-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RAD6893+bJVwuSfbna908Z/YUggpq8+Y8NUFQ5aKuPEcgHC9YpEvoAalcdiixE6+ nuVhWm/XsBzKNMTTZk6CZw== 0000950134-00-004799.txt : 20000517 0000950134-00-004799.hdr.sgml : 20000517 ACCESSION NUMBER: 0000950134-00-004799 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLICOM A S CENTRAL INDEX KEY: 0000891426 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: SEC FILE NUMBER: 000-20738 FILM NUMBER: 637652 BUSINESS ADDRESS: STREET 1: NYBROVEJ 114 STREET 2: DK 2800 LYNGBY CITY: DENMARK STATE: G7 BUSINESS PHONE: 2144237560 20-F 1 FORM 20-F 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 or [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission File number 0-20738 ------------------------ OLICOM A/S (Exact name of registrant as specified in its charter) N/A THE KINGDOM OF DENMARK (Translation of Registrant's (Jurisdiction of incorporation or name into English) organization) ------------------------ NYBROVEJ 110 DK-2800 LYNGBY DENMARK (Address of principal executive offices) ------------------------ Securities registered or to be registered pursuant to Section 12(b) of the Act: None Securities registered or to be registered pursuant to Section 12(g) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED Common Shares, nominal value DKK 0.25 each Nasdaq National Market Common Stock Purchase Warrants Nasdaq National Market Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Common Shares, nominal value DKK 0.25 each Common Stock Purchase Warrants ------------------------ Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: Common Shares, nominal value DKK 0.25 each: 17,863,604 Common Stock Purchase Warrants: 922,388 Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark which financial statement item the Registrant has elected to follow: Item 17 [ ] Item 18 [X] 2 DOCUMENTS INCORPORATED BY REFERENCE None. 2 3 ITEM 1. DESCRIPTION OF BUSINESS. Certain statements included in this Report include trend analysis and are forward-looking statements (within the meaning of Section 27A of the United States Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act")), including, without limitation, statements containing the words "believes", "anticipates", "expects", "plans", "may", "will", "should", "objective", "target", "goal", "strategy" or "continue" or the negative of such terms or other words of similar import. Such forward-looking statements relate to future events, the future financial performance of the Company, and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Prospective investors should specifically consider the various factors identified in this Report that could cause actual results to differ, including, without limitation, those discussed in the following section, as well as in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations". The Company is under no duty to update any such factors or to update any of the forward-looking statements after the date of this Report to conform such statements to actual results. OVERVIEW Owing to several significant transactions undertaken by Olicom A/S ("Olicom" or the "Company") during 1999 (the "1999 Transactions"), the nature of the Company's business has changed significantly. While this Report will summarize the more material developments in the Company's business during the past five years, such description must be viewed with reference to the 1999 Transactions. As a result of the 1999 Transactions and the attendant change in the nature of the Company's business as a result thereof, the nature of the Company's business prior to the 1999 Transactions has limited relevance. Prior to the 1999 Transactions, the Company developed, marketed and supported network software and hardware products that enabled personal and work-group computer users to communicate, exchange data and share computing resources in local area networks ("LANs"), in wide area networks ("WANs") and over the Internet. The Company's products were marketed worldwide, primarily through distributors, value-added resellers (including dealers, systems integrators and other resellers) ("VARs") and original equipment manufacturer customers ("OEMs"). COMPANY HISTORY Olicom was organized in the Kingdom of Denmark in 1985, and offered its shares publicly in the United States in 1992. Since December 1997, the Company's shares have been listed on the Copenhagen Stock Exchange. Beginning in 1987, Olicom was involved in the design, development and production of high-quality networking products. In 1988, Olicom began marketing an increasingly broader range of network interface cards ("NICs" or "adapters"), internetworking products, hubs and cabling components, repeaters, converters, filters and associated software drivers. The Company established Olicom, Inc. ("Olicom USA") in 1990, with its headquarters in metropolitan Dallas, to coordinate marketing in North and South America. In late 1991, Olicom introduced a line of Token-Ring bridging products. In 1992, an acquisition enabled Olicom to broaden its product line to Ethernet networks, and in 1995, Olicom began shipping 155 Mbps Asychronous Transfer Mode ("ATM") NICs. 3 4 In June 1997, with the acquisition of CrossComm Corporation ("CrossComm"), Olicom acquired a chassis-based integrated networking platform for its Token-Ring, Ethernet and ATM solutions. In September 1997, Olicom introduced advanced Token-Ring and ATM switching solutions, including the CrossFire(R) 8600 Token Ring Switch. In November 1998, the Company announced a strategy of focusing on the Company's core businesses. Consistent with this strategy, in January 1999, Olicom divested its interest in Lasat A/S ("Lasat"), a producer of PC modems. In March 1999, the Company announced a suite of Fast Ethernet switching products designed for customers migrating from Token-Ring to Fast Ethernet. During the first six months of 1999, the Token-Ring market experienced a dramatic and accelerating decline, leading to a significant reduction in Olicom sales and severe operating losses. The Company also began experiencing significantly increased competition in the Fast Ethernet market. On a continuing basis during the period, Olicom reviewed its strategic and financial position, and began investigating a broad spectrum of possibilities, including entering into strategic alliances focused on Fast Ethernet technology and the sale of Olicom as a whole. Such inquiries failed to generate suitable potential relationships. As a result, the Company decided to divest its activities on a piecemeal basis. 1999 TRANSACTIONS On August 31, 1999, the Company announced the sale of its Token-Ring business to Madge Networks N.V. ("Madge"). On September 19, 1999, Intel Corporation ("Intel") purchased certain intellectual property and other assets of the Company and acquired Olicom's development group. Finally, on October 27, 1999, Olicom announced the sale of all of its interest in Digianswer A/S ("Digianswer") to Motorola, Inc. ("Motorola"). In late 1999, Olicom relocated its international corporate headquarters to a smaller facility adjacent to its previous facilities. In addition, the Company is in the process of closing down its U.S. headquarters and other U.S. and international offices. Although the transactions with Intel, Madge and Motorola have contributed to the improvement in Olicom's financial position, significant operational losses during 1999 and substantial asset write-downs, and other charges associated with the 1999 Transactions, resulted in a substantial decrease in Olicom's shareholders' equity as at December 31, 1999, compared with the same date in 1998. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Since the closing of the 1999 transactions, the Company's main focus has been on the fulfillment of various product delivery and associated warranty and service obligations, primarily through various agreements with Madge and Intel, a warranty and support agreement with VITAL Network Services ("VITAL"), and agreements and arrangements with Olicom's other business partners and service providers. With the divestiture to Madge, Intel and Motorola, the Company's assets at December 31, 1999, were comprised mainly of, cash and cash equivalents, accounts receivables, inventories and certain intellectual property. In addition, there will be certain other assets and contingent payments related to the 1999 Transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a further discussion of the 1999 Transactions. 4 5 In connection with the reduction of its operating activities and the consummation of the 1999 Transactions, the Company will retain certain contingent liabilities, primarily relating to the return of products from United States distributors, product warranty and support obligations (relating to the transaction with Madge), indemnification obligations with respect to representations, warranties and other obligations, and non-competition covenants relating to all of the divestitures. In addition, the Company continued to have certain lease commitments. PRODUCTS Prior to the 1999 Transactions, the Company's strategic focus was to address the local area networking needs of large and medium size enterprises as they transitioned from shared, medium speed network topologies like 16 Mbps Token-Ring and 10 Mbps Ethernet to switched, high-speed networks. The Company's products were fully compatible with applicable industry standards and provided connectivity to all major PC architectures and network operating systems. The main product lines included the following: Desktop Network Interface Cards. NICs provide connectivity between a PC and the network. Olicom NICs provided support for industry standard speeds and features, as well as support for leading network operating systems developed by major vendors. Notebook Connectivity Products. Olicom's GoCard(R)range of PC Card adapters provided network connectivity for the rapidly growing portable computing market. Network System Products. Olicom's network systems products included LAN switches, routers, router switches and network management products. Network Services. Olicom network services included network monitoring, training, installation and on-call site maintenance. These services were sold by Olicom and performed by selected partners such as VITAL and other VARs around the world. With the sale of the Token-Ring business to Madge in August 1999, Olicom divested a substantial part of its Token-Ring product lines, including: Token-Ring Desktop Network Interface Cards Token-Ring Notebook Connectivity Products Token-Ring Hub Products CrossFire Token-Ring Switch Products The transfer of these product lines was implemented during September, October and November 1999. Olicom continued to support Madge with maintenance activities with respect to the transferred products on technical support projects that Madge escalates to Olicom, until this maintenance support obligation terminated at the end of February 2000. In September 1999, Olicom announced discontinuation of the CrossFire ATM Switch product line. To support existing partners and customers, end-of-life sales were arranged at reduced prices at the same time. Sales of these products effectively ceased in December 1999. 5 6 In January 2000 Olicom announced discontinuation of the following additional product lines: ATM Network Interface Cards and associated software products CrossFire Fast Ethernet Switch Products Fast Ethernet Hub Products Fast Ethernet Desktop Network Interface Cards Fast Ethernet Notebook Connectivity Products XL Router and Switch Products (former CrossComm products) To support existing partners and customers, an end-of-life sales campaign began with respect to the foregoing products. The Company anticipates that sales of these products will effectively cease by February 29, 2000. Beginning approximately April 2000, the Company anticipates that it will cease to market and sell products; however, the Company expects that it will continue to fulfil product warranty obligations and technical support obligations for Ethernet products, ATM products and XL products. Such obligations will be performed through agreements with VITAL Network Services. Olicom is no longer involved in the network service business. Customers seeking network services (including general support, product replacement, network monitoring, training, installation and on-site support for products sold by Olicom) are referred to Madge, VITAL Network Services or NWorks (a Denmark-based start-up service company established by former Olicom employees). PRODUCT SALES AND MARKETING Prior to the consummation of the 1999 Transactions, Olicom marketed and sold its products through indirect distribution channels that included distributors, VARs and OEMs. As is common in the LAN industry, the Company's agreements with distributors and VARs were terminable on prior notice and provided for the right upon such termination to return products that were unopened and undamaged. The Company has received notice from Ingram Micro Inc. and Tech Data Corporation, the Company's largest distributors, of their exercise of the right to return products. The Company has created reserves with respect to the financial impact associated with right of distributors to return products. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". Olicom product sales during the first quarter of 2000 will be limited to sales of Token-Ring products to Madge from pre-existing finished goods and certain component inventories. In addition, end-of-life sales are ongoing for a range of recently discontinued ATM, Ethernet and XL products. It is anticipated that Olicom will cease to sell products sometime during fiscal year 2000. Except for the ongoing end-of-life sales program, the Company has no active marketing programs with respect to products formerly produced by it. Pursuant to rights obtained in connection with its agreement with the Company, Madge may continue to manufacture, market and sell several Olicom-branded Token-Ring products. 6 7 PRODUCT SUPPORT Prior to the 1999 Transactions, the Company's distribution partners supported the Company's products. These distribution partners had access to the Company's sales support engineers and field engineers for end-user support. The Company's resellers and large accounts received sales and technical training from the Company at its training centers in greater Copenhagen, Denmark, Marlborough, Massachusetts and Richardson, Texas. The performance of technical support obligations retained by Olicom after the 1999 Transactions is now being provided through VITAL and NWorks. On-line information access is currently provided through the World Wide Web and electronic bulletin boards as well as additional technical support available through VITAL by telephone and telefax during extended business hours. For Olicom products that were purchased or licensed by Madge, technical support services are now being provided by Madge's technical support organization. Depending on the distribution channel, the Company's products generally have been warranted free of defects in materials and workmanship for one to three years. Selected NIC products have a limited lifetime warranty. Before the expiration of the product warranty period, the Company is offering parts replacement services through VITAL for the product lines that have remained with the Company, and Madge is providing similar services for the product lines that it purchased or licensed from Olicom. Olicom currently refers customers requesting maintenance and support contracts that include on-site service and 24-hour telephone dial-in support to Madge, VITAL or NWorks. To date, the Company has not encountered any significant product maintenance problems. RESEARCH AND DEVELOPMENT Prior to the 1999 Transactions, the Company was developing new products and enhancements to existing products, with the goal of further improving performance, assuring continued interoperability and increasing market share. In this connection, the Company maintained significant research and development operations in greater Copenhagen and in Gdansk, Poland. In connection with the agreement with Intel, Olicom's development group was transferred to Intel, and approximately 220 Olicom development employees based in greater Copenhagen and in Gdansk became employees of Intel. After consummation of the transaction with Intel, and the subsequent sale of Olicom's shareholding in Digianswer, all Olicom research and development activities were terminated. As part of the agreement with Intel, Olicom has access to former Olicom engineering resources, both in Copenhagen and in Gdansk, who are now employed by Intel, in order to handle warranty obligations for Olicom's installed base of Ethernet, ATM and XL products. MANUFACTURING AND DISTRIBUTION Prior to the 1999 Transactions, Olicom outsourced all of its manufacturing needs. Its products were manufactured in fully automated, high-quality ISO 9002 certified production lines utilizing Surface Mount Technology techniques, and were manufactured to meet Olicom specifications on a turnkey basis. In connection with the sale of the Token-Ring business to Madge, the Company continued to maintain its contract manufacturing base to support remaining products, and facilitated the availability of a continued supply of Token-Ring products to Madge. Following a transition period that extended from 7 8 August until November 1999, Madge assumed direct responsibility for the contract manufacturers for the product line purchased/licensed from the Company. The Company's distribution of products has been consolidated to its Copenhagen distribution center. The Company's distribution center in Richardson, Texas, was closed in December 1999, in line with the overall reduction in activities. INTELLECTUAL PROPERTY The Company has been dependent on its proprietary technology since its inception. The Company relied upon a combination of copyright and trade secret laws to establish and maintain proprietary rights to its products. The Company has had a program to file applications for and obtain patents in the United States. During 1999, most of these patent applications were licensed or transferred to Madge or Intel. In most cases where patent applications were transferred, Olicom at the same time received a license of the right to utilize the technology represented by the transferred patent applications. While the Company has not been issued any patents to date, several original Olicom patent applications are currently pending. There can be no assurance that patents will be issued from pending applications, or that claims allowed on any future patents will be sufficiently broad to protect the Company's technology. In addition, to the extent that patents are issued from pending applications, there can be no assurance that any of such patents will not be challenged, invalidated or circumvented, or that any rights granted thereunder will provide competitive advantages to the Company. Although the Company believes that its products and technology have not and do not infringe the proprietary rights of others, and the Company does not have any knowledge that its products infringe the proprietary rights of any third parties, there can be no assurance that third parties will not assert infringement claims in the future or that such claims will not be successful, notwithstanding the divestitures in connection with the 1999 Transactions. It has been the Company's practice to enter into confidentiality agreements with its customers, suppliers and industry partners, to limit access to sensitive information. Despite these precautions, it may be technologically possible for past competitors of the Company to "reverse engineer" or otherwise obtain information regarding aspects of the Company's products that the Company regards as proprietary. The laws of some foreign countries in which the Company sells or may sell its products do not protect the Company's proprietary rights in its products to the same extent, as do the laws of the Kingdom of Denmark and/or the United States. From time to time the Company has received communications from third parties asserting that its use of trademarks, or that its products, infringe or may infringe the rights of third parties. There can be no assurance that any such claims will not result in protracted and costly litigation; however, based upon general practice in the industry, the Company believes that such matters can ordinarily be resolved without any material adverse impact on its business, financial condition or results of operations. Nevertheless, there can be no assurance that the necessary licenses would be available on acceptable terms, if at all, or that the Company would prevail in any such challenge. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms, or litigation arising out of such other parties' assertion, could have a material adverse effect on the business, financial condition or results of operations of the Company, notwithstanding the divestitures in connection with the 1999 Transactions. 8 9 TRADEMARK AGREEMENT The trademark "Olicom" (the "Trademark") is a registered trademark of Ing. C. Olivetti & C., S.p.A. ("Olivetti"). Pursuant to a Trademark Agreement dated December 11, 1998, Olivetti extended the grant to the Company of a worldwide license to use the Trademark. The term of the Trademark Agreement expires on September 1, 2009, with the Company having the right to extend the term for an additional ten years. During the term of the Trademark Agreement and for a period of one year after any termination thereof, Olivetti has agreed not to use itself or grant to a third party any rights to use the Trademark on products or services of the type manufactured, marketed or offered by the Company. Olicom has the right to terminate the Trademark Agreement for convenience upon the provision of notice, as provided therein. In connection with the transactions with Madge, Olivetti, Madge and Olicom agreed to the licensing of the Trademark on terms substantially similar to those enjoyed by Olicom under the Trademark Agreement, in order to enable Madge to market Olicom product lines. Olicom has trademarks on several selected products, such as CellDriver(R), Lanscout(TM) and RapidLan(TM), and on products and services such as CrossFire(R), GoCard(R), RapidFire(R), ClearServer(R), ClearSession(R), ClearSight(TM), ClearCare(R), ClearPartner(R), ClearStep(R) and ExpertWatch(R). Several of these trademarks were licensed to Madge in connection with the 1999 Transactions. EMPLOYEES In connection with the Company's restructuring efforts and the 1999 Transactions, Olicom has reduced staff dramatically. As of February 1, 2000, the Company employed or retained (as employees or independent contractors) approximately 59 persons, including 6 in sales and marketing, 28 in operations/production (including quality assurance), and 25 in administration and finance. Of these employees and independent contractors, approximately 9 were located in the United States, and the remainder were located in Denmark. As of May 1, 2000, the Company anticipates that it will cease to have personnel in sales and marketing or operations. At such time, the Company will have limited personnel, primarily in finance and other administrative functions. ITEM 2. DESCRIPTION OF PROPERTY. OLICOM A/S LEASES Pursuant to the sublease agreement entered into with Intel Denmark ApS ("Intel Denmark"), Olicom has subleased the premises situated at Nybrovej 112, DK-2800 Lyngby (the "TopDanmark Lease No. 1") to Intel Denmark and the premises situated at Nybrovej 114, DK-2800 Lyngby (the "TopDanmark Lease No. 2") to Intel Denmark on the same terms and conditions as agreed in the head leases. The sublease agreement is for a fixed term terminating on February 1, 2006, for the TopDanmark Lease No. 1 and on April 1, 2008, for the sublet part of the TopDanmark Lease No. 2. During these periods, Olicom will remain contingently liable to TopDanmark Ejendom A/S ("TopDanmark"), as lessor of the premises, for the performance of lease obligations by its subtenants. While Olicom A/S provided bank guarantees 9 10 and deposits to TopDanmark as security under the head leases, Intel Corporation has provided Olicom with a parent company guarantee covering Intel Denmark' fulfillment of its obligations under the subleases. In addition, Intel Denmark is obligated to use reasonable commercial efforts together with Olicom to procure the assignment of the head leases to Intel Denmark with the necessary consent of TopDanmark. In this relation, Intel Denmark is obligated to provide security to TopDanmark sufficient for the release of the bank guarantees and deposits presently provided as security by Olicom to TopDanmark. Further, Olicom had leased premises situated at Nybrovej 110, DK-2800 Lyngby from Tryg Baltica Forsikring, Pensionsforsikringsselskab A/S. This lease was transferred from Olicom to Eli Lilly Danmark A/S ("Eli Lilly Danmark") as of January 1, 2000, and has been accepted by the lessor of the premises. As part of this transfer, Olicom made a payment to Eli Lilly Danmark for refurbishment of the leased premises. Further, Olicom has entered into a sublease agreement with Eli Lilly Danmark, whereby Olicom will sublease 1,046 square meters of the premises situated at Nybrovej 110, DK-2800 Lyngby. The sublease is non-terminable until December 31, 2002; however, Olicom may assign this lease or enter into a further sublease. The sublease with Eli Lilly Danmark may terminate with at least a 12 months' written notice. OLICOM USA LEASES Pursuant to a Lease Agreement dated October 16, 1997, Olicom USA leased approximately 40,000 square feet of office space in Richardson, Texas, for a term expiring on January 30, 2005. Effective November 29, 1999, Olicom USA assigned its obligations under the Lease Agreement to Nextel of Texas, Inc. ("Nextel Texas"). The parent corporation of Nextel Texas guaranteed its assumed obligations under the Lease Agreement. Pursuant to such assignment, the landlord granted Olicom USA a release from substantially all of its obligations under the Lease Agreement (including the obligation to pay rental). So long as Nextel Texas is not in default in its obligations under the Lease Agreement, the landlord has agreed to pay to Olicom USA an aggregate amount of $291,183 in 44 monthly installments, which represents a portion of the increased rental obtained as a result of the assignment of the Lease Agreement to Nextel Texas. In connection with the assignment of the Lease Agreement, Nextel Texas also assumed substantially all of the obligations of Olicom USA regarding the lease of telephone equipment at the leased premises. However, as the parent of Nextel Texas did not guarantee the obligations of Nextel Texas under the telephone lease, the lessor of the telephone equipment did not release Olicom USA from its obligations under such lease; as a result, Olicom USA agreed to guarantee the performance of the assumed obligations of Nextel Texas under the telephone lease. The guaranteed payments are approximately $7,200 per month for a period of 47 months as of February, 2000 (or a maximum amount of approximately $338,400 as of such date). Olicom USA also leases warehouse space in Plano, Texas, for a term expiring on April 14, 2000. Olicom USA will utilize portions of this space to handle returned products, and has moved its administrative offices into the office portion of the warehouse. Owing to the April 2000 expiration date of the term of such lease, Olicom USA is not endeavoring to sublet these premises at this time. Olicom USA also leases space in Marlborough, Massachusetts, for a term expiring December 31, 2002. Of the space originally leased by the former CrossComm, portions have been previously sublet. As part of the sale of the services business to VITAL Network Services, it agreed to split the cost of any 10 11 unoccupied space. As a result, Olicom USA's estimated share of rental and operating expense attributable to this premises through 2002 is $476,637. While Olicom USA is presently trying to sublet the remaining space, it is not optimistic that it will be successful in doing so. OLICOM POLAND LEASE Pursuant to a Lease Agreement dated December 22, 1997, Olicom Poland sp. z o.o. ("Olicom Poland") leased office space in Gdansk for a term expiring on November 28, 2008. Commencing October 25, 1999, these premises were sublet to Intel Technology Poland on back-to-back terms until the day when all rights and obligations of Olicom Poland can be assigned to Intel Technology Poland. If the lease is not assigned to Intel Technology Poland, Olicom Poland's liability vis-a-vis the landlord will not expire until November 28, 2008. This liability is covered by guarantees provided by Intel Corporation. ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. As of the date of this Report, the Company was not a party to any legal proceedings, the adverse outcome of which, in management's opinion, would have a material adverse effect on the Company's business, results of operations or financial position. See also "Description of Business -- Proprietary Rights." On or about September 13, 1996, Datapoint Corporation ("Datapoint") commenced litigation in the United States District Court for the Eastern District of New York against CrossComm Corporation (now known as Olicom, Inc. ("CrossComm")), Cisco, Plaintree Systems Corporation, Accton Technology Corporation, Cabletron Systems, Inc., Bay Networks and Asante Technologies, Inc., individually, and as representatives of a putative class of all manufacturers, vendors and users of Fast Ethernet dual protocol local area network products. In its complaint, Datapoint alleges that the defendants have been, and still are, directly infringing U.S. Patent No. 5,077,732 by making, using, selling and/or offering for sale products embodying inventions claimed in that patent. Similarly, Datapoint alleges that the defendants are also infringing U.S. Patent No. 5,008,879 by using or selling products encompassed within that patent's claims. Datapoint is seeking a permanent injunction against all of the defendants, enjoining each of them from making, using or selling any product that infringes either patent, and is also seeking unspecified damages (which it claims should be trebled) and its costs and attorneys' fees. On April 15, 1998, the Special Master submitted a report in which he generally supported the contention of the defendants as to their construction of the claims with respect to the patents-in-suit. A Stipulated Order and Judgment was filed by the parties, and subsequent thereto, the Court granted Summary Judgment in favor of the defendants, finding that the accused products do not infringe the patents-in-suit. On February 3, 1999, Datapoint filed a notice of appeal to the United States District Court for the Federal Circuit. On January 6, 2000, Datapoint filed a motion seeking a stay of the appeal, on the grounds that one of the two claims that is the subject of the appeal had been rejected by the United States Patent and Trademark Office during a reexamination. 11 12 ITEM 4. CONTROL OF REGISTRANT. As of February 24, 2000, the Company was not aware of any person who was the beneficial owner of more than 10% of the outstanding shares of the Company, nominal value DKK 0.25 per share ("Common Shares"). The following table sets forth as of such date the number of Common Shares beneficially owned by all directors and executive officers of the Company as a group:
Amount of Percent Beneficial of Ownership Class(1) --------- -------- All directors and executive officers as a group (consisting of 8 persons) 250,898 1.4%
- ---------------- (1) Percentages in the foregoing table are based on 17,863,604 Common Shares issued and outstanding as of February 24, 2000, excluding 702,291 Common Shares held in the Company's treasury. ITEM 5. NATURE OF TRADING MARKET. The Common Shares are traded on the Nasdaq National Market (under the symbol OLCMF) and on the Copenhagen Stock Exchange ("CSE"). The following table sets forth the high and low sales prices of the Common Shares for the periods indicated, as reported by the Nasdaq National Market ("Nasdaq") and the Copenhagen Stock Exchange.
Nasdaq(1) CSE(1) -------------------- ---------------- High Low High Low ---- --- ---- --- Calendar 2000 First Quarter (through February 24, 2000) 1.3 0.8 9.5 5.9 Calendar 1999 First Quarter 7.9 2.9 52.4 21.3 Second Quarter 4.5 3.1 29.6 19.8 Third Quarter 4.4 0.6 29.2 5.8 Fourth Quarter 1.7 0.5 9.4 3.9 Calendar 1998 First Quarter 30.8 24.8 214.0 177.0 Second Quarter 30.8 26.5 210.0 186.0 Third Quarter 28.4 13.7 197.0 82.4 Fourth Quarter 14.5 4.9 87.1 32.5
- ---------------- (1) Prices reported for Nasdaq are expressed in U.S. dollars; prices reported for the CSE are expressed in Danish kroner. 12 13 As of February 24, 2000, there were approximately 132 United States record holders of Common Shares, who held approximately 83% of the outstanding Common Shares as of such date. The foregoing includes 14,826,060 Common Shares held of record by Depository Trust Company, as nominee for various beneficial holders. On January 31, 2000, the Company announced that it had received notification from Nasdaq relating to the failure of the Common Shares to maintain a minimum bid price of $1.00 during a 30 consecutive trading day period, as required for continued listing of the shares on Nasdaq. The Company also announced that it had received notification from Nasdaq relating to the failure to maintain a minimum of two active market makers for the Company's common share purchase warrants, as required for continued listing of the warrants on Nasdaq. The Company appealed Nasdaq's determinations of noncompliance, and a hearing has been scheduled for February 24, 2000, with respect to the appeal. As of the close of business on February 25, 2000, the Company had not been advised of the outcome of the hearing. In connection with the Company's acquisition of CrossComm on June 12, 1997, the Company issued three-year warrants ("Warrants") to purchase Common Shares at an exercise price of $19.74 per whole Common Share. The Warrants are traded only on the Nasdaq National Market (under the symbol OLCWF). The following table sets forth the high and low sales prices of the Warrants for the periods indicated, as reported by Nasdaq.
