<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 12, 1996
STANDARD MICROSYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> DELAWARE <C> 0-7422 <C> 11-2234952
(State or other jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
80 ARKAY DRIVE
HAUPPAUGE, NEW YORK 11788
(Address of principal executive offices, including zip code)
(516) 434-4600
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 9, 1996, the registrant, Standard Microsystems
Corporation ("SMC"), together with SMC Enterprise Networks, Inc., a Delaware
corporation and wholly-owned subsidiary of SMC (collectively, the "Sellers"),
and Cabletron Systems, Inc., a Delaware corporation ("Cabletron") and Cabletron
Systems Acquisition, Inc., a Delaware corporation ("Acquisition"), entered into
an Asset Purchase Agreement (the "Agreement"). Under the terms of the Agreement,
on January 12, 1996, Cabletron and Acquisition (collectively, the "Buyer")
purchased substantially all of the assets (and assumed certain of the
liabilities) of the Enterprise Networks business unit of the Sellers for
$75,900,000 in cash. The Enterprise Networks business unit of Sellers designed,
developed, manufactured and sold enterprise-wide switching products for computer
networks. The purchase price is subject to adjustment based on certain changes
that may be required upon audit of the final assets acquired and liabilities
assumed by the Buyer at the closing date of the asset sale. The purchase price
was determined by arms-length negotiations between Sellers and the Buyer. Under
the terms of the Agreement, the Sellers have agreed to indemnify the Buyer
against certain losses. As security for Sellers' indemnification obligations,
$7,050,000 of the purchase price was placed in escrow to be used as a source
from which certain indemnifiable losses may be paid by Sellers to Buyer.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information.
(1) Unaudited Pro Forma Consolidated Condensed Balance Sheet as
of November 30, 1995.
(2) Unaudited Pro Forma Consolidated Condensed Statements of
Income for the year ended February 28, 1995 and nine months
ended November 30, 1995
(c) Exhibits. The exhibit identified below is made part of this report.
Exhibit No. Description
- ----------- -----------
2 Asset Purchase Agreement, dated as of January 9, 1996,
among Cabletron Systems, Inc., Cabletron Systems
Acquisition, Inc., SMC Enterprise Networks, Inc., and
Standard Microsystems Corporation.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STANDARD MICROSYSTEMS CORPORATION
(Registrant)
Date: January 26, 1996 By: /s/ Anthony M. D'Agostino
--------------------------------
Anthony M. D'Agostino
Vice President Finance and
Chief Financial Officer
<PAGE> 5
ITEM 7 (b) PRO FORMA FINANCIAL INFORMATION
DESCRIPTION OF TRANSACTION
In January 1996, Standard Microsystems Corporation and its wholly-owned
subsidiary, SMC Enterprise Networks, Inc. (collectively, the "Company") sold
substantially all of the net assets of the Company's Enterprise Networks
business unit ("ENBU") to Cabletron Systems, Inc. and Cabletron Systems
Acquisition, Inc. (collectively, "Cabletron") pursuant to an Asset Purchase
Agreement between the Company and Cabletron. The Company's ENBU designs,
develops, manufactures and sells enterprise-wide switching products for
computer networks.
Under the terms of the agreement, Cabletron acquired specific assets and
intellectual properties, and assumed certain liabilities, related to the ENBU
in exchange for $75.9 million in cash, subject to certain purchase price
adjustments as defined in the Asset Purchase Agreement.
FINANCIAL INFORMATION PRESENTED
The unaudited Pro Forma Consolidated Condensed Balance Sheet as of November 30,
1995 presents Standard Microsystems Corporation's consolidated financial
position assuming the transaction had taken place on that date. The unaudited
Pro Forma Consolidated Condensed Statements of Income for the year ended
February 28, 1995 and nine months ended November 30, 1995 present Standard
Microsystems Corporation's consolidated operating results (before extraordinary
items) assuming the transaction had taken place at the beginning of each period
presented.
The pro forma figures presented do not necessarily represent the actual results
that would have occurred had the transaction taken place as assumed herein, nor
are they necessarily indicative of future operating results or financial
condition.
<PAGE> 6
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF NOVEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
NOV. 30, 1995 BUSINESS ADJUSTMENTS NOV. 30, 1995
ACTUAL SOLD (SEE NOTES) PRO FORMA
----------------------------------------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 12,594 $ - $ 68,850 (A) $ 81,444
Accounts receivable 50,456 (3,774) - 46,682
Inventories 50,151 (8,485) - 41,666
Deferred tax benefits 10,929 - (1,934) (C) 8,995
Other current assets 5,889 (1,448) 254 (B) 4,695
----------------------------------------------- ------------
Total current assets 130,019 (13,707) 67,170 183,482
----------------------------------------------- ------------
Property, plant and equipment 136,571 (6,926) - 129,645
Accumulated depreciation and amortization 80,616 (2,798) - 77,818
----------------------------------------------- ------------
55,955 (4,128) - 51,827
----------------------------------------------- ------------
Intangible assets 19,663 (4,423) - 15,240
Long-term investment 13,990 - - 13,990
Deferred tax benefits 2,904 - (920) (C) 1,984
Other assets 4,287 - 7,050 (A) 11,337
----------------------------------------------- ------------
$ 226,818 $ (22,258) $ 73,300 $ 277,860
=============================================== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 17,712 $ (1,846) $ - $ 15,866
Accrued expenses and other liabilities 17,739 (1,609) 5,734 (B) 21,864
Income taxes payable 174 - 17,793 (C) 17,967
----------------------------------------------- ------------
Total current liabilities 35,625 (3,455) 23,527 55,697
----------------------------------------------- ------------
Long-term debt 18,000 - - 18,000
Minority interest in subsidiary 11,327 - - 11,327
Shareholders' equity:
Preferred stock - - - -
common stock 1,342 - - 1,342
Additional paid-in capital 79,467 - - 79,467
Retained earnings 73,813 - 30,970 (D) 104,783
Unrealized gain on investment, net 1,929 - - 1,929
Foreign currency translation adjustment 5,315 - - 5,315
----------------------------------------------- ------------
Total shareholders' equity 161,866 - 30,970 192,836
----------------------------------------------- ------------
$ 226,818 $ (3,455) $ 54,497 $ 277,860
=============================================== ============
</TABLE>
<PAGE> 7
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED PRO FORMA YEAR ENDED
FEB. 28, 1995 BUSINESS ADJUSTMENTS FEB. 28, 1995
ACTUAL SOLD (SEE NOTES) PRO FORMA
------------------------------------------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $ 378,671 $ (22,113) $ - $ 356,558
Cost of goods sold 214,269 (11,336) - 202,933
------------------------------------------------------ ------------------
Gross profit 164,402 (10,777) - 153,625
Operating expenses:
Research and development 28,286 (7,604) - 20,682
Selling, general and administrative 90,005 (9,386) 1,296 (A) 81,915
Amortization of intangible assets 5,489 (1,083) - 4,406
------------------------------------------------------ ------------------
123,780 (18,073) 1,296 107,003
Income from operations 40,622 7,296 (1,296) 46,622
Other income (expense), net 670 - - 670
------------------------------------------------------ ------------------
Income before minority interest and
provision for income taxes 41,292 7,296 (1,296) 47,292
Minority interest in net income
of subsidiary 185 - - 185
------------------------------------------------------ ------------------
Income before provision for income taxes 41,107 7,296 (1,296) 47,107
Provision for income taxes 15,940 - 1,918 (B) 17,858
------------------------------------------------------ ------------------
Income before extraordinary item $ 25,167 $ 7,296 $ (3,214) (C) $ 29,249
====================================================== ==================
Income per share before extraordinary item $ 1.89 $ 2.20
================== ==================
Weighted average common and common
equivalent shares outstanding 13,305 13,305
================== ==================
</TABLE>
<PAGE> 8
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED PRO FORMA ENDED
NOV. 30, 1995 BUSINESS ADJUSTMENTS NOV. 30, 1995
ACTUAL SOLD (SEE NOTES) PRO FORMA
----------------------------------------------------- ------------------
<S> <C> <C> <C> <C>
Revenues $ 248,213 $ (13,708) $ - $ 234,505
Cost of goods sold 159,339 (11,210) - 148,129
----------------------------------------------------- ------------------
Gross profit 88,874 (2,498) - 86,376
Operating expenses:
Research and development 23,937 (7,616) - 16,321
Selling, general and administrative 79,659 (9,541) 1,306 (A) 71,424
Amortization of intangible assets 6,816 (812) - 6,004
----------------------------------------------------- ------------------
110,412 (17,969) 1,306 93,749
Income (loss) from operations (21,538) 15,471 (1,306) (7,373)
Other income (expense), net (620) - - (620)
----------------------------------------------------- ------------------
Income (loss) before minority interest and
provision for income taxes (22,158) 15,471 (1,306) (7,993)
Minority interest in net income
of subsidiary 153 - - 153
----------------------------------------------------- ------------------
Income (loss) before provision
for income taxes (22,311) 15,471 (1,306) (8,146)
Provision for (benefit from) income taxes (7,508) - 5,208 (B) (2,300)
----------------------------------------------------- ------------------
Net income (loss) $ (14,803) $ 15,471 $ (6,514) $ (5,846)
===================================================== ==================
Net income (loss) per share $ (1.11) $ (0.44)
================== ==================
Weighted average common and common
equivalent shares outstanding 13,325 13,325
================== ==================
</TABLE>
<PAGE> 9
STANDARD MICROSYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(A) Reflects the sale of substantially all of the assets of the ENBU to
Cabletron Systems, Inc. for $75.9 million in cash, of which $7.1
million was placed in escrow pursuant to the Asset Purchase Agreement
as security for the Company's indemnification obligations.
(B) Represents certain assets not conveyed ($254,000) and liabilities not
assumed ($1,434,000) by Cabletron, as well as an accrual for
approximately $4.3 million of expenses directly related to the
transaction.
(C) Income taxes on the gain realized by the Company on the transaction
have been accrued at a rate of 40%, which includes the statutory
federal tax rate and state tax rates of those states impacted by this
transaction. Of the resulting $20.6 million accrued for income taxes,
$17.8 million is estimated to be currently payable, and $2.8 million is
deferred.
(D) An after-tax gain of approximately $31.0 million on this transaction is
presented within these assumptions.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(A) Represents various allocated selling, general and administrative
expenses which would not have been eliminated had the transaction
occurred as presented. These expenses include general marketing
services, sales administration and certain field sales expenses.
(B) Income taxes have been provided at a rate of 39%, which approximates
the effective combined federal and state statutory rate for the periods
presented.
(C) The Company reported a $944,000 extraordinary loss (net of tax) on an
early extinguishment of debt in fiscal 1995. This loss is excluded from
these pro forma results for the year ended February 28, 1995.
<PAGE> 10
EXHIBIT INDEX
Exhibit Index Description
- ------------- -----------
2 Asset Purchase Agreement, dated as
of January 9, 1996, among Cabletron
Systems, Inc., Cabletron Systems
Acquisition, Inc., SMC Enterprise
Networks, Inc., and Standard Microsystems
Corporation.
<PAGE> 1
ASSET PURCHASE AGREEMENT
AMONG
CABLETRON SYSTEMS, INC.,
CABLETRON SYSTEMS ACQUISITION, INC.,
SMC ENTERPRISE NETWORKS, INC.
AND
STANDARD MICROSYSTEMS CORPORATION
JANUARY 9, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Acquisition of Assets by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1. Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4. Liabilities Not Assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6. Adjustment to Purchase Price; Closing Date Audit . . . . . . . . . . . . . . . . . . . . . . 15
2.7. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8. Deliveries at the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.9. Preliminary Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.10. Joint Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. Representations and Warranties of the Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1. Organization of the Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3. Authorization of Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4. Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5. Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.6. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.7. Acquired Assets Used in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.8. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.9. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10. Indebtedness; Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.11. Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.13. Legal and Other Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.15. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.17. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.18. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.19. Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.20. Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.21. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.22. Product Warranties; Defects; Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.23. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.24. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
3.25. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.26. Affiliated Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.27. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.28. Distributors, Customers, Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.29. No Illegal Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.30. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.31. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.32. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4. Representations and Warranties of Cabletron and Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1. Organization of Cabletron and Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.2. Authority for Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.3. Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.4. Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2. Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4. Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.5. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.7. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8. Retention of and Access to Records after Closing . . . . . . . . . . . . . . . . . . . . . . 34
5.9. Bulk Sales Compliance; Liens under Chapter 62C,
Section 51 of the Massachusetts General Laws . . . . . . . . . . . . . . . . . . . . . . . . 35
5.10. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.11. Product Warranty Repair and Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.12. Delivery of Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.13. License of Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.14. Cooperation in Connection with Pending Litigation . . . . . . . . . . . . . . . . . . . . . . 36
5.15. General Skill and Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.16. Relationship with Nu-Link .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.17. License under Multimedia Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.18. Trillium Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.1. Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.2. Conditions to Obligations of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.1. Confidential Information Related Exclusively to the
Business Relating to the Assets of the ENBU . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
7.2. Shared Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2. Indemnity by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.3. Environmental Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4. Indemnity by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.5. Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.6. Other Indemnification Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1. Press Releases and Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4. Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.6. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.11. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.12. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.13. Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.14. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.15. Resolution of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<PAGE> 5
EXHIBITS
A - Form of Escrow Agreement
B-1 - Assignment and Assumption Agreement
B-2 - Bill of Sale
B-3 - Inventory Bill of Sale
C - Allocation of Purchase Price
D - Financial Statements
E - Form of Opinion of Wilson, Sonsini, Goodrich & Rosati
F - Form of Opinion of Ropes & Gray
G - Form of Product Agreement
H - Form of Assignment of Patent Application
SCHEDULES
Schedule 1.1 - Retained Products
Schedule 2.1(a) - Encumbrances on Acquired Assets
Schedule 2.1(b) - Leases
Schedule 2.1(c) - Permits
Schedule 2.1(d) - Intellectual Property
Schedule 2.1(e) - Contracts
Schedule 2.3(e) - Penril Litigation
Schedule 2.6(a) - Preliminary Closing Net Assets Acquired Statement
Schedule 6.1(m) - Contracts to be Terminated
Disclosure Letter - Exceptions to Representations and Warranties
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<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into on
January 9, 1996 by and among Cabletron Systems, Inc., a Delaware corporation
("Cabletron"), Cabletron Systems Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Cabletron ("Acquisition") (Cabletron and Acquisition
are collectively referred to herein as the "Buyer"), Standard Microsystems
Corporation, a Delaware corporation ("SMC") and SMC Enterprise Networks, Inc., a
Delaware corporation and a wholly-owned subsidiary of SMC, ("Subsidiary") (SMC
and Subsidiary are collectively referred to herein as the "Sellers"). The Buyer
and the Sellers are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Enterprise Networks business unit of SMC in consideration of the Purchase
Price (as defined below).
