitled, in
addition to such other relief as may be granted, to receive reimbursement from
the opposing party or parties, as applicable, for such first party's attorneys'
fees in such litigation, which shall be determined by the court in that
litigation.
11. Waiver of Trial by Jury. EACH OF THE PARTIES HERETO WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON-CONENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11. EACH OF THE PARTIES
HERETO WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. EACH OF THE PARTIES HERETO REPRESENTS THAT IT RAS REVIEWED THIS WAIVER
AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
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<PAGE> 51
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
12. Confirmation of Transfer Instructions. If fund transfer
instructions are given (other than in writing at the time of execution of the
Purchase Agreement), whether in writing, by telecopier or otherwise, the Escrow
Agent is authorized to seek confirmation of such instructions by telephone
call-back to the person or persons designated on Schedule A attached hereto, and
the Escrow Agent may rely upon the confirmations of anyone purporting to be the
person or persons so designated. The persons and telephone numbers for
call-backs may be changed only in a writing actually received and acknowledged
by the Escrow Agent. The parties to this Escrow Agreement acknowledge that such
security procedure is commercially reasonable.
13. Counterparts and Facsimile Signature. This Escrow Agreement may be
executed in one or more counterparts, each of which shall be deemed an original.
but all of which together shall constitute one and the same instrument.
Notwithstanding the laws of any jurisdiction in which this Agreement is executed
or delivered. A facsimile signature shall for all purposes be deemed an original
and shall bind the signer as if such facsimile were an original. Each party
hereto undertakes to deliver to each other party hereto original copies of any
facsimile signature by overnight courier to the addresses set forth in Section
8.3 above.
[Signature Page Follows]
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IN WITNESS WHEREOF. The parties hereto have caused this Escrow
Agreement to be executed effective as of the date first written above.
BUYER:
MOTOROLA, INC.
By:
----------------------------------------------
Name: John Steadman
Title: Vice President and Director. Licensing and
Strategic Alliances. Personal Network
Group, PCS. CE
SELLER:
OLICOM VENTURES A/S
By:
----------------------------------------------
Name:
--------------------------------------------
Its:
---------------------------------------------
OLICOM:
OLICOM A/S
By:
----------------------------------------------
Name:
--------------------------------------------
Its:
---------------------------------------------
ESCROW AGENT:
UNIBANK A/S
By:
----------------------------------------------
Name:
--------------------------------------------
Its:
---------------------------------------------
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