Nasdaq ------------------------- High Low ------ ----- Calendar 2000 First Quarter (through February 24, 2000) 0.2 0.1 Calender 1999 First Quarter 0.7 0.3 Second Quarter 0.4 0.1 Third Quarter 0.4 0.1 Fourth Quarter 0.2 0.0 Calendar 1998 First Quarter 12.8 8.1 Second Quarter 12.0 7.3 Third Quarter 9.0 1.0 Fourth Quarter 1.5 0.1
- ---------------- As of February 24, 2000, there were approximately 88 United States record holders of Warrants, who held approximately 99% of the Warrants as of such date. The foregoing includes 918,975 Warrants held by Depository Trust Company. ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS. There are no governmental laws, decrees or regulations of the Kingdom of Denmark that restrict the export or import of capital (including, without limitation, foreign exchange controls), or that affect the 13 14 remittance of dividends, interest or other payments to nonresident holders of Common Shares. There are no limitations imposed by the laws of the Kingdom of Denmark or the Company's Articles of Association (except for the Share Ownership Limit described below) on the right of nonresident or foreign holders to hold or vote Common Shares. The Articles of Association provide that no person, firm or entity (each, a "person") may, without obtaining the approval of the Company's Board of Directors, own more than 33% of the Company's share capital or votes at any time (the "Share Ownership Limit"). The Company's Board of Directors may condition its approval on the satisfaction of such conditions that it determines to be appropriate. For the purpose of determining ownership of Common Shares or votes, a person will generally be deemed to own Common Shares or votes which are considered to be beneficially owned by such person under Rule 13d-3 under the Exchange Act. A person who owns more than 33% of the Company's share capital or votes at any time who has not obtained the approval of the Board of Directors cannot be registered or otherwise accepted as a shareholder, and such person will have no voting rights, rights to dividends or distributions, or any other rights as a shareholder for the portion of such person's shareholding that exceeds 33%. The Board of Directors may approve the ownership by a person of more than 33% of the Company's share capital or votes in (i) the event that such person has, prior to purchasing more than 33% of the Company's share capital or votes, requested the approval by the Board of Directors to own more than the Share Ownership Limit, (ii) the event that such person has made a legally binding and irrevocable bona fide offer to all shareholders of the Company (other than such person, to the extent that he or she is a shareholder) to purchase all the Common Shares and votes in the Company at a price deemed favorable by the Board of Directors, in its discretion, or (iii) in such other circumstances, as determined by the Company's Board of Directors. Other than the foregoing, there are no limitations by the Company's Articles of Association on the right of holders to hold or vote Common Shares. ITEM 7. TAXATION. The following summary of certain United States federal and Danish tax matters is based on tax laws of the United States and Denmark as in effect on the date of this Report, and is subject to changes in United States and Danish law, including changes that could have retroactive effect. The following summary is also based on the current United States-Denmark Double Taxation Convention which is subject to change. A proposal for a new treaty has been concluded between USA and Denmark. The treaty must be ratified by the two states before it can take effect. In Denmark the Gouverment proposed a Bill on the new treaty on 3 November 1999 but the Bill has not yet been passed by the Parliament. This discussion is based on current laws unless otherwise stated and interpretations thereof, and there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements contained herein. The following summary does not consider or discuss the tax laws of any country other than the United States or Denmark. This summary does not describe United States federal estate and gift tax considerations, nor state, local or provincial tax considerations. Furthermore, this summary does not address United States federal income tax or Danish tax considerations relevant to United States holders of Common Shares or Warrants subject to taxing jurisdictions other than or in addition to the United States, and does not address all possible categories of United States holders, some of whom (such as financial 14 15 institutions, trusts, estates, insurance companies, dealers in securities, certain retirement plans and tax exempt organizations) may be subject to special rules. This summary contains a description of the material United States federal income tax and Danish tax consequences of the purchase, ownership and disposition of Common Shares and Warrants by a beneficial owner that (i) is an individual citizen or resident in the United States (for United States federal income tax purposes), a corporation or partnership organized under the laws of the United States or any state thereof, or estates or trusts the income of which is subject to United States federal income tax regardless of its source, (ii) is not also a resident or corporation of Denmark and is not domiciled in Denmark, (iii) does not hold Common Shares or Warrants in connection with any permanent establishment or fixed base in Denmark, (iv) does not own, and has not owned (directly, indirectly or by attribution) at any time, 10% or more of the total combined voting power or equity of the Company, and (v) holds Common Shares or Warrants as capital assets. The term "United States holder," as used in this summary, means a beneficial owner of Common Shares or Warrants meeting these requirements. UNITED STATES HOLDERS OF COMMON SHARES OR WARRANTS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE UNITED STATES, DANISH OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF COMMON SHARES AND WARRANTS. UNITED STATES TAX CONSEQUENCES OF OWNERSHIP OF COMMON SHARES Dividends. For United States federal income tax purposes, the gross amount of all dividends (that is, the amount before reduction for Danish withholding tax) paid with respect to Common Shares out of the current or accumulated earnings and profits of Olicom ("E&P") to a United States holder will be subject to United States federal income taxation as foreign source dividend income. United States corporations that hold Common Shares will not be entitled to the dividends received deduction available for dividends received from United States corporations. To the extent that a distribution exceeds E&P, it will be treated first as a return of capital to the extent of the United States holder's basis, and then, as gain from the sale of a capital asset. For United States federal income tax purposes, the amount of any dividend paid in Danish kroner will be the United States dollar value of the kroner at the exchange rate in effect on the date of receipt, whether or not the kroner is converted into United States dollars at that time. The withholding tax imposed by Denmark generally is a creditable foreign tax for United States federal income tax purposes. Therefore, a United States holder generally will be entitled to include the amount withheld as foreign tax paid in computing a foreign tax credit (or in computing a deduction for foreign income taxes paid, if the United States holder does not elect to use the foreign tax credit provisions of the Internal Revenue Code of 1986, as amended (the "Code")). The Code, however, imposes a number of limitations on the use of foreign tax credits, based on the particular facts and circumstances of each taxpayer. United States holders who hold Common Shares should consult their tax advisors regarding the availability of the foreign tax credit. A United States holder also may be subject to backup withholding at the rate of 31% with respect to dividends paid on or proceeds from the sale or other disposition of Common Shares, unless the United States holder (i) is a corporation or comes within certain other exempt categories or (ii) provides a 15 16 taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Sale or Other Disposition of Common Shares. Gain or loss recognized by a United States holder on the sale or other disposition of Common Shares will be subject to United States federal income taxation as capital gain or loss in an amount equal to the difference between such United States holder's basis in the Common Shares and the amount realized upon such disposition. The capital gain or loss will be long term or short term depending on whether the holder has held the Common Shares for (i) more than 12 months (which is subject to a maximum United States federal income tax rate of 20% for certain non-corporate taxpayers) or (ii) not more than one year (which is subject to a maximum United States federal income tax rate of 39.6% for certain non-corporate taxpayers). Capital losses are generally deductible only against capital gains and not against ordinary income. Capital gain recognized by a United States holder on the sale or other disposition of Common Shares will be United States source gain. Treasury Regulations have been finalized under which losses from the sale of Common Shares would generally be sourced in the same manner as gains from the sale of such Common Shares. However, the final regulations include a dividend recapture rule and other exceptions that may apply. United States holders of Common Shares should consult their tax advisors regarding the proper treatment of such losses. UNITED STATES TAX CONSEQUENCES OF OWNERSHIP OF WARRANTS Exercise of Warrants. Generally, no gain or loss will be recognized for United States federal income tax purposes upon exercise of a Warrant. A holder's initial tax basis in a Warrant will be equal to the value of the Warrant at the time the holder receives such Warrant. The tax basis of the Common Shares acquired upon exercise of a Warrant will be equal to the sum of (i) the holder's tax basis in such Warrant and (ii) the exercise price. The holding period of the Common Shares acquired upon exercise of a Warrant will begin on the date of the exercise of the Warrant. Disposition of Warrants. In general, the sale, exchange or other taxable disposition of a Warrant will result in gain or loss to the holder in an amount equal to the difference between the amount realized on such sale, exchange or other disposition and the holder's tax basis in the Warrant. Such gain or loss generally will be capital gain or loss (so long as the Warrant is a capital asset in the hands of the holder) and such capital gain or loss will be long term or short term depending on whether the holder has held the Warrant for (i) more than 12 months (which is subject to a maximum United States federal income tax rate of 20% for certain non-corporate taxpayers) or (ii) not more than one year (which is subject to a maximum United States federal income tax rate of 39.6% for certain non-corporate taxpayers). Expiration. The expiration of a Warrant should generally result in a capital loss to the holder equal to the holder's tax basis in the Warrant if the Common Shares issuable upon exercise of the Warrant would have been a capital asset if acquired by such holder. Adjustments to Conversion Ratio. Adjustments made to the number of Common Shares that may be acquired upon the exercise of a Warrant, or the failure to make such adjustments, may result in a taxable distribution to the holder of a Warrant pursuant to Section 305 of the Code. 16 17 DANISH TAX CONSEQUENCES OF OWNERSHIP OF COMMON SHARES Dividends. For Danish income tax purposes, the gross amount of all distributions made by the Company to its shareholders is taxed as a dividend. However distributions liquidation proceeds made by the Company to its shareholders during the calender year in which the Company is finally liquidated and dissolved are taxed as capital gain. In addition, the gross amount paid by the Company to redeem Common Shares owned by a shareholder and considerations paid at purchase of own shares are generally taxed as a dividend. However, a shareholder may apply to Danish tax authorities for an exemption from the dividend tax. If the exemption request is granted, the consideration will be taxed as capital gain. The granting of bonus shares to shareholders, and the right of shareholders to subscribe for Common Shares at a price that is less than the current trading value of such Common Shares, are not considered taxable distributions to shareholders. In general, a Danish withholding tax of 25% is levied on all dividends. However, a United States holder may apply to the Danish tax authorities for a partial refund of the dividends tax that has been withheld under tax treaty. If this refund request is granted, the Danish withholding tax on such dividends is effectively reduced to 15%. Note that under the new treaty the rate is reduced to 5% for corporate shareholders holding at least 10% of the share capital as oppose to 90% to the voting power in the current treaty. Further, corporate shareholders holding at least 25% of the share capital for a consecutive period of a least one year may be exempt from Danish tax on dividends. The Company does not presently contemplate the payment of any dividends on Common Shares. However, should the Company decide to make payment of dividend, the Company will apply to the Danish tax authorities for a blanket exemption allowing the Company to withhold only 15% of all gross dividends paid to a United States holder. While the Company believes that such an exemption will be granted, there can be no assurance that this will occur. Shareholders eligible for further reduction must apply individually for such reduction. Sale or Other Disposition of Common Shares. Capital gains realized by United States holders upon the sale or other disposition of Common Shares should be exempt from Danish taxation. DANISH TAX CONSEQUENCES OF OWNERSHIP OF WARRANTS Exercise of Warrants. Generally, a United States holder should not recognize taxable gain or loss for Danish income tax purposes upon the exercise of a Warrant. Sale of Warrants. Generally, a United States holder should not recognize taxable gain or loss for Danish income tax purposes upon the sale of a Warrant. However if the warrant is disposed of to the Company any (deemed) consideration will be taxed as dividend, cf. above, unless a ruling allowing for capital gains treatment has been obtained. Expiration. Upon the expiration of a Warrant, a United States holder should not recognize taxable gain or loss for Danish income tax purposes. DANISH SHARE TRANSFER DUTY No Danish share transfer duty is levied on the disposal of Common Shares or Warrants. 17 18 DANISH ESTATE AND GIFT TAXES. Generally, if a United States holder acquires or disposes of Common Shares or Warrants by inheritance, legacy or gift, such holder will not be subject to Danish gift or inheritance taxes. If a United States holder should make a gift of such Common Shares or Warrants to a close relative resident in Denmark other than a spouse, the United States holder could be liable for Danish gift tax; however the tax is subject to relief under the United States-Denmark Double Taxation Convention with respect to taxes on estates, inheritance and gifts. ITEM 8. SELECTED FINANCIAL DATA. The following table sets forth certain financial information with respect to the Company for the five years ended December 31, 1999. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements and related notes included elsewhere herein.
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 1995 1996 1997 1998 1999 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net sales $ 127,469 $ 168,228 $ 238,229 $ 227,602 $ 71,291 Cost of sales 65,191 95,236 123,195 134,990 60,874 Special charges related to inventories 0 0 0 3,463 33,737 ---------- ---------- ---------- ---------- ---------- Gross profit 62,278 72,992 115,034 89,149 (23,320) ---------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Sales and marketing 31,660 40,496 53,754 71,300 42,216 Research and development 9,193 12,852 17,748 23,174 14,298 General and administrative 5,662 6,848 11,032 13,657 11,218 Acquisition-related expenses 0 3,787 40,917 0 0 Restructuring charges 0 1,402 0 7,327 36,695 ---------- ---------- ---------- ---------- ---------- Total operating expenses 46,515 65,385 123,451 115,458 104,427 ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) FROM OPERATIONS BEFORE INTEREST AND INCOME TAXES 15,763 7,607 (8,417) (26,309) (127,747) Income from sale of activities 0 0 0 0 51,205 Interest income, net 3,297 1,531 2,966 2,302 829 Foreign currency gains (losses) (31) 675 (1,736) 481 722 Related party gain on sale of investment 0 2,878 0 0 0 ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 19,029 12,691 (7,187) (23,526) (74,991) Provision for income taxes 6,223 4,727 10,689 (531) 4,656 ---------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARY 12,806 7,964 (17,876) (22,995) (79,647) Minority interest in income of consolidated subsidiary 0 539 245 (56) 660 ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS)$ 12,806 $ 7,425 $ (18,121) $ (22,939) $ (80,307) ========== ========== ========== ========== ========== DILUTED EARNINGS (LOSS) PER SHARE $ 0.87 $ 0.50 $ (1.15) $ (1.28) $ (4.50) ========== ========== ========== ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING INCLUDING COMMON STOCK EQUIVALENTS IN 1997, 1998 AND 1999 14,748 14,786 15,821 17,894 17,864 ========== ========== ========== ========== ==========
18 19
DECEMBER 31, -------------------------------------------------------------- 1995 1996 1997 1998 1999 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital $ 78,600 $ 86,407 $ 100,552 $ 76,249 $ 22,265 Total assets 127,327 127,924 162,331 149,013 48,468 Total shareholders' equity 90,127 97,509 125,559 103,023 22,438
19 20 ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Certain statements included in this Report include trend analysis and are forward-looking statements (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act), including, without limitation, statements containing the words "believes", "anticipates", "expects", "plans", "may", "will", "should", "objective", "target", "goal", "strategy" or "continue" or the negative of such terms or other words of similar import. Such forward-looking statements relate to future events, the future financial performance of the Company, and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Prospective investors should specifically consider the various factors identified in this Report that could cause actual results to differ, including, without limitation, those discussed in the following section, as well as in the section titled "Description of Business". The Company is under no duty to update any such factors or to update any of the forward-looking statements after the date of this Report to conform such statements to actual results. The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes. OVERVIEW The Company's wholly-owned subsidiaries include Olicom Ventures A/S ("Olicom Ventures"), Olicom Finance Limited and Olicom Trading A/S. Olicom, Inc. is a wholly-owned subsidiary of Olicom Trading A/S. During the first six months of 1999, the Token-Ring market experienced a dramatic and accelerating decline, leading to a significant reduction in Olicom's sales and severe operating losses. The Company also began experiencing significantly increased competition in the Fast Ethernet market. On a continuing basis during the period, Olicom reviewed its strategic and financial position, and began investigating a broad spectrum of possibilities, including entering into strategic alliances focused on Fast Ethernet technology and the sale of Olicom as a whole. Such inquiries failed to generate suitable potential relationships. As a result, the Company decided to divest its activities on a piecemeal basis (see "Description of Business"). As a result of the 1999 Transactions, the nature of the Company's business changed significantly during 1999. This discussion will summarize the 1999 Transactions (see "The 1999 Transactions"). The 1999 Transactions significantly affected the Company's financial condition and results of operations at and for the fiscal year ended December 31, 1999, as described more fully below. As a result of these significant changes in the nature of the Company's business, the following discussion will include summary references to the Company's results of operations, liquidity and financial condition during the period prior to the 1999 Transactions, and describe the effect of the 1999 Transactions on the Company's results of operations, liquidity and financial condition. The Company's functional currency is the U.S. dollar. The Company prepares its financial statements in U.S. dollars and in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). References herein to "U.S. dollars", "$" or "USD" are references to United States currency, and references to "Danish kroner", "kroner" or "DKK" are references to Danish currency. 20 21 1999 TRANSACTIONS On August 31, 1999, the Company closed the sale of its Token-Ring business to Madge. The consideration for the sale of Olicom's Token-Ring business to Madge consisted of a cash payment of $15 million, of which a certain amount was paid into escrow subject to Olicom fulfilling certain development and other technical support commitments, and obligations with respect to documentation and training, and additional cash payments due over the succeeding three years based on Madge's revenue derived from the combined Madge and Olicom Token-Ring product portfolio during this period. With respect to the additional cash payments, a certain minimum cash amount for the whole period is guaranteed by a financial institution and held in escrow, and will be released in instalments over a period of twelve quarters from the closing date. Until February 29, 2000, Madge is entitled to withhold payments capped at a certain amount in connection with the Company's agreement to indemnify Madge with respect to intellectual property claims. The escrowed amounts and the potential additional cash payments have not been taken into income in 1999. The Company intends to record these amounts and payments as income when and to the extent received, but only to the extent that Madge does not make claims which would have the effect of reducing the amount of monies received. With respect to a given quarter, Olicom will receive payments in excess of the agreed quarterly amount if Madge's revenue from Token-Ring products in that quarter exceeds the thresholds set for the calculation of the minimum payment; however, Madge may reduce the next quarterly payment by an amount equal to the amount of the excess payment, if the sale of Token-Ring products in the succeeding quarter is less than the agreed threshold. Consequently, the Company will be able to make a complete assessment of the total amount paid by Madge only after the end of the twelve quarters following the closing. Olicom can make no assurance with respect to the anticipated outcome of the sale of Token-Ring products during the three-year period above the agreed minimum amount. In addition, Madge agreed to purchase certain Olicom Token-Ring inventory. The obligation for Madge to purchase inventory will expire by March 31, 2000. In addition, Olicom agreed to provide certain warranty-related services with regard to the product lines transferred to Madge. This agreement obligates Olicom to repair or replace defective goods in accordance with Olicom's general commercial warranty terms for up to one year following product purchases. On September 19, 1999, Olicom closed a transaction whereby Intel Corporation ("Intel") purchased certain intellectual property and other assets of the Company and acquired Olicom's development group. The consideration for the Intel transaction included a cash payment, with a portion thereof being paid into escrow as security for the performance of indemnification obligations with respect to warranties, representations and other agreements made by the Company to Intel. The escrowed amount will remain in escrow for twelve months following the closing date, to the extent not applied to claims against the Company that are subject to warranty and indemnification obligations. In addition, the agreement with Intel contains a provision pursuant to which Olicom may receive additional payments upon the satisfaction of certain conditions. Olicom can make no assurance with respect to the anticipated outcome of this provision, which will expire by September 30, 2000. On October 27, 1999, Olicom closed the sale of all of its interest in Digianswer A/S ("Digianswer") to Motorola, Inc. ("Motorola"). The consideration for the Digianswer transaction consisted of cash, with a portion thereof being paid into escrow as security for the performance by the Company of indemnification obligations with respect to warranties, representations and other agreements made by the Company to Motorola. The escrowed amount will remain in escrow for 18 months following the closing date, to the extent not applied to claims against the Company that are subject to warranty and indemnification 21 22 obligations. In connection with the agreement with Motorola, the Company recorded both the cash payment and the escrowed amount as an income in 1999, as management believes that the risk associated with the escrowed amount is limited. In connection with the foregoing agreements, Olicom made warranties, representations and other agreements that are customary for transactions of this nature. Warranty claims are barred following the expiration of stated periods (generally, 1 1/2 to 2 years) following the closing of the respective transactions. Olicom's liability for indemnification is limited to certain maximum amounts, in no case exceeding the cash payments received by it. In all the transactions Olicom entered into confidentiality agreements which limit the detail that Olicom can disclose regarding the terms of each transaction. In connection with the reduction in its operating activities and the consummation of the 1999 Transactions, the Company will retain certain contingent liabilities, primarily relating to the return of products, particularly from United States customers, product warranty and support obligations relating to the transaction with Madge, and indemnification obligations with respect to representations and warranties. The Company entered into non-competition covenants relating to all of the divestitures. In addition, the Company will retain certain lease commitments (see "Description of Property"), and remain responsible for litigation arising out of its operations. Subsequent to the closing of the 1999 Transactions, the nature of the Company's business changed, as the Company focused on (i) pushing product through the channel (such products consisting of products on hand and products received subsequent to such closing as a result of existing commitments to third-party manufacturers), (ii) collection of receivables, (iii) provision of warranty and technical support, (iv) receipt of products from distributors and VARs who have cancelled distribution agreements, and (v) the reduction in U.S. operations and operations in countries outside of the U.S. and Denmark. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain financial data as percentages of the Company's net sales. The Company believes that period to period comparisons of its financial results are not meaningful and should not be relied upon as an indicator of future performance. In particular, the Company's 1999 results of operations were heavily influenced by the 1999 Transactions. Consequently, comparisons between 1998 and 1999 are not meaningful. Prior year amounts have been reclassified to conform to the current year presentation of the financial statements. 22 23
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1998 1999 -------- -------- -------- Net sales ............................................. 100.0% 100.0% 100.0% Cost of sales ......................................... 51.7 59.3 85.4 Special charges related to inventories ................ 0.0 1.5 47.3 -------- -------- -------- Gross profit ....................................... 48.3 39.2 (32.7) Operating expenses: Sales and marketing ................................ 22.6 31.3 59.2 Research and development ........................... 7.4 10.2 20.1 General and administrative ......................... 4.6 6.0 15.7 Restructuring charges .............................. 0.0 3.2 51.5 Acquisition-related expenses ....................... 17.2 0.0 0.0 -------- -------- -------- Total operating expenses ........................... 51.8 50.7 146.5 -------- -------- -------- Income (loss) from operations before interest and income taxes .................................... (3.5) (11.5) (179.2) Income from sales of activities .................... 0.0 0.0 71.8 Interest income, net ............................... 1.2 1.0 1.2 Foreign currency gains (losses) .................... (0.7) 0.2 1.0 -------- -------- -------- Income (loss) before income taxes ..................... (3.0) (10.3) (105.2) Provision for income taxes ......................... 4.5 (0.2) 6.5 Income (loss) before minority interest in income of consolidated subsidiary ................ (7.5) (10.1) (111.7) -------- -------- -------- Minority interest in income of consolidated subsidiary ............................ 0.1 (0.0) 0.9 -------- -------- -------- Net income (loss) ..................................... (7.6)% (10.1)% (112.6)% ======== ======== ========