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"694 Chip" means the device marketed by SMC under the part number
SMC83C694 for implementing the 10BASE-T interface and Manchester Encoder/Decoder
functions.
"Acquired Assets" shall have the meaning set forth in Section 2.1.
"Acquisition" shall have the meaning set forth in the preamble above.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local, or foreign law.
"Agreement" shall have the meaning set forth in the preamble above.
"Assets of the ENBU" means the Products, Technology and other assets,
rights, business and operations that directly relate to, are incorporated or
embodied in, or are used in or necessary to the development, manufacture,
testing or marketing of the Products.
"Assumed Liabilities" shall have the meaning in Section 2.3.
<PAGE> 7
"Bacon Chip" means the device marketed by SMC under the part number
SMC83C110 that implements the 100BASE-TX conveyance sub-layer, 4B/5B
encoding/decoding, and stream ciphering functions.
"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 reasonably form the
basis for any specified consequence.
"Buyer" has the meaning set forth in the preamble above.
"Cabletron" shall have the meaning set forth in the preamble above.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Chemical Substance" means any chemical substance, including but not
limited to any: (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste, (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyl; (vi) chlorofluorocarbons; and, (vii) any
other substance, material or waste, which is identified or regulated under any
Environmental Law or Safety Law, as now and hereinafter in effect, or other
comparable laws.
"Closing" has the meaning set forth in Section 2.7 below.
"Closing Date" has the meaning set forth in Section 2.7 below.
"Closing Date Audit" has the meaning set forth in Section 2.6 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Component Products Division" means the Component Products Division of
SMC located principally in Hauppauge, New York.
"Confidential Information" means any and all information concerning the
Assets of the ENBU that is not already generally or readily obtainable by the
public or is publicly known or becomes publicly known through no fault of the
Sellers.
"Contracts" has the meaning set forth in Section 2.1(e).
"Controlled Group of Corporations" means a group of corporations that
is treated as a single employer by reason of Code Sections 401(b), (c) or (m).
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<PAGE> 8
"Desktop Networks Business Unit" means the Desktop Networks Business
Unit of SMC located principally in Irvine, California.
"Disclosure Letter" has the meaning set forth in Section 3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"ENBU" means the Sellers with respect to its Enterprise Networks
business unit.
"Environment" means real property and any improvements thereon, and
also includes, but is not limited to, ambient air, surface water, drinking
water, groundwater, land surface, subsurface strata and water body sediments.
"Environmental Laws" mean any federal, state, local and foreign law,
regulation or legal requirement relating to pollution, or protection or cleanup
of the Environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Air Act, as amended, the
Clean Water Act, as amended, and any other law or legal requirement, as now or
hereinafter in effect, relating to: (a) the Release, containment, removal,
remediation, response, cleanup or abatement of any sort of any Chemical
Substance; (b) the manufacture, generation, formulation, processing, labeling,
distribution, introduction into commerce, use, treatment, handling, storage,
recycling, disposal or transportation of any Chemical Substance; (c) exposure of
persons, including employees, to any Chemical Substance; or, (d) the physical
structure, use or condition of a building, facility, fixture or other structure,
including, without limitation, those relating to the management, use, storage,
disposal, cleanup or removal of asbestos, asbestos-containing materials,
polychlorinated biphenyls or any other Chemical Substance.
"Environmental Liabilities and Costs" means all Losses incurred: (i)
that are required by a governmental agency or third party in order to comply
with any Environmental Law or Environmental Permit; (ii) that are required by a
governmental agency or third party as a result of a Release of any Chemical
Substance; or, (iii) that are required by a governmental agency or third party
as a result of any environmental conditions present at, created by or arising
out of the past or present operations of Sellers through the Closing Date or of
any prior owner or operator of a facility or site at which Sellers now operates
or has previously operated.
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<PAGE> 9
"Environmental Permit" means any Permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by any
Environmental Law.
"Escrow Agreement" means the Escrow Agreement entered into by the
Parties pursuant to Section 6.1(o).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" has the meaning set forth in Section 2.2 below.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FEAST Chip" means the device marketed by SMC under the part number
SMC91C100 for implementing the Fast Ethernet Media Access Control (MAC)
functions in all its revisions. The functions of this chip are documented in the
SMC91C100 data sheet dated 12/09/94.
"FEAST Full Duplex Chip" means the pin compatible successor to the
SMC91C100 that adds full duplex communications capability to the functions
implemented by the SMC91C100. The details of the functions of this chip are
documented in the engineering spec titled "FEAST Full Duplex" specification
dated 12/04/95.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Balance Sheet" has the meaning set forth in Section 2.6 below.
"Final Closing Net Assets Acquired Statement" has the meaning set forth
in Section 2.6 below.
"Financial Statement" has the meaning set forth in Section 3.9 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indebtedness" has the meaning set forth in Section 3.10.
"Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including Patents,
copyrights, Trademarks, mask works, trade secrets and proprietary information,
all applications for any of the foregoing, and any license or agreements
granting rights related to the foregoing: (i) subsisting in, covering, reading
on, directly applicable to or existing in the Products or the Technology,
including, without limitation, all
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<PAGE> 10
Technology identified in Schedule 2.1(d); or (ii) that are owned, licensed or
controlled in whole or in part by ENBU and directly relate to the Assets of the
ENBU; or (iii) that are used in or necessary to the development, manufacture,
marketing or testing of the Products.
"Interim Financial Statements" has the meaning set forth in Section
3.9.
"Inventory" means the inventory of Products, including all raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, comprising the Acquired Assets.
"Joint Software" means the source code, object code, programmer
documentation and user documentation, as further developed pursuant to Section
2.10, comprising: (i) the software programs known as EliteView 3.1 (Microsoft
Windows version) for the following - 3512 Ethernet Hub, 3812 Ethernet Hub,
Tigerstack Ethernet Hub, PC Agent, 4008 Token Ring MAU, 4016 Token Ring MAU,
Tigerswitch XE, ES/1, ES/1 ATX; (ii) the software programs known as EliteView
4.3 (Microsoft Windows version); (iii) the software programs known as EliteView
Snap-in (Novell NMS version); and (iv) the software program known as Agent
Emulator.
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" has the meaning set forth in Section 2.1(b).
"Liability" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, whether incurred or
consequential and whether due or to become due), including any liability for
Taxes.
"Lien" means any mortgage, pledge, lien, security interest, charge,
claim, equity, encumbrance, restriction on transfer, conditional sale or other
title retention device or arrangement (including, without limitation, a capital
lease), transfer for the purpose of subjection to the payment of any
Indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include (i) statutory liens for Taxes to
the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the uses of real property if the same do not
materially detract from the value of the property encumbered thereby or impair
the use of such property in the Assets of the ENBU as currently conducted, (iii)
statutory or common law liens to secure landlords, lessors or renters under
leases or rental agreements confined to the premises rented to the extent that
no payment or performance under any such lease or rental agreement is in arrears
or is otherwise due, (iv) deposits or pledges made in connection with, or to
secure payment of, worker's compensation, unemployment insurance, old age
pension programs mandated under applicable laws or other social security
regulations and (v) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, statutory or common
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<PAGE> 11
law liens to secure claims for labor, materials or supplies and other like
liens, which secure obligations to the extent that payment thereof is not in
arrears or otherwise due.
"Losses" has the meaning set forth in Section 9.2.
"Most Recent Balance Sheet" means the statement of assets and
liabilities dated November 30, 1995 prepared by Sellers and included in the
Financial Statements attached as Exhibit D hereto.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.9
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Asset Value" means the excess of the Acquired Assets over the
Assumed Liabilities as shown on the Final Closing Net Assets Acquired Statement
prepared as of the Closing Date and determined in accordance with GAAP applied
on a basis consistent with the preparation of the Financial Statements;
provided, however, that assets, liabilities, gains, losses, revenues, and
expenses for interim periods or as of dates other than fiscal year-end will be
determined, for purposes of the Final Closing Net Assets Acquired Statement,
through the full application of the procedures which would be used in preparing
an audited balance sheet.
"Ordinary Course of Business" means the ordinary course of business
consistent with past practice (including with respect to quantity and
frequency).
"Parties" has the meaning set forth in the preamble above.
"Patent" means any: (i) United States or foreign patent, patent
application, patent disclosure or other patent right; (ii) any division,
continuation, continuation-in-part or similar extension of an application that
is a Patent; and (iii) any patent or other patent right that issues or is based
upon an application that is a Patent.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Penril Litigation" has the meaning set forth in Section 2.3(e) below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Preliminary Closing Net Assets Acquired Statement" has the meaning set
forth in Section 2.6 below.
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<PAGE> 12
"Product Agreement" means the Product Agreement entered into by the
Parties attached hereto as Schedule G.
"Products" means all current products and services that are identified
in Schedule 2.1(d), any subsequent versions of such products currently being
developed, any products currently being developed by ENBU which are designed to
supersede, replace or function as a component of such products, and any
upgrades, enhancements, improvements and modifications to the foregoing
currently being developed.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2.5 below.
"Release" means any actual or, to the Knowledge of the Seller, alleged
spilling, leaking, pumping, pouring, emitting, dispersing, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of any
Chemical Substance into the Environment that would cause an Environmental
Liability and Cost (including the abandonment or discarding of barrels,
containers, tanks or other receptacles containing or previously containing any
Chemical Substance).
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Products" means all current products and services that are
identified in Schedule 1.1, all current products and services of and products
currently under development by the Component Products Division and Desktop
Networks Business Unit, any subsequent versions of such products currently being
developed, any products currently being developed which are designed to
supersede, replace or function as a component of such products, and any
upgrades, enhancements, improvements and modifications to the foregoing
currently being developed.
"Retained Technology" means all inventions, copyrightable works,
integrated circuit masks, discoveries, innovations, know-how, information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, business and marketing plans and proposals, documentation, and
manuals), computer software, computer hardware, integrated circuits, electronic,
electrical and mechanical equipment and all other forms of technology, including
improvements, modifications, derivatives or changes, whether tangible or
intangible, embodied in any form, whether or not protectible or protected by
patent, copyright, mask work right, trade secret law or otherwise, that are
incorporated, embodied or used in or are used to develop, manufacture, test or
market the Retained Products.
"Safety Laws" means any federal, state, local and foreign law,
regulation or legal requirement relating to health or safety, including the
Occupational Safety and Health Act, as amended, as now or hereinafter in effect
relating to (a) exposure of employees to any Chemical
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<PAGE> 13
Substance or (b) the physical structure, use or condition of a building,
facility, fixture or other structure, including, without limitation, those
relating to equipment or manufacturing processes, or the management, use,
storage, disposal, cleanup or removal of any Chemical Substance.
"Safety Liabilities and Costs" means all Losses incurred to comply with
any Safety Law or as a result of any health or safety conditions present at,
created by or arising out of the past or present operations of the ENBU through
the Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar, including FICA), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Technology" means all inventions, copyrightable works, integrated
circuit masks, discoveries, innovations, know-how, information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
business and marketing plans and proposals, documentation, and manuals),
computer software, computer hardware, integrated circuits, electronic,
electrical and mechanical equipment and all other forms of technology, including
improvements, modifications, derivatives or changes, whether tangible or
intangible, embodied in any form, whether or not protectible or protected by
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<PAGE> 14
patent, copyright, mask work right, trade secret law or otherwise, that are
incorporated, embodied or used in or are used to develop, manufacture, test or
market the Products.
"Trademarks" means any trademarks, service marks, trade dress, and
logos, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith.