YEARS ENDED DECEMBER 31, 1998 AND 1999 Net sales. Net sales decreased from $227.6 million in 1998 to $71.3 million in 1999. Net sales in North and South America (the "Americas") decreased from $106.0 million in 1998 to $13.3 million in 1999, while sales outside of the Americas decreased from $121.6 million in 1998 to $58 million in 1999. Digianswer sales amounted to $4.7 million during 1999. This dramatic decrease in sales was primarily due to significant price competition in the Token-Ring market, most evident in the Americas, the failure of the Company to derive significant sales from its Fast Ethernet product portfolio, and the effect of the 1999 Transactions, and in particular, the sale of the Company's Token-Ring business to Madge effective August 31, 1999. Following the Madge transaction, the Company's sales consisted primarily of Token-Ring products sold to Madge at extremely low margins and Ethernet and ATM products that were not part of the product lines purchased by Madge. Such products consisted of goods on hand in the Company's warehouses, as well as goods that were in the process of being manufactured pursuant to existing commitments. Subsequent to the closing of the Madge transaction and the scaling down of Olicom's sales and marketing organizations, the Company's sales efforts were directed toward pushing through the channels, utilizing various incentives. The Company has created reserves with respect to the financial impact associated with right of distributors to return products. Gross Profit. Gross profit decreased from $89.1 million in 1998 to a negative gross profit of $23.3 million in 1999. Prior to the Company's sale of its Token-Ring business to Madge, gross profit was being significantly and adversely impacted by increased price competition in the Token-Ring market. In connection with the closing of the 1999 Transactions, the Company incurred a $33.7 million special charge, primarily related to write-offs of inventory. In addition, commencing with the closing of the Madge transaction, the Company began offering incentives designed to push Ethernet and ATM inventory 23 24 through the channel. Such incentives generally resulted in decreased selling prices, which in turn depressed margins. Expenses. Total operating expenses decreased by $11.1 million from $115.5 million in 1998 to $104.4 million in 1999. However, when adjusted for restructuring charges of $7.3 million in 1998 and $36.7 million in 1999, there would have been a net decrease in total operating expenses of $40.4 million in 1999 compared to 1998, on a pro forma basis. Restructuring charges of $36.7 million in 1999 related primarily to the 1999 Transactions, and were comprised of write-downs of $6.4 million related to fixed assets and a write-off of $6.0 million in goodwill recorded in 1997 in connection with the acquisition of CrossComm. Other significant restructuring charges in 1999 related to external assistance and personnel related expenses. Depreciation and Amortization. Total depreciation and amortization, which are included in the respective expense items, decreased from $8.9 million in 1998 to $3.9 million in 1999. This decrease was attributable in part to the above mentioned restructuring charges relating to the 1999 Transactions. The depreciation of capitalized software related to the Company's integrated management information system. Sales and Marketing. Sales and marketing expenses decreased from $71.3 million in 1998 to $42.2 million in 1999. This decrease was primarily a consequence of the significant reduction in activities following the 1999 Transactions, whereby the Company's Token-Ring product line was acquired by Madge, with the result that most of the Company's then-existing sales and marketing activities were discontinued. The Company's current sales and marketing activity is focused on pushing remaining inventory through the channel. Research and Development. Research and development expenses decreased from $23.2 million in 1998 to $14.3 million in 1999. This decrease was primarily a consequence of the significant reduction in activities following the 1999 Transactions, whereby Intel acquired the Company's development team, with the result that all of the Company's then-existing research and development activities were discontinued. General and Administrative. General and administrative expenses decreased from $13.7 million in 1998 to $11.2 million in 1999. This decrease was primarily a consequence of the significant reduction in activities following the 1999 Transactions, which resulted in a significant reduction in general and administrative staff. While the 1999 Transactions resulted in lower expense levels in sales and marketing and in research and development, the Company's remaining activities continue to require the attention of general and administrative personnel. Interest and Other Financial Income. Net interest and other financial income decreased from $2.3 million in 1998 to $0.8 million in 1999. This decrease was primarily a consequence of a reduction in cash and cash equivalents in the first two quarters of 1999, compared with 1998. Income From Sale of Activities. Income from sale of activities included net proceeds from the 1999 Transactions, less fees to investment bankers and other related expenses. Income related to the Madge transaction included an amount, which is the net present value of a portion of the guaranteed minimum payment. Only after the expiration of twelve quarters following the closing of the Madge transaction will the Company be able to calculate the exact amount of additional payments stipulated in the agreement with Madge. Other contingent income relating to the 1999 Transactions has not been recorded as income in 1999 (see "The 1999 Transactions" above). 24 25 Income Taxes. The Company's income tax increased from a tax benefit of $531,000 for 1998 to an income tax of $4.7 million in 1999, primarily due to a tax asset write-down in connection with Olicom, Inc. YEARS ENDED DECEMBER 31, 1997 AND 1998 Net sales. Net sales decreased from $238.2 million in 1997 to $227.6 million in 1998. Net sales in the Americas decreased from $112.2 million in 1997 to $106 million in 1998, while sales outside of the Americas decreased from $126 million in 1997 to $121.6 million in 1998. During 1998, the Company's revenues were favorably influenced by the sales of Network Infrastructure Products, as to which net sales increased from $49.2 million in 1997 to $64.9 million in 1998. This product group includes Token-Ring and ATM switches and the product portfolio acquired from the former CrossComm. In addition, the Company's revenues reflected 12 months operations of the former CrossComm, while revenues during 1997 reflected only operations of the former CrossComm subsequent to June 12, 1997. As a consequence, primarily due to increased price competition with respect to Network Interface Cards, revenue derived from such products decreased to $110.6 million, from $128.5 million in 1997, a decrease of 14%. Total service revenue during 1998 was $8.5 million, an increase of 43% compared with 1997. However, the expansion of the Company's professional service relationship with VITAL Network Services during the fourth quarter of 1998 resulted in decreased service revenue during such quarter. It should be noted that levels of service revenue during 1997 substantially related to revenue during the last six months of such period, owing to the acquisition of the former CrossComm in June 1997 (and, as a result, service revenues during 1998 reflected revenues during a longer period than in 1997). Gross Profit. Gross profit decreased by 22.6%, from $115.0 million in 1997 to $89.1 million in 1998, and decreased as a percentage of net sales from 48.3% in 1997 to 39.2% in 1998. The decrease in gross margins was primarily due to increased price competition for both the Network Interface Card and switch markets, and the Company's inability during 1998 to sufficiently reduce manufacturing costs in its product line to compensate for declines in selling prices. In addition, during 1998 the Company incurred a $3.5 million special charge, primarily related to write-offs of inventory of obsolete products. Expenses. Total operating expenses decreased by $8.0 million during 1998; however, when adjusted for acquisition-related expenses in 1997 of $40.9 million and restructuring charges of $7.3 million in 1998, there would have been a net increase in total operating expenses from $82.5 million in 1997 to $108.1 million in 1998, or an increase of $25.6 million (or 31%) during 1998 on a pro rata basis compared to 1997. The main reason for this increase was that 1997 did not reflect a full year of inclusion of CrossComm's operations in the Company's results of operations (such operations were included subsequent to CrossComm's acquisition in June 1997). The major increases in expenses during 1998 related to employee costs as well as sales promotion. Sales and Marketing. Sales and marketing expenses increased 32.6%, from $53.8 million in 1997 to $71.3 million in 1998. The increase in 1998 was primarily due to increased marketing activities in the United States, Europe and the Far East. 25 26 Research and Development. Research and development expenses increased 30.6%, from $17.7 million in 1997 to $23.2 million in 1998. The increase in research and development expenses was in line with the strategic decision to be a leading supplier of Token-Ring solutions and ATM and Ethernet switching. General and Administrative. General and administrative expenses increased 23.8%, from $11.0 million in 1997 to $13.7 million in 1998. The increase was attributed to an increased average number of employees in 1998 compared to 1997, and to increased occupancy expense during 1998. Restructuring Charges. The Company incurred restructuring charges related to two separate corporate actions during 1998. The expansion of the Company's professional service relationship with VITAL Network Services in September 1998 resulted in the transfer or termination of approximately 50 employees in administrative functions. As a result thereof, the Company recorded charges of $2.3 million related to staff reductions and fixed asset write-offs. The second corporate action was the implementation, in November 1998, of a new business strategy that resulted in a significant reduction in the number of employees. As a consequence thereof, the Company recorded charges of $6.6 million related to staff reductions and fixed asset write-offs. Interest and Other Financial Income. Net interest and other financial income decreased from $3.0 million in 1997 to $2.3 million in 1998. This decrease was primarily a consequence of a reduction in cash and cash equivalents. Income Taxes. The Company's income tax decreased from $10.7 million during 1997 to a tax benefit of $531,000 for 1998. LIQUIDITY AND CAPITAL RESOURCES Although the 1999 Transactions have contributed to an improvement in Olicom's financial position, significant operational losses during 1999 and substantial asset write-downs and other charges associated with the 1999 Transactions have resulted in a substantial decrease in shareholders' equity as at December 31, 1999, compared with the same date in 1998. During 1999, Olicom had a negative cash flow of $42.1 million from operating activities and $48.9 million (net) in capital expenditures. The Company's available cash totaled $28.3 million as of December 31, 1999, which represented 58.4% of total assets. The net cash used in operating activities of $42.1 million in 1999 was due in significant part to the Company's net loss of $80.3 million and depreciation, amortization and write-offs of $23 million. Net cash used for investing activities during 1998 and 1999 was $(9.8) million and $48.9 million, respectively, and consisted, prior to the 1999 Transactions, in large part of capital expenditures associated with the expansion of sales and marketing, and research and development activities mainly associated with the Company's Fast Ethernet strategy. At December 31, 1999, the Company had no material commitments for capital expenditures. To date, inflation has not had a material impact on the Company's financial results. 26 27 The Company presently intends to retain any earnings. If and when dividends are paid, such payment will be made in Danish kroner. RECENT DEVELOPMENTS Since the closing of the 1999 Transactions, the Company's main focus has been on the fulfillment of various product delivery and associated warranty and service obligations, primarily through various agreements with Madge and Intel, a warranty and support agreement with VITAL, and agreements and arrangements with Olicom's other business partners and service providers. In late 1999, Olicom relocated its international headquarters to a smaller facility adjacent to its previous facilities. In addition, the Company relocated its U.S. headquarters to a smaller facility, and is in the process of winding down its U.S. operations and closing other U.S. and international offices. On January 10, 2000, Olicom's Board of Directors announced the intention of the Company's executive management team, comprising Niels Christian Furu, chief executive officer, and Lars Larsen, chief financial officer, to resign following the announcement of Olicom's financial results for 1999. Mr. Furu will remain with Olicom until the end of February 2000 and Mr. Larsen until the end of April 2000. A new management team is expected to be appointed shortly after the Annual General Meeting of Shareholders. On January 31, 2000, the Company announced that it had received notification from Nasdaq relating to the continued listing of the Common Shares and the common stock purchase warrants on Nasdaq (see "Nature of Trading Market"). On January 31, 2000, the Company announced the discontinuation of its branded ATM, Fast Ethernet and Enterprise products. (see "Description of Business -- Products"). YEAR 2000 The Company to date has experienced no significant adverse effects of the Year 2000 problem. However, the Company can provide no assurance that claims regarding the Year 2000 will not be raised in the future. COMMON EUROPEAN CURRENCY The Treaty on European Economic and Monetary Union provides for the introduction of a single European currency, the "Euro", in substitution for the national currencies of the member states of the EU that adopt the Euro. The Euro became a reality on January 1, 1999, when irrevocable conversion rates were set between the national currencies of the 11 member states of the EU that have qualified to participate, and have elected to participate, in the Euro at this time and when foreign exchange operations in the Euro commenced. Of the European countries in which Olicom maintains a presence, the Netherlands, France, Germany and Spain are among such 11 member states. Sweden did not qualify, and the United Kingdom and Denmark elected not to participate in the Euro at this time. Poland is not currently a member state of the EU. As the Company's operational and financial activities have been 27 28 significantly reduced, the Euro is not expected to impact the Company's results of operations to a material extent. BUSINESS ENVIRONMENT AND RISK FACTORS (AGAIN THIS ASSUMES AN ON GOING OPERATION) The Company's future operating results may be affected by various trends and factors, which the Company must successfully manage. In addition, there are trends and factors that are beyond the Company's control that may affect its operations. Such trends and factors include, without limitation, the following: conditions within the networking industry, and economic conditions generally; rapid technological change, frequent product introductions, changes in customer needs and evolving industry standards; fluctuations in the Company's revenues and operating results from quarter to quarter, due to a variety of factors, including, among others, the failure of the Company to timely and successfully execute material aspects of its remaining activities and operational and promotional decisions by Madge, as well as by distributors and value added resellers, which could affect their supply of, or end-user demand for, the Company's products or Token-Ring products on which future payments are based (see "The 1999 Transactions"); the degree of success that Madge realizes from the integration of the Company's Token-Ring product line with Madge's operations; any claims for indemnification that may be made by Madge, Intel or Motorola with respect to warranties, representations or covenants made by the Company in connection with the 1999 Transactions; the absence, in general, of any continuing obligations on the part of distributors to purchase products from the Company; unexpected changes in regulatory requirements, tariffs and other trade barriers, longer accounts receivable payment cycles and other risks associated with international operations and with the discontinuation of various of the Company's products; the ability or inability of the Company to hedge against foreign currency, exchange rates and fluctuations in such rates; and a change in the value of the U.S. dollar (the Company's functional currency) relative to other currencies. In light of the foregoing factors, as well as other factors affecting the Company's operating results, past trends should not be used by investors or others to anticipate future trends, and prior operating performance may not be an accurate indicator of future performance. ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. As the Company conducts its business world-wide, the Company's sales may be affected by changes in demand resulting from fluctuations in currency exchange rates, as well as by governmental controls and other risks associated with international sales (such as export licenses, political instability, trade restrictions and changes in tariff and freight rates). The Company generates revenues primarily in U.S. dollars (including revenues generated from the agreements with Intel, Madge and Motorola), and incurs expenses in a number of currencies, principally in U.S. dollars and Danish kroner. Although the Company seeks to manage its foreign currency exposures by matching non-dollar revenues and expenses and by entering into hedging transactions, there can be no assurance that exchange rate fluctuations will not have a material adverse effect on the Company's business, financial condition or results of operations. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations - Common European Currency". 28 29 At December 31, 1999, the effect of a hypothetical uniform 10% strengthening in the value of the U.S. dollar relative to the Danish kroner would result in an increase in operating income of approximately $600,000 for the year ended December 31, 2000. Comparatively, at December 31, 1998, the effect of a hypothetical uniform 10% strengthening in the value of the U.S. dollar relative to the Danish kroner would have resulted in an increase in operating income of approximately $3.8 million for the year-ended December 31, 1999. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting expenses, changes in exchange rates also might affect the volume of sales outside the U.S. The Company's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels. ITEM 10. OFFICERS AND DIRECTORS OF THE REGISTRANT. As of February 24, 2000, the members of the Company's Board of Directors, the executive officers of the Company, and other key employees are as shown below. On January 10, 2000, Olicom's Board of Directors announced the intention of the Company's executive management team, comprising Niels Christian Furu, chief executive officer, and Lars Larsen, chief financial officer, to resign following the announcement of Olicom's financial results for 1999. Mr. Furu will remain with Olicom until the end of February 2000 and Mr. Larsen until the end of April 2000. The timing of the resignations has been agreed in accordance with the Company's reorganization. Olicom's Board of Directors is considering the composition of the future management team.
Name Age Position - ---- --- -------- Jan Bech........................... 60 Chairman of the Board of Directors Bo F. Vilstrup..................... 57 Deputy Chairman of the Board of Directors Frank G. Petersen.................. 66 Member of the Board of Directors Michael J. Peytz................... 43 Member of the Board of Directors Anders Knutsen..................... 52 Member of the Board of Directors Soren Bjerre-Nielsen............... 47 Member of the Board of Directors Niels Christian Furu............... 43 President and Chief Executive Officer Lars Larsen........................ 35 Executive Vice President and Chief Financial Officer Edward P. Simmonds................. 44 President and Chief Executive Officer of Olicom, Inc. Jorgen Hog......................... 52 Vice President of Network Product Marketing Mette R.L. Fogt.................... 36 Director of Legal Affairs
Mr. Bech has been Chairman of the Company's Board of Directors since 1985. He serves as Chairman of the Board and Managing Director of ARCO-TECH Ltd., a company engaged in the business of consulting in strategic marketing. Mr. Bech previously served as a Vice President of Ing. C. Olivetti & C., S.p.A., with responsibility for its commercial activities in Scandinavia (from 1985 to 1992). Mr. Vilstrup has been a member of the Board of Directors since 1992 and Deputy Chairman of the Board since 1994. He is an attorney and was a partner in the law firm of Lett, Vilstrup & Partnere, Copenhagen, Denmark (from 1972 to 1999). 29 30 Mr. Petersen has been a director of the Company since 1996. He was employed by IBM from 1957 until his retirement in 1994. At the time of his retirement, he served as Chairman and President of IBM Nordic AB, with responsibility for IBM's commercial activities in Scandinavia. Mr. Peytz has been a director of the Company since 1996. He has served as Managing Director and Chief Executive Officer of EuroCom Industries A/S since 1997. Mr. Peytz previously served as Division Director for Alcatel Kirk A/S, with responsibility for Alcatel's space electronics business in Denmark (from 1994 to 1997). He previously was a management consultant with McKinsey & Company (from 1985 to 1994). Mr. Knutsen has been a director of the Company since 1997. He has served as Managing Director and Chief Executive Officer of Bang & Olufsen A/S, a company that develops and markets audio and visual products (since 1991). Mr. Bjerre-Nielsen has been a director of the Company since 1998. He has served as Vice Executive Officer and Chief Financial Officer of Danisco A/S, a food ingredients conglomerate (since 1995). Prior thereto, he was a state-authorized Public Accountant, being a partner at Deloitte & Touche (from 1982 to 1995) and managing partner (from 1986 to 1995). Mr. Furu was appointed as President and Chief Executive Officer in 1998. He joined the Company in 1997 as Executive Vice President and Chief Operating Officer. Prior to joining the Company, Mr. Furu served as Vice President of IBM Denmark A/S and Director of Nordic PC Sales (from 1995 to 1997). Prior thereto, he served as Director of Sales for Finance and Telecommunications for IBM Denmark A/S (from 1993 to 1995) and as Assistant to the General Manager of Marketing, IBM Europe (from 1991 to 1993). Mr. Larsen has been employed by the Company since February 1999 as Executive Vice President and Chief Financial Officer. Prior to joining the Company, Mr. Larsen was Director of Health Care, Finance and Information Technology (and prior thereto, Director of Corporate Planning & Economy) at Novo Nordisk A/S, a Danish pharmaceuticals manufacturer (from 1995 to 1999). Prior thereto, he was Group Controller at Baltica Holding A/S (from 1991 to 1995). Mr. Simmonds has been employed by the Company since 1998 and became President and Chief Executive Officer of Olicom, Inc. in October 1999, after having served as Director of Finance and Administration. Prior to joining the Company, Mr. Simmonds was Vice President and Chief Financial Officer of Beckett Corporation, a Dallas-based manufacturing company. Mr. Hog has been employed by the Company since 1994, having served as its Director of Business Development. In 1996, Mr. Hog became Vice President of Strategic Marketing. Prior to joining the Company, Mr. Hog was the President of CR Systems A/S, a Danish data communications company. Ms. Fogt has served as Director of Legal Affairs since 1997. Prior to joining the Company, Ms. Fogt served as Secretary to the Management at Jacob Holm & Sons A/S, a Danish manufacturer of fiber products, primarily for the hygiene industry (from 1995 to 1997). Prior thereto, Ms. Fogt was an attorney at the law firm Kromann & Munter (from 1988 to 1995). 30 31 Except for Mr. Simmonds, all directors and members of corporate management are Danish citizens. There are no family relationships among directors and executive officers of the Company or its subsidiaries. The Company's Articles of Association provide for a Board of Directors of four to eight members, to be elected by the shareholders to serve one-year terms. In addition, directors may be elected for four-year terms by the Company's employees, in accordance with Danish law. The statutory rights of the Company employees to elect directors have not been exercised to date. Officers of the Company serve at the discretion of the Board of Directors. LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS The Company has entered into Indemnification Agreements with its directors, executive officers and key employees. Each such Indemnification Agreement provides for indemnification of the Company's directors, executive officers and key employees to the fullest extent permitted by the Companies Act of the Kingdom of Denmark (the "Companies Act"). Additionally, Olicom, Inc., has entered into Indemnification Agreements with its directors, executive officers and key employees. Each such Indemnification Agreement provides for indemnification of the directors, executive officers and key employees of Olicom, Inc., to the fullest extent permitted by the Delaware General Corporation Law. Further, such Indemnification Agreements permit advancing attorney's fees and all other costs, expenses, obligations, fines and losses paid or incurred by a director, executive officer or key employee generally in connection with the investigation, defense or other participation in any threatened, pending or completed action, suit or proceeding or any inquiry or investigation thereof, whether conducted by or on behalf of the Company or any other party. If it is later determined that the director, executive officer or key employee is or was not entitled to indemnification under applicable law, the Company will be entitled to reimbursement by the director, executive officer or key employee. The Indemnification Agreements further provide that in the event of a change in control of the Company or Olicom, Inc., with respect to all matters thereafter arising concerning the rights of directors, executive officers and key employees to indemnity payments and expense advances, all determinations regarding claims will be made only by a court of competent jurisdiction or by special independent legal counsel selected by the director, executive officer or key employee and approved by the Company or Olicom, Inc., as appropriate. To the extent that the Board of Directors of the Company or Olicom, Inc., or their respective shareholders may in the future wish to limit or repeal the ability of the Company or Olicom, Inc., to indemnify directors, executive officers and key employees, such repeal or limitation may not be effective as to directors, executive officers and key employees who are parties to such Indemnification Agreements, because their rights to full protection will be contractually assured by the Indemnification Agreements. It is anticipated that similar contracts may be entered into, from time to time, with future directors, executive officers and key employees of the Company and Olicom, Inc. ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS. An aggregate of approximately $1,056,000 was paid by the Company to its directors and executive officers as a group (9 persons) for services rendered during fiscal year 1999 in all capacities, and 31 32 approximately $841,000 was paid by the Company during fiscal year 1999 to its senior management, consisting of the Company's President and Chief Executive Officer, its Chief Financial Officer and its former Chief Technology Officer, registered with the Commercial and Companies Agency of the Kingdom of Denmark. ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES. At February 24, 2000, the Company had outstanding options to its employees and directors, and employees and directors of Olicom, Inc., to purchase an aggregate of 449,950 Common Shares (the foregoing includes options assumed by the Company in connection with the acquisition of CrossComm). The exercise price for such options ranges from $3.925 to $30.25. Such options terminate on various dates through February 28, 2007. At February 24, 2000, options to purchase an aggregate of 246,000 Common Shares were held by directors and executive officers of the Company. ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS. See "Officers and Directors of the Registrant -- Limitation of Liability and Indemnification Agreements." The Company's policy is to require that all transactions between the Company and its officers, directors and other affiliates be on terms no less favorable to the Company than could be obtained from unaffiliated third parties, and that all such transactions be approved by a majority of the disinterested members of the Company's Board of Directors. 32 33 PART II Not applicable. PART III ITEM 15. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES. Not applicable. PART IV ITEM 17. FINANCIAL STATEMENTS. The Company has responded to Item 18 in lieu of responding to this Item. 33 34 ITEM 18. FINANCIAL STATEMENTS. Report of Independent Auditors The Board of Directors and Shareholders, Olicom A/S We have audited the accompanying consolidated balance sheets of Olicom A/S and subsidiaries as of December 31, 1998 and 1999, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Olicom A/S and subsidiaries at December 31, 1998 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring operating losses and has a negative cash flow from operations. As described in Note 1, substantially all of the Company's operations have been discontinued, and management is considering alternative strategies for the Company. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company's future strategy. /s/ Ernst & Young Ernst & Young Statsautoriseret Revisionsaktieselskab Copenhagen, February 24, 2000 34 35 Olicom A/S Consolidated Balance Sheets
DECEMBER 31 1998 1999 ------------ ------------ (In thousands) ASSETS Current assets: Cash and cash equivalents $ 22,494 $ 28,327 Restricted cash 0 8,844 Accounts receivable, less allowance of $2,577 in 1998 and $10,477 in 1999 44,837 4,157 Inventories: Finished goods 30,633 2,837 Raw materials 8,875 1,499 ------------ ------------ 39,508 4,336 Deferred income taxes (Note 4) 4,335 0 Prepaid expenses and other current assets 10,262 2,244 ------------ ------------ Total current assets 121,436 47,908 Investments in affiliated companies 958 0 Property and equipment: Leasehold improvements 4,385 694 Equipment 34,826 9,755 ------------ ------------ 39,211 10,449 Accumulated depreciation (19,761) (9,889) ------------ ------------ 19,450 560 Goodwill, net of accumulated amortization and write-down of $3,641 in 1998 and $9,684 in 1999 7,169 0 ------------ ------------ Total assets $ 149,013 $ 48,468 ============ ============
See accompanying notes 35 36 Olicom A/S Consolidated Balance Sheets
DECEMBER 31 1998 1999 ------------ ------------ (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 24,664 $ 11,014 Accrued payroll and related expenses 6,438 801 Accrued product warranty expense 1,123 377 Deferred revenue 611 62 Accrued restructuring costs 4,935 8,680 Other accrued expenses 7,416 4,999 Notes payable, current 0 97 ------------ ------------ Total current liabilities 45,187 26,030 Minority interests 803 0 Shareholders' equity: Common shares, DKK 0.25 nominal value Authorized and issued - 18,594 in 1998 and 18,566 in 1999 715 715 Additional paid-in capital 104,364 103,732 Retained earnings 15,789 (64,518) Treasury stock - 731 in 1998 and 702 in 1999 (17,462) (17,104) Unearned compensation (383) 0 Other comprehensive income 0 (387) ------------ ------------ Total shareholders' equity 103,023 22,438 ------------ ------------ Total liabilities and shareholders' equity $ 149,013 $ 48,468 ============ ============
See accompanying notes 36 37 Olicom A/S Consolidated Statements of Income
YEAR ENDED DECEMBER 31 1997 1998 1999 ---------- ---------- ---------- (In thousands except per share amounts) Net sales $ 238,229 $ 227,602 $ 71,291 Cost of sales 123,195 134,990 60,874 Special charges related to inventories (Note 5) 0 3,463 33,737 ---------- ---------- ---------- Gross profit 115,034 89,149 (23,320) ---------- ---------- ---------- Operating expenses: Sales and marketing 53,754 71,300 42,216 Research and development 17,748 23,174 14,298 General and administrative 11,032 13,657 11,218 Restructuring charges (Note 5) 0 7,327 36,695 Acquisition-related expenses 40,917 0 0 ---------- ---------- ---------- Total operating expenses 123,451 115,458 104,427 ---------- ---------- ---------- Income (loss) from operations before interest and income taxes (8,417) (26,309) (127,747) Income from sale of activities 0 0 51,205 Interest and other financial income 3,663 2,978 1,221 Interest and other financial expense (697) (676) (392) Foreign currency gains (losses) (1,736) 481 722 ---------- ---------- ---------- Income (loss) before income taxes (7,187) (23,526) (74,991) Income taxes (Note 4) 10,689 (531) 4,656 ---------- ---------- ---------- Income (loss) before minority interest in income of consolidated subsidiary (17,876) (22,995) (79,647) Minority interest in income of consolidated subsidiary 245 (56) 660 ---------- ---------- ---------- Net income (loss) $ (18,121) $ (22,939) $ (80,307) ========== ========== ========== Earnings (loss) per share: Earnings (loss) per share, basic and diluted $ (1.15) $ (1.28) $ (4.50) ========== ========== ========== Weighted average shares outstanding 15,821 17,894 17,864 ========== ========== ==========
See accompanying notes 37 38 Olicom A/S Consolidated Statements of Comprehensive Income
YEAR ENDED DECEMBER 31 1997 1998 1999 ------------ ------------ ------------ (In thousands) Net income (loss) $ (18,121) $ (22,939) $ (80,307) Other comprehensive income (loss), net of tax: Currency translation adjustments 0 0 (387) Unrealized holding gains (losses) arising during period 660 30 0 Less: reclassification adjustment for gains included in net income (121) (98) (0) ------------ ------------ ------------ Comprehensive net income (loss) $ (17,582) $ (23,007) $ (80,694) ============ ============ ============
38 39 Olicom A/S Consolidated Statements of Shareholders' Equity
Other Additional compre- Common paid-in Retained Treasury Unearned hensive stock capital earnings stock compensation income Total - ---------------------------------------------------------------------------------------------------------------------------------- (In thousands) BALANCE AT DEC. 31, 1996 $ 614 $ 52,348 $ 56,849 $ (11,831) $ 0 $ (471) $ 97,509 Net (loss) for 1997 (18,121) (18,121) Issuance of 2,537 common stock to acquire CrossComm 97 38,691 38,788 Issuance of 1,023 warrants to acquire CrossComm 3,806 3,806 Exchange of vested CrossComm options for Olicom options 3,834 3,834 Exchange of unvested CrossComm options for Olicom options 1,859 (1,859) 0 Purchase of treasury stock - 630 common stock (15,716) (15,716) 320 common stock sold through offering at the Copenhagen Stock Exchange 5,295 3,030 8,325 Options exercised - 626 common stock (3,326) 9,529 6,203 Warrants exercised - 20 common stock 1 126 127 Change in unrealized gains (losses) 539 539 Amortization of unearned compensation 265 265 ---------------------------------------------------------------------------------------- BALANCE AT DEC. 31, 1997 $ 712 $102,633 $ 38,728 $ (14,988) $ (1,594) $ 68 $125,559 Net (loss) for 1998 (22,939) (22,939) Purchase of treasury stock - 400 common stock (10,358) (10,358) Options exercised - 609 common stock (12) 7,884 7,872 Warrants exercised - 99 common stock 3 1,950 1,953 Change in unrealized gains (losses) (68) (68) Amortization of unearned compensation (207) 1,211 1,004 ---------------------------------------------------------------------------------------- BALANCE AT DEC. 31, 1998 $ 715 $104,364 $ 15,789 $ (17,462) $ (383) $ 0 $103,023 Cancellation of treasury shares etc. (358) 358 0 Currency translation adjustments (387) (387) Net (loss) for 1999 (80,307) (80,307) Amortization of unearned compensation (274) 383 109 ---------------------------------------------------------------------------------------- BALANCE AT DEC. 31, 1999 $ 715 $103,732 $ (64,518) $ (17,104) $ 0 $ (387) $ 22,438 ----------------------------------------------------------------------------------------
See accompanying notes 39 40 Olicom A/S Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1997 1998 1999 ---------- ---------- ---------- (In thousands) OPERATING ACTIVITIES Net income $ (18,121) $ (22,939) $ (80,307) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and write-off of fixed assets 4,954 6,937 15,960 Amortization and write-off of goodwill 1,262 1,963 7,034 Non cash compensation 265 1,004 109 Gain on sale of investment (121) (98) (24,318) Gain on sale of activities 0 0 (26,887) Deferred income taxes (980) (2.410) 4,335 Minority interest in earnings 245 (56) 660 Share of net income (loss) of affiliates (206) (225) (198) Acquisition-related expenses 40,917 0 0 Changes in operating assets and liabilities: Accounts receivable (15,716) 13,130 35,865 Inventories (98) (13,845) 32,616 Prepaid expenses and other current assets (2,198) (5,925) 6,241 Accounts payable (4,757) 5,849 (9,858) Accrued payroll and related expenses 241 2,346 (5,250) Accrued product warranty expense (886) 5 (746) Deferred revenue (638) (2,331) (549) Accrued restructuring costs 0 4,935 3,745 Other accrued liabilities 8,180 (1,099) (637) Income taxes payable (371) (363) 113 ---------- ---------- ---------- Net cash provided by/(used in) operating activities 11,972 (13,122) (42,072) INVESTING ACTIVITIES Capital expenditures (8,132) (12,681) (2,108) Proceeds from sale of property and equipment 136 1,979 5,038 Proceeds from sale of investments 42,089 945 28,521 Proceeds from sale of activities 0 0 26,823 Restricted cash 0 0 (8,844) Business acquisitions - net of cash acquired and other investments (40,161) 0 (483) ---------- ---------- ---------- Net cash used in investing activities (6,068) (9,757) 48,947
See accompanying notes 40 41 Olicom A/S Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31 1997 1998 1999 ---------- ---------- ---------- (In thousands) FINANCING ACTIVITIES Change in notes payable, current $ 0 $ 0 $ 97 Proceeds from sale of treasury stock - Copenhagen Stock Exchange 8,325 0 0 Proceeds from options and warrants exercised 6,330 9,825 0 Purchase of treasury stock (15,716) (10,358) 0 ---------- ---------- ---------- Net cash used in financing activities (1,061) (533) 97 Effects of exchange rates on cash (915) 315 (1,139) ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents 3,928 (23,097) 5,833 Cash and cash equivalents at beginning of year 41,663 45,591 22,494 ---------- ---------- ---------- Cash and cash equivalents at end of year $ 45,591 $ 22,494 $ 28,327 ========== ========== ========== Interest paid during the year $ 58 $ 50 $ 153 ========== ========== ========== Income taxes paid during the year $ 10,645 $ 6,566 $ 2,426 ========== ========== ==========
See accompanying notes 41 42 Olicom A/S Notes to Consolidated Financial Statements 1. ACCOUNTING POLICIES DESCRIPTION OF BUSINESS The Company was a world-wide vendor of Asynchronous Transfer Mode, Token Ring, Ethernet and multi-protocol routing products used in local area and wide area networks. During 1999 the Company sold its Token Ring Business to Madge Networks in August, and its development group and certain intellectual properties to Intel in October. These transactions affected the valuation of the inventory significantly as the value of the Token Ring inventory reflects the purchase commitment included in the agreement with Madge Networks. The rest of the inventory has been revalued to reflect the end of life decision of the remainder of the Company's products as announced in January 20, 2000. The disposal and discontinuation of most of the business at Olicom has also affected the carrying value of fixed assets which has been reduced to reflect the reduction in the scope of future business for Olicom. As of beginning 2000 the expected useful lifetime of the remaining fixed assets has been set to the end of 2000. The prior year amounts have been reclassified to conform to the current year presentation of the financial statements. Prior year's financial statement presentation to disclose the sale of the Company's 75% investment in Lasat A/S ("Lasat") as a discontinued operation has been changed. The balance sheet, the statements of income and cash flows of Lasat have now been consolidated through to the date of disposal. BASIS OF PRESENTATION The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities, in the normal course of business. As shown in the financial statements during the years ended December 31, 1997, 1998 and 1999, the Company incurred losses of $18 million, $23 million and $80 million, respectively. Despite the losses, management is of the opinion that preparation of the financial statements on a going concern basis is appropriate, because the Company has sufficient future revenue and funds available to satisfy the Company's liabilities as and when they fall due, and is considering alternative strategies for the Company. REPORTING CURRENCY Although the Company and its subsidiaries maintain their books and records in local currencies, as required by law, the Consolidated Financial Statements have been prepared in U.S. dollars because the U.S. dollar is the currency of the primary economic environment in which the Company and its subsidiaries conduct their operations. The majority of the Company's sales are billed and collected in U.S. dollars, and the majority of the Company's purchases of raw materials and finished goods inventories are invoiced and paid in U.S. dollars. 42 43 PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Olicom A/S and its majority-owned subsidiaries (the Company). The Company's investments in 20-50% owned companies are accounted for by the equity method of accounting. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions, which affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company's inventories and capitalized technologies consist primarily of items which are susceptible to technological obsolescence, a fact which has been considered in determining asset valuation reserves as of December 31, 1999. However, in the event of certain circumstances, such as the emergence of otherwise unforeseen new technologies and significant changes in anticipated market requirements and conditions, additional reserves related to assets held as of December 31, 1999 could be required in the future. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent cash and short-term deposits with maturities of less than three months at the time of purchase. INVENTORIES Inventories are stated as the lower of cost or market with cost determined on the basis of the first in, first out method. Raw materials inventories are sold at the Company's cost to subcontractors who assemble products to the Company's specifications. Finished goods inventories include completed products purchased from subcontractors. Finished goods to be sold to Madge Networks have been written down to net realizable value. LEASEHOLD IMPROVEMENTS AND EQUIPMENT Leasehold improvements and equipment are carried at cost. Depreciation is charged on a straight-line basis to costs and expenses over the expected useful lives of the assets. Equipment is depreciated over the expected useful life ending December 31, 2000. Leasehold improvements are amortized over the shorter of their estimated lives or non-cancelable term of the lease. GOODWILL Cost in excess of net assets of businesses acquired (goodwill) represents the unamortized excess of the cost of acquiring a business over the fair value of the assets acquired at the date of acquisition. Amortization is computed by the straight-line method over the estimated life of the benefit received, which is five to seven years. The Company applies the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed of", in evaluating its fixed and intangible assets. ACCOUNTS RECEIVABLE Accounts receivable are stated at nominal value less allowance for losses on doubtful debtors, returned products in process and price-protection. The allowance is based on an individual evaluation of each debtor. Should the debtor end up with a negative balance (e.g., a liability) it is reclassified to Accounts Payable. 43 44 REVENUE RECOGNITION Revenue is recognized when products are shipped. Service revenues are deferred and recognized ratably over the contractual periods. Certain sales have been made allowing a right of return and price protection, for which the Company has made a provision. ACCRUED PRODUCT WARRANTY EXPENSE The Company provides for the estimated cost of warranty at the time of product shipment. RESEARCH AND DEVELOPMENT COSTS Research and development costs, including costs of developing software products, are expensed as incurred. Application of Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed," has not had any material effect on the Company's consolidated financial position or results of operations. INCOME FROM SALE OF ACTIVITIES Income from the sale of activities of the Company has been recognized as an income reduced by expenses related to the transactions. FOREIGN CURRENCY TRANSLATION Gains and losses resulting from non-U.S. dollar transactions, and the remeasurement of foreign currency balances and accounts denominated in currencies other than the U.S. dollar, are included in the determination of net income in the period in which they occur, in accordance with the requirements of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation". Gains and losses resulting from translation of the Company's equity investments into U.S. dollars are included in other comprehensive income. INCOME TAXES The Company accounts for income taxes by the liability method, as required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". ADVERTISING Costs associated with advertising the Company's products and services are expensed as incurred. Advertising costs for the years ended December 31, 1997, 1998 and 1999 approximated $1,485,000, $2,553,000 and $1,545,000, respectively. DERIVATIVES AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives are either offset against the change in fair value of assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective proportion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of Statement No. 133 on January 1,1999 had no effect on the net income or other comprehensive income. 44 45 2. BUSINESS COMBINATIONS In June 1997, the Company consummated its acquisition of CrossComm Corporation, a provider of ATM and multi-protocol router technology for mission-critical SNA/Token-Ring environments. The consideration, which was a combination of $47.6 million in cash, 2,537,423 Common Shares and 1,022,771 three-year warrants to purchase Common Shares, totalled approximately $96.0 million. The acquisition was accounted for as a purchase. Accordingly, the results of operations of the acquired business and the fair market values of the acquired assets and assumed liabilities were included in the Company's financial statements as of the effective date. This accounting treatment resulted in approximately $9.7 million of intangible assets that will be amortized over their estimated period of benefit. Approximately $40.9 million of the acquisition cost represented purchased in process research and development, which was determined through known valuation techniques in the high-technology communications industry and was immediately expensed in the period of acquisition because technological feasibility had not been established and no alternative commercial use had been identified. The following summary, prepared on a pro forma basis, combines the results of operations as if CrossComm had been acquired as of the beginning of the periods presented. The summary includes the impact of certain adjustments such as goodwill amortization and estimated changes in interest income because of cash outlays associated with the transaction and the related income tax effect: The summary only includes 1997 as the impact on 1998 has already been accounted for.
DECEMBER 31, 1997 ---- (In thousands, except per share amounts) (Unaudited) Net sales $ 283,025 Net income (loss) 18,832 Basic earnings (loss) per share 1.11 Diluted earnings (loss) per share 1.06
The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for all periods presented. In addition, they are not intended to be a projection of future results and do not reflect any synergies that might or might not be achieved from the combined operations. In April 1999, the Company exercised a call option to acquire an additional 31.9% interest in Digianswer A/S in which the Company already held a 35% interest. The acquisition was accounted for as a purchase at a cash consideration of $2.3 million. The Company recorded goodwill of $1.6 million on the acquisition. On October 26, 1999, the Company sold its 66.9% interest in Digianswer A/S. The operations of Digianswer A/S were consolidated in the period May 1 to October 30, 1999. 3. WARRANTS In connection with the acquisition of CrossComm Corporation, the Company's shareholders approved the issuance of three-year warrants, each whole warrant being the right to acquire a Common Share at a 45 46 price of $19.74 per each full Common Share. The holders of the remaining 922,388 outstanding warrants as of December 31, 1999, may exercise a warrant, at a price of $19.74 per share, no later than June 12, 2000. In the event that all or any part of the warrants are not exercised by June 12, 2000, then such warrants will expire. The warrants are listed on the Nasdaq National Market (OLCWF). 4. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1998 and 1999 are as follows:
1998 1999 ---------- ---------- (In thousands) Deferred tax liabilities Tax over book depreciation $ 1,373 $ 0 Other 343 532 ---------- ---------- 1,716 532 ---------- ---------- Deferred tax assets Book over tax depreciation 2,314 2,271 Allowance for uncollectible receivables 316 3,071 Inventory valuations 4,467 10,927 Net operating losses carried forward (NOL) 12,936 23,227 Tax credit carryforwards 1,710 1,710 Other accruals 2,546 6,501 ---------- ---------- Deferred tax assets, gross 24,289 47,707 ---------- ---------- Net deferred tax liabilities (assets) before valuation allowance $ (22,573) $ (47,175) Valuation allowance $ 18,238 $ 47,175 ---------- ---------- Net deferred tax liabilities (assets) $ (4,335) $ 0 ========== ==========
As of December 31, 1999, the Company had approximately $56.8 million of federal net operating loss carryover. Of this amount approximately $25 million is subject to limitation under Section 382 of the Internal Revenue Code. In addition, the Company has approximately $31.4 million of U.S. state net operating loss carryover at December 31, 1999. The Company had approximately $1.2 million of U.S. research and development credit carryover at December 31, 1999 subject to limitation under Section 383 of the U.S. Internal Revenue Code. In addition, at December 31, 1999, the Company had approximately $7.3 million of Danish net operating loss carryover, which expires in 2003. The Company's valuation allowance is approximately $47.2 million because it is more likely than not that the Company's net deferred tax assets will not be realized. 46 47 For financial reporting purposes, income before income taxes includes the following components:
1997 1998 1999 ---------- ---------- ---------- (In thousands) Pretax income: Denmark $ (31,813) $ (23,242) $ (42,125) United States 24,626 (284) (32,866) ---------- ---------- ---------- $ (7,187) $ (23,526) $ (74,991) ========== ========== ==========
Significant components of the provision for income taxes are as follows:
1997 1998 1999 ---------- ---------- ---------- (In thousands) Current: Denmark $ 1,090 $ 2,769 $ 90 United States 10,579 (1,115) 205 ---------- ---------- ---------- 11,669 1,654 295 ---------- ---------- ---------- Deferred: Denmark 1,312 (2,185) 0 United States (2,292) 0 4,361 ---------- ---------- ---------- (980) (2,185) 4,361 ---------- ---------- ---------- $ 10,689 $ (531) $ 4,656 ========== ========== ==========
The reconciliation of income tax computed at the Danish statutory tax rates to income tax expense is:
1997 1998 1999 -------- -------- -------- (In thousands) % % % Danish tax $ (2,444) (34) $ (7,999) (34) $(24,208) (32) Goodwill amortization 411 6 2,003 9 284 0 Valuation allowance on increase in deferred tax 0 0 3,337 15 28,937 39 Hereof expensed 0 0 0 0 (4,335) (5) Acquisition-related expenses 12,827 179 0 0 0 0 Use of NOL's 0 0 0 0 1,840 1 Benefit of foreign tax relief (112) (2) 0 0 379 0 United States taxes net of credits 0 0 (304) (1) 513 1 Adjustments prior years 0 0 2,496 11 1,152 2 Other net 7 0 (64) 0 94 0 -------- -------- -------- -------- -------- -------- $ 10,689 149 $ (531) 0 $ 4,656 6 ======== ======== ======== ======== ======== ========
47 48 Undistributed earnings of the Company's United States subsidiaries amounted to $41.5 million in 1999. Those earnings are considered to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends, the amount thereof would be subject only to withholding tax at a rate of 5% in accordance with the provisions of the Denmark/United States double tax treaty. 5. SPECIAL CHARGES AND RESTRUCTURING CHARGES On September 9, 1998, the Company announced plans to discontinue its U.S. based Research and Development activities and to consolidate all such activities in Denmark and Poland. Also, the Company expanded its professional service relationship with Vital Network Services. Vital has according to the agreement assumed responsibility for certain of the Company's professional services. As part of the agreement Vital purchased the resources and assets of Olicom's North American professional service operations. The actions were part of a global consolidation, which resulted in the release of approximately 50 employees in Administrative functions, Marketing, Research & Development and Operations. As a consequence of these actions the Company has recorded special charges of approximately $1 million, related to inventory write-offs, and restructuring charges of $2.3 million, primarily related to staff reductions and fixed asset write-offs. On November 30, 1998, the Company announced its strategy for 1999 and forward. This included a major corporate restructuring in the fourth quarter of 1998. The restructuring included a staff reduction of approximately 20 percent, the closing of some offices and discontinuation of certain of products. The Company recorded special charges of $2.5 million in connection with the restructuring, related primarily to discontinued product write-offs. Furthermore, restructuring charges of $5 million were recorded, primarily related to the staff reduction and fixed asset write-offs. The total restructuring charges and special charges are specified as follows:
Accrued Total expenses Dec. 31, 1998 -------------- -------------- (In thousands) Employee expenses $ 3,939 $ 1,207 Other expenses 3,388 2,727 -------------- -------------- Restructuring charges 7,327 3,934 Special charges related to inventories 3,463 1,001 -------------- -------------- $ 10,790 $ 4,935 ============== ==============
All amounts accrued at December 31, 1998, have been paid during 1999. As a consequence of the sale of the Company's main activities, Olicom has had very large restructuring charges and special charges in 1999. The restructuring charges amounted to $36.7 million, while special charges totalled $33.7 million. The restructuring charges related to employee expenses of $7.1 million, mainly salaries and bonus, while $29.6 million related to other expenses, such as write-downs on fixed assets, write-down on the goodwill in CrossComm, extraordinary write-down for bad debts, external assistance and facilities. 48 49 In 1999 the accruals amounted to $8.7 million regarding restructuring charges and $31.7 million regarding special charges related to inventories. The total restructuring charges and special charges are specified as follows:
Accrued Total expenses Dec. 31, 1999 -------------- -------------- (In thousands) Employee expenses $ 7,091 $ 3,091 Other expenses 29,604 5,589 -------------- -------------- Restructuring charges 36,695 8,680 Special charges related to inventories 33,737 31,676 -------------- -------------- $ 70,432 $ 40,356 ============== ==============
Employees terminated during 1999 in connection with the reorganization were distributed as follows: Operations 47 Sales and marketing 162 Research and development 194 General and administrative 48 ----- Total number of employees terminated 451 =====
The figures include the employees transferred to Madge or Intel, which amount to approximately 241 employees. 6. EMPLOYEE STOCK OPTION PLANS The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires use of option valuation models that were not developed for use in valuing employee stock options and warrants. Under APB 25, because the exercise price of the Company's employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized. 1994, 1996 AND 1997 SHARE INCENTIVE PLANS The Company's 1994, 1996 and 1997 Share Incentive Plans have authorized the grant of options to directors, executives and key employees for up to 425,000, 1,000,000 and 2,000,000 shares, respectively, of the Company's common stock. The majority of options granted have 5 year terms and vest and become fully exercisable at the end of 4 years of continued employment. 49 50 CROSSCOMM STOCK OPTIONS EXCHANGED FOR OLICOM STOCK OPTIONS At the acquisition of CrossComm approximately 1,500,000 CrossComm stock options were exchanged for 905,511 Olicom stock options ("CrossComm options"), with comparable exercise prices and terms. PRO FORMA INFORMATION Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1997, 1998 and 1999: risk-free interest rates of 6.5%; dividend yields of 0%; volatility factors of the expected market price of the Company's common stock of 0.4, 0.4 and 1.188, respectively; 25% of these options granted are expected to expire without being exercised; and weighted-average expected life of the options of 5 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
1997 1998 1999 ------------ ------------ ------------ (In thousands, except earnings per share) Net income (loss) - as reported $ (18,121) $ (22,939) $ (80,307) Net income (loss) - pro forma $ (20,307) $ (25,792) $ (83,660) Basic and diluted earnings (loss) per share - as reported $ (1.15) $ (1.28) $ (4.50) Basic and diluted earnings (loss) per share - pro forma $ (1.28) $ (1.44) $ (4.68)
SUMMARY OF STOCK OPTION ACTIVITY On December 10, 1998, the exercise prices of 482,300 outstanding options issued in March 1998 (314,500 options) and August 1998 (167,800 options) were reset with reference to the then prevailing market price for the Company's Common Shares. The original exercise prices for the options reset were $26.25 and $19.50, respectively. The new exercise price for these options is $10.00. The market price for the Company's Common Shares at the date of the reset was $5.25. A summary of the Company's stock option activity, and related information for the three years ended December 31, 1999, follows: 50 51
Outstanding Exercisable Weighted-average Weighted-average number of number of exercise fair value of options options price option granted ---------- --------- -------------- -------------- January 1, 1997 665,725 77,875 10.74 CrossComm options 905,511 10.52 Granted 710,200 14.79 $ 6.36 Exercised (589,794) 9.98 Expired (170,814) 16,87 ----------- ---------- December 31, 1997 1,520,828 326,699 12.11 Granted 1,001,605 12.24 $ 7.99 Exercised (608,910) 12.89 Expired (246,349) 15.48 ------------ ---------- December 31, 1998 1,667,174 425,960 $ 11.53 Granted 483,400 3.98 $ 2.42 Exercised 0 0 Expired (1,599,833) 9.89 ------------ ---------- December 31, 1999 550,741 182,119 $ 9.67 =========== ========== ==========
The following table summarizes the status of the Company's stock options outstanding and exercisable at December 31, 1999:
Outstanding Weighted-average Weighted-average Exercisable Weighted-average Range of number of remaining exercise number of exercise Exercise Prices shares contractual life price shares price --------------- ---------------------------------------------- ----------------------------- $ 3.35 - $ 6.00 176,500 2.37 years $ 4.28 11,250 $ 5.31 $ 8.40 - $ 9.00 49,421 6.49 years $ 8.43 49,273 $ 8.43 $ 9.00 - $ 12.00 239,082 2.54 years $10.13 84,795 $10.26 $ 14.00 - $ 17.00 51,738 1.89 years $14.07 26,301 $14.07 $ 26.25 - $ 30.25 34,000 2.71 years $29.58 10,500 $29.71 --------- --------- 550,741 182,119
7. EMPLOYEE BENEFIT PLANS The Company's subsidiaries in the U.S. have a 401(k) Plan. The Plan has been in place since May 1, 1993. Effective January 1, 1997, the Plan allows for both the Company and eligible employees to contribute. All employees over 21 years of age are eligible to participate. The Company's contribution equals 50% of an employee's contribution that does not exceed 6% of compensation. The Company's contribution expenses for 1997, 1998 and 1999, were $255,759, $398,106 and $ 98,961, respectively. The plan was terminated at the end of December 1999. The Company does not provide its employees with other post-retirement and post-employment benefits. 8. LEASE COMMITMENTS The Company leases its headquarters and main warehouse facility under noncancellable operating leases which expire during the period from 2006 to 2008. The leases contain escalation clauses. Additionally, the 51 52 Company and its subsidiaries are lessees in other noncancellable lease arrangements for office buildings and warehouses, expiring on different dates. The total future minimum lease payments under the foregoing leases at December 31, 1999, are:
Headquarters Other Total ----------------------------------------- (In thousands) 2000 1,483 1,638 3,121 2001 1,410 1,562 2,972 2002 1,445 1,617 3,062 2003 1,305 973 2,278 2004 1,338 1,036 2,374 Remaining 3,423 4,860 8,283 ----------------------------------------- $ 10,404 $ 11,686 $ 22,090 =========================================
Total lease amounts charged to expense are $3,594,000 in 1997 and $4,018,000 in 1998 and $3,470,000 in 1999. The Company has subleased most of these leased premises to Intel. Intel has provided Olicom with a guarantee corresponding to the obligation Olicom has to the landlord. The net lease commitments adjusted for this amount to $1,219,000. 9. SEGMENT INFORMATION The Company operated in 1997, 1998 and 1999 in the data networking industry, primarily within the following technologies: Asynchronous Transfer Mode, Token-Ring and Fast Ethernet. The Company considers its products being one group of similar products. The Company manages its business primarily in two separate geographical areas: Americas, incorporating North and South America, and International, incorporating Europe and Asia Pacific. Information about the Company's operations by reportable segments is as follows: 52 53
INTER- ELIMI- CONSO- NATIONAL AMERICAS NATIONS LIDATED ---------- ---------- ---------- ---------- (In thousands) 1999 Net sales: External customers $ 57,971 $ 13,320 $ 0 $ 71,291 Intercompany 17,277 22,861 (40,138) 0 ---------- ---------- ---------- ---------- Total $ 75,248 $ 36,181 $ (40,138) $ 71,291 ========== ========== ========== ========== Depreciation, amortization and write-off $ 19,115 $ 3,879 $ 0 $ 22,994 ========== ========== ========== ========== Operating income (loss) $ (94,105) $ (36,614) $ 2,972 $ (127,747) ========== ========== ========== ========== Investments in affiliated companies $ 0 $ 0 $ 0 $ 0 ========== ========== ========== ========== Total current assets $ 42,452 $ 55,314 $ (49,858) $ 47,908 ========== ========== ========== ========== Long-lived assets $ 530 $ 30 $ 0 $ 560 ========== ========== ========== ========== 1998 Net sales: External customers $ 121,613 $ 105,989 $ 0 $ 227,602 Intercompany 76,931 10,471 (87,402) 0 ---------- ---------- ---------- ---------- Total $ 198,544 $ 116,460 $ (87,402) $ 227,602 ========== ========== ========== ========== Depreciation and amortization $ 6,937 $ 1,963 $ 0 $ 8,900 ========== ========== ========== ========== Operating income (loss) $ (21,081) $ (3,447) $ (1,781) $ (26,309) ========== ========== ========== ========== Investments in affiliated companies $ 958 $ 0 $ 0 $ 958 ========== ========== ========== ========== Total current assets $ 80,004 $ 84,313 $ (42,881) $ 121,436 ========== ========== ========== ========== Long-lived assets $ 13,123 $ 6,327 $ 0 $ 19,450 ========== ========== ========== ========== 1997 Net sales: External customers $ 125,960 $ 112,269 $ 0 $ 238,229 Intercompany 63,128 6,076 (69,204) 0 ---------- ---------- ---------- ---------- Total $ 189,088 $ 118,345 $ (69,204) $ 238,229 ========== ========== ========== ========== Depreciation and amortization $ 4,889 $ 1,327 $ 0 $ 6,216 ========== ========== ========== ========== Operating income (loss) $ (30,181) $ 22,955 $ (1,191) $ (8,417) ========== ========== ========== ========== Investments in affiliated companies $ 733 $ 0 $ 0 $ 733 ========== ========== ========== ========== Total current assets $ 121,157 $ 57,397 $ (42,156) $ 136,398 ========== ========== ========== ========== Long-lived assets $ 12,543 $ 3,485 $ 0 $ 16,028 ========== ========== ========== ==========
53 54 In the year 1997, sales to a single customer exceeded 10% of sales, amounting to $ 24.7. In the year 1998, sales to one customer exceeded 10% of sales, amounting to $37.1 million. In the year 1999, sales to one customer exceeded 10% of sales, amounting to $11.0 million 11. FINANCIAL INSTRUMENTS A. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value. Short-term investments: The fair values for short-term investments are based on quoted market prices. Foreign currency exchange contracts: The fair value of the Company's foreign currency exchange contracts are based on quoted market prices. The carrying amounts and fair values of the Company's financial instruments at December 31, 1998 and 1999 are as follows:
1998 1999 ------------------------ --------------------- Carrying Fair Carrying Fair amount value amount value ------------------------ --------------------- (In thousands) Cash and cash equivalents $ 22,494 $ 22,494 $ 28,327 $ 28,327 Restricted cash 0 0 8,844 8,844 Foreign currency exchange contract 0 1,251 (387) (387)
B. OFF-BALANCE SHEET RISK The Company enters into forward currency exchange contracts and options to hedge foreign currency transactions on a continuing basis for periods consistent with its foreign currency exposures. The objective of this practice is to reduce the impact of foreign exchange movements on the Company's operating results. The Company's hedging activities do not create exchange rate risk because gains and losses on these contracts generally offset losses and gains on the assets, liabilities and transactions being hedged. At December 31, 1998 and 1999 the stated or notional amounts of the Company's forward currency exchange contracts amounted to $21.4 million and $4.5 million, respectively. C. CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. 54 55 Cash is maintained with major banks in Denmark and the United States. Foreign currency exchange contracts and options are entered into with a major bank in Denmark. The Company markets its products principally to distributors, value added resellers and original equipment manufacturers in the computer industry. Concentrations of credit risk with respect to accounts receivable from customers located outside Denmark are limited under the terms of an agreement entered into with the company "EKR CreditInsurance A/S". This agreement guarantees up to 90% of the amount of the related receivables. The amounts so covered at December 31, 1998 and 1999 were $18,728,000 and $2,817,991, respectively. 12. LITIGATION From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. As of December 31, 1999, the Company is not a party to any legal proceedings, the adverse outcome of which, in management's opinion, would have a material adverse effect on the Company's results of operations or financial position. ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS. (a) The following consolidated financial statements are filed as part of this Annual Report:
Page no ------- 1. Consolidated Financial Statements Report of Independent Auditors 34 Consolidated Balance Sheets at December 31, 1998 and 1999 35 Consolidated Statements of Income for the years ended December 31, 1997, 1998 and 1999 37 Consolidated Statements of Comprehensive Income for the years ended December 31, 1997, 1998 and 1999 38 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1998 and 1999 39 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999 40 Notes to Consolidated Financial Statements 42
All other supplementary schedules relating to the Company are omitted because they are not required or because the required information, where material, is contained in the Consolidated Financial Statements or Notes thereto. (b) The following exhibits are filed as part of this Annual Report: 55 56
Exhibit Number Description of Exhibits ------ ----------------------- 1.1 -- Articles of Association of the Company, as amended (1). 1.2 -- Rules of Procedure for the Board of Directors (2). 2.1 -- 1994 Share Incentive Plan, as amended (3). 2.2 -- 1996 Share Incentive Plan (4). 2.3 -- 1997 Share Incentive Plan (4). 3.1 -- Agreement of Substitution (License Agreement) dated as of September 1, 1990, between Willemijn Houdstermaatschappij BV and the Company (5).+ 3.2 -- Form of Indemnification Agreement between the Company and/or Olicom, Inc.) and Jan Bech, Bo Vilstrup, Frank G. Petersen, Michael Peytz, S0ren Bjerre-Nielsen, J0rgen H0g, Niels Christian Furu, Lars Larsen and Mette R.L. Fogt (5). 3.3 -- Trademark Agreement effective as of December 11, 1998, between the Company and Ing. C. Olivetti & C., S.p.A. (6) 3.4 -- License Agreement dated October 19, 1988, between the Company and Texas Instruments France, as amended by Amendment to License Agreement dated November 29, 1989, together with Texas Instruments Program License Agreement dated October 11, 1989, between the Company and Texas Instruments A/S, Amendment to License Agreements dated October 6, 1992, between the Company and Texas Instruments France, and Amendment to License Agreement(s) dated January 1, 1992, between the Company and Texas Instruments Trade Corporation (5).+ 3.5 -- Share Purchase Agreement dated January 23, 1996, between the Company and Nilex Systems ApS.(1).