2. Acquisition of Assets by Buyer.
2.1. Purchase and Sale of Assets. The Sellers agree to sell and
transfer to the Buyer, and the Buyer agrees to purchase from the Sellers at the
Closing, subject to and upon the terms and conditions contained herein, free and
clear of any Lien or Security Interest except as listed on Schedule
2.1(a), all of the Sellers' right, title, and interest in and to the
following properties and assets, except as provided in Section 2.2
(collectively, the "Acquired Assets"):
(a) All assets of the ENBU reflected on the Most Recent
Balance Sheet and all assets of the ENBU of the same nature as
those reflected on the Most Recent Balance Sheet that have been
acquired by Sellers in the Ordinary Course of Business since
November 30, 1995 (other than assets reflected on the Most
Recent Balance Sheet that have been disposed of in the Ordinary
Course of Business since November 30, 1995) including without
limitation:
(i) all tangible personal property (such as
machinery, equipment, inventories, raw materials,
supplies, manufactured and purchased parts, works in
progress, finished goods, furniture, tools, jigs and
dies) included in the Most Recent Balance Sheet;
(ii) prepaid expenses and other similar
current assets of the ENBU included in Most Recent
Balance Sheet;
(b) All leasehold interests and subleases and rights
thereunder relating to the real and personal property as listed
on Schedule 2.1(b) (the "Leases");
(c) All licenses (other than Intellectual Property),
permits, authorizations, orders, registrations, certificates,
variances, approvals, consents and franchises pertaining to or
used in connection with the Assets of the ENBU or any pending
applications relating to any of the foregoing, including
without limitation all governmental permits, licenses,
authorizations, approvals and consents described in
Schedule 2.1(c);
(d) All Intellectual Property, except as set forth in
Section 2.2, goodwill associated therewith, licenses and
sublicenses granted in respect thereto and rights thereunder,
remedies against infringements thereof and rights to protection
of
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<PAGE> 15
interest therein, including without limitation the
Intellectual Property described in Schedule 2.1(d) hereto;
(e) All contracts, indentures, mortgages, instruments,
Security Interests, guaranties, or other agreements relating to
the Assets of the ENBU as listed on Schedule 2.1(e)
(the "Contracts");
(f) (i) All customer, distribution, supplier and
mailing lists of any of the Sellers relating exclusively to the
business of ENBU and (ii) copies of all other customer,
distribution, supplier and mailing lists of any of the Sellers
relating to the Assets of ENBU, excluding the Excluded Assets;
(g) All claims, deposits, prepayments, refunds, causes
of action, choses in action, rights of recovery, rights of set
off and rights of recoupment relating to the Assets of the ENBU
or the other Acquired Assets, excluding the Excluded Assets,
except as set forth on Schedule 2.3(e); and
(h) (i) All business and financial records, books,
ledgers, files, plans, documents, correspondence, lists,
architectural plans, drawings, notebooks, creative materials,
advertising and promotional materials, marketing materials,
studies, reports, equipment repair, maintenance or service
records exclusively relating to the Assets of the ENBU
excluding the Excluded Assets whether written or electronically
stored or otherwise recorded and (ii) copies of all other
business and financial records, books, ledgers, files, plans,
documents, correspondence, lists, architectural plans,
drawings, notebooks, creative materials, advertising and
promotional materials, marketing materials, studies, reports,
equipment repair, maintenance or service records relating in
part to the Assets of the ENBU excluding the Excluded Assets
and relating in part to businesses retained by SMC whether
written or electronically stored or otherwise recorded.
2.2. Excluded Assets. There shall be excluded from the Acquired
Assets to be sold, assigned, transferred, conveyed and delivered to Buyer
hereunder, and to the extent in existence on the Closing Date, there shall be
retained by the Sellers, the following assets, properties and rights
(collectively, the "Excluded Assets"):
(a) all accounts receivable and notes receivable;
(b) all Patents owned by the Sellers other than that
certain application for U.S. Letters Patent known as Multimedia
Bandwidth Accelerator, Serial No. 08/428,403, and any division,
continuation, continuation-in-part in similar extension of such
application;
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<PAGE> 16
(c) the entire right, title and interest in and to all
proprietary rights of every kind and nature, including Patents,
copyrights, Trademarks, mask works, trade secrets and
proprietary information, all applications for any of the
foregoing, and any license or agreements granting rights
related to the foregoing subsisting in, covering, reading on,
directly applicable to or existing in the Feast Chip, the Feast
Full Duplex Chip, the Bacon Chip and the 694 Chip and, any
subsequent versions of such chips currently being developed,
and any upgrades, enhancements, improvements and modifications
to such chips currently being developed.
(d) the entire right, title and interest in and to all
proprietary rights of every kind and nature, including Patents,
copyrights, Trademarks, mask works, trade secrets and
proprietary information, all applications for any of the
foregoing, and any license or agreements granting rights
related to the foregoing: (i) subsisting in, covering, reading
on, directly applicable to or existing in the Retained Products
or the Retained Technology; or (ii) that are owned, licensed or
controlled in whole or in part by ENBU and directly relate to
the Retained Products or Retained Technology; or (iii) that are
used in or necessary to the development, manufacture, marketing
or testing of the Retained Products including but not limited
to a non-exclusive, non-transferable right to: (i) use the
technology claimed in the application for U.S. Letters Patent
known as Multimedia Bandwidth Accelerator, Serial No.
08/428,403 (the "Multimedia Patent") to the extent such
technology is embodied in the Retained Products; and (ii)
license the Multimedia Patent to the extent SMC is
contractually required to do so pursuant to the licenses
described in Section 3.16(e) of the Disclosure Letter;
(e) all rights in and to the trademarks EliteView(TM)
and TigerSwitch(TM) except as set forth in Section 5.13;
(f) any goodwill of the Sellers;
(g) loans by Sellers to employees of Sellers;
(h) fixed assets not directly relating to employees of
the ENBU; and
(i) deferred service revenue.
2.3. Assumption of Liabilities. On the terms and subject to the
conditions set forth herein and subject to Section 2.4 hereof, from and after
the Closing, the Buyer will assume and satisfy or perform when due only the
following Liabilities and obligations of the Sellers and its Subsidiaries (the
"Assumed Liabilities"):
(a) all Liabilities of the ENBU set forth on the face
of the Most Recent Balance Sheet;
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(b) all Liabilities of the ENBU incurred after
November 30, 1995 in the Ordinary Course of Business that
would, if incurred during the last fiscal year, be required in
accordance with GAAP to be set forth on the face of the Most
Recent Balance Sheet;
(c) all Liabilities and obligations of the ENBU under
the Leases listed on Schedule 2.1(b);
(d) all Liabilities and obligations under the
Contracts listed in Schedule 2.1(e); and
(e) all Liabilities and obligations of the Sellers and
the ENBU in respect of the case pending in the Circuit Court in
Maryland captioned Penril Datacomm Networks, Inc. v. Standard
Microsystems Corporation et al. (Cir. Ct. MD, No. 106878) (the
"Penril Litigation") but only to the extent and subject to the
terms described on Schedule 2.3(e).
2.4. Liabilities Not Assumed. Except as expressly set forth in
this Agreement, the Buyer will not assume or perform any Liabilities or
obligations not specifically contemplated by Section 2.3 hereof nor any of the
following Liabilities and obligations (whether or not contemplated by Section
2.3 unless specifically contemplated by this Section 2.4):
(a) any Liability or obligation of any of the Sellers
for Taxes of any Person attributable to any taxable period or
activities or events that occurred prior to the Closing Date
regardless of whether reserved on the Financial Statements;
(b) any Liability of any of the Sellers for the unpaid
Taxes of any Person prior to the Closing Date or as a
consequence of the Closing, including Taxes imposed on any of
the Sellers as a transferee or successor, by contract, or
otherwise;
(c) any Liability or obligation of any of the Sellers
to indemnify any Person (including any of the Sellers) by
reason of the fact that such Person was a director, officer,
employee, or agent of any of the Sellers or was serving at the
request of such entity as a partner, trustee, director,
officer, employee, or agent of another entity;
(d) any Liability or obligation of any of the Sellers
as a result of any legal or equitable action or judicial or
administrative proceeding initiated at any time caused by any
action that occurred or condition that existed prior to the
Closing Date and in respect of anything done, suffered to be
done or omitted to be done by
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such Seller or any of their directors, officers, employees or
agents except as set forth in Section 2.3(e);
(e) any Liability of any of the Sellers for costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby;
(f) any Liability or obligation of any of the Sellers
under this Agreement (or under any side agreement between any
of the Sellers on the one hand and the Buyer on the other hand)
entered into on or after the date of this Agreement;
(g) any Liability or obligation of any of the Sellers
incurred in connection with the making or performance of this
Agreement;
(h) any Liability or obligation for products
manufactured or sold (or, in the case of warranty obligations,
for products sold prior to Closing) or services rendered by the
ENBU prior to the Closing Date (i) except (A) to the extent
described on Schedule 2.3(e) and (B) any Liability for product
warranty repair and replacement (as described in Section 5.11)
to the extent of the reserve as set forth in the Most Recent
Balance Sheet and in Section 2.3(b) above, and (ii) including,
without limitation, any Liability relating to the pending
dispute between the Sellers and Willemijn Houdstermaatschappiuj
BV regarding the Soderblom Patent (U.S. Patent No. Re. 31,852)
and related contractual Liabilities except as described on
Schedule 2.3(e);
(i) any Liability or obligation of any of the Sellers
arising out of any Employee Benefit Plan established or
maintained by any of the Sellers for the benefit of past or
present employees of ENBU or to which the ENBU contributes or
any liability or the termination of any such plan;
(j) any Liability or obligation of any of the Sellers
for making payments or providing benefits of any kind to its
employees or former employees (including, without limitation,
(A) as a result of the sale of the Acquired Assets or as a
result of the termination by any of the Sellers of any
employees, (B) any Liability or obligation arising out of, or
relating to, the Worker Adjustment and Retaining Act of 1988,
(C) any obligation to provide former employees (including
individuals who become former employees by reason of the
consummation of the transactions contemplated by this
Agreement) so-called COBRA continuation coverage, (D) any
Liability or obligation in respect of medical and other
benefits for existing and future retirees and for claims made
after Closing in respect of costs and expenses incurred prior
to Closing, (E) any Liability or obligation in respect of
work-related employee injuries or worker's compensation claims
(F) any Liability of Sellers pursuant to Section 5.7 hereof (G)
any Liability or obligation in respect of
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the Sellers' 401(k) savings plan, except as set forth in
Section 5.7, and (H) any Liability or obligation in respect of
employee bonuses);
(k) any Liability pertaining to the ENBU or its
business and arising out of or resulting from noncompliance
prior to the Closing Date with any national, regional or local
laws, statutes, ordinances, rules, regulations, orders,
determinations, judgments, or directives, whether
legislatively, judicially or administratively promulgated
(including, without limitation, any Environmental Liabilities
and Costs whether or not arising out of or resulting from
Sellers' noncompliance with Environmental Laws);
(l) any Liability or obligation of any of the Sellers
under any leases, contracts, or agreements not listed on
Schedules 2.1(b) and 2.1(e);
(m) any Liability or obligation of any of the Sellers
in respect of Environmental Liabilities and Costs arising out
of any condition existing at or prior to Closing which
constitutes a violation of or gives rise to a duty to remediate
under any Environmental Law which is occurring or occurred on
either (A) property which is not owned or leased by any of the
Sellers on the Closing Date or (B) property which is owned or
leased by any of the Sellers on the Closing Date, in both cases
without limit as to point of time, knowledge or amount
(including, without limitation, any Liability or obligation to
remediate any Chemical Substance, (i) generated, used, stored,
disposed of or Released (specifically including naphtha) at any
property or facility owned or leased by the Sellers or their
Affiliates at any time prior to the Closing Date, (ii) Released
from or in connection with any underground or above-ground
storage tank maintained at any property or facility owned or
leased by any of the Sellers or its Affiliates at any time
prior to the Closing Date or (iii) generated, used, stored,
disposed of or Released in connection with the ENBU's past or
present operations);
(n) all Safety Liabilities and Costs;
(o) any Liability or obligation in respect of accounts
payable; and
(p) any Liabilities or obligations for accrued
royalties for Soderblom, accrued payroll, accrued legal fees,
accrued bonuses, incentives and accrued vacation, and accrued
Taxes; and
(q) any Liabilities or obligations of the Sellers and
Buyer in respect of the Penril Litigation in excess of the
amounts described on Schedule 2.3(e) except for any Liabilities
(including damages) of Buyer in the Penril Action arising from
actions taken by Buyer post-closing.
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2.5. Purchase Price. The Buyer agrees to pay to SMC the purchase price
(the "Purchase Price") as follows:
2.5.1. Cash. At closing, $68,850,000 in cash payable by wire
transfer upon such wire instructions delivered by SMC to Buyer two
business days prior to the Closing; and
2.5.2. Escrow Amount. $7,050,000 in cash payable by wire to
Fleet National Bank of Massachusetts as escrow agent (the "Escrow
Agent"), to be held in escrow pursuant to the Escrow Agreement among
the Parties and the Escrow Agent in the form of Exhibit A hereto.