56 57 3.6 -- Agreement and Plan of Reorganization dated as of March 20, 1997, among the Company, PW Acquisition Corporation and CrossComm Corporation (1). 3.7 -- Agreement re sale of shareholding in Lasat. (6) 3.8 -- Agreement for the Sale and Purchase of assets relating to Olicom's Token Ring Business made on August 31, 1999, between the Company and Madge Networks NV. 3.9 -- Umbrella Agreement relating to the Purchase and Sale of Certain businesses and assets made on September 30, 1999, between the Company, Intel Corporation and Olicom Poland Sp. Z O.O. 3.10 -- Stock Purchase Agreement dated October 26, 1999, by and among the Company, Olicom Ventures A/S and Motorola, Inc.
------------- (1) Incorporated herein by reference to the Company's registration statement on Form F-4, registration no. 333-24655. (2) Incorporated herein by reference to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1997, file no. 0-20738. (3) Incorporated herein by reference to the Company's registration statement on Form S-8, registration no. 33-93684. (4) Incorporated herein by reference to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1996, file no. 0-20738. (5) Incorporated herein by reference to the Company's registration statement on Form F-1, registration no. 33-51818. (6) Incorporated herein by reference to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1999, file no. 0-20738. + Confidential treatment granted as to portions thereof. 57 58 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. OLICOM A/S By: /s/ Niels Christian Furu ---------------------------- Niels Christian Furu President and Chief Executive Officer February 25, 2000 58 59 INDEX TO EXHIBITS
Exhibit Number Description of Exhibits ------ ----------------------- 1.1 -- Articles of Association of the Company, as amended (1). 1.2 -- Rules of Procedure for the Board of Directors (2). 2.1 -- 1994 Share Incentive Plan, as amended (3). 2.2 -- 1996 Share Incentive Plan (4). 2.3 -- 1997 Share Incentive Plan (4). 3.1 -- Agreement of Substitution (License Agreement) dated as of September 1, 1990, between Willemijn Houdstermaatschappij BV and the Company (5).+ 3.2 -- Form of Indemnification Agreement between the Company and/or Olicom, Inc.) and Jan Bech, Bo Vilstrup, Frank G. Petersen, Michael Peytz, S0ren Bjerre-Nielsen, J0rgen H0g, Niels Christian Furu, Lars Larsen and Mette R.L. Fogt (5). 3.3 -- Trademark Agreement effective as of December 11, 1998, between the Company and Ing. C. Olivetti & C., S.p.A. (6) 3.4 -- License Agreement dated October 19, 1988, between the Company and Texas Instruments France, as amended by Amendment to License Agreement dated November 29, 1989, together with Texas Instruments Program License Agreement dated October 11, 1989, between the Company and Texas Instruments A/S, Amendment to License Agreements dated October 6, 1992, between the Company and Texas Instruments France, and Amendment to License Agreement(s) dated January 1, 1992, between the Company and Texas Instruments Trade Corporation (5).+ 3.5 -- Share Purchase Agreement dated January 23, 1996, between the Company and Nilex Systems ApS.(1).
60 3.6 -- Agreement and Plan of Reorganization dated as of March 20, 1997, among the Company, PW Acquisition Corporation and CrossComm Corporation (1). 3.7 -- Agreement re sale of shareholding in Lasat. (6) 3.8 -- Agreement for the Sale and Purchase of assets relating to Olicom's Token Ring Business made on August 31, 1999, between the Company and Madge Networks NV. 3.9 -- Umbrella Agreement relating to the Purchase and Sale of Certain businesses and assets made on September 30, 1999, between the Company, Intel Corporation and Olicom Poland Sp. Z O.O. 3.10 -- Stock Purchase Agreement dated October 26, 1999, by and among the Company, Olicom Ventures A/S and Motorola, Inc.
- ------------- (1) Incorporated herein by reference to the Company's registration statement on Form F-4, registration no. 333-24655. (2) Incorporated herein by reference to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1997, file no. 0-20738. (3) Incorporated herein by reference to the Company's registration statement on Form S-8, registration no. 33-93684. (4) Incorporated herein by reference to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1996, file no. 0-20738. (5) Incorporated herein by reference to the Company's registration statement on Form F-1, registration no. 33-51818. (6) Incorporated herein by reference to the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1999, file no. 0-02738. + Confidential treatment granted as to portions thereof. EX-3.8 2 AGREEMENT FOR THE SALE AND PURCHASE OF ASSETS 1 EXHIBIT 3.8 DATED 31ST AUGUST 1999 MADGE NETWORKS N.V. and OLICOM A/S ---------------------------------------- Agreement for the Sale and Purchase of assets relating to Olicom's token ring business ---------------------------------------- Bird & Bird 90 Fetter Lane London EC4A 1JP Tel: 0171-415 6000 Fax: 0171-415 6111 Ref: DXK/NXB/MADGE.5 2 CONTENTS 1. DEFINITIONS AND INTERPRETATION..........................................................................1 2. SALE OF THE ASSETS.....................................................................................10 3. CONSIDERATION..........................................................................................12 4. ......................................................................................................... 5. COMPLETION.............................................................................................13 6. TRANSFERRING EMPLOYEES.................................................................................14 7. APPORTIONMENT..........................................................................................15 8. WARRANTIES.............................................................................................16 9. COVENANTS BY THE SELLER................................................................................17 10. POST-COMPLETION OBLIGATIONS............................................................................19 11. TRANSITION.............................................................................................19 12. INTELLECTUAL PROPERTY RIGHTS...........................................................................20 13. ANNOUNCEMENTS AND CONFIDENTIALITY......................................................................23 14. COSTS..................................................................................................24 15. ASSIGNMENT.............................................................................................24 16. GENERAL................................................................................................25 17. APPLICABLE LAW AND JURISDICTION........................................................................26 18. NOTICES................................................................................................26 SCHEDULE 1 ......................................................................................................... SCHEDULE 2 ......................................................................................................... SCHEDULE 3 ......................................................................................................... SCHEDULE 4 .........................................................................................................
3 SCHEDULE 5 ......................................................................................................... SCHEDULE 6 ......................................................................................................... SCHEDULE 7 ......................................................................................................... SCHEDULE 8 ......................................................................................................... SCHEDULE 9 ......................................................................................................... SCHEDULE 10 ......................................................................................................... SCHEDULE 11 ......................................................................................................... SCHEDULE 12 ......................................................................................................... SCHEDULE 13 ......................................................................................................... ANNEX 1 ......................................................................................................... ANNEX 2 .........................................................................................................
4 THIS AGREEMENT is made on 31st August 1999 BETWEEN (1) MADGE NETWORKS NV a company organized under the laws of the Netherlands whose registered office is at Transpolis Schipol Airport, Polaris Avenue 23, 2132 JH Hoofdorp, the Netherlands (the "BUYER"); and (2) OLICOM A/S, a company incorporated in Denmark, whose principal office is at Nybrovej 114, DK-2800 Lyngby, Denmark (the "SELLER"). BACKGROUND A. The Seller and its subsidiaries carry on the Business which involves the use of the Assets. B. The Seller wishes to sell and (as appropriate) will procure that its subsidiaries will sell and the Buyer wishes to buy the Assets. OPERATIVE PROVISIONS 1. DEFINITIONS AND INTERPRETATION 1.1 In this Agreement and the Schedules, the following terms shall have the following meanings unless otherwise stated: "ACCOUNTS" means the audited consolidated balance sheet of the Seller and the audited profit and loss account of the Seller and its subsidiaries for the year ended on the Accounts Date, together in each case with the related notes, directors' report and auditor's report; "ACCOUNTS DATE" means 31 December 1998; "AGREED FORM" means in the form agreed between the Seller and the Buyer and initialed by each of them or their representatives before execution of this Agreement, with any amendments which they subsequently agree in writing; "ASSETS" means all the assets and rights owned by the Seller or other members of the Seller's Group relating to the Business as described in clause 2 and includes, where the context permits, each or any of them; "ASSIGNED CONTRACTS" means the contracts listed in the Third Schedule to the IPR Agreement and any Contracts which become Assigned Contracts after the Completion Date pursuant to paragraph 2.1 of Schedule 6; 1 5 "ASSUMED LIABILITIES" means: (a) all liabilities of the Seller in respect of obligations falling due for performance or satisfaction after the Completion Date (or in respect of contracts assigned pursuant to paragraph 2.1 of Schedule 6, after the date of assignment of such contracts) in respect of contractual or other obligations of the Seller relating to the Assets to the extent disclosed or identifiable from the written terms of any of the Disclosure Documents, but not including (i) any liabilities in respect of express or implied warranties given by any member of the Seller's Group if not included in the Assumed Warranty Obligations and (ii) any liabilities specifically excluded pursuant to the terms of this Agreement or the Intellectual Property Rights Agreements and (iii) any liabilities relating to the Distribution Contracts which are included solely for the purpose of the Inventory Agreement; (b) all liabilities of the Seller in respect of Assumed Warranty Obligations; provided that the Seller shall indemnify the Buyer's Group against all costs and liabilities incurred by the Buyer's Group in connection with warranty claims associated with any latent and material defects discovered within a period of one year from the Completion Date in products sold by the Seller before the Completion Date; and (c) all liabilities of the Seller in relation to the Transferring Employees to the extent that such liabilities relate to the period after the Completion Date; (d) all liabilities of the Seller in relation to the Call Off and Scheduled Orders to the extent that performance falls due from the sixth day after the Completion Date; "ASSUMED WARRANTY OBLIGATIONS" means (a) Warranty Obligations relating to Transferred Products other than those liabilities retained by the Seller pursuant to Schedule 10 (Technical Support) and other than Warranty Obligations associated with latent and material product defects in products sold by the Seller before the Completion Date; and (b) Warranty Obligations the Buyer has elected in writing to perform in relation to Discontinued Products pursuant to Paragraph 1.15 of Schedule 6 to the extent stated in that clause and in relation to Discontinued RMA Stock pursuant to paragraph 8 of Schedule 7 to the extent stated in that clause. "BUSINESS" means the business of the Seller and other members of the Seller's Group involving the design, manufacture, distribution and sale of Token Ring Products as carried out by the Seller at Completion; "BUSINESS DAY" means a day (excluding Saturday, Sunday, Christmas Day or New Year's Day) which is also a day on which clearing banks in New York and Copenhagen are open for the conduct of banking business; 2 6 "BUSINESS INFORMATION" means: (a) all information, know-how and techniques (whether or not confidential and in whatever form held) owned by the Seller and members of the Seller's Group (including correspondence relating to the Contracts) and which relates to all or any part of the Business or the Assets; (b) all information held by the Seller relating to the supply of CCU products to customers of the Seller including without limitation, the names and addresses of customers, the type/model of CCU product supplied and the date of supply); (c) all information held by the Seller relating to the warranty cards completed by Customers (including without limitation, the names and addresses of' customers who have completed warranty cards, the Token Ring Product supplied and the date of supply. "BUYER'S GROUP" means the Buyer and each of its subsidiaries, its holding company and any subsidiaries of its holding company, including any entity, which had it been formed and registered as a company in England and Wales would have fallen within this definition; "BUYER'S SOLICITORS" means Bird & Bird, 90 Fetter Lane, EC4A 1JP; "BUYER'S YEAR 2000 STATEMENT" means the statements made on the Buyer's website under the heading "Madge Networks Token Ring and ATM Year 2000 Compliance Test Room Report (Issues)" dated July 1999, a complete and accurate copy of which is contained in Schedule 11; "CALL OFF AND SCHEDULED ORDERS" means any order in the order book of the Seller that has not been shipped by the end of the fifth day after Completion "CLAIM" means any claim for breach of Warranties; "CLEARSIGHT" means OC8000 Clearsight for Open View v 10.3 (w/HP OV D.03) and Clearsight for Open View NNM/NT v 10.3; "COMPLETION" means completion of the sale and purchase of the Assets pursuant to this Agreement and in accordance with Clause 5; "COMPLETION DATE" means the date on which Completion occurs; "CONTRACTS" means the End User Contracts, the Maintenance Contracts, the Supplier Contracts and the OEM Contracts; "CUSTOMER" means any person who has directly or indirectly purchased Token Ring Products from any member of the Seller's Group at any time on or before Completion; 3 7 "DATABASE" means the database containing details of all Customers; "DISCONTINUED PRODUCTS" means Token Ring Products manufactured or supplied by the Seller prior to Completion which at the sole discretion of the Seller have been discontinued prior to Completion as listed in Part B of Schedule 8; "DISCONTINUED RMA STOCK" means RMA Stock manufactured or supplied by the Seller which at the sole discretion of the Seller has been discontinued prior to Completion; "DISTRIBUTION CONTRACTS" means those contracts between members of the Seller's Group and distributors relating to the Business relating to the supply of goods or equipment or the provision of maintenance or other services which are listed in Part C of Schedule 1; "DISCLOSURE DOCUMENTS" means the documents attached as annexure 1 initialed by or on behalf of the parties and listed in the index of disclosure documents set out in Schedule l4; "EMPLOYMENT REGULATIONS" means the Acquired Rights Directive (77/187/EEC as it is applied in each member state of the European Union in which employees employed in the Business are based including, without limitation, the United Kingdom, Austria, Denmark, France, Germany, Spain, Norway, Sweden or such analogous legislation in any other country in which employees employed in the Business are based including, without limitation the United States of America, Japan, Poland; "END USER CONTRACTS" means the contract dated 22 June 1999 between Olicom Inc. and the State of Ohio and the contract dated 20 November 1995 between the Seller and State Farm Mutual Automobile Insurance Company; "EQUIPMENT" means all moveable equipment and tooling used for research and development, manufacture and repair and maintenance services in connection with the Business as described in Part A of Schedule 1; "FINANCIAL INFORMATION" means the financial information contained in the documents referred to in 9.1 and 9.2 of the Disclosure Documents; "GOODWILL" means the goodwill associated with the Business with the exclusive right to carry on the Business in succession to the Seller and other members of the Seller's Group 4 8 under the name "Olicom" (subject to license from Olivetti with regard to the use of the wordmark and trademark "Olicom") and the right for the Buyer to represent itself as carrying on business in succession to the Seller provided that: (a) the Seller and the Seller's Group shall retain the right to use the wordmark and trademark "Olicom" in connection with any part of any business other than the Business; (b) the Buyer shall not be entitled to use the word "Olicom" as any part of its corporate name; "INTELLECTUAL PROPERTY RIGHTS AGREEMENTS" means the following agreements in the Agreed Forms to be made between the Seller and the Buyer at Completion relating to the transfer to the Buyer of certain intellectual property rights and other know-how connected with the Business owned by or licensed to the Seller or member of the Seller's Group: (a) IPR Agreement, (b) Assignment of Trade Marks; (c) Assignment of Patent Applications; (d) Trade Mark License; (e) Patent License; "INTELLECTUAL PROPERTY RIGHTS" or "IPR" means patents, trademarks, service marks. trade names, design rights, copyright (including rights in computer software), rights in know-how and all other intellectual property rights, in each case whether registered or unregistered and including applications for the grant of such rights and all rights or forms of protection having equivalent or similar effect anywhere in the world provided such are in connection with the Business; "INVENTORY" has the meaning given in the Inventory Agreement; "INVENTORY AGREEMENT" means the agreement in the Agreed Form to be made between the Seller and the Buyer at Completion relating to the valuation of and the parties' rights and obligations with regard to the product inventory of the Seller's Group relating to the Business; 5 9 "MADGE CLARIFY SYSTEM" means Madge's Oracle system database in which Madge logs certain details relating to problems reported by Madge customers relating to products it has supplied; "MADGE DATABASE" means the database to be agreed between the parties pursuant to clause 4 of Schedule 6 containing details of whom the Seller exclusively supplied Token Ring Products on or before the Completion Date; "MAINTENANCE CONTRACTS" means those contracts between members of' the Seller's Group and customers in connection with the Business for the maintenance of the Seller's Token Ring Products which are listed in Part C of Schedule 1; "NON-TRANSFERRING EMPLOYEES" means those employees of the Seller and other members of the Seller's Group employed (and any person who may claim to be so employed) in connection with the Business but who are not Transferring Employees; "OEM CONTRACTS" means the contracts made between Olicom and certain manufacturers listed in Part C of Schedule 1; "OLICOM DATABASE" means the database to be agreed between the parties pursuant to clause 4 of Schedule 6, containing details of any person to whom the Seller supplied products other than Token Ring Products on or before the Completion Date; "OLICOM LOTUS NOTES SYSTEM" means the Seller's Lotus Notes system database in which the Seller logs certain details relating to problems reported by the Seller's customers relating to Token Ring Products it has supplied; "PARTIES" means the parties to this Agreement; "PERIOD 1" shall bear the meaning given to it in paragraph 1 of the Technical Support Schedule; "PERIOD 2" shall bear the meaning given to it in paragraph 1 of the Technical Support Schedule; "PERMITS" means all licenses, consents, permits and authorizations issued by any competent governmental or regulatory body and which are held by any member of the Seller's Group in connection with the Business and which are listed in Part A of Schedule 1; "QUARTER" means each complete period of three months ending on 30 September, 31 December, 31 March and 30 June; 6 10 "RECORDS" means all lists of Customers, current reports, price lists, cost records, catalogues, records relating to the Transferring Employees and all other records. documents and files relating to the Business or any of the Assets; "RMA STOCK" means new or refurbished inventory suitable for shipment to customers in replacement of Token Ring Products under warranty, returned by customers as listed in Part C of Schedule 8; "SELLER'S GROUP" means the Seller and each of its subsidiaries, its holding company and any subsidiaries of its holding company, including any entity which had it been formed and registered as a company in England and Wales would have fallen within this definition; "SELLER'S SOLICITORS" means Bech-Bruun & Trolle of Norre Farimagsgade 3, DK-1364 Copenhagen K, Denmark; "SUPPLIER CONTRACTS" means those contracts entered into on or prior to the Completion Date by or on behalf of the Seller or other members of the Seller's Group for the supply or sale of components and other goods to the Seller in connection with the Business which are listed in Part C of Schedule 1; "TAX" means all forms of taxation, duties, imposts, levies, withholdings or liability imposed whether in the United Kingdom or elsewhere and shall further include any penalty, fine or surcharge or interest payable in addition to or in connection with it; "TECHNICAL SUPPORT PERIOD" shall bear the meaning given to it in the Technical Support Schedule; "TECHNICAL SUPPORT SCHEDULE" means Schedule 10 to this Agreement; "TECHNICAL SUPPORT SERVICES" means the technical support services which the Seller will provide to the Buyer in respect of the Transferred Products in accordance with the Technical Support Schedule; "TOKEN RING INTERFACE" means a local area network interface implementing and operating substantially in accordance with the IEEE 802.5 family of standards (including 100Mbit/s, and DTR functions) including, without limitation, an interface implementing either token ring end station or hub or switch functions; "TOKEN RING PRODUCTS" means subject to clause 1.8; (i) networking products (including, but not limited to, network interface cards, local area network hubs, local area network switches and routers) having one or more Token Ring Interfaces; and 7 11 (ii) network management software required to configure or control such products, provided that where a product is modular consisting of a number of customer or field replaceable units then only the customer or field replaceable unit within that product having a Token Ring Interface (and associated network management software) shall be treated as a Token Ring Product. (As an example, only the token ring interface module with a combined Ethernet/token ring local area network switch shall be treated as a Token Ring Product). However, an add-in module solely used to extend the functions of a Token Ring Product shall also be considered a Token Ring Product even if it does not implement a Token Ring Interface (as an example, an ATM uplink module for a token ring switch shall be treated as a Token Ring Product) and Token Ring Product shall have a corresponding meaning; "TOKEN RING SERVICES" means maintenance and support services relating to Token Ring Products; "TRANSFERRING EMPLOYEES" means those individuals employed by the Seller and members of the Seller's Group and named in Part B of Schedule 1 or any person transferred after the Completion Date pursuant to clause 6.4; "TRANSFERRED PRODUCTS" means Token Ring Products manufactured or supplied by the Seller prior to Completion and listed in Part A of Schedule 8; "TRANSITION SCHEDULE" means Schedule 9 to this Agreement; "UNRELEASED PRODUCTS" means Token Ring Products developed or in the process of, development by the Seller prior to Completion (whether or not such development has resulted in a usable Token Ring Product) which have not been manufactured or supplied on a commercial basis prior to Completion; "VAT" means value added tax; "WARRANTIES" means the warranties on the part of the Seller contained in Clause 8 and Schedule 3 of this Agreement and clause 8 of the IPR Agreement; "WARRANTY OBLIGATIONS" means those obligations of any member of the Seller's Group in relation to: (a) written warranties given to Customers, re-sellers or distributors concerning products supplied to such persons in connection with the Business to the extent that an accurate copy of the document containing the relevant warranty is contained in the Disclosure Documents; or (b) warranties implied by any applicable law or by industry practice to the extent that Token Ring Products designed, manufactured, or supplied by the Buyer on or before the date of' this Agreement are subject to substantially the same implied warranties, 8 12 but does not include any liabilities in respect of claims for warranty work to be performed which have been notified in writing by a Customer or a reseller or distributor to any member of the Seller's Group on or before the Completion Date or any liability arising from or in connection with any express or implied warranty that a product is Year 2000 Compliant; "YEAR 2000 COMPLIANT" shall have the meaning given in the statements made on the Seller's website under the heading "The Year 2000 Challenge" as at 12 August 1999, a complete and accurate copy of which is set out in the Disclosure Documents; "YEAR 2000 CONFORMITY" shall have the meaning as set out in the Buyer's Year 2000 Statement; "YEAR 2000 REPORT" means the report by Century Technology Services Inc. on evaluating the Year 2000 effects on the business of the Seller, a complete and accurate copy of which is available in the Disclosure Documents. 1.2 In this Agreement, unless expressly stated otherwise: (a) a reference to a person or people includes a reference to any entity which has legal personality by the law of any applicable country or territory; (b) a reference to a statute or ordinance or a provision of a statute or ordinance includes a reference to any amendment, or re-enactment of it, any subordinate legislation (as defined in s.21(1) Interpretation Act 1978 or other applicable law) made under it and any previous statute or provision re-enacted by it, including, without limitation, orders in council, orders and any subordinate legislation to such orders, in any case before or after the date of this Agreement except to the extent that any amendment, re-enactment or subordinate legislation coming into force after the date of this Agreement would increase or extend the liability of any party to this Agreement to any other party under this Agreement; (c) a reference to a clause, schedule or to the parties is to a clause or schedule or the parties of or to this Agreement, and a reference in any schedule to a paragraph is to a paragraph of that schedule; (d) a reference to any action, legal document, remedy, proceedings, status or other legal concept shall, in respect of any foreign jurisdiction, relate to whatever in that jurisdiction most closely corresponds to the relevant English term. 1.3 Headings shall be disregarded in construing this Agreement. 1.4 Any undertaking by a party not to do any act or thing includes an undertaking not to allow, cause or assist the doing of that act or thing. 1.5 The ejusdem generis rule shall not apply in the construction of this Agreement, and accordingly general words shall not be given a restrictive meaning by reason of their 9 13 being followed or preceded by words indicating a particular class or examples of acts or matters. 1.6 References to "$" or "dollars" are to the lawful currency of the United States of America. 1.7 "Subsidiary" and "holding company" shall have the meanings given in Section 736 of the Companies Act 1985. 1.8 For the avoidance of doubt: (a) routers included under Token Ring Products are not Transferred Products; (b) IPR associated with routers are not assigned or licensed under this Agreement by the Seller to the Buyer; (c) the Seller shall keep all rights to manufacture, support and enhance routers that support all other technologies than Token Ring; (d) the Seller commits to refrain from developing, manufacturing and selling routers with Token Ring ports except for the 7052 TR-variant and the 8012 TR-variant; (e) the 7052 TR-variant and the 8012 TR-variant are subject to specific end-of-life provisions specified in the IPR Agreement. 2. SALE OF THE ASSETS 2.1 On and subject to the terms of this Agreement and with effect from the close of business on the Completion Date the Seller shall sell, and shall procure the sale by each relevant member of the Seller's Group, and the Buyer shall or shall procure that a member of the Buyer's Group shall purchase the following Assets with full title guarantee free from all Encumbrances and together with all rights and benefits attaching or accruing to them: (a) the Goodwill; (b) the Equipment; (c) the Business Information; (d) the Records; (e) all Intellectual Property Rights relating to the Business in accordance with the terms of the Intellectual Property Rights Agreements; and (f) the Permits. 10 14 2.2 On the Completion Date, the Seller shall and shall procure that each member of the Seller's Group shall assign the Database to the Buyer. 2.3 The Buyer shall not be obliged to complete the purchase of' any of the Assets unless the purchase of all of the Assets is completed simultaneously. 2.4 The Buyer undertakes with effect from the Completion Date to assume and perform the obligations of the Seller under the Assigned Contracts in accordance with their terms to the extent that they are Assumed Liabilities and shall become entitled to the benefits of the Seller under the Assigned Contracts, provided that nothing in this Agreement shall require the Buyer to perform any obligation or satisfy any liability arising under the Assigned Contracts save to the extent that such obligations or liabilities are as stated in the Assigned Contracts, complete and accurate copies of which are contained in the Disclosure Documents, provided that in respect of any Assigned Contracts which are assigned pursuant to paragraph 2.1 of Schedule 6, references in this clause to the Completion Date shall be deemed to be a reference to the date of assignment of such Assigned Contract. 