2.6. Adjustment to Purchase Price; Closing Date Audit. Within
20 days following the Closing Date, SMC shall prepare a closing statement that
shall consist solely of a balance sheet of the Assets Acquired and the Assumed
Liabilities relating to the ENBU as of the Closing Date (the "Final Closing Net
Assets Acquired Statement") prepared consistently with the Preliminary Closing
Net Assets Acquired Statement attached hereto as Schedule 2.6(a) (the
"Preliminary Closing Net Assets Acquired Statement") and (ii) a Final Balance
Sheet of the ENBU dated as of the Closing Date prepared in accordance with GAAP
consistently with the Most Recent Balance Sheet (the "Final Balance Sheet") and
shall deliver them to Buyer. The Final Closing Net Assets Acquired Statement
shall be derived from the Final Balance Sheet and shall specifically describe
the derivation from such Final Balance Sheet. Within 30 days of receipt of the
Final Closing Net Assets Acquired Statement, KPMG Peat Marwick will, at Buyer's
expense, conduct an examination in accordance with generally accepted auditing
standards or such other similar procedures reasonably considered necessary by
KPMG Peat Marwick (the "Closing Date Audit") of the Acquired Assets and Assumed
Liabilities as reflected on the Final Closing Net Assets Acquired Statement as
of the close of business on the Closing Date. SMC shall make its work papers and
back up materials used in preparation of the Final Closing Net Assets Acquired
Statement and the Final Balance Sheet available for review by Buyer and KPMG
Peat Marwick. Within ten days of the completion of the Closing Audit, Buyer
shall provide SMC with written notice of any adjustments to the Final Closing
Net Assets Acquired Statement provided to Buyer from SMC excluding issues
relating to inventory valuation and including adjustments to the total amount of
accounts receivable less accounts payable as reflected on the Final Balance
Sheet ("Dispute Notice"). If Buyer does not provide a Dispute Notice to SMC
within such 10 day period, Buyer shall be deemed to have accepted the Final
Closing Net Assets Acquired Statement as prepared by SMC and shall be final and
binding on the parties in the absence of fraud or manifest error.
Based upon the Final Balance Sheet as audited and as agreed to by the
Parties as contemplated by this Section 2.6, (i) Seller will pay to Buyer,
within 5 days of the resolution of such disputes, an amount equal to the amount
by which (A) the accounts receivable less the accounts payable as reflected on
Final Balance Sheet exceeds (B) $1,900,000 or (ii) Buyer will pay Sellers,
within 5 days of the resolution of such disputes, an amount equal to the amount
by which (A) the accounts receivable less the accounts payable as reflected on
Final Balance Sheet is less than (B)
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<PAGE> 21
$1,900,000. Any other payments that may be determined based on the above, shall
be made by Sellers to Buyer within 5 days of such resolution.
The Dispute Notice shall set forth the amounts as to which the Buyer
disagrees. The Parties shall attempt in good faith to resolve such dispute. In
the event that the Parties cannot so agree, the Parties shall, at Sellers' and
Buyer's joint expense, resolve the dispute by arbitration. The Buyer and Sellers
have selected Price Waterhouse to resolve any remaining objections. The
determination of such accounting firm shall be made within 30 days of the
notification of Price Waterhouse by Buyer and Sellers, shall be set forth in
writing and shall be conclusive and binding on the Parties. The fees and
expenses of Price Waterhouse shall be shared equally by the Buyer and the SMC.
The Final Closing Net Assets Acquired Statement shall be revised to reflect the
resolutions of any objections thereto.
2.7. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Ropes &
Gray in Boston, Massachusetts, commencing at 10:00 a.m. eastern time five
business days following satisfaction of the Closing Conditions set forth in
Sections 6.1 and 6.2, and in any event on or prior to 45 days following the
expiration or termination of the waiting period under the Hart-Scott Rodino Act,
or such other date as the Parties may mutually determine (the "Closing Date").
2.8. Deliveries at the Closing. At the Closing, (i) the Sellers
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6.1 below; (ii) the Sellers will execute, acknowledge (if
appropriate), and deliver to the Buyer (A) assignments of the Leases, Permits,
Intellectual Property and Contracts, listed in Section 3.31 of the Disclosure
Letter (including Intellectual Property transfer documents), (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyer and its
counsel may reasonably request; (C) the Escrow Agreement; and (D) the Product
Agreement; (iii) the Buyer and Sellers will execute, acknowledge (if
appropriate), and deliver the Assignment and Assumption Agreement in the form
attached hereto as Exhibit B-1, the Bill of Sale in the form attached hereto as
Exhibit B-2, and the Inventory Bill of Sale in the form attached hereto as
Exhibit B-3; (iv) the Sellers will deliver copies of all material items among
the items identified in Section 2.1(h)(ii), identifying in connection with such
delivery that Sellers have retained a copy of such materials; and (v) the Buyer
will deliver to SMC the consideration payable at Closing specified in Section
2.5 above.
Simultaneously with such delivery, each of the Sellers will use its
reasonable best efforts and take all action as may be necessary to put Buyer
and, in respect of Inventory, Cabletron Sales & Service, Inc. in possession and
operating control of the Acquired Assets.
At any time and from time to time after the Closing, at the request of
Buyer and without further consideration, except as stated below, any of the
Sellers: (a) will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as Buyer may
reasonably determine is necessary to transfer, convey and assign to Buyer, and
to confirm Buyer's title to or interest in the Acquired Assets, to put Buyer in
actual possession and
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<PAGE> 22
operating control thereof and to assist Buyer in exercising all rights with
respect thereto; (b) will deliver to Buyer copies of all non-material items
among the items identified in Section 2.1(h)(ii).
2.9. Preliminary Allocation of Purchase Price. The Parties
agree that the preliminary allocation of the Purchase Price for the Acquired
Assets shall be as determined by the allocation formula set forth on Exhibit
C hereto, as may be adjusted to reflect any Additional Payment or other
adjustments. The Sellers and Buyer agree that the allocation may be amended or
modified by mutual agreement prior to the filing of the applicable Tax Returns
of Buyer and the Sellers. The Sellers and Buyer shall use such final allocation
in all Tax Returns.
2.10. Joint Software. Buyer shall use reasonable efforts to
perform such further development of the Joint Software as is currently
anticipated by the Parties, provided, however, that Buyer's sole obligation will
be to devote ten man hours a week through April 7, 1996 to further development
of the Joint Software. Sellers hereby assign an undivided 50% interest in the
Joint Software, and all intellectual property, including copyrights, therein, to
Buyer, and Buyer hereby assigns an undivided 50% interest in the Joint Software,
and all intellectual property, including copyrights, therein, to Sellers. The
Parties agree that Sellers shall receive no title in any enhancements, upgrades,
modifications or new versions of the Joint Software developed by Buyer other
than developed pursuant to the first sentence of this paragraph. THE PARTIES
AGREE THAT THE SELLERS ARE RECEIVING THE JOINT SOFTWARE "AS IS", AND THAT BUYER
MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE JOINT SOFTWARE.
3. Representations and Warranties of the Sellers. The Sellers each severally and
not jointly represent and warrant to the Buyer that the statements contained
in this Section 3 are correct and complete as of the date of this Agreement
and, if different than the date of this Agreement, will be correct and
complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3), except as set forth in the Disclosure Letter accompanying this
Agreement and initialed by the Parties (the "Disclosure Letter"). The
Disclosure Letter will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 3.
3.1. Organization of the Sellers. Each of the Sellers is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Copies of the certificate of incorporation and
bylaws of each of the Sellers, as amended to date, have been heretofore
delivered to Buyer and are accurate and complete.
3.2. [Reserved].
3.3. Authorization of Transaction. Each of the Sellers has the
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to
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perform its respective obligations hereunder. All corporate and other actions or
proceedings to be taken by or on the part of each of the Sellers to authorize
and permit the execution and delivery by it of this Agreement and the
instruments required to be executed and delivered by it pursuant hereto, the
performance by each of the Sellers of its obligations hereunder, and the
consummation by each of the Sellers of the transactions contemplated herein,
have been duly and properly taken. This Agreement has been duly executed and
delivered by each of the Sellers and constitutes the legal, valid and binding
obligation of each of the Sellers, enforceable in accordance with its terms and
conditions.
3.4. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Sellers or the Acquired Assets
is subject or any provision of the charter or by-laws of any of the Sellers or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, Lien, Security Interest or other arrangement to which any
of the Sellers is a party or by which it is bound or to which any of their
assets is subject (or result in the imposition of any Security Interest upon any
of their assets) except where such violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice or
Security Interest would not have a material adverse effect on the financial
condition of the ENBU or on the ability of the Sellers to consummate the
transactions contemplated by this Agreement. None of the Sellers needs to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above) except for the
required filings under the Hart-Scott-Rodino Act, which filings have been made,
and except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the financial condition of the ENBU or on the ability of the Sellers to
consummate the transactions contemplated by this Agreement.
3.5. Brokers' Fees. None of the Sellers has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.6. Title to Assets. The Sellers collectively have good and valid
title to, or a valid and subsisting leasehold interest in, and the power to sell
the Acquired Assets, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since
November 30, 1995 and not in contravention of provisions of Section 3.11.
3.7. Acquired Assets Used in Business. The Acquired Assets
comprise all of the assets, properties and rights of every type and description,
real, personal, tangible and intangible
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<PAGE> 24
used by the ENBU in product development, manufacturing, marketing and testing of
the Products other than the Excluded Assets set forth in Section 2.2(d) and (e)
above.
3.8. Subsidiaries. Section 3.8 of the Disclosure Letter sets
forth for the Subsidiary (i) its name and jurisdiction of incorporation, (ii)
the number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof and the number of shares held by
each such holder, (iv) the number of shares of its capital stock held in
treasury, and (v) its directors and officers. SMC holds of record and owns
beneficially all of the outstanding shares of the Subsidiary, free and clear of
any restrictions on transfer, Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
3.9. Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited balance sheet (statement of net assets and liabilities) and an
unaudited statement of revenues and expenses for the fiscal year ended February
28, 1995 (the "Most Recent Fiscal Year End") for the Acquired Assets and (ii)
unaudited Most Recent Balance Sheet as of November 30, 1995 and unaudited
statement of revenues and expenses relating to the Acquired Assets for the nine-
and three-month periods ending November 30, 1995 ("Interim Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby and
are consistent with the books and records of the ENBU. The Parties agree that
inventory reserves for valuation as of the date of the Most Recent Balance Sheet
are deemed to be adequate.
3.10. Indebtedness; Guarantees. Except as set forth on the Most
Recent Balance Sheet, none of the Sellers has any indebtedness for money
borrowed or for the deferred purchase price of property or services, excluding
trade payables and other accrued current liabilities incurred in the ordinary
course of business, or capital lease obligations, conditional sale or other
title retention agreements relating to the Assets of the ENBU ("Indebtedness").
None of the Sellers is a guarantor or otherwise liable for any Liability or
obligation, of any other Person for any matter which relates to or affects or
will affect the Assets of the ENBU.
3.11. Absence of Changes. Since the Most Recent Balance Sheet
date and except as disclosed in Section 3.11 of the Disclosure Letter, there has
not been any material adverse change in the business, financial condition,
operations or results of operations of the ENBU. Without limiting the generality
of the foregoing, since that date:
(a) none of the Sellers has sold, leased, transferred,
or assigned any of the ENBU's assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of
Business;
(b) none of the Sellers has entered into (i) any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses)
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involving payments of more than $25,000 relating to the Assets
of the ENBU or (ii) any exclusive distribution agreement or
any agreement that would limit Buyer's rights to select
distribution channels for the Products;
(c) no party (including the ENBU and the Sellers) has
accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving payments of more
than $25,000 relating to the Assets of the ENBU;
(d) none of the Sellers has imposed any Security
Interest upon any of the ENBU's assets, tangible or intangible;
(e) the ENBU has not made any capital expenditure (or
series of related capital expenditures) involving more than
$10,000 singly or $50,000 in the aggregate.
(f) none of the Sellers has 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) involving
payments of more than $25,000 relating to the Assets of the
ENBU;
(g) the ENBU 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
involving payments of more than $25,000;
(h) the ENBU has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(i) the ENBU has not canceled, compromised, waived, or
released any right or claim (or series of related rights and
claims) involving payments of more than $25,000;
(j) none of the Sellers or the ENBU has granted any
license or sublicense of any rights under or with respect to
any Intellectual Property;
(k) none of the Sellers has any reason to believe that
its major vendors, licensors, distributors and customers do not
intend to continue with Buyer a business relationship on terms
at least as favorable as the relationship such vendors,
licensors, distributors and customers, as the case may be,
currently have with Sellers.
(l) the ENBU has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to
its property;
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(m) none of the Sellers has made any loan to, or
entered into any other transaction with, any of the ENBU's
directors, officers, and employees outside the Ordinary Course
of Business;
(n) none of the Sellers has entered into any
employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or
agreement relating to the Assets of the ENBU;
(o) none of the Sellers has granted any increase in
the base compensation of any of the directors, officers, and
employees of the ENBU outside the Ordinary Course of Business;
(p) none of the Sellers has adopted, amended, modified
or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any
of the directors, officers, and employees of the ENBU(or taken
any such action with respect to any other Employee Benefit
Plan);
(q) none of the Sellers has made any payment pursuant
to any Employee Benefit Plan, or bonus, profit-sharing,
incentive, severance or other plan, contract or commitment for
the benefit of any of ENBU's directors, officers and employees;
(r) none of the Sellers has changed employment terms
for any of the directors, officers, and employees of the ENBU
outside the Ordinary Course of Business;
(s) the ENBU has not made or pledged to make any
charitable or other capital contribution outside the Ordinary
Course of Business;
(t) none of the Sellers or the ENBU has modified or
changed the application of GAAP from the manner in which it was
applied in the Financial Statements;
(u) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the ENBU; and
(v) none of the Sellers has accelerated the collection
or conversion of accounts receivable or notes receivable by
offering any incentive for such acceleration, including but not
limited to prepayment discounts, allowances or enhancements;
and
(w) none of the Sellers has committed to do any of the
foregoing.
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3.12. Absence of Undisclosed Liabilities. There is no Liability (and,
to the Sellers' knowledge without additional investigation 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) of
the ENBU, except for (i) Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto), (ii) Liabilities which have
arisen after the date of the Most Recent Balance Sheet in the Ordinary Course of
Business, and (iii) Liabilities not assumed pursuant to Section 2.3.
3.13. Legal and Other Compliance. Each of the ENBU and its respective
predecessors is in compliance with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) the violation of which would have a material adverse effect on
the ENBU or its operations, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply. Neither the
ownership nor use of the properties of the ENBU, excluding Intellectual
Property, nor the conduct of the business relating to the Assets of the ENBU
conflicts with the rights of any other Person or violates, with or without the
giving of notice or the passage of time or both, any terms or provisions of any
Lien or Security Interest, lease, license, agreement, understanding, law,
ordinance, rule or regulation, or any order, judgment or decree to which the
ENBU is a party or by which they or their assets are bound or affected.
3.14. Taxes.
(a) Each of the Sellers has timely filed all Tax
Returns that they were required to file concerning the ENBU.
All Taxes owed by the Sellers concerning the ENBU (whether or
not shown on any Tax Return) have been paid. The Sellers
currently are not the beneficiary of any extension of time
within which to file any Tax Return relating to the Assets of
the ENBU. No claim has ever been made by an authority in a
jurisdiction where any of the Sellers does not file Tax Returns
that they may be subject to taxation by that jurisdiction in
respect of Assets of the ENBU. There are no Security Interests
in any of the Assets of the ENBU that arose in connection with
any failure (or alleged failure) to pay any tax.
(b) There is no dispute or claim concerning any Tax
Liability relating to the Assets of the ENBU either (A) claimed
or raised by any authority in writing or (B) as to which the
Sellers have Knowledge based upon contact with any agent of
such authority. The federal Tax Returns for SMC and its
consolidated subsidiaries have been audited for all years from
February 28, 1988 through February 28, 1993. Included in that
return were the ENBU operations for the short period January 1,
1993 to February 28, 1993. No other income Tax Returns filed
with respect to the ENBU Assets have been audited. All returns
filed for periods subsequent to February 28, 1993 remain open,
but are not currently under audit. Each of the
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Sellers has delivered to the Buyer correct and complete copies
of all federal Income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to
relating to the Assets of the ENBU.
(c) The unpaid Taxes of the Sellers for the business
relating to the Assets of the ENBU (A) did not, as of the Most
Recent Balance Sheet, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax Income) set
forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date.
(d) At the Closing, the Sellers will provide the Buyer
with a certificate substantially in the form specified in
Treas. Reg. Section 1.1445-2(b)(2)(iii)(B) to the effect that
the Sellers are not foreign persons for purposes of sections
897 and 1445 of the Internal Revenue Code of 1986, as amended.
3.15. Property, Plant and Equipment.
(a) None of the Sellers owns any real property that is
used in the Acquired Assets other than incidental assets
located at SMC's sites in New York;
(b) Section 3.15(b) of the Disclosure Letter lists all
real property leased or subleased to the Sellers that is used
in the Assets of the ENBU. The Sellers have delivered to the
Buyer correct and complete copies of the leases and subleases
listed in Section 3.15(b) which have not been amended or
modified since the date thereof of the Disclosure Letter (as
amended to date). With respect to each lease and sublease
listed in Section 3.15(b) of the Disclosure Letter:
(i) to the Sellers' Knowledge, the lease or
sublease is legal, valid, binding, enforceable, and in
full force and effect;
(ii) to the Sellers' Knowledge, the lease or
sublease will continue to be in full force and effect
on identical terms following the consummation of the
transactions contemplated hereby (including the
assignments and assumptions referred to in Section 2
above);
(iii) to the Sellers' Knowledge, 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 material breach or default or
permit termination, modification, or acceleration
thereunder;
(iv) to the Sellers' Knowledge, no party to
the lease or sublease has repudiated any provision
thereof;
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(v) none of the Sellers has granted any
sublease under the lease or sublease;
(vi) none of the Sellers has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold; and
(vii) 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.
(c) All improvements, machinery, equipment and other
tangible assets which are included in the Acquired Assets and
used in the development, manufacture and testing of the
Products are free from defects (patent and latent), have been
reasonably maintained, are in good operating condition and
repair (subject to normal wear and tear) and are suitable in
all material respects for the purposes for which they presently
are used.
3.16. Intellectual Property.
(a) To the Seller's Knowledge, the Sellers own or have
the right to use pursuant to a written license or agreement,
all Intellectual Property.
(b) Except as disclosed in Section 3.16 of the
Disclosure Letter and except for Patents owned by parties other
than the Sellers, the Assets of the ENBU have not infringed
upon or misappropriated any intellectual property rights of
third parties (and, to Sellers' Knowledge, there is no Basis
for a claim of such infringement or misappropriation), and none
of the Sellers and the officers (and employees with
responsibility for Intellectual Property matters at the ENBU)
of the ENBU has ever received any notice alleging any such
infringement or misappropriation.
(c) All of the Sellers' employees that have
participated in the development of the Products have entered
into employee agreements with one Intellectual Property therein
to a Seller. Pursuant to such employee agreements or applicable
law, the Sellers own all of the right, title and interest of
their employees to any Intellectual Property in the Products.
(d) Schedule 2.1(d) identifies: (i) certain items of
Intellectual Property, and (ii) each license or agreement which
the Sellers have granted to any third party
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of the Sellers assigning all right, title and interest in the
with respect to any of the Intellectual Property. With respect
to each item of Intellectual Property:
(i) the Sellers own all Intellectual Property
designated as owned by Sellers, free and clear of any
Security Interest and are in compliance with all
material terms of all licenses relating to any
Intellectual Property licensed to Sellers;
(ii) the item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending, or to the Knowledge of the Sellers, is
threatened, which challenges the legality, validity,
enforceability, use, or ownership of the item, and to
the Sellers' actual knowledge without independent
investigation, there is no Basis therefor; and
(iv) none of the Sellers has agreed to
indemnify any Person (other than customers of the
Sellers or users of the Sellers' products) for or
against any infringement or misappropriation with
respect to the item.
(e) Section 3.16(e) of the Disclosure Letter
identifies each item of Intellectual Property among the
Acquired Assets which, to the Knowledge of the Sellers, is
owned by a third party and is used pursuant to license or
agreement. The Sellers have provided to the Buyer correct and
complete copies of all such licenses and agreements. With
respect to each item of Intellectual Property, except as set
forth in Section 3.16(e) of the Disclosure Letter:
(i) the underlying item of Intellectual
Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is
pending or, to the Knowledge of the Sellers, is
threatened, which challenges the legality, validity,
or enforceability of the underlying item of
Intellectual Property;
(iii) none of the Sellers or the ENBU has
granted any sublicense or similar right with respect
to the license, sublicense, agreement or permission;
and
(iv) the license or agreement is legal, valid,
binding, enforceable, and in full force and effect,
and, to the Sellers' Knowledge, will continue to be
legal, valid, binding, enforceable, and in full force
and effect on identical
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terms following the consummation of the transactions
contemplated hereby.
(f) To the Knowledge of the Sellers, the Acquired
Assets do not infringe upon any Patents owned by parties other
than the Sellers. It is expressly understood that for the
purposes of this Section 3.16(f), the Sellers have not searched
any patent records and the Sellers do not undertake to make a
search of any patent records.
(g) To the Knowledge of the Sellers, no third party
has infringed upon or misappropriated any Intellectual
Property. It is expressly understood that for the purposes of
this Section 3.16(g), the Sellers have not conducted any
independent investigation intended to reveal any such
infringement or misappropriation.
3.17. Inventories. The inventory of the ENBU consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, none of which is damaged, or defective, subject only to the
reserve for inventory writedown set forth on the face of the Most Recent Balance
Sheet as adjusted for the passage of time through the Closing Date in accordance
with GAAP and the past custom and practice of the Sellers. The inventory, taken
as a whole, as reflected in the Most Recent Balance Sheet and books and records
of the ENBU is valued at the lower of cost (on a first-in, first-out basis) or
market in accordance with GAAP, consistently applied. Since the date of the Most
Recent Balance Sheet, no inventory has been sold or disposed of except through
sales in the Ordinary Course of Business. The Parties agree that the inventory
reserves for valuation as of the date of the Most Recent Balance Sheet are
deemed to be adequate.
3.18. Contracts. Section 3.18 of the Disclosure Letter lists the
following contracts and other agreements (including the Contracts, and Leases
listed on Schedules 2.1(b) and 2.1(e)) related to the Assets of the ENBU to
which any of the Sellers is a party:
(a) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing
for lease payments in excess of $25,000;
(b) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will involve
consideration in excess of $25,000;
(c) any agreement concerning a partnership or joint
venture;
(d) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed
any Indebtedness in excess of $25,000
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<PAGE> 32
or under which it has imposed a material Security Interest on
any of its assets, tangible or intangible of the ENBU;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any agreement for the employment of any individual
on a full-time, part-time, consulting or other basis in excess
of $25,000 or providing severance benefits;
(g) any agreement under which it has advanced or
loaned any amount to any directors, officers, and employees of
the ENBU outside the Ordinary Course of Business;
(h) any agreement which will be assigned to Buyer
pursuant to Section 2.1(e), under which the consequences of a
default or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations of the Assets of the ENBU;
(i) any contract or arrangement with any federal,
state or local government agency relating to the Assets of the
ENBU; or
(j) any support contract with customers relating
exclusively to the Acquired Assets.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3.18 of the Disclosure Letter (as amended to
date). Except as disclosed in Section 3.18 of the Disclosure Letter, with
respect to each such material agreement: (A) the agreement is legal, valid, and
binding and in full force and effect; (B) the Sellers are not, and to the
Sellers' Knowledge, no other party 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, under the
agreement; and (C) to the Sellers' Knowledge, no party has repudiated any
provision of the agreement.
3.19. Notes and Accounts Receivable. All notes and accounts
receivable of the Sellers pertaining to the Assets of the ENBU are reflected
properly on the Sellers' books and records in accordance with GAAP, are valid
receivables, arose in the Ordinary Course of Business subject to no setoffs or
counterclaims except as recorded as accounts payable, are current and
collectible and will be collected in accordance with their terms at their
recorded amounts, except as reflected as net of allowance for bad debts on the
face of the Most Recent Balance Sheet (rather than in any notes thereto or
reserve therefor) as adjusted for the passage of time in accordance with GAAP
and past practice and custom of the Sellers.
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3.20. Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Sellers in respect of the Assets of the ENBU,
its assets, liabilities or business.
3.21. Litigation. Except as disclosed in Section 3.21 of the Disclosure
Letter, there are no judicial or administrative actions, claims, suits,
proceedings or investigations pending or, to the actual knowledge of the Sellers
without independent investigation, threatened, that may result in any material
adverse change in the business relating to the Assets of the ENBU or the
Acquired Assets or which may materially interfere with any part of the business
relating to the Assets of the ENBU as currently conducted, or that question the
validity of this Agreement or of any action taken or to be taken pursuant to or
in connection with the provisions of this Agreement, nor, to the actual
knowledge of Sellers' without independent investigation, is there any Basis for
any such action, claim, suit, proceeding or investigation. There are no
judgments, orders, decrees, citations, fines or penalties heretofore assessed
against the Sellers affecting the business relating to the Assets of the ENBU or
the Acquired Assets under any federal, state or local law, except for such
judgments, orders, decrees, citations, fines or penalties which would not have a
material adverse effect on the Assets of the ENBU or the Acquired Assets.
3.22. Product Warranties; Defects; Liability. Except as set forth in
Section 3.22 of the Disclosure Statement, each product manufactured, sold,
leased, or delivered by the ENBU which is an Acquired Asset or was a predecessor
product to any product which is an Acquired Asset (collectively, the "Acquired
Products"), has complied with and conformed to all applicable federal, state,
local or foreign laws and regulations, contractual commitments and all
applicable warranties, and none of the Sellers or the ENBU has any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand giving rise to any
Liability) for replacement or repair thereof or other damages in connection
therewith, subject in each case only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet. Except as disclosed in
Section 3.22 of the Disclosure Letter, no Acquired Product is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease including any Liability as a result of field and
epidemic failures. Section 3.22 of the Disclosure Letter includes copies of the
standard terms and conditions of sale or lease for the Products of the ENBU
(containing applicable guaranty, warranty, and indemnity provisions).