2.5 Following Completion the Buyer shall be responsible for discharging the Assumed Liabilities and shall indemnify the Seller against all actions, proceedings, costs, damages, claims or demands brought or made against the Seller in connection with the Assumed Liabilities. 2.6 Nothing in this Agreement: (a) shall require the Buyer to perform any obligation or satisfy any liability save to the extent that such obligation or liability is an Assumed Liability or is expressly stated in this Agreement; (b) without prejudice to the generality of 2.6(a), shall require the Buyer to perform any obligation or satisfy any liability of the Seller's Group: (i) in respect of support for Discontinued Products; (ii) in respect of liabilities relating to promotional or marketing offers in effect on or before the Completion Date whether or not applying to the supply of products and services after the Completion Date; (iii) in respect of liabilities relating to special pricing, rebates, special cash incentives to distributors or resellers and other similar incentive payments in effect on or before the Completion Date whether or not applying to the supply of products and services after the Completion Date; (c) shall make the Buyer liable for or impose any obligation oil the Buyer in respect of any act, neglect, default or omission of the Seller unless specifically stated in this Agreement. 11 15 2.7 The Seller shall indemnify the Buyer against all costs, claims, demands and liabilities in respect of all debts, liabilities and obligations (including, without limitation, as described in clause 2.6) asserted against the Buyer or any member of the Buyer's Group not included in Assumed Liabilities. In relation to any Third Party Claim (as defined in clause 3.5 of Schedule 4) for which the Buyer is entitled to seek an indemnity from the Seller under this clause, the Seller shall be entitled to take such action at its expense (including without limitation, settle or compromise with the Third Party) in relation to the Third Party, Claim as it shall in its absolute discretion decide. 2.8 The Seller shall indemnify the Buyer's Group against all costs, claims, demands and liabilities in respect of all debts, liabilities and obligations asserted against the Buyer or any member of Buyer's Group arising in relation to: (a) any products supplied by the Seller to any third party prior to the Completion Date not being Year 2000 Compliant; (b) Transferred Products manufactured by the Buyer after the Completion Date to the specifications used by the Seller prior to the Completion Date not having Year 2000 Conformity provided that: (i) the Seller shall not be liable under this clause where such Transferred Products fail to have Year 2000 Conformity as a result of any modifications made to such specifications by the Buyer; and (ii) the Seller shall not be liable under this clause unless written notice of any claim is given to the Seller on or before 1 April 2000. 3. CONSIDERATION 12 16 5. COMPLETION 5.1 Completion shall take place at the offices of the Buyer's Solicitors. At Completion the Seller and the Buyer shall each perform their respective obligations in relation to the sale and purchase of the Assets in accordance with Parts A and B of Schedule 2. 5.2 The Seller shall continue to carry on the Business for its own benefit and at its own risk up to the close of business on the Completion Date at which time the Assets shall be transferred to the Buyer. 13 17 5.3 If on the Completion Date the Seller fails to comply with any of the provisions of' Schedule 2 but shall be able to comply with all of the provisions of Schedule 2 within no more than twenty Business Days, the Seller may by notice to the Buyer postpone Completion by up to twenty Business Days provided that the Seller shall not be able to postpone Completion more than once. 5.4 If on the postponed Completion Date either party fails to comply with any of the provisions of Schedule 2, the other party may by notice to the party in default: (a) terminate this Agreement; or (b) proceed to Completion, in which case the party in default shall be obliged to fulfill those of its obligations under Schedule 2 as it is then able and to fulfill any unfulfilled obligations under Schedule 2 on any later date specified in the notice. 5.5 Beneficial ownership and risk in respect of the Assets shall pass to the Buyer from the close of business on the Completion Date at which time the Assets shall be transferred to the Buyer. 5.6 Neither the Buyer nor the Seller shall be entitled to rescind or repudiate this Agreement or any other agreement in the Agreed Form referred to in Schedule 13 for any reason unless expressly stated or for fraudulent misrepresentation whether before or after Completion. 6. TRANSFERRING EMPLOYEES 14 18 7. APPORTIONMENT 7.2 All periodical sums receivable in respect of the Assets (including, but not limited to, license fees and other similar sums) shall be apportioned between the Seller and the Buyer on a time basis so that such part of the relevant periodical sums as is attributable to the period ending on and including the Completion Date shall be for the benefit of the Seller and such part of the relevant periodical sums as is attributable to the period commencing on the day following the Completion Date shall be for the benefit of the Buyer. However, any part of such license fees or other sums received by the Seller or Buyer, which represent VAT chargeable on the amount received by the Seller or Buyer shall (as relevant) be paid in full to or retained in full by the party which is required to account to the relevant authority for VAT on such. 7.3 The Seller and the Buyer shall indemnify each other from and against any actions, proceedings, damages, costs, claims and demands arising from or in connection with the 15 19 charges or outgoings apportioned pursuant to clause 7.1 and any failure to discharge them. 7.4 All payments due from one party to the other pursuant to this clause 7 shall be paid within five Business Days after the end of each month after the Completion Date in respect of amounts accruing during that month. Each party shall provide the other with appropriate evidence of the calculation of such amounts. 8. WARRANTIES 8.1 SELLER'S WARRANTIES (a) The Seller warrants to the Buyer in the terms of the Warranties. (b) The Warranties are given subject only to matters disclosed in the Disclosure Documents meaning that the Seller shall not have any liability for any Claim based on any fact, matter, or circumstance having been disclosed in this Agreement or by the Disclosure Documents. (d) Each of the Warranties shall be separate and independent and, save as expressly provided, shall not be limited by reference to any other Warranty or any other provision in this Agreement. (e) The Seller agrees with the Buyer (for itself and as trustee for each of the Transferring Employees): (i) that the giving by any Transferring Employee to the Seller or its respective agents or advisers of any information or opinion in connection with the Warranties or any of the other agreements to be entered into pursuant to this agreement or other-wise in relation to the Business shall not be deemed to be a representation, warranty or guarantee to the Seller of the accuracy of such information or opinion; (ii) to waive any right or claim which it may have against any Transferring Employee or for any error, omission or misrepresentation in any such information or opinion save for any such right or claim based on gross negligence or willful conduct; and (iii) that any such right or claim shall not constitute a defense to any claim by the Seller under or in relation to this agreement (including the Warranties) or any of the other agreements to be entered into pursuant to this 16 20 agreement save for any such right or claim based on gross negligence or willful conduct. (f) Part A of Schedule 4 shall apply to limit or exclude in accordance with its terms, any liability which the Seller might otherwise have in respect of a breach of the Warranties, provided that (a) the provisions of Part A of Schedule 4 shall not apply to any such liability in circumstances of fraud by or on behalf of the Seller; or (b) the provisions of paragraph 2 of Schedule 4 shall not apply in circumstances of willful non-disclosure by or on behalf of the Seller. References in Schedule 4 to the Buyer and the Seller shall (apart from paragraph 3.15 of Part A and paragraph 10 of Part B) be deemed to be references to the Buyer's Group and the Seller's Group respectively. (g) The Warranties shall continue in full force and effect notwithstanding Completion. 8.2 BUYER'S WARRANTIES (a) The Buyer warrants that: (i) it has the requisite power and authority to enter into and perform this Agreement and the agreements to be entered into pursuant to it. (ii) it does not require the consent, approval or authority of any other person to enter into or perform its obligations under this Agreement. (iii) the execution and delivery of and the performance by the Buyer of its obligations under this Agreement and the agreements to be entered into pursuant to it will not: (A) be or result in a breach of, or constitute a default under, any agreement, instrument or arrangement to which the Buyer is a party or by which the Buyer is bound; or (B) be or result in a breach of any order, judgement or decree of any court or governmental agency to which the Buyer is a party or by which the Buyer or the Business is bound; or (C) be or result in a breach of any of the provisions of the memorandum or articles of association of the Buyer. 9. COVENANTS BY THE SELLER 17 21 9.2 18 22 POST-COMPLETION OBLIGATIONS 10.1 The Seller shall, and shall procure that members of the Seller's Group shall after Completion comply with Schedule 6 and the Technical Support Schedule. 10.2 The Buyer shall, and shall procure that member's of the Buyer's Group shall after Completion comply with Schedule 7 and the Technical Support Schedule. 11. TRANSITION 11.1 GENERAL (a) The Seller shall, and shall procure that members of the Seller's Group shall after Completion use all reasonable endeavours to comply with the Transition Schedule and to carry into effect the matters referred to in it. (b) The Buyer shall, and shall procure that members of the Buyer's Group shall after Completion use all reasonable endeavors to assist, make timely management and operational decisions, give advice, answer queries, conduct any audits (as defined in the Transition Schedule) as may be reasonably required by the Seller and allocate relevant resources in order to carry into effect the matters referred to in the Transition Schedule. (c) The Seller agrees to provide at no cost to the Buyer a translation of any Technical Documents (as defined in the IPR Agreement) transferred in connection with this Agreement after the Completion Date which are not in the English language provided that where the Seller has any documents that are not in the English language which are translations of documents originally in the English language it shall not be obliged to provide a translation. (d) The Seller agrees to use its reasonable endeavours to transfer or to make arrangements to transfer to the Buyer all rights related to the electronic identity and address ranges (IEEE) embedded in the Transferred Products. (f) The Seller undertakes with the Buyer that it will not grant a sub-lease relating to any sales offices occupied by it on or before the Completion Date without (a) first giving the Buyer written notice and allowing it 21 Business Days from the date of service of such notice to state in writing whether it wishes to take the sub-lease; and (b) if the Buyer wishes to negotiate the terms of such sublease in good faith with the Buyer provided that, if such terms have not been agreed within a period of 30 Business Days after they commence, the Seller shall be free to enter into a 19 23 sub-lease relating to that office with any other person on no more favorable terms to the sub-tenant. 12. INTELLECTUAL PROPERTY RIGHTS 12.1 GENERAL (a) All intellectual property rights (including patents, registered designs, unregistered designs, copyrights, technical information or know how and similar rights worldwide) arising in the course of or as a consequence of the Seller undertaking development work under the Transition Schedule shall belong to the Buyer. Without prejudice to the above, the Seller shall have a non-exclusive license to use any know-how developed in the course of or as a consequence of the Seller undertaking such development work for purposes not related to Token Ring Products or Token Ring Services. (b) Such intellectual property shall be free of all third party claims of ownership and all work undertaken by the Seller in which Intellectual Property Rights might arise shall be its own original work. (c) The Seller shall (a) forthwith communicate to the Buyer any designs, discoveries, inventions or other matters potentially the subject to such Intellectual Property Rights, (b) shall not disclose them (or any proposals communicated to it by the Buyer, which proposals it shall retain in confidence) to any third party without the prior written consent of the Buyer, to which they shall belong and (c) deliver all documents, drawings, models, samples. prototypes and the like prepared by or for the Seller in each case to the extent that such matters relate to the development work under the Transition Schedule; (d) Further, to the extent that full legal title to any copyright so arising shall fall automatically to belong to the Buyer by virtue of the above provisions the Seller shall hold such right on trust for the Buyer absolutely, and shall forthwith at the request of the Buyer execute or procure the execution of any document required by the Buyer to vest in it (or as it shall direct) the full legal title to such copyright and to enable it (or its nominee) to enjoy the benefit of such right. (e) The Seller agrees that it shall (and shall procure that any member of the Seller's Group shall) where it has agreed under the Transition Schedule to provide Business Information and any other information or documentation to the Buyer, provide true and accurate copies of such information on or before any date stipulated or where not stipulated as soon as reasonably practicable. (f) If there is any conflict between the provisions of this clause 12.1 and the provisions of the IPR Agreement, the provisions of this Agreement shall prevail. 20 24 12.2 DISPUTES (a) In the case of any disputes between the parties as to any matter arising out of or in connection with the Transition Schedule or any disputes relating to the failure of any party to perform an obligation under the Transition Schedule the parties shall procure that the operational directors of the Buyer and Seller with responsibility for the relevant area in dispute shall meet to attempt in good faith to resolve the dispute. The meeting shall be held within 7 days of a written request from one party to the other. This request must set out full details of the dispute. (b) If the dispute is not resolved as a result of the meeting referred to in paragraph 11.3(a), the parties will procure that a meeting between the relevant senior executive of the Seller and a director of the Buyer shall be held within 7 days of a written request from one party to the other. (c) If the dispute is not resolved as a result of the director's meeting referred to in clause 12.2(b), either party may propose to the other at such meeting or subsequently in writing that negotiations be entered into with the assistance of a neutral adviser ("the NEUTRAL ADVISER"). (d) Unless the parties, within 5 Business Days of a proposal under clause 11.3(c), agree on the appointment of the Neutral Adviser, either party may apply to the Centre for Dispute Resolution at 100 Fetter Lane, London EC4A 1DD ("CEDR") to recommend a non-binding procedure for the resolution of the dispute and to nominate the Neutral Adviser provided always that any Neutral Adviser appointed shall be an expert or have at least 5 years experience in the area of the dispute referred. (e) The parties shall within 14 days of the appointment of the Neutral Adviser meet him in order to agree a programme for the exchange of' any relevant information and the structure to be adopted for the negotiating session(s). If considered appropriate, the parties may seek assistance from CEDR to provide guidance on a suitable procedure. (f) All negotiations shall be conducted in confidence and without prejudice to the rights of the parties in any future proceedings. (g) If the parties reach agreement on the resolution of the dispute, such agreement, including agreement as to the costs of the parties involved in the negotiations and the reference to the Neutral Adviser, shall be reduced to writing and, once it is signed by each party, it shall be binding on the parties. Failing agreement. either of the parties may invite the Neutral Adviser to provide a non-binding but informative opinion in writing. Such opinion shall not be used in evidence in any proceedings commenced pursuant to the terms of this Agreement without the consent of both parties. In the event of failure of agreement resulting from a reference to a Neutral Adviser the fees of the Neutral Adviser and of CEDR will be borne equally by the parties to the dispute and each party will also bear its own costs of the reference. 21 25 (h) If: (a) the parties do not agree to refer to dispute to a Neutral Adviser pursuant to clause 12.3(c); or (b) the parties fail to reach agreement in the negotiations with the Neutral Adviser. then any dispute or difference between them shall be subject to resolution pursuant clause 17. 22 26 13. ANNOUNCEMENTS AND CONFIDENTIALITY 13.1 No announcement relating to the provisions of this Agreement or any matter ancillary to this Agreement shall be made by or on behalf of the Seller or the Buyer without the prior written approval (which shall not be unreasonably withheld or delayed) of the other party save as may be required by any legal or regulatory authority or securities exchange (including, without limitation, Copenhagen Stock Exchange, NASDAQ, and the Securities & Exchange Commission) to which the disclosing party or any member of its group is subject. 13.2 Nothing in clause 13.1 shall prevent the Buyer from writing to the customers, suppliers or employees of the Business after Completion, or if earlier, the date of any public announcement made with the agreement of the parties, notifying them of the acquisition by the Buyer of the Business. 13.3 The Seller shall, and shall procure that each member of the Seller's Group shall, keep confidential and not at any time after the date of this Agreement disclose or make known in any way to anyone (other than the Buyer) or use for its own or any other person's benefit any Business Information or any other information which may have been disclosed or otherwise known to the Seller or any member of the Seller's Group or which may otherwise have come to the attention of the Seller or any member of the Seller's Group (as relevant) and which relates to the Business or Assets. 13.4 The Buyer shall, and shall procure that each member of the Buyer's Group shall, keep confidential and not at any time after the date of this Agreement disclose or make known in any way to anyone or use for its own or any other person's benefit any confidential information relating to the Seller or the Seller's Group which may during the negotiations relating to this Agreement have been disclosed to the Buyer or any member of the Buyer's Group or which during the negotiations relating to this Agreement may otherwise have come to the attention of the Buyer or any member of the Buyer's Group and which does not relate to the Business or Assets. 13.5 The obligations imposed by the provisions of clauses 13.3 and 13.4 inclusive shall not apply: (a) to the extent that the information in question is or comes into the public domain without fault on the part of the disclosing party or any member of its Group; (b) to the extent that the information in question save, in the case of Business Information, was already known to the disclosing party or any member of its Group at the time the same was disclosed to it or came to its attention; (c) to the extent that the information in question (in the case of Business Information, after Completion) has been lawfully disclosed to the disclosing party or any member of its Group by a third party; or 23 27 (d) to the extent that the information in question may be required by any legal or regulatory authority or securities exchange (including, without limitation, the Copenhagen Stock Exchange, NASDAQ and the Securities & Exchange Commission) to which the disclosing party or any member of its Group is subject. 13.6 The parties acknowledge that remedies at law may be inadequate to protect against a breach of clauses 13.3 or 13.4 and the parties therefore agree, in the event of any such breach, not to oppose the granting of injunctive relief, specific performance or other equitable relief in favor of the other part), or any member of its Group without proof of actual damages. 14. COSTS 14.1 The parties shall pay their own costs and expenses in relation to the preparation, execution and implementation of this Agreement and the agreements referred to in it. 14.2 All stamp duty payable on the transactions effected by this Agreement and fees for registration of transfers of the Intellectual Property Rights are to be borne by the Buyer. 14.3 The obligation to adjust the value added tax accrued ("momsreguleringsforpligtelse") shall be taken over by the Buyer without any separate consideration being payable herefore provided that it shall not be greater than $25,000. 15. ASSIGNMENT 15.1 This Agreement shall be binding upon and inure for the benefit of the successors of the parties but, save as provided in clause 15.2 or with the written consent of the parties, shall not be assignable. 15.2 Each party's rights under this Agreement or any of the other documents referred to in this Agreement may be assigned by that party to any wholly-owned subsidiary of that party or any holding company of that party or any wholly-owned subsidiary of such holding company provided that: (a) if such assignee company ceases to be a wholly-owned subsidiary or holding company of that party or a wholly-owned subsidiary of such holding company such rights shall be promptly assigned to another wholly-owned subsidiary of the assigning party or holding company of that party or a wholly-owned subsidiary of such holding company; (b) the assigning party shall continue to be liable to the other party pursuant to this Agreement notwithstanding such assignment. 15.3 Where, subsequent to Completion, the Buyer transfers the Business to any member of the Buyer's Group (or any such member of the Buyer's Group transfers the Business to any other member of the Buyer's Group and so on and so forth) such transferee company shall be entitled (for so long as it remains a wholly-owned subsidiary or holding company of 24 28 the Buyer or a wholly-owned subsidiary of such holding company) to claim under the Warranties as if it were the Buyer under this Agreement. 16. GENERAL 16.1 This Agreement, together with the agreements to be entered into by the parties pursuant to it, constitutes the entire agreement between the parties relating to the sale and purchase of the Assets and supersedes all previous agreements, arrangements and understanding between the parties in relation to it. Each of the parties acknowledges that in entering into this Agreement it has not relied on any representation, warranty or other assurance except those expressly contained in this Agreement and the documents which the parties will enter into as referred to in this Agreement. Each party waives all rights and remedies which, but for this clause, might be available to it in respect of such representation, warranty or assurance provided that nothing in this clause shall limit or exclude any liability for fraudulent misrepresentation. 16.2 No failure or delay by either party to exercise and no delay, forbearance or indulgence given by it in or before exercising any remedy or right under or in relation to this Agreement shall operate as a waiver of that right, power or remedy or preclude its exercise at any subsequent time or on any subsequent occasion. No single or partial exercise of any remedy or right shall preclude any further exercise of the same or the exercise of any other remedy or right. The remedies and rights provided in this Agreement are cumulative and are not exclusive of any remedies or rights provided by law or otherwise. 16.3 This Agreement may be executed in two or more counterparts and execution by each of the parties of any one of such counterparts will constitute due execution of this Agreement. 16.4 The Seller shall and shall procure that any third party shall (so far as is within its power so to do) do, execute and perform all such further deeds, documents, assurances, acts and things as the Buyer may reasonably require to effectively vest in the Buyer the benefit of this Agreement. 16.5 The provisions of this Agreement shall remain in full force and effect after Completion so far as they then remain to be observed and performed. 16.6 No variation of this Agreement shall be effective unless made in writing and signed by or on behalf of each of the parties. 16.7 If any provision of this Agreement shall be held to be illegal, void, invalid or unenforceable under the laws of any jurisdiction, the legality, validity and enforceability of the remainder of this Agreement in that jurisdiction shall not be affected, and the legality, validity and enforceability of the whole of this Agreement in any other jurisdiction shall not be affected. 25 29 17. APPLICABLE LAW AND JURISDICTION 17.1 This Agreement shall be governed by and construed in accordance with English law. Each of the parties irrevocably submit to the non-exclusive jurisdiction of the courts of England and Wales in respect of any claim, dispute or difference arising out of or in connection with this Agreement. 17.2 The Seller and Buyer each agree to appoint and maintain the appointment of an authorized agent to receive on their behalf service of process in England. 17.3 The Seller hereby appoints Bird & Bird of 90 Fetter Lane, London, EC4A 1JP (Ref: DXK/NXB) as its authorized agent to receive service of process in England on its behalf and the Buyer hereby appoints Law Debenture Corporate Services Limited of Princes House, 95 Gresham Street, London, EC2V 7LY)(telephone number: 0171 696 5213, fax 0171 696 5262) as its authorized agent to receive service of process in England on its behalf. 18. NOTICES Any notice or other communication required or permitted under this Agreement shall be in writing and shall be delivered personally, sent by facsimile transmission (with confirmation or receipt) or sent by nationally recognized courier service, postage prepaid. Any such notice shall be deemed given when so delivered personally or, if sent by facsimile, at the time of receipt of a legible copy thereof or, if sent by internationally recognized courier service, three days after the date of deposit with the courier service, postage prepaid, and shall be sent to the registered office of the party addressed for the attention of "the Secretary". THIS AGREEMENT has been signed by or on behalf of the parties on the date appearing on page 1. 26 30 SIGNED by ) MADGE NETWORKS NV ) /s/ Acting by: ) SIGNED by ) OLICOM A/S ) /s/ Acting by: ) EX-3.9 3 UMBRELLA AGREEMENT RE: PURCHASE AND SALE OF ASSETS 1 Exhibit 3.9 UMBRELLA AGREEMENT RELATING TO THE PURCHASE AND SALE OF CERTAIN BUSINESSES AND ASSETS between (1) INTEL CORPORATION; and (2) OLICOM A/S; INTEL CORPORATION-OLICOM A/S - Umbrella Agreement 2 THIS AGREEMENT is made the 30th day of September 1999 BETWEEN: (1) INTEL CORPORATION OF 2200 MISSION COLLEGE BOULEVARD, CA 95052, U.S.A. (the "PRINCIPAL PURCHASER"); and (2) OLICOM A/S, REG.NO. A/S 101.733, NYBROVEJ 114, 2800 LYNGBY, DENMARK (the "DANISH SELLER"); with the adherence of (3) OLICOM POLAND SP. Z O.O., STOWACKIEGO 173, GDANSK - WRZESZCZ, POland (the "POLISH SELLER"); (each a "PARTY" and together, the "PARTIES") IT IS AGREED as follows: 1. DEFINITIONS AND INTERPRETATION 1.1 All terms defined in Schedule A shall have the meaning specified therein when used in this Umbrella Agreement or in any of the Transaction Agreements unless a specific separate definition is contained therein. 1.2 Unless the context requires otherwise words in the singular include the plural and vice versa and words for any gender shall include all genders. Reference to persons includes a body corporate. 1.3 Other than in the case of any warranties, reference to any legislation includes a reference to any amending legislation, directives or orders made further to it and includes consolidations or amendments or modifications or re-enactments. 1.4 The headings are inserted for convenience only and shall not affect the construction of this Umbrella Agreement. 1.5 Unless otherwise stated a reference to a clause or a schedule or a party is a reference to a clause in or a schedule or a party to this Umbrella Agreement. 1.6 Reference to writing includes any method of reproducing words in a legible and non-transitory form. 1.7 Unless the context requires otherwise any period of time from a specified date or day shall be calculated exclusive of that date or day. Page 2 3 1.8 The Parties have participated jointly in the negotiation and drafting of this Umbrella Agreement and the schedules and exhibits hereto. In the event of any ambiguity or question of intent or interpretation arises, this Umbrella Agreement or any schedule or exhibit hereto shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Umbrella Agreement or any schedule or exhibit hereto. 1.9 Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. 1.10 Any reference to this Umbrella Agreement and to the Transaction Agreements shall be deemed to include a reference to all schedules and exhibits hereto and thereto. 1.11 Anything reasonably identified in the Disclosure Volume shall be deemed adequate to disclose an exception to a representation or warranty made herein or in any of the Transaction Agreements. 1.12 The Principal Purchaser acknowledges the existence of an agreement between the Danish Seller and Madge Networks N.V. relating inter alia to the grant by the Danish Seller of a non-exclusive license to Madge Networks N.V. relating to certain parts of the Base IP and to one assigned provisional patent application, 1.13 Any statement in this Umbrella Agreement and in the Transaction Agreements which is qualified by the expression "to the best of knowledge" or "as far as the Danish Seller is aware" or any similar expression shall mean the actual knowledge, information, and belief of the following executives of Niels Christan Furu, Chief Executive Officer; Per Larsen, Executive Vice President Global Sales and Marketing and Chief Executive Officer, Olicom lnc.: Niels Jorgensen, Former Chief Technical Officer; Lars Larsen, Chief Financial Officer: Per Friis, Vice President of Operations; Niels Christian Gjellerup, Vice President Business Operations; Mette Fogt, Director of Legal Affairs; and Mr. Pankiewicz, CEO of the Polish Seller, provided that the knowledge of Mr. Pankiewicz shall only be deemed relevant up to the Polish Completion. 