3.23. Employees. Since January 1, 1993, none of the Sellers has
experienced any labor disputes or work stoppage due to labor disagreements with
respect to the employees of the Sellers engaged in the Assets of the ENBU. The
Sellers are in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours and
have not been and are not engaged in any unfair labor practice as defined in the
National Labor Relations Act, as amended, the violation of which could have a
material adverse effect on the Assets of the ENBU. There is no unfair labor
practice charge or complaint against the Sellers pertaining to the Assets of the
ENBU pending or, to the Knowledge of the Sellers, threatened before the National
Labor Relations Board. Section 3.23 of the Disclosure Letter lists any
collective bargaining agreement to which the any of the Sellers is party. No
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grievance which may have an adverse affect on the ENBU and its operations or
prospects nor any arbitration proceeding arising out of or under any collective
bargaining agreement is pending and no pending claims therefore have been made.
Except as disclosed in Section 3.23 of the Disclosure Letter, no collective
bargaining agreement to which the any of the Sellers is a party restricts such
Seller or the ENBU from relocating, closing or subcontracting any of the ENBU's
operations.
3.24. Employee Benefits.
(a) Section 3.24 of the Disclosure Letter lists each
Employee Benefit Plan that the Sellers maintain or to which any
of the Sellers contributes relating to employees of the ENBU
and any other profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of the ENBU's
current or former directors, officers, or employees.
(i) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
materially complies in form and in operation in all
respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(ii) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code Section
4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan
subject to such Part.
(iii) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee
Pension Benefit Plan. All premiums or other payments
for all periods ending on or before the Closing Date
have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit
Plan.
(iv) Each such Employee Benefit Plan which is
an Employee Pension Plan intended to be qualified
under Section 401(a) of the Code is so qualified.
(v) The Sellers have delivered to the Buyer
correct and complete copies of the plan documents,
summary plan descriptions, insurance contracts and
similar contractual or descriptive materials with
respect to each Employee Benefit Plan listed in
Section 3.24 of the Disclosure Letter.
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(b) No Employee Benefit Plan that any of the Sellers
and their Subsidiaries and the Controlled Group of Corporations
which includes the Sellers and their Subsidiaries maintains or
ever has maintained or to which any of them contributes, ever
has contributed, or ever has been required to contribute has
been completely or partially terminated or been the subject of
a Reportable Event as to which notices would be required to be
filed with the PBGC. There have been no Prohibited Transactions
with respect to any Employee Benefit Plan. None of the Sellers
has not incurred any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(c) None of the Sellers, their Subsidiaries and the
other members of the Controlled Group of Corporations that
includes the Sellers and its Subsidiaries contributes to, ever
has contributed to, or ever has been required to contribute to
any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(d) None of the Sellers and their Subsidiaries
maintains or has ever maintained, contributed or been required
to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance
with Code Section 4980B).
(e) None of the Sellers and their Subsidiaries
maintains or has ever maintained, contributed or been required
to contribute to any Employee Benefit Plan that is a defined
benefit plan or arrangement.
3.25. [Reserved].
3.26. Affiliated Transactions. Except as set forth in Section 3.26
of the Disclosure Letter, the Sellers and their Affiliates (other than the ENBU)
do not own any asset, tangible or intangible, which is used in the business
relating to the Assets of the ENBU which is not being transferred to Buyer
hereunder as an Acquired Asset, other than Excluded Assets.
3.27. [Reserved]
3.28. Distributors, Customers, Suppliers. Section 3.28 of the
Disclosure Letter sets forth a complete and accurate list of (i) the ten largest
distributors for the ENBU products indicating the specific product, existing
contractual arrangements, if any, with each such distributor and the volume of
products distributed, (ii) the ten largest customers (by dollar volume) of the
ENBU during the Most Recent Fiscal Year, indicating the existing contractual
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arrangements with each such customer by product and (iii) all suppliers of
significant materials or services to the ENBU, indicating the contractual
arrangements for continued supply from such Person. All distributorship
agreements relating to the Assets of the ENBU are terminable at the election of
the ENBU on not more than 60 days notice and none of such agreements provide
that such distributor has exclusive rights for any geographic area or for any
Product.
3.29. No Illegal Payments, Etc. To the Knowledge of the
Sellers, none of the Sellers, nor any of the officers, employees or agents of
the ENBU, has (a) directly or indirectly given or agreed to give any illegal
gift, contribution, payment or similar benefit to any supplier, customer,
governmental official or employee or other person who was, is or may be in a
position to help or hinder the Assets of the ENBU (or assist in connection with
any actual or proposed transaction) or made or agreed to make any illegal
contribution, or reimbursed any illegal political gift or contribution made by
any other person, to any candidate for federal, state, local or foreign public
office (i) which may subject the ENBU to any damage or penalty in any civil,
criminal or governmental litigation or proceeding or (ii) the non-continuation
of which has had or might have, individually or in the aggregate, a material
adverse effect on the ENBU or (b) established or maintained any unrecorded fund
or asset or made any false entries on any books or records for any purpose.
3.30. Books and Records. The books and all corporate (including
minute books and stock record books) and financial records of the ENBU are
complete and correct in all material respects and have been maintained in
accordance with applicable sound business practices, laws and other
requirements.
3.31. Consents. Section 3.31 of the Disclosure Letter sets
forth a true, correct and complete list of the identities of any Person whose
consent or approval is required and the matter, agreement or contract to which
such consent relates in connection with the transfer, assignment or conveyance
by the Sellers of any of the Acquired Assets.
3.32. Disclosure. Neither the representations and warranties
contained in this Section 3 (including the Disclosure Letter) nor any
certificate furnished or to be furnished by Sellers to Buyer contains any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained in this Section 3 not
misleading. There is no material fact known to the Sellers relating to the ENBU
or the Acquired Assets which may materially adversely affect the same which has
not been disclosed in writing in this Agreement to the Buyer. Notwithstanding
the foregoing sentence, the Sellers make no representation as to the future
financial performance of the business relating to the Assets of the ENBU.
4. Representations and Warranties of Cabletron and Acquisition. The Buyer
represents and warrants to each of the Sellers that the statements contained
in this Section 4 are correct and complete as of the date of this Agreement
and, if different than the date of this Agreement, will be correct and
complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 4).
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4.1. Organization of Cabletron and Acquisition. Each of Cabletron and
Acquisition is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
4.2. Authority for Agreement. Each of Cabletron and Acquisition has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of each of
Cabletron and Acquisition, enforceable in accordance with its terms and
conditions.
4.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Cabletron and Acquisition is subject or
any provision of their respective charters or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Cabletron and Acquisition is a party or by which
it is bound or to which any of its assets is subject. None of Cabletron nor
Acquisition needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in Section 2
above), except for filings under the Hart-Scott-Rodino Act, which filings have
been made.
4.4. Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of the Sellers could
become liable or obligated.
5. Covenants. The Parties agree as follows:
5.1. General. Subject to the terms and conditions provided in this
Agreement, 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
Section 6 below).
5.2. Notices and Consents. Each of the Sellers will give any notices to
third parties, and will use its reasonable best efforts to obtain any third
party consents, that are required to transfer the Acquired Assets to Buyer, and
any other consent that the Buyer may reasonably request. Each of the Parties has
filed any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States
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Department of Justice under the Hart-Scott-Rodino Act, will use its reasonable
best efforts to obtain an early termination of the applicable waiting period,
and will make any further filings pursuant thereto that may be necessary in
connection therewith, provided that neither party shall be obligated to divest
any part of its business or assets or to agree to forego any business activities
or opportunities, present or future, as a result of such reasonable best efforts
obligation.
5.3. Preservation of Business. Each of the Sellers will use its
reasonable best efforts to keep the business and properties of the ENBU
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
5.4. Full Access. Each of the Sellers will permit representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the ENBU, to all premises,
properties, personnel, books, records (including Tax records), contacts, and
documents of or pertaining to the ENBU.
5.5. Notice of Developments. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of any
of its own representations and warranties in Section 3 and Section 4 above. No
disclosure by any Party pursuant to this Section 5.5, however, shall be deemed
to amend or supplement the Disclosure Letter or to prevent or cure any
misrepresentations, breach of warranty, or breach of covenant.
5.6. Exclusivity. Each of the Sellers will not and will cause
Seller's Subsidiaries, Affiliates, directors, officers, employees,
representatives and agents not to directly or indirectly (i) solicit, initiate
or encourage the submission of any proposal or offer or transaction from any
Person relating to the sale or acquisition of the assets of the ENBU, the Assets
of the ENBU or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Sellers will notify the Buyer immediately if any Person makes any
bona fide written proposal, offer, inquiry, or contact with respect to any of
the foregoing.
5.7. Employee Matters.
5.7.1. Each of the Sellers agrees to (i) terminate all the
employees who are engaged in the business relating to the Assets of the
ENBU who Cabletron intends to hire after the Closing (the "Employees")
immediately prior to Closing and to pay any and all Liabilities
relating to such termination, including, without limitation any
payments and benefits due such Employees pursuant to accrued salary and
wages, pension, retirement, savings, health, welfare and other benefits
and severance payments or similar payments of the Employees and (ii)
provide to all Employees any notice (which notice shall be reasonably
acceptable to Buyer) required under any law or regulations in respect
of such termination including, without limitation COBRA.
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5.7.2. As soon as practicable following Closing and in all events
within twenty-one days thereafter, Sellers shall pay an amount equal to
the grossed-up value (assuming an effective average tax rate of 37% for
all participants) of the 1995 401(k) matching contribution on a fully
vested basis to those Employees who participated in the Sellers' 401(k)
savings plan during 1995, including applicable income taxes, FICA and
similar amounts. Buyer shall reimburse Sellers for the amount of such
additional payment. As soon as practicable following Closing and in all
events within twenty-one days thereafter, Sellers shall pay to
Employees an amount equal to the grossed-up value (assuming an
effective average tax rate of 37% for all participants) of the unvested
amount in the accounts of all Employees under Sellers' Plan, taking
into account all contributions for 1995. Promptly thereafter Sellers
shall cause the accounts of all Employees under Sellers' Plan, taking
into account all contributions for 1995, to be distributed or
transferred in a direct rollover. In connection with such distribution
or direct rollover, the plan administrator of Sellers' Plan shall
certify to each distributee, including any plan or IRA accepting a
rollover or direct rollover, that after taking into account such
distribution or direct rollover Sellers' Plan is and remains qualified
under Section 401(a) et seq. of the Code.
5.7.3. Employees (other than any Employee who is not employed by
Buyer or who is in an ineligible classification of employees) shall be
eligible to participate in Buyer's 401(k) plan following Closing
without regard to the normal entry- date requirements under such plan.
5.7.4. Any Employee who immediately after the Closing becomes an
active full-time employee of Buyer shall be eligible to participate in
Buyer's employee health, life insurance and disability plans as of the
date such employee commences active employment with the Buyer;
provided, however, any and all other terms, conditions and exclusions
of such plans (including, but not limited to, pre-existing condition
exclusions, actively-at-work requirements, evidence of insurability
requirements, and nonconfinement/nondisability requirements) shall
fully apply.
5.7.5. Contemporaneously with the Closing, Sellers agree to vest
any unvested options held by any Employees and to extend the period
during which such options may be exercised to one year following
Closing.
5.7.6. After Closing, SMC will promptly pay Employees' accrued
vacation through Closing.
5.8. Retention of and Access to Records after Closing. The Sellers may
retain a single set of copies of any books and records of the ENBU which Sellers
reasonably believe will be required by them for the purpose of: (i) performing
any of Sellers' accounting, public reporting, or other administrative functions
which are performed in the ordinary course of Sellers' business, or (ii)
complying with discovery requests arising in all litigation currently pending
against Sellers or
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otherwise conducting SMC's defense in such actions. Sellers shall destroy such
copies upon the Sellers' determination that any such copies are no longer
reasonably required by them for either of the purposes set forth in the
preceding sentence. Seller's use, disclosure and disposition of such copies
shall otherwise be governed in accordance with Section 7.1 to the extent that
such copies contain Exclusive Confidential Information. For a period of five
years after the Closing Date, the Sellers and their representatives shall have
reasonable access to any other books and records of the ENBU to the extent that
such access may reasonably be required by any of the Sellers in connection with
matters relating to or affected by the operations of the ENBU prior to the
Closing Date. Such access shall be afforded by Buyer upon receipt of reasonable
advance notice and during normal business hours. Each of the Sellers shall be
solely responsible for any costs or expenses incurred by it pursuant to this
Section 5.8. If Buyer shall desire to dispose of any of such books and records
prior to the expiration of such five-year period, Buyer shall, prior to such
disposition, give the Sellers a reasonable opportunity, at Sellers' expense, to
segregate and remove such books and records as any of the Sellers may select.