2. SCOPE OF AGREEMENT 2.1 This Umbrella Agreement governs and sets out the principal terms and conditions relating to the Sellers' sale and transfer of the Businesses to the Purchasers. The detailed terms and conditions of the sale and transfer of the individual parts of the Businesses are set out in the Transaction Agreements. In the event of a conflict between the terms and conditions in this Umbrella Agreement and the terms and conditions in any of the Transaction Agreements, the Umbrella Agreement shall prevail. Page 3 4 2.2 It is the mutual intention of the Parties, that upon the consummation of the transactions contemplated by this Umbrella Agreement and by each of the Transaction Agreements, the Purchasers shall have become the sole and unrestricted proprietor of the Businesses, the FE Patents and the Remaining FE IP and a non-exclusive licensee of the Base IP. 2.3 Unless expressly stated in this Umbrella Agreement or in any of the Transaction Agreements the Purchasers shall not assume any of the Liabilities. The Danish Seller agrees to indemnify and keep the Purchasers harmless from and against any and all loss, cost and expense relating to or arising out of any of the Liabilities not expressly assumed by any of the Purchasers. For the avoidance of doubt, the mention of or reference to any Liability in this Umbrella Agreement, or any of the Transaction Agreements (including without limitation the representations and warranties herein or thereto or any of the Disclosure Volume) shall not be construed as an agreement by any Purchaser to assume and/or discharge any such Liability unless otherwise expressly stated herein or therein. 2.4 In the event of any inconsistency between any of the Agreements or in the event of any dispute among the Parties to this Umbrella Agreement or any of the Transaction Agreements, it is the intention of the Parties that any such inconsistency or dispute shall be resolved consistently with the main objects and principles expressed in Clauses 2.1, 2.2 and 2.3 of this Umbrella Agreement. Simultaneously with the execution of this Umbrella Agreement, the Parties indicated below have executed the agreements specified: 2.5.1 The Danish Business Agreement between the Danish Seller and the Danish Purchaser, relating to the sale and transfer of the Danish Business, Schedule B. 2.5.2 The Danish FE Patents Agreement between the Danish Seller and Dialogic relating to the sale and transfer of the Danish FE Patents, Schedule C. 2.5.3 The Danish Remaining FE IP Agreement between the Danish Seller and the Principal Purchaser, Schedule D. 2.5.4. The Danish Base IP Agreement between the Danish Seller and the Principal Purchaser, Schedule E. 2.5.5 The Polish FE Patents Agreement between the Polish Seller and Dialogic relating to the sale and transfer of the Polish FE Patents, Schedule G. 2.5.6. The Polish Remaining FE IP Agreement between the Polish Seller and the Principal Purchaser, Schedule H. 2.5.7 The Polish Base IP Agreement between the Polish Seller and the Principal Purchaser, Schedule 1. 2.5.8 The FE IP Grant Back License Agreement between Principal Purchaser and the Danish Seller, Schedule J. Page 4 5 2.5.9 The Warranty Support Services Agreement between the Danish Purchaser and the Danish Seller, Schedule K. 2.5.10 The First Danish Hold Back Escrow Agreement between the Danish Purchaser and the Danish Seller, Schedule B.1. 2.5.11 The Second Danish Hold Back Escrow Agreement between the Danish Purchaser and the Danish Seller, Schedule B.2. 2.5.12 The First Danish Conditional Escrow Agreement between the Danish Purchaser and the Danish Seller, Schedule B.3. 2.5.13 The Second Danish Conditional Escrow Agreement between the Danish Purchaser and the Danish Seller, Schedule B.4. 2.5.14 The Sublease Agreement between the Danish Purchaser and the Danish Seller. Schedule B.10. 2.5.15 The Service Agreement between the Danish Purchaser and the Danish Seller, Schedule B.6. 2.5.16 The Polish Hold-Back Escrow Agreement between the Principal Purchaser and the Polish Seller, Schedule F.1. 2.5.17 The Intel Guaranty issued by the Principal Purchaser, Schedule B.11. 2.6 The Principal Purchaser agrees to procure the incorporation of the Polish Purchaser without undue delay and pursuant hereto to procure the execution by the Polish Purchaser of the Polish Business Agreement between the Polish Seller and the Polish Purchaser, relating to the sale and transfer of the Polish Business in the same or substantially the same form as Schedule F. Furthermore, the Principal Purchaser agrees to use reasonable commercial efforts to procure the consummation by the Polish Purchaser of the transactions contemplated by the Polish Business Agreement without undue delay. 2.7 The Danish Seller agrees to procure the execution by the Polish Seller of the Polish Business Agreement between the Polish Seller and the Polish Purchaser, relating to the sale and transfer of the Polish Business in the same or substantially the same form as Schedule F. Furthermore, the Danish Seller agrees to use reasonable commercial efforts to procure the consummation by the Polish Seller of the transactions contemplated by the Polish Business Agreement without undue delay. Page 5 6 3. COMPLETION 3.1 The completion of the transactions contemplated by this Umbrella Agreement shall be governed by the relevant Transaction Agreements. 3.2 In the event that (a) the Polish Business Agreement cannot be executed by any of the respective parties thereto or (b) any of the transactions contemplated by the Polish Business Agreement cannot be consummated on or before 31 December 1999, then the Danish Seller and the Principal Purchaser undertake to use all reasonable efforts to procure either (i) that such execution and consummation is accomplished without undue delay or (ii) that the transactions contemplated by the Danish Business Agreement shall be replaced by one or more other transactions capable of facilitating the same or substantially the same results, such other transaction(s) to be consummated by the Danish Seller and the Principal Purchaser, or their respective affiliates, without undue delay. The foregoing sentence shall not apply, however, in case of a material breach for the whole transaction by a Party to the Umbrella Agreement or its affiliate of any of the representations, warranties, agreements and undertakings in this Umbrella Agreement or in any of the Transaction Agreements. 3.3 Each Purchaser may waive any requirement or condition contained in this Umbrella Agreement or in any of the respective Transaction Agreements or may waive such requirement or condition on condition that the relevant Sellers give on the relevant date of completion a written undertaking to the relevant Purchaser in a form reasonably required by such Purchaser. 3.4 The Parties agree to use all reasonable efforts to take, or cause to be taken all actions and to do, or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Umbrella Agreement and by each of the Transaction Agreements. 4. CONDITIONS FOR COMPLETION 4.1 The obligations of the Principal Purchaser to perform its obligations pursuant to this Umbrella Agreement and/or any of the Transaction Agreements is subject to satisfaction of each of the following conditions: (1) No unfavorable injunction, judgement, order, decree, ruling, or charge by any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator would: (A) prevent to any material extent the consummation of any of the transactions contemplated by this Umbrella Agreement; or (B) save for clause 7.7, cause any of the transactions contemplated by this Umbrella Agreement to be rescinded to any material extent following consummation. Page 6 7 (2) The Danish Seller and/or the Polish Seller shall have taken all of the following action required or reasonably advisable for them to take in connection with the consummation of the transactions contemplated hereby: (i) Approval of this Umbrella Agreement and each of the Transaction Agreements by the Danish Seller's board of directors and, if decided by the Danish Seller, by a shareholders' meeting; (ii) Approval of the Polish Transaction Agreements by the Polish Seller's board of directors. 4.2 The obligations of the Purchasers to perform their respective obligations pursuant to the Danish Transaction Agreements and the Polish Transaction Agreements (with the exception of the Polish Business Agreement) shall be subject to the simultaneous consummation of all transactions contemplated thereby. 4.3 The obligations of the Polish Purchaser to perform its obligations pursuant to the Polish Business Agreement (and of the Principal Purchaser pursuant to Clause 3.2 herein) shall be subject to the prior fulfillment of the condition precedent in Clause 4.2 herein. 4.4 The obligations of the respective Purchasers to consummate the transactions contemplated by the respective Transaction Agreements shall be subject to the conditions precedent specified in each such Transaction Agreement. 5. GENERAL COVENANTS 5.1 Further Assurances Each Party shall, and shall procure that its respective affiliates shall, at the other Party's request, from time to time execute and deliver such further instruments of conveyance, assignment and transfer in addition to those specified in this Umbrella Agreement and/or in any of the Transaction Agreements, which are necessary to consummate and make effective the transactions contemplated by this Umbrella Agreement and by the Transaction Agreements, and each Party shall take, or cause or procure to be taken by it or by its affiliates, such other actions as either Party may reasonably request for more effective conveyance, assignment and transfer of the Businesses to the Purchasers. 5.2 Reasonable Efforts. Each of the Parties shall (and shall use reasonable commercial efforts to procure that their affiliates shall) co-operate and use their respective reasonable efforts to take, or cause to be taken, all appropriate actions, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Umbrella Agreement and by the Transaction Agreements. Page 7 8 5.3 Books and Records. To the extent not included in the Assets, the Principal Seller shall (and shall use reasonable commercial efforts to procure that their affiliates shall) maintain the books and records relating to the Businesses not delivered to the Purchasers at the First Completion or the Second Completion for the period during which a legal duty to do so exists according to statutory law and whenever reasonably required by the Principal Purchaser shall allow the Principal Purchaser and/or its affiliates and their respective auditors and counsel access to such books and records during normal business hours provided that the Principal Purchaser shall give the relevant Seller reasonable notice. Copies shall be provided at the Principal Purchaser's expense. 5.4 6. MUTUAL REPRESENTATIONS AND WARRANTIES Each of the Principal Purchaser, the Danish Seller and the Polish Seller (who adheres to this Umbrella Agreement for the purpose of this Clause 6) makes the following representations and warranties: 6.1 Corporate Existence/Authority The Danish Seller is a corporation duly organized and validly existing under the laws of Denmark, and has the corporate power and authority to enter into this Umbrella Agreement and each of the Transaction Agreements to which it is a party and to consummate - or procure the consummation of - the transactions contemplated hereby or thereby. The Polish Seller is a corporation duly organized and validly existing under the laws of Poland, and has the corporate power and authority to enter into this Umbrella Agreement and each of the Transaction Agreements to which it is a Party and to consummate - or procure the consummation of - the transactions contemplated hereby or thereby. The Principal Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware, U.S.A., and has the corporate power and authority to enter into this Umbrella Agreement and each of the Transaction Agreements to which it is a Party and to consummate the transactions contemplated hereby or thereby or to procure that such transactions are consummated. Page 8 9 6.2 Authorisation. The execution and delivery by the Danish Seller and the Polish Seller of this Umbrella Agreement and each of the Transaction Agreements to which it is a party and the performance by the Danish Seller hereunder and thereunder has been duly authorised by the Danish Seller, and this Umbrella Agreement and each of the Transaction Agreements to which it is a party is valid and binding on the Danish Seller and the Polish Seller and enforceable against the Danish Seller and the Polish Seller in accordance with their respective terms except when such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect which affect creditors' rights generally. The Danish Seller and the Polish Seller are not insolvent nor are any of the Danish Seller's and the Polish Seller's assets subject to attachment or seizure (in Danish: udlae eller arrest). The execution and delivery by the Principal Purchaser of this Umbrella Agreement and each of the Transaction Agreements to which it is a party and the performance by the Principal Purchaser hereunder and thereunder has been duly authorized by the Principal Purchaser, and this Umbrella Agreement and each of the Transaction Agreements to which it is a party is valid and binding on the Principal Purchaser and enforceable against the Principal Purchaser in accordance with their respective terms except when such enforceability may be limited by applicable bankruptcy, insolvency or similar laws from time to time in effect which affect creditors' rights generally. 6.3 No Conflict. Neither the execution and delivery of this Umbrella Agreement and each of the Transaction Agreements to which it is a party, nor the performance by the Danish Seller and the Polish Seller hereunder or thereunder does or will (i) violate, conflict with or constitute a default under any provision of the Danish Seller's or the Polish Seller's, respectively constitutional documents or applicable law, (ii) conflict with or result in a breach of any agreement to which the Danish Seller or the Polish Seller, respectively is a party or by which its properties are bound other than such covenants and agreements with respect to which failure to perform would not have a material adverse effect on the transactions contemplated by this Umbrella Agreement and/or by any Transaction Agreement, (iii) violate any judgement, order, injunction, decree or award of any court, administrative agency or governmental body against, or binding upon, the Danish Seller or the Polish Seller, respectively or its properties or (iv) constitute a violation by the Danish Seller or the Polish Seller, respectively of any law or regulation applicable to the Danish Seller or the Polish Seller, respectively or its properties. Neither the execution and delivery of this Umbrella Agreement and/or by any Transaction Agreement, nor the performance by the Principal Purchaser hereunder or thereunder does or will (i) violate, conflict with or constitute a default under any provision of the Principal Purchaser's constitutional documents or applicable law, (ii) conflict with or result in a Page 9 10 breach of any agreement to which the Principal Purchaser is a party or by which its properties are bound other than such covenants and agreements with respect- to which failure to perform would not have a material adverse effect on the transactions contemplated by this Umbrella Agreement and/or by any Transaction Agreement,, (iii) violate any judgement, order, injunction, decree or award of any court, administrative agency or governmental body against, or binding upon, the Principal Purchaser or its properties or (iv) constitute a violation by any the Principal Purchaser of any law or regulation applicable to the Principal Purchaser or its properties. 6.4 No Consents. The execution, delivery and performance by the Danish Seller and the Polish Seller respectively of and the consummation of the transactions contemplated by this Umbrella Agreement and/or by any Transaction Agreement do not require approval from any shareholder, any holder of any indebtedness or obligation of any the Danish Seller and the Polish Seller respectively, or any other person, or any notice to or filing or recording with, or any consent or approval of, any governmental body except as specified in the conditions precedent of this Umbrella Agreement and/or by any Transaction Agreement, which consents shall have been obtained and shall be in full force and effect as of the First Completion Date. The Danish Seller and the Polish Seller respectively has received written advice from its legal counsel which support the aforesaid representation with regard to company law matters. The execution, delivery and performance by the Principal Purchaser of and the consummation of the transactions contemplated by this Umbrella Agreement and/or by any Transaction Agreement do not require approval from any shareholder, any holder of any indebtedness or obligation of any the Principal Purchaser, or any other person, or any notice to or filing or recording with, or any consent or approval of, any governmental body except as specified in the conditions precedent of this Umbrella Agreement and/or by any Transaction Agreement, which consents shall have been obtained and shall be in full force and effect as of the First Completion Date. 6.5 Legal proceedings. There are no actions, suits or proceedings pending, or to the Danish Seller's and the Polish Seller's respectively knowledge threatened against the Danish Seller and the Polish Seller respectively or its properties before any court, arbitrator, administrative or governmental body that, if adversely determined, would hinder or prevent the Danish Seller's and the Polish Seller's respectively ability to carry out the transactions contemplated by this Umbrella Agreement and/or by any Transaction Agreement, or affect the right, title or interest of any of the Purchasers in the Businesses or any part thereof and, as far as the Danish Seller and the Polish Seller respectively is aware, there is no basis for any such suits or proceedings. There are no actions, suits or proceedings pending, or to the Principal Purchaser's knowledge threatened against the Principal Purchaser or its properties before any court, arbitrator, administrative or governmental body that, if adversely determined, would Page 10 11 hinder or prevent the Principal Purchaser's ability to carry out the transactions contemplated by this Umbrella Agreement or by any Transaction Agreement, or affect the right, title or interest of any of the Purchasers in the Businesses or any part thereof and, as far as the Principal Purchaser is aware, there is no basis for any such suits or proceedings. 6.6 the Sellers nor any affiliate of a Seller has during the period of 12 months immediately preceding the First Completion or the Second Completion respectively transferred, assigned or licensed any part of the fixed and loose assets (with regard to fixed and loose assets, to any material extent), the employees, the leases or the intellectual property rights pertaining to the Businesses, to any affiliate of a Seller or to any third party other than (i) in the ordinary course of business and (ii) the grant of a non-exclusive license to Madge Networks N.V. as reflected in the Transaction Agreements. 6.7 Each of the representations and warranties made by the Sellers in this Umbrella Agreement and/or in any of the Transaction Agreements (including without limitation the schedules and exhibits thereto) shall be incorporated by reference in this Umbrella Agreement. Any breach by any Seller of any of the representations and warranties made by any Seller in any of the Transaction Agreements (including any schedule or exhibit thereto) shall be deemed to constitute a breach of the representations and warranties made by the Danish Seller in this Umbrella Agreement. 7. INDEMNIFICATION 7.1 The Danish Seller and the Polish Seller (who shall adhere to this Umbrella Agreement) shall indemnify and hold harmless each of the Purchasers from and against any and all loss, damage, cost or expense (including legal fees and expenses), judgements and fines (collectively, "Damages") (i) caused by any misrepresentation, breach of warranty or failure to fulfil any covenant, undertaking or agreement of any of the Sellers contained herein or in any of the Transaction Agreements or in any schedule or exhibit hereto or thereto or in any agreement or document delivered or to be delivered pursuant to this Umbrella Agreement or any of the Transaction Agreements, or (it) arising from any action or inaction of the Danish Seller and/or the Polish Seller after the First Completion or the Second Completion respectively, other than in accordance with the terms of this Umbrella Page 11 12 Agreement and/or any Transaction Agreement or any schedule or exhibit hereto or thereto or any agreement or document delivered or to be delivered pursuant to this Umbrella Agreement or any of the Transaction Agreements. The Danish Seller acknowledges that the Purchasers have relied on the representations and warranties given by the Sellers in this Umbrella Agreement and the Transaction Agreements and in any schedule or exhibit hereto or thereto. The Parties agree that the Sellers' representations and warranties, agreements, indemnities and covenants in this Umbrella Agreement and any Transaction Agreement or any schedule or exhibit hereto or thereto shall not operate to relieve any of the Sellers from any liability which would otherwise apply under general principles of Danish law. 7.2 7.3 In the event that any third party forwards a claim against any Purchaser relating to any event or circumstance prior to the relevant Completion and/or any act or omission of a Seller (a "THIRD PARTY CLAIM"), such Purchaser must give prompt notice to the relevant Seller of the Third Party Claim. The relevant Seller may, at its sole cost and expense, upon notice to the relevant Purchaser within thirty (30) days after the relevant Seller receives notice of the Third Party Claim, assume the defense of the Third Parry Claim, with counsel of its choice. The relevant Seller shall not consent to a settlement of, or the entry of any judgement arising from any Third Party Claim, unless; (i) the settlement or judgement is solely for money damages and the relevant Seller shall have provided unconditional and irrevocable security for the fulfillment of such settlement or judgement, including any costs awarded to the relevant third party or; (ii) the relevant Purchaser consents thereto, which consent shall not be unreasonably withheld. The relevant Seller shall provide the relevant Purchaser with thirty (30) days prior notice before it consents to a settlement of, or the entry of a judgement arising from, any Third Party Claim. The Purchasers shall be entitled to participate in the defense of (but not control) any Third Party Claim, the defense of which is assumed by the relevant Seller, with its own counsel and at its own expense. The relevant Seller and the relevant Purchaser shall co-operate in the defense of any Third Party Claim and the relevant records of each party shall be made available on a timely basis. If the relevant Seller does not assume the defense of any such claim or proceeding resulting therefrom in accordance with the terms hereof, the relevant Purchaser may defend such claim or proceeding in a reasonable manner, including settling such claim or Page 12 13 proceeding on such terms as the relevant Purchaser may deem appropriate after giving thirty (30) days' notice of the same to the relevant Seller. 7.4 The Principal Purchaser shall procure that on service of any notice to the Danish Seller of any claim for breach of this Umbrella Agreement or any Transaction Agreement or any of the schedules or exhibits hereto or thereto, the relevant Purchaser shall: 7.4.1 take any action the Sellers may reasonably request to avoid or dispute or resist or appeal or compromise or defend a claim in relation to a third party subject to the relevant Purchaser being indemnified by the Danish Seller against all losses, costs, damages and expenses incurred by that action; 7.4.2 allow the Sellers and their agents access at all reasonable times to and to inspect and take copies of all necessary books and records of the relevant Purchaser-, 7.4.3 require the personnel of the relevant Purchaser to provide statements and proof of evidence and, as commercially reasonable, to attend any trial or hearing to give evidence or otherwise and to provide similar assistance to enable the Sellers to avoid or dispute or resist or appeal or compromise or defend any claim; 7.4.4 take or procure that any relevant subsidiary shall take all reasonable steps necessary to mitigate any loss in relation to any action or claim. 7.5 The provisions in Clause 7.3 shall apply mutatis mutandis in the event that any third party forwards a claim against any Seller relating to any event or circumstance prior to Completion of any transaction contemplated by this Umbrella Agreement or any Transaction Agreement or any schedule or exhibit hereto or thereto; and/or any act or omission of a Purchaser. 7.6 To the extent that a Seller discharges any claim by a Purchaser for indemnification pursuant to this Umbrella Agreement or any of the Transaction Agreements or any schedule or exhibit hereto or thereto, the relevant Seller shall be subrogated to all rights of such Purchaser against third parties. 7.7 Exclusion of Remedies. The Parties agree that following completion of any transaction contemplated by this Umbrella Agreement or any Transaction Agreement or any schedule or exhibit hereto or thereto, no Party to this Umbrella Agreement shall be entitled to rescind (in Danish: "haeve aftalen") this Umbrella Agreement or the respective Transaction Agreement or any schedule or exhibit hereto or thereto in respect of any such transaction except as stipulated in Clause 9. For the avoidance of doubt, any other remedies available to the Purchasers under the law or in equity, including without limitation the right to claim specific performance and/or injunctive relief, shall not be excluded. Page 13 14 7.8 Specific Performance Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event that any of the provisions of this Umbrella Agreement and/or in any of the Transaction Agreements are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that each other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Umbrella Agreement and to enforce specifically this Umbrella Agreement and the terms and provisions hereof in any action instituted in any court in addition to any other remedy to which it may be entitled, at law or in equity. 7.9 Claims against the Escrow Accounts. In the event that any Purchaser has a claim for indemnification hereunder or under any Transaction Agreement or any schedule or exhibit hereto or thereto, such Purchaser shall be entitled to notify the claim to the Danish Escrow Bank in accordance with the terms and conditions of the Escrow Agreements. For the avoidance of doubt, all of the Escrow Accounts established pursuant to the terms of any Transaction Agreement or any schedule or exhibit thereto shall, subject to Clause 8 of this Umbrella Agreement, serve as collateral for any claim by any Purchaser hereunder or under any Transaction Agreement or any schedule or exhibit hereto or thereto. 7.10 Right of Set 0ff Subject to Clause 8 of this Umbrella Agreement, each Purchaser shall be entitled to set off the amount of any claim against any Seller against any amount due and owing by any Purchaser to any Seller or its assignee. 8. LIMITATIONS OF SELLERS' LIABILITY 8.1 The liability of the Sellers under this Umbrella Agreement and the Transaction Agreements and any schedules or exhibits hereto or thereto shall be limited in accordance with the provisions of Clauses 8.2 to 8.15 of this Umbrella Agreement (inclusive). 8.2 The liability of the Sellers under this Umbrella Agreement and the Transaction Agreements and any schedules or exhibits hereto or thereto shall cease on the first anniversary of the First Completion except as regards any alleged specific breach in respect of which notice in writing (containing reasonable details of the event or circumstances giving rise to the breach and a reasonable estimate of the amount of the liability in question or if such amount is not possible to determine the Purchasers best estimate of such amount). Notwithstanding the foregoing, the representations and warranties in Clauses 6.1 to 6.5 herein shall survive indefinitely, 8.3 Where in relation to a claim for damages under this Umbrella Agreement and the Transaction Agreements and the schedule and exhibits hereto and thereto, a notice has Page 14 15 been served in accordance with Clause 14 of this Umbrella Agreement then unless proceedings are commenced in respect of that claim by the issue and service of legal process (which are not satisfied or withdrawn or settled) within two (2) months of the date of the notice the Sellers shall cease to be under any liability in respect of that claim. 8.4 The Sellers shall not be liable for breach of this Umbrella Agreement and the Transaction Agreements and the schedules and exhibits hereto and thereto unless: (a) (b) 8.5 8.6 The Sellers shall not be liable in respect of any claim for whatever reason, if the claim: 8.6.1 occurs or arises as a result of any change or changes in legislation made after the Completion; 8.6.2 occurs or arises wholly or parity out of or as a result of or in connection with: 8.6.2.1 any change in the nature of the Businesses or in the manner of conducting the Businesses after the Completion; 8.6.2.2 any asset acquired by the Purchasers or any of its affiliates after the date of Completion; or 8.6.2.3 any matter or thing that has been or is made good or otherwise compensated for at no expense to the Purchasers. 8.7 Any payment made in respect of any claim by the Sellers shall be deemed (as between the Sellers and the Purchasers) to be a reduction in the Danish Purchase Price and the Polish Purchase Price, as applicable, payable by the Sellers to the Purchasers under this Umbrella Agreement and the Transaction Agreements. 8.8 The Parties each agree that they have not entered into this Umbrella Agreement and Transaction Agreements in reliance upon any representation or promise other than those incorporated herein or therein and acknowledge that they have not relied upon, and will make no claim hereafter in respect of any such representation or promise made by or on behalf of the Sellers. Page 15 16 8.9 The Sellers shall not be liable in respect of any breach of any of the representation and warranty if and to the extent that the loss occasioned thereby has been recovered under the same or any other representation and warranty, 8.10 Subject to clause 12, the representation and warranty and any indemnities or undertakings given or made by the Sellers in this Umbrella Agreement and the Transaction Agreements and the schedules or the exhibits hereto and thereto shall be actionable only by the Purchasers or any of them and no other party, shall be entitled to make any claim or to take any action whatsoever against the Sellers under or arising out of or in connection therewith. 