5.9. Bulk Sales Compliance; Liens under Chapter 62C, Section 51 of
the Massachusetts General Laws. Buyer hereby waives compliance by the
Sellers with the provisions of any bulk transfer law which may be applicable to
the transactions contemplated by this Agreement. Further, the Parties recognize
that the Massachusetts Commissioner of Revenue may not, by Closing, have granted
a waiver of any Tax Lien that might accrue pursuant to Chapter 62C, Section 51
of the Massachusetts General Laws. Buyer hereby consents to such Lien arising
upon the sale of the Acquired Assets; provided, however, that
such consent is conditioned upon Sellers indemnifying and holding harmless Buyer
against and in respect of any Loss (as defined in Section 9.2 below) resulting
from the existence of any Tax Lien on the Acquired Assets under said Section 51.
5.10. Transfer Taxes. Buyer and Sellers each agree to bear fifty
percent of any Massachusetts sales and use Taxes on the transfer of the Acquired
Assets hereunder, including any such Taxes which may be imposed in the event
Sellers do not obtain a clearance certificate from the Massachusetts
Commissioner of Revenue. Sellers have applied for a clearance certificate and
shall use their best efforts to obtain such certificate.
5.11. Product Warranty Repair and Service. Buyer agrees that for a
period of 18 months following Closing, Buyer shall perform the warranty work for
products sold by Sellers prior to the Closing date pursuant to Buyer's normal
repair or replacement procedures. To the extent that Buyer's actual costs for
providing such warranty work does not exceed the warranty reserve on the Most
Recent Balance Sheet, Buyer shall bear all costs of such warranty without
reimbursement from Sellers. However, Buyer shall be entitled to indemnification
by Sellers pursuant to the procedures set forth in Section 9.2 below to the
extent that Buyer's cost of providing such warranty work for products for which
Sellers' standard warranty had not yet expired exceeds the amount of such
warranty reserves. In the event that Buyer shall determine to provide additional
warranty work beyond the applicable warranty provided by Seller, the cost of
providing such optional warranty work shall be borne by Buyer, and Buyer shall
not be entitled to indemnification or credit in connection with such optional
warranty work. In addition, Buyer
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shall not be entitled to credit or indemnification for the incremental cost of
providing new replacement products instead of repaired products, where a
repaired product would be adequate to satisfy Sellers' warranty obligation.
In addition, SMC shall indemnify Buyer pursuant to the procedures set
forth in Section 9.2 below for liability incurred by Buyer due to Epidemic
Failure. Such liability shall be deemed to be Buyer's direct costs due to
repair, replacement and product recalls in the event of an Epidemic Failure. An
Epidemic Failure shall be deemed to be a repetitive failure of a product
originating from a single cause which has such severity and frequency of
occurrence that the exercise of reasonable product business practice would
require a product recall, repair or replacement. Liability for product warranty
and repair and servicing shall be allocated among the Parties as provided in
Sections 2.3, 2.4 and 9.
5.12. Delivery of Audited Financial Statements. On or before
January 19, 1996, SMC shall deliver to Buyer an audited balance sheet (statement
of assets and liabilities) and a statement of revenues and expenses for the
fiscal year ended February 28, 1995 for the Acquired Assets acquired by Buyer,
subject to the Assumed Liabilities (the "Audited Financial Statements"). The
Audited Financial Statements shall be prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and shall be
consistent with the books and records of the ENBU. Sellers shall deliver,
together with the Audited Financial Statements, an opinion of Sellers'
independent auditors, Arthur Andersen & Co., that the Audited Financial
Statements present fairly the financial condition and results of operations of
the business relating to the Assets of the ENBU. Sellers shall make available to
Buyer and Buyer's auditors Sellers' work papers and backup materials used in the
preparation of the Audited Financial Statements.
5.13. License of Trademarks. In order to effect the transactions
contemplated by this Agreement, (i) after the Closing, Sellers agree to and
hereby do license on a nonexclusive, royalty-free basis for the limited purpose
of the sale and resale of the Inventory the trademarks EliteView(TM) and
TigerSwitch(TM) and (ii) after the Closing, Buyer agrees to and hereby does
license on a nonexclusive, royalty-free basis, for the limited purpose of using
existing sales collateral and packaging and similar items retained by Seller,
the ENBU trademarks purchased by Buyer pursuant to this Agreement.
5.14. Cooperation in Connection with Pending Litigation. Buyer agrees
to cooperate in Sellers' defense of any litigation pending against Sellers on
the date of Closing as required by law or as otherwise reasonably necessary,
including making Employees reasonably available to the extent doing so would not
unduly interfere with Buyer's business. Sellers agree to pay all reasonable
out-of-pocket costs incurred by Buyer in connection with such cooperation. The
foregoing shall not apply to Penril Datacomm, Inc. v. Standard Microsystems
Corporation, et. al., Case No. 106878, which is the subject of a separate letter
between the Parties.
5.15. General Skill and Knowledge. Each of the Parties agree that
employees of Sellers who are either retained by Sellers or terminated by Sellers
and hired by Buyer may use the general
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skill and knowledge they have developed in the future business of Sellers or
Buyer, as the case may be.
5.16. Relationship with Nu-Link. SMC and Buyer agree that neither of
them shall enter into any agreement with Nu-Link, Inc. that prohibits Nu-Link,
Inc. from entering into an agreement with the other.
5.17. License under Multimedia Patent. In order to effect the
transactions contemplated by this Agreement, after the Closing, Buyer agrees to
and hereby does grant to Sellers the rights with respect to the Multimedia
Patent set forth in Section 2.2(d).
5.18. Trillium Software. Sellers agree to use their reasonable best
efforts to cause Trillium to grant to Buyer a license for the Trillium software
being transferred to the Buyer satisfactory to Buyer granting the Buyer rights
equivalent to the rights held by the Sellers in such software.
6. Conditions to Obligation to Close.
6.1. Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 3 above shall be true and correct
in all material respects when made and on and as of the Closing
Date;
(b) Performance by the Sellers. Each of the Sellers shall have
performed and complied with all of its covenants, agreements and
obligations hereunder in all material respects through the
Closing;
(c) Consents. The Sellers shall have procured all of the
governmental approvals, consents or authorizations and third party
consents specified in Section 3.31 and Section 5.2 above;
(d) Absence of Litigation. No action, suit, or proceeding not
set forth in the Disclosure Letter shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction 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) materially and adversely affect the right of
the Buyer to own the Acquired Assets, to operate the former Assets
of the ENBU (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
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(e) Absence of Material Adverse Change. There shall not have
occurred any material adverse change in the condition, financial
or otherwise, business, properties, assets or prospects of the
business relating to the Assets of the ENBU.
(f) Absence of Disasters. The business relating to the
Assets of the ENBU shall not have been materially adversely
affected in any way as a result of fire, explosion, disaster,
accident, labor dispute, flood, act of war, civil disturbance, or
act of God.
(g) Anti-trust Matters. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated;
(h) Employment and Noncompetition Agreements. The Employment
Agreement dated as of December 22, 1995 by and between Acquisition
and Ashraf M. Dahod shall not be in default and be in full force
and effect;
(i) Notices. The Sellers shall have sent termination notices to
employees as contemplated by Section 5.7;
(j) Tax Clearance Certificates. The Sellers shall have made
application for and be using best efforts to obtain as soon as
possible a certificate of the Massachusetts Commissioner of
Revenue waiving any Taxes under Chapter 62C, Section 44 of the
Massachusetts General Laws and a waiver of any Tax lien on the
Acquired Assets that might accrue pursuant to Chapter 62C, Section
51 of the Massachusetts General Laws.
(k) Certificates. The Sellers shall have delivered to the Buyer
a certificate to the effect that each of the conditions specified
above in Section 6.1(a), (b), (c), (d), (e), (f), (i) and (j) are
satisfied in all respects;
(l) F.I.R.P.T.A. Certificate. The Sellers shall have delivered
to the Buyer the certificate contemplated by Section 3.14(d).
(m) Termination. The Sellers shall have terminated, effective
as of or prior to the date of the Closing, the contracts and
agreements set forth in Schedule 6.1(m).
(n) Opinion. The Buyer shall have received from the Sellers a
corporate opinion, in form and substance as set forth in Exhibit E
attached hereto, addressed to the Buyer, and dated as of the
Closing Date; Buyer shall have received an opinion of patent
counsel for Sellers as to the Sellers application for U.S. Letters
Patent known as Multimedia Bandwidth Accelerator, Serial No.
08/428,403 in form and substance reasonably satisfactory to Buyer;
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(o) Escrow Agreement. The Sellers shall have executed and
delivered the Escrow Agreement, in form and substance the same or
substantially the same as the Escrow Agreement set forth as
Exhibit A;
(p) Product Agreement. The Sellers shall have executed and
delivered the Product Agreement, in form and substance the same or
substantially similar to the Product Agreement set forth as
Exhibit G;
(q) Assignment of Patent Application. The Sellers shall have
executed and delivered the Assignment of Patent Application, in
form and substance the same or substantially similar to the
Assignment of Patent Application set forth as Exhibit H; and
(r) Payment of Sellers to Buyer. Sellers shall pay Buyer by
wire transfer $1,900,000.
The Closing shall not be deemed a waiver of any breach by the Sellers of the
Agreement or any of the Sellers' representations and warranties.
6.2. Conditions to Obligations of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 4 above shall be true and correct
in all material respects at and as of the Closing Date;
(b) Performance by Buyer. The Buyer shall have performed and
complied with all of its covenants hereunder in all material
respects through the Closing;
(c) Absence of 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 wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of
the transactions contemplated by this Agreement or (B) 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);
(d) Certificates. The Buyer shall have delivered to the Sellers
a certificate to the effect that each of the conditions specified
above in Section 6.2(a)-(c) is satisfied in all respects;
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(e) Anti-trust Matters. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated;
(f) Opinion. The Sellers shall have received from counsel to
the Buyer an opinion in form and substance as set forth in Exhibit
F attached hereto, addressed to the Sellers, and dated as of the
Closing Date.
The Closing shall not be deemed a waiver of any breach by the Buyer of the
Agreement or any of the Buyer's representations and warranties.
7. Confidentiality.
7.1. Confidential Information Related Exclusively to the Business
Relating to the Assets of the ENBU. Each of the Sellers will treat and hold as
confidential all of the Confidential Information related exclusively to the
Acquired Assets (other than the Acquired Assets identified in Sections
2.1(f)(ii) and 2.1(h)(ii)) and all other Confidential Information related
exclusively to the business relating to the Assets of the ENBU (the "Exclusive
Confidential Information"), refrain from using any of the Exclusive Confidential
Information except in connection with this Agreement, and will use reasonable
best efforts to deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all tangible embodiments (and, except as set forth in
Section 5.8, all copies) of the Exclusive Confidential Information which are in
his or its possession. In the event that any of the Sellers 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 Exclusive Confidential Information, such Seller will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 7.1. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled by
any government agency or court to disclose any Exclusive Confidential
Information, then such Seller may disclose the Exclusive Confidential
Information; provided, however, that the disclosing Seller shall use his or its
best efforts to obtain, at the request of the Buyer, an order or other assurance
that confidential treatment will be accorded to such portion of the Exclusive
Confidential Information required to be disclosed as the Buyer shall designate.
7.2. Shared Confidential Information. Each of the Parties will
treat and hold as confidential all of the Confidential Information other than
the Exclusive Confidential Information (the "Shared Confidential Information")
and will use such Shared Confidential Information only for purposes consistent
with this Agreement. In the event that any of the Parties 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 Shared Confidential Information, such Party will notify
the other Parties promptly of the request or requirement so that the such other
Parties may seek an appropriate protective order or waive compliance with the
provisions of this Section 7.2. If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Parties is, on the advice of counsel,
compelled by any
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government agency or court to disclose any Shared Confidential Information, then
such Party may disclose such Shared Confidential Information; provided, however,
that the disclosing Party shall use his or its best efforts to obtain, at the
request of another Party, an order or other assurance that confidential
treatment will be accorded to such portion of the Shared Confidential
Information required to be disclosed as the other Party shall designate.
8. Noncompetition.
8.1. Noncompetition. The Sellers agree, for themselves and
their subsidiaries and any entity which they control, that, in consideration of
the purchase by the Buyer hereunder, they shall not, on or prior to the date
which is three (3) years after the Closing Date (the "Restricted Period"),
directly or indirectly, run, own, manage, operate, control, invest (other than
for minority investments) or participate in any business, venture or activity
which engages in the business of backbone enterprise level switching solutions,
including ES/1 class switches, in direct sale to end users and in Fortune 1000
class organizations markets; provided, however, that the Sellers continue to
have the right during the Restricted Period and thereafter, to engage in the
Sellers' current LAN businesses (other than backbone enterprise level switching
solutions, including ES/1 class switches) and in workgroup switching and fast
Ethernet switching, in the sale of either: (i) products for the low- to
mid-range LAN markets or (ii) products which are appropriate for two-step
distribution. Any products that Sellers are permitted to sell pursuant to the
foregoing provision may be sold by Sellers in any market, through any channel or
directly to customers, and to any customer desired by Sellers. The foregoing
provision shall not bind or otherwise apply to any Person which merges or
consolidates with SMC with the result that SMC is not the surviving entity or
purchases all or substantially all of the assets of SMC, the Desktop Networks
Business Unit or the business related to the Retained Products set forth on
Schedule 1.1 and upon such transaction, the covenant set forth in this Section
8.1 shall terminate as to such transferred businesses.
8.2. Each of the Parties agree that for a period of two (2) years from
and after the Closing Date it will not, without the consent of the other Party,
directly or indirectly solicit or initiate contact with any of the employees of
the other Party with a view of inducing or encouraging such employees to leave
the employ of the other Party for the purpose of being hired by the soliciting
Party or an employer affiliated with it. Mass media advertising of open
positions, job fairs and other recruiting programs not directed at specific
individuals shall not in and of themselves be deemed solicitation or initiation
of contact for purposes of this paragraph.
9. Indemnification.
9.1. Survival of Representations and Warranties. All of the
representations and warranties of the Sellers (except for those contained in
Section 3.6 and Section 3.14) contained herein or in any document certificate or
other instrument required to be delivered hereunder shall survive the Closing
and continue in full force and effect until 18 months after Closing, after which
such representations and warranties shall terminate. All of the representations
and warranties of the Buyer contained in Section 4 shall survive the Closing and
shall continue in full force and effect until 18 months after
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Closing. The representations and warranties of the Sellers contained in
Section 3.6 and 3.14 shall survive the Closing and shall continue in full force
and effect without limit as to time (subject to any applicable statutes of
limitations).
9.2. Indemnity by Sellers. SMC hereby agrees to indemnify,
defend and hold harmless Buyer and its directors, officers and Affiliates
against and in respect of all Liabilities, obligations, judgments, Liens,
injunctions, charges, orders, decrees, rulings, damages, dues, assessments,
Taxes, losses, fines, penalties, expenses, fees, costs, amounts paid in
settlement (including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling any action
or threatened action), in each case net of (i) income tax benefits to the Buyer
to the extent realized by the Buyer in the Tax year in which the Loss occurred
and (ii) insurance proceeds if and when actually received by the Buyer,
provided, however, that Buyer shall retain the right in its sole discretion to
determine whether to pursue such claims by, through or against an insurer or to
bring such claims directly or indirectly against the Sellers pursuant to this
Section 9.2, arising out of any claim, damages, complaint, demand, cause of
action, audit, investigation, hearing, action, suit or other proceeding asserted
or initiated or otherwise existing in respect of any matter (collectively, the
"Losses") that results from:
(a) the inaccuracy of any representation or warranty made by
Sellers herein which Buyer has not received express written notice
of prior to Closing, or resulting from any misrepresentation,
breach of warranty as if all materiality provisions were not
contained therein or nonfulfillment of any agreement or covenant
of Sellers contained herein (including the Disclosure Letter and
Exhibits hereto, excluding the Product Agreement) or in any
agreement or instrument required to be entered into in connection
herewith or from any misrepresentation in or omission from any
schedule, document, certificate or other instrument required to be
furnished by Sellers hereunder; provided, however, that SMC shall
be liable under this Section 9.2(a) in respect of Losses only to
the extent that the aggregate of such Losses exceeds $500,000 in
which case the Sellers will be liable for the amount of such
Losses in excess of $500,000 up to an aggregate amount equal to
$7,700,000;
(b) any Liability of the Sellers or the ENBU which is not an
Assumed Liability (including any Liability which is not an assumed
Liability of the Sellers or the ENBU that becomes a Liability of
the Buyer under any bulk transfer law of any jurisdiction, under
any common law doctrine of de facto merger or successor liability,
or otherwise by operation of law); and
(c) any Liability in respect of any Taxes relating to the
Assets of the ENBU attributable to periods beginning before and
ending on the Closing Date.
In the event that SMC may be obliged to indemnify Buyer under both subsection
(a) and subsection (b) or subsection (c) of this Section 9.2, its obligations
under subsection (b) or subsection (c), as the case may be, shall be controlling
and the limitations provided in Sections 9.1 and 9.2(a)
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hereof relating to its obligations in respect of Losses resulting from the
inaccuracy of any representation and warranty, or any misrepresentation, breach
of warranty or non-fulfillment of an agreement or covenant as described in
Section 9.2(a), shall not apply. Buyer shall provide Sellers written notice for
any claim made in respect of the indemnification provided in this Section 9.2,
whether or not arising out of a claim by a third party.
9.3. Environmental Indemnification. Notwithstanding any other provision
of this Agreement to the contrary, this Section 9.3 shall control and limit
Sellers' obligation to indemnify Buyer for Environmental Liabilities and Costs
and Safety Liabilities and Costs. Sellers agree to indemnify and hold harmless
Buyer against any Losses relating to Environmental Liabilities and Costs and
Safety Liabilities and Costs to the extent arising out of any condition existing
at or prior to Closing which constitutes a violation of or gives rise to a duty
to remediate under Environmental Laws or Safety Laws which occurred on property
which is owned or leased by Sellers or on property which is not owned or leased
by Sellers relating to the business relating to the Assets of the ENBU, without
limit in point of time, knowledge or amount.
9.4. Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and
hold harmless Sellers and their respective directors, officers and Affiliates
against and in respect of all Liabilities, obligations, judgments, liens,
injunctions, charges, orders, decrees, rulings, damages, dues, assessments,
Taxes, losses, fines, penalties, damages, expenses, fees, costs, amounts paid in
settlement (including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling any action
or threatened action) arising out of any claim, complaint, demand, cause of
action, audit, investigation, hearing, action, suit or other proceeding asserted
or initiated in respect of any matter that results from the inaccuracy of any
representation or warranty made by Buyer herein, or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any agreement or
covenant of Buyer, including Buyer's agreement to assume certain Liabilities of
the ENBU pursuant to Section 2.2 of this Agreement, contained herein or in any
agreement or instrument required to be entered into in connection herewith or
from any misrepresentation in or omission from any schedule, document,
certificate or other instrument required to be furnished by Buyer hereunder.
9.5. 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 Section 9, then the
Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on 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.
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(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 (A) the Indemnifying Party notifies the Indemnified Party
in writing within 15 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 Losses the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (B) 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, (C) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief, and (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to result
in a material restriction upon the business practices of the
Indemnified Party in respect of the Assets of the ENBU, and (E)
the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 9.2(b) above,
(A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third
Party Claim, (B) 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 (which consent shall not unreasonably be
withheld), and (C) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim unless written agreement is obtained
releasing the Indemnified Party from all liability thereunder. The
Indemnified Party shall cooperate in all reasonable respects with
the Indemnifying Party and such attorneys in the investigation,
trial and defense of such lawsuit or action and any appeal arising
therefrom.
(d) In the event any of the conditions in Section 9.2(b) above
is or becomes unsatisfied, however, (A) 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 may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party
in connection therewith), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (C) the Indemnifying Parties
will remain responsible for any Losses 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 Section 9.
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9.6. Other Indemnification Provisions. Each of the Sellers
hereby agrees that it will not make any claim for indemnification against any of
the Buyer and its Subsidiaries solely by reason of the fact that he or it was a
director, officer, employee, or agent of the Sellers, the ENBU or was serving at
the request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses,
or otherwise and whether such claim is pursuant to any statute, charter
document, bylaw, agreement, or otherwise) with respect to any action, suit,
proceeding, complaint, claim, or demand brought by the Buyer against such
Sellers (whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise) unless the underlying
claim is an Assumed Liability.
10. Termination.
10.1. Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below.
(a) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to SMC at any time prior to the Closing (A) in the event
any of the Sellers has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, the
Buyer has notified such Seller of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
the earliest to occur of 45 days after the expiration or other
termination of all applicable waiting periods under the
Hart-Scott-Rodino-Act and February 29, 1996, by reason of the
failure of any condition precedent under Section 6.1 hereof
(unless the failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant contained in
this Agreement); and
(c) SMC may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the
Buyer has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, SMC has
notified the Buyer of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or
(B) if the Closing shall not have occurred on or before the
earliest to occur of 45 days after the expiration or other
termination of all applicable waiting periods under the
Hart-Scott-Rodino-Act and February 29, 1996, by reason of the
failure of any condition precedent under Section 6.2 hereof
(unless the failure results primarily from the Company itself
breaching any representation, warranty, or covenant contained in
this Agreement).
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10.2. Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1 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).
11. Miscellaneous.
11.1. Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the other Party; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will advise the other Party prior to making the
disclosure).
11.2. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.3. Entire Agreement. This Agreement (including the documents
referred to herein and attached hereto) 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, including but not limited to
the Confidentiality Agreement between Cabletron and SMC dated October 20, 1995.
11.4. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder and that the Sellers may assign any or all of their rights
and interests, but not its obligations, hereunder to a wholly-owned subsidiary
of SMC.
11.5. Counterparts. This 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.
11.6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7. 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) upon
confirmation of facsimile, (ii) when sent by overnight delivery and (iii) when
mailed by registered or certified mail return receipt requested and postage
prepaid at the following address:
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If to the Sellers:
Standard Microsystems Corporation
80 Arkay Drive
Hauppauge, New York 11788
Tel: 516-434-2803
Fax: 516-273-5550
Attention: Paul Richman
Copy to:
Tor Braham
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
Tel: 415-493-9300
Fax: 415-493-6811
If to the Buyer:
Cabletron Systems, Inc.
P.O. Box 6257
Rochester, New Hampshire
Tel: 603-332-9400
Fax: 603-332-4616
Attention: David J. Kirkpatrick
Copy to:
Lauren I. Norton
Ropes & Gray
One International Place
Boston, Massachusetts
Tel: 617-951-7000
Fax: 617-951-7050
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, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change
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the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
11.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
11.9. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Sellers. 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.
11.10. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
11.11. Expenses. Each of the Buyer and the Sellers will bear his or its
own costs and expenses (including legal fees and expenses) and the Sellers will
bear all of the costs and expenses (including legal fees and expenses) of the
ENBU incurred in connection with this Agreement and the transactions
contemplated hereby. Sellers will bear all fees of Robertson Stephens & Company,
L. P., and any associated costs and expenses.
11.12. Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement 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 Agreement. 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. For purposes of the
Disclosure Letter, each disclosure: (i) applies only to the particular section
referenced unless a disclosure is specifically cross-referenced in a separate
section or otherwise clearly and unambiguously applies to another section; and
(ii) shall be deemed to adequately disclose an exception to a representation or
warranty only where such disclosure expressly identifies the exception. Without
limiting the generality of the foregoing, the mere identification (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself) unless a review of such item would provide a reasonable disclosure
of such exception. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
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breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
11.13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.14. Specific Performance. Each of the Parties acknowledges
and agrees that the other Party would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which it may be
entitled, at law or in equity.
11.15. Resolution of Disputes.
11.15.1. If a dispute arises between the parties relating to this
Agreement, it shall be resolved solely in accordance with the following
procedures. Either Party may call a meeting by written notice to be
attended by individuals with decision-making authority regarding the
dispute. Within ten days of the initial request, the Parties will meet
and attempt to resolve the dispute. If the Parties are unable to
resolve the dispute at such meeting, either Party may, within five days
of such meeting, call a meeting by written notice to be attended by the
Chief Executive Officer of SMC and the Chief Operating Officer of
Cabletron. Within ten days of the initial request, the Chief Executive
Officer of SMC and the Chief Operating Officer of Cabletron will meet
and attempt to resolve the dispute.
11.15.2. If the Chief Executive Officer of SMC and the Chief
Operating Officer of Cabletron are unable to resolve the dispute at
their meeting, either Party may, within five days of such meeting,
submit the dispute to expedited mediation under the Commercial
Mediation Rules of the American Arbitration Association ("AAA"). The
mediator shall not have authority to impose a settlement upon the
parties to the dispute, but will attempt to assist them in reaching a
satisfactory resolution of the dispute. The mediator shall end such
mediation whenever, in his or her judgment, further efforts at
mediation would not contribute to resolution of the dispute. If the
dispute is not resolved through mediation in ten days from submission
of the dispute to the mediator, either Party may terminate mediation.
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11.15.3. Upon termination of mediation, the Parties may avail
themselves of any remedies that are available under this Agreement and
applicable law, including litigation.
11.15.4. In addition to the procedures set forth in subsections
11.15.1 through 11.15.3, in the event of a dispute arising from conduct
by one Party that is likely to cause irreparable harm to another Party,
such other Party may, at its option, bring an action in state or
federal court solely for the purpose of obtaining an injunction
maintaining the status quo ante during the pendency of the other
procedures specified in subsections 11.15.1 through 11.15.3.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
CABLETRON SYSTEMS, INC.
By: /s/ Craig R. Benson
-----------------------------------------------
Craig R. Benson
Chairman, Chief Operating Officer and Treasurer
CABLETRON SYSTEMS ACQUISITION, INC.
By: /s/ Craig R. Benson
-----------------------------------------------
Craig R. Benson
Treasurer
STANDARD MICROSYSTEMS CORPORATION
By: /s/ Paul Richman
-----------------------------------------------
Paul Richman
Chairman and Chief Executive Officer
SMC ENTERPRISE NETWORKS, INC.
By: /s/ Paul Richman
-----------------------------------------------
Paul Richman
President