8.11 The Purchasers shall not be entitled to claim that any fact, matter, or circumstance constitutes a breach of this Umbrella Agreement or the Transaction Agreements or the schedules or the exhibits hereto or thereto or gives rise to a claim hereunder or thereunder if or to the extent that such fact, matter, or circumstance has been reasonably disclosed in the Disclosure Volume. 8.12 If any of the Sellers pays to any of the Purchasers an amount in respect of any claim under this Umbrella Agreement or the Transaction Agreements or the schedules or the exhibits hereto or thereto and any of the Purchasers subsequently recovers from a third party (including any insurer or tax authority) a sum which is referable to that claim (including any tax saving), such Purchaser shall forthwith repay to such Seller so much of the amount paid by such Seller does not exceed the sum recovered from the third party less all reasonable costs, charges, and expenses incurred by such Purchaser in obtaining that payment and in recovering that sum from the third party. 8.13 To the extent that any representation and warranty is made in respect of a corresponding liability, the Sellers shall not be liable to make any payment in respect of any breach of any of the representations and warranties unless and until one of the Purchasers has become finally liable to make payment in respect of any corresponding liability. 8.14 Exclusion of limitations. None of the limitations set out in Clause 8 or anywhere else in this Umbrella Agreement and the Transaction Agreements and any schedules or exhibits hereto or thereto shall apply in any circumstances where the breach of a representation, warranty or covenant made by a Seller arises out of or as a result of fraud or willful or grossly negligent (in Danish: "forsaet eller grov uagtsomhed") misrepresentation, concealment, mis-statement or other similar willful or grossly negligent conduct of such Seller or any of its respective directors, officers or employees. 8.15 The Sellers shall not be liable for loss of profits, revenues and savings. Page 16 17 9. TERMINATION OF THE UMBRELLA AGREEMENT 9.1 The Principal Purchaser may terminate this Umbrella Agreement and any of the Transaction Agreements by giving written notice to the Danish Seller at any time prior to the completion of all of the Transaction Agreements (provided that if termination occurs after the completion of some - but not all - of the transactions contemplated by the Transaction Agreements, such termination shall take effect only in respect of such transactions which remain uncompleted at the time of such termination) in the following events: A. in the event that any Seller has breached in any material respect any material representation, warranty, or covenant contained in this Umbrella Agreement or in any of the Transaction Agreements or in any schedule or exhibit hereto or thereto and the Principal Purchaser has notified the Danish Seller of such breach, and the breach has continued without cure for a period of 14 days after the notice of breach. The Parties agree: that for the purpose of this Clause 9.1 a "breach in any material respect" shall be construed in the context of the transactions contemplated by the Umbrella Agreement and the Transaction Agreements as a whole, provided that for the purposes solely for determining the Purchaser's right to terminate under this Clause any breach by any Seller of its representations and warranties in respect of Clauses 6.1 (corporate existence/authority), 6.2 (authorization), 6.3 (no conflict), 6.4 (no consents) or 6.5 (legal proceedings) (or similar representations made in respect of any of the Transaction Agreements shall be considered "a breach in any material respect"; or B. if on or before 31 December 1999, any transaction contemplated by this Umbrella Agreement or any Transaction Agreement has not been completed provided, that such non-completion is attributable to events and/or circumstances for which any of the Sellers bears the risk. 9.2 If any Party terminates this Umbrella Agreement pursuant to this clause 9, all rights and obligations of the Parties under this Umbrella Agreement and under any Transaction Agreement which has not been completed shall terminate without any liability of any party thereto or hereto (except for any liability of any party hereto or thereto then in breach of this Umbrella Agreement or any uncompleted transaction under any Transaction Agreement). For the avoidance of doubt, the termination of this Umbrella Agreement and any uncompleted Transaction Agreement shall be without prejudice to the rights and obligations of any Seller and any Purchaser under any Transaction Agreement which has been completed and under this Umbrella Agreement in respect of any such completed Transaction Agreements. Page 17 18 10. CONFIDENTIALITY PRESS RELEASES AND PUBLIC ANNOUNCEMENTS 10.1 The terms and conditions of this Umbrella Agreement and all of the Transaction Agreements, including their existence, shall be considered confidential information and shall not be disclosed by any party hereto or thereto to any third party except in accordance with the provisions set forth below. 10.2 No party shall issue any press release or make any public announcement relating to the subject matter of this Umbrella Agreement or any of the Transaction Agreements without the prior written approval of the other Parties. No other announcements regarding this Umbrella Agreement or any of the Transaction Agreements in any press release, conference, advertisement, announcement, professional or trade publication, mass marketing materials or otherwise to any third party may be made without such prior written consent. 10.3 Notwithstanding the foregoing, any Party may disclose any element of this Umbrella Agreement or any of the Transaction Agreements to its current employees on a 'necessity to know' basis, investment bankers, lenders, accountants and legal advisors, in each case only where such persons or entities are under appropriate nondisclosure obligations. 10.4 In the event that any Party is requested or becomes legally compelled (including without limitation, pursuant to securities laws and regulations (which shall include the applicable rules governing securities listed on Kobenhavns Fondsbors and Nasdaq)) to disclose the existence or contents of this Umbrella Agreement or any of the Transaction Agreements in contravention of the provisions of this clause, such Party (the "Disclosing Party") shall provide the other Parties (the "Non-Disclosing Parties") with prompt written notice of that fact so that the appropriate party may seek (with the co-operation and reasonable efforts of the other Parties) a protective order, confidential treatment or other appropriate remedy. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information to the extent reasonably requested by any Non-Disclosing Party. 10.5 The provisions of this Clause 10 shall be in addition to, and not in substitution for, the provisions of any separate non-disclosure agreement executed by any of the Parties hereto with respect to the transactions contemplated hereby. Additional disclosures and exchange of confidential information between the Danish Seller and the Principal Purchaser shall be governed by the terms of the corporate non-disclosure agreement number 102755, dated 6th August 1999, executed by the Danish Seller and the Principal Purchaser, and any confidential information transmittal records provided in connection therewith. 10.6 All notices required under this clause shall be made pursuant to Clause 14 of this Umbrella Agreement. The foregoing duty to provide notice shall not prevent or restrict a party from disclosing facts, if legal requirements do not permit a party to give such notice before disclosing. Page 18 19 11. ENTIRE AGREEMENT This Umbrella Agreement and the Transaction Agreements (including the documents referred to and the Schedules attached hereto and thereto) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. 12. SUCCESSION AND ASSIGNMENT This Umbrella Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Umbrella Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties; provided, however, that each Purchaser may (i) assign any or all of its rights and interests hereunder or under any of the Transaction Agreements to one or more of its affiliates and (ii) designate one or more of its affiliates to perform its obligations hereunder or under any of the Transaction Agreements (in any or all of which cases such Purchaser nonetheless shall remain responsible for the performance of all of its obligations hereunder). 13. COUNTERPARTS This Umbrella Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 14. NOTICES All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if delivered solely in accordance with the following alternative methods of delivery, and shall be deemed to be given: (a) following receipt on the next business day in the place of receipt after delivery, if delivered by hand; (b) two (2) business days after delivery, if delivered by Federal Express or similar internationally recognized overnight courier, freight prepaid; or (c) two (2) business days after delivery, if delivered by confirmed facsimile transmission. Any such notice, request, demand, claim or other communication shall be addressed: if to the Principal Purchaser, at: Page 19 20 Intel Corporation 2200 Mission College Boulevard Santa Clara CA 95052 USA Attn.: M&A Portfolio Manager (MIS RN6-46) Fax: + 1 (408) 765 6038 with a copy to: Intel Corporation 2200 Mission College Boulevard Santa Clara CA 95052 USA Attn.: General Counsel (M/S SC4-203) Fax: + 1 (408) 765 7056 if to the Danish Seller at: Olicom A/S Nybrovej 114 2800 Lyngby Denmark Attn.: Legal Affairs Fax: +45 45 27 01 01 or at such other address as a party may designate by ten (10) days' advance written notice to the other parties pursuant to the provisions above. 15. AMENDMENTS AND WAIVERS No amendment of any provision of this Umbrella Agreement and/or any of the Transaction Agreements and/or any schedule or exhibit hereto or thereto shall be valid unless the same shall be in writing and signed by each Party to the relevant Agreement. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. Page 20 21 16. SEVERABILITY Any term or provision of this Umbrella Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 17. EXPENSES Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Umbrella Agreement and the transactions contemplated hereby. The Sellers shall carry all costs and expenses in relation to stamp duty, value added tax or other levies arising out of or as a result of this Umbrella Agreement, the Transaction Agreements, any schedule and exhibit hereto or thereto and the transactions contemplated hereby and thereby. 18. PROPER LAW AND JURISDICTION Save for the enforcement of any Intellectual Property outside of Denmark and subject to specific election of a different system of law and/or dispute resolution venue in any of the Transaction Agreements the construction and validity and performance of' this Umbrella Agreement and any of the schedules and exhibits hereto shall be governed by the laws of Denmark: and each Party submits to the exclusive jurisdiction of the Danish courts for the purposes of determining any dispute arising out of this Umbrella Agreement. Page 21 22 SCHEDULE A DEFINITIONS Page 22 23 SCHEDULE B DANISH BUSINESS AGREEMENT Page 23 24 SCHEDULE C DANISH FE PATENTS AGREEMENT Page 24 25 SCHEDULE D DANISH REMAINING FE IP AGREEMENT Page 25 26 SCHEDULE E DANISH BASE IP AGREEMENT Page 26 27 SCHEDULE F POLISH BUSINESS AGREEMENT Page 27 28 SCHEDULE G POLISH FE PATENTS AGREEMENT Page 28 29 SCHEDULE H POLISH REMAINING FE IP AGREEMENT Page 29 30 SCHEDULE I POLISH BASE IP AGREEMENT Page 30 31 SCHEDULE J FE IP GRANT BACK LICENCE AGREEMENT Page 31 32 SCHEDULE K WARRANTY SUPPORT AGREEMENT Page 32 33 THIS UMBRELLA AGREEMENT IS SIGNED BY: FOR THE PRINCIPAL PURCHASER INTEL CORPORATION By: /s/ C. L. Turner Name: C. L. Turner Title: Attorney-In-Fact Page 33 34 THIS UMBRELLA AGREEMENT IS SIGNED BY: FOR THE DANISH SELLER OLICOM A/S By: /s/ N. C. Furu Name: N. C. Furu Title: CEO In adherence by Polish Seller OLICOM POLAND Sp. z.o.o. By: /s/ Lars Larsen Name: Lars Larsen Title: Vice President Page 34 EX-3.10 4 STOCK PURCHASE AGREEMENT DATED OCTOBER 26, 1999 1 Exhibit 3.10 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into as of October 26, 1999, by and among Olicom A/S (Reg. No. A/S 101.733), a corporation organized and existing under the laws of the Kingdom of Denmark ("Olicom"), Olicom Ventures A/S (Reg. No. A/S 205.748), a corporation organized and existing under the laws of the Kingdom of Denmark and a subsidiary of Olicom ("Seller") and Motorola, Inc., a Delaware corporation ("Buyer"). R E C I T A L S A. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer shares (the "Shares") of common stock of Digianswer A/S (Reg. No. A/S 151.570), a corporation organized and existing under the laws of the Kingdom of Denmark ("Digianswer") with a nominal value of 2,017,000 DKK (the "Shares") representing sixty-six and 85/100 percent (66.85%) of the issued and outstanding shares of Digianswer and owned by Seller (the "Common Stock"), in consideration of __________________ (the "Purchase Price"), upon the terms and subject to the conditions set forth herein (the "Purchase"). B. Unless the context otherwise so requires the term the "Company" shall include a reference to each of Digianswer and Digianswer Ireland, Ltd. (the "Subsidiary"). C. In connection with the Purchase, Buyer, Olicom, the Company, Ole Jensen ("OJ") and Seller desire to enter into certain other agreements, upon the terms and subject to the conditions set forth herein. A G R E E M E N T S NOW, THEREFORE, in consideration of the respective representations, warranties, agreements and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 PURCHASE AND SALE OF THE SHARES 1.1 Purchase and Sale of the Shares. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing (as hereinafter defined) Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Shares, free and clear of all liens, security interests, claims, charges, rights of another, defects in title and encumbrances of any kind or character ("Liens") and restrictions on transfers imposed by the Shareholders' Agreement (as hereinafter defined) and all applicable Danish law. Seller shall deliver the Shares to Buyer at the Closing by delivering to Buyer one or more share certificates representing the Shares to be purchased by Buyer hereunder, executed by a duly authorized officer of Seller duly endorsed in blank or accompanied by assignment(s) separate from certificate(s). 1 2 ARTICLE 2 MANNER OF PAYMENT ARTICLE 3 CLOSING 3.1 Purchase Closing. The closing of the Purchase (the "Closing") will take place at the offices of Holleb & Coff, 55 East Monroe, Suite 400, Chicago, Illinois as soon as practicable, but in no event later than ten (10) days from the date of this Agreement or such other date as may be agreed to by the parties hereto (the "Closing Date"). For purposes of this Agreement, each and every event referred to in this Section 3.1 that is to occur at the Closing shall be deemed to have occurred contemporaneously. 2 3 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF OLICOM AND SELLER Olicom and Seller hereby jointly and severally represent and warrant to Buyer as follows (with the understanding that Buyer is relying on such representations and warranties in entering into and performing this Agreement): 4.1 Organization, Good Standing, Etc. Each of the Company, Olicom and Seller is a corporation duly organized, validly existing and in good standing under the laws of the Kingdom of Denmark and Ireland, as applicable, has all requisite corporate power and authority to own, lease and operate its respective properties and to carry on its respective business as now being conducted and is duly qualified and in good standing to do business, except where the failure to so qualify or be in good standing has not had, or could not be reasonably expected to have, a material adverse effect on the business, operations, properties, condition (financial or otherwise), results of operations, assets or liabilities of the Company (a "Material Adverse Effect"). Attached as Exhibit E1 to this Agreement are (i) true and complete copies of the resume of Danish Commerce and Companies Agency ("DCAA") which reflects Digianswer's current Articles of Association; and (ii) true and complete copies of the Subsidiary's Memorandum and Articles of Association, attached hereto as Exhibit E2, which copies set out in full the rights and restrictions attaching to each class of share capital in the Subsidiary. The Company is not in violation of any provisions of its Articles of Association or, to the Seller's knowledge, the Rules of Procedure for the Board of Directors. Except for the Subsidiary, the Company does not own, directly or indirectly, any subsidiaries (as defined in Section 14.13) or own, or have the right, pursuant to a contract or otherwise, to acquire any capital stock, equity interest or other similar investment in any corporation, partnership, joint venture, association, limited liability company, trust or other entity. 4.2 Capital Structure. (a) The authorized share capital of the Company consists of DKK 3,017,000 represented by share certificate numbers 1 through 9 and 11 through 26, which represent all of the Common Stock issued and outstanding. Attached hereto as Schedule 4.2(a) is a true, complete and accurate list of each record holder of capital stock of Digianswer and the number of shares of Common Stock held by each such holder. Seller owns twelve (12) shares of Digianswer which represent a total of sixty-six and 85/100ths (66.85%) of the economic interest in Digianswer. (b) The authorized share capital of the Subsidiary is EUR100,000 divided into 100,000 shares having a nominal value of EUR1 each. There are 2 shares of EUR1 in issue. The issued share capital is beneficially owned by Digianswer free of any Liens. No shares of Common Stock are held by the Company in its treasury. No shares of capital stock of the Company are reserved for issuance for any purpose. There are no bonds, debentures, notes or other indebtedness issued or outstanding having the right to vote ("Voting Debt") on any matters on which holders of Common Stock may vote. All of the issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and have not been issued in violation of any preemptive or similar rights. Except as set forth on Schedule 4.2(b), there are no options, warrants, calls, rights, commitments or agreements of any character to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt of the Company, or obligating the Company to grant, extend or enter into any 3 4 such option, warrant, call, right, commitment or agreement. Except as set forth on Schedule 4.2(c), there are no outstanding contractual obligations of the Company to sell, dispose of, repurchase, redeem or otherwise acquire any shares of Common Stock or other capital stock of the Company. 4.3 Authority. Olicom and Seller each has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and Olicom, Seller and the Company have all requisite corporate power and authority to enter into each other agreement, document and instrument required to be executed in accordance herewith, including, without limitation, each of the documents the forms of which are attached as Exhibits hereto (collectively, and including this Agreement, the "Transaction Documents") and to consummate the transactions contemplated thereby. The execution and delivery of the Transaction Documents by the Company, Olicom and Seller, as applicable, and the consummation by the Company, Olicom and Seller of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company, Olicom and Seller. This Agreement and each of the other Transaction Documents have been duly executed and delivered by the Company, Olicom and Seller, as applicable, and constitute the valid and binding obligations of the Company, Olicom and Seller, enforceable against each of them, as applicable, in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and as provided for under The Securities Trading Act (Act N. 1072 of 20 December 1995 with amendments). 4.4 No Conflict; Required Filings and Consents. The execution and delivery of the Transaction Documents by the Company, Olicom and Seller, as applicable, do not, and the performance by the Company, Olicom and Seller, as applicable, of the transactions contemplated hereby or thereby will not, subject to making the filings and obtaining the consents, approvals and authorizations described in Schedule 4.4, violate, conflict with, or result in any breach of any provision of the Articles of Association or Rules of Procedure for the Board of Directors, as amended or restated, of the Company, Olicom or Seller, violate, conflict with, or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination of, or result in the acceleration of, or entitle any party to accelerate (whether as a result of a change in control of the Company or otherwise) any obligation, or result in the loss of any benefit, or give any person the right to require any security to be repurchased, or give rise to the creation of any lien, charge, security interest or encumbrance upon any of the properties or assets of the Company under any of the terms, conditions, or provisions of, any loan or credit agreement, note, bond, mortgage, indenture or deed of trust, or any license, lease, agreement or other instrument or obligation to which the Company, Olicom or Seller is a party or by which the Company, Olicom or Seller or any of their respective properties or assets may be bound or subject, except for such violations, conflicts, breaches, defaults, terminations, accelerations, losses or other such events as have not had, or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or violate any order, writ, judgment, injunction, decree, statute, rule or regulation of any court or any federal, state or local administrative agency or commission or other United States or foreign governmental authority or instrumentality (a "Governmental Entity") applicable to the 4 5 Company, Olicom or Seller or by which or to which any of their properties or assets are bound or subject ("Applicable Laws"), except for such violations as have not had, or could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. No consent, approval, order, or authorization of, or registration, declaration, or filing with, any Governmental Entity is required by or with respect to the Company, Olicom or Seller in connection with the execution and delivery of the Transaction Documents by the Company, Olicom or Seller or the consummation of the transactions contemplated hereby or thereby, except for applicable requirements, if any, of the Danish securities law or the Danish Corporation law. 4.5 Financial Statements. Attached hereto as Schedule 4.5 is a copy of the Company's audited balance sheets as of April 30, 1999, April 30, 1998 and April 30, 1997, and the income statements for each of such 12-month periods then ended and the Company's unaudited balance sheet as of September 30, 1999 and the related income statement for that period then ended (collectively, the "Financial Statements"). The Financial Statements are complete and correct, have been prepared in accordance with Danish GAAP consistently applied and present fairly the financial position of the Company as at their respective dates and the profits and losses of the Company for the periods then ended. The financial books and records of the Company have been maintained in accordance with reasonable business practices. The information provided in the Financial Statements as of September 30, 1999 (the "Most Recent Balance Sheet Date") was not misleading, and since the Most Recent Balance Sheet Date no event has occurred which has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company has no liabilities, contingent or otherwise, other than: (i) liabilities disclosed in the Financial Statements; (ii) liabilities incurred since the Most Recent Balance Sheet Date in the ordinary course of business, none of which individually or in the aggregate are material; (iii) obligations under contracts and commitments incurred in the ordinary course of business, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company; and (iv) liabilities and obligations set forth on Schedule 4.5. Since the Most Recent Balance Sheet Date, the Company has conducted its business only in the ordinary course consistent with pat practice. 4.6 Net Worth. Olicom and the Seller represent and warrant that as of the date of execution of this Agreement and as of the Closing Date the Net Worth of the Company shall be at least Three Million (3,000,000) DKK more than the Net Worth of the Company as of April 30, 1999. At the Closing, Olicom and Seller shall deliver to Buyer a certificate representing the foregoing. 4.7 Compliance with Applicable Laws; Licenses and Permits. (a) The business of the Company has been conducted in compliance with each law, ordinance, regulation, judgment, decree, injunction, rule or order of any Governmental Entity binding on the Company or any of its properties or assets ("Applicable Laws"), except for such failures to comply which have not had, or could not reasonably be expected to have, a Material Adverse Effect. No investigation or review by any Governmental Entity with respect to the Company is pending or, to the Knowledge of Olicom or Seller, threatened. To the Knowledge of Olicom and Seller, none of the Company, its directors and officers, or any person acting with their knowledge, has made any payment to, or conferred any benefit, directly or indirectly, on suppliers, customers, employees, or agents of suppliers or customers, or officials or 5 6 employees of any government or agency or instrumentality of any government (domestic or foreign) or any political parties or candidates for office, which is or was unlawful under any applicable law. The Company filed all forms, reports, statements, and other documents required to be filed with any Governmental Entities, except where the failure to file such forms, reports, statements or other documents under this Section 4.7(a) would not have a Material Adverse Effect. (b) The Company has all licenses, permits, approvals, authorizations and consents of all Governmental Entities and all certification organizations required for the conduct of its businesses (as presently conducted) and operation of its facilities. All such licenses, permits, approvals, authorizations and consents, if any, are described in Schedule 4.7(b), and copies of such documents have been delivered to Buyer, are in full force and effect and will not be affected or made subject to loss, limitation or, except as set forth on Schedule 4.7(b)(i), any obligation to reapply as a result of the transactions contemplated hereby. Except as set forth in Schedule 4.7(b) and for such incidental infractions as mentioned above, the Company (including its operations, properties and assets) are and have been in compliance with all such permits and licenses, approvals, authorizations and consents. 4.8 Absence of Litigation. The Company is not a party to and there is no claim, action, suit, inquiry, judicial or administrative proceeding, grievance or arbitration pending, or to the Knowledge of Seller and Olicom, threatened against the Company, any of its officers or directors or any of its respective properties or assets by or before any arbitrator or Governmental Entity and, to the Knowledge of Olicom and Seller, there are no facts likely to give rise thereto. Nor to the Knowledge of Seller and Olicom are there any investigations relating to the Company, any of its officers or directors or any of its properties or assets pending or threatened by or before any arbitrator or Governmental Entity. There is no judgment, decree, injunction, order, determination, award, finding or letter of deficiency of any Governmental Entity or arbitrator outstanding against the Company or any of its properties or assets or to the Knowledge of Seller and Olicom, any of its officers or directors. There is no action, suit, inquiry, judicial or administrative proceeding pending or, to the Knowledge of Seller and Olicom, threatened against the Company, Olicom or Seller relating to the transactions contemplated by this Agreement or the other Transaction Documents. There are no unfunded settlements or other settlements or letters of commitment or conciliation agreements that the Company or any of its officers or directors has entered into with any party, including any Governmental Entity. 4.9 Insurance Matters. Schedule 4.9(a) lists the current insurance policies (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which the Company is a party, a named insured, or otherwise the beneficiary of coverage. With respect to each such insurance policy: (i) the policy is legal, valid, binding, enforceable, and in full force and effect; (ii) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iii) the Company is not in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit termination, modification or acceleration, under the policy; and (iv) no third party to the policy has repudiated any provision thereof to the Knowledge of Seller and Olicom. The Company is covered by insurance in scope and amount customary and reasonable for the businesses in which 6 7 it is or has been engaged and the business environment in which it is operating. To Seller's and Olicom's Knowledge, they have caused the Company to deliver to Buyer all insurance policies within the Company's or OJ's possession. Schedule 4.9(b) describes any self-insurance arrangements affecting the Company. 4.10 Title and Related Matters. (a) The Company has, under all applicable laws, good and marketable title to all the properties, interests in properties and assets, real and personal, reflected in the Financial Statements or acquired after the date of the Financial Statements (except properties, interests in properties and assets sold or otherwise disposed of since the date of the Financial Statements in the ordinary course of business), free and clear of all mortgages, liens, pledges, charges or encumbrances of any kind or character, except the lien of current taxes not yet due and payable. The equipment of the Company used in the operation of its business is in good operating condition and repair, normal wear and tear excepted. Schedule 4.10(a) contains a description of all real property and personal property with a value in excess of $50,000 leased, subleased or owned by the Company. (b) All of the buildings, structures and appurtenances situated on the real property, reflected in the Financial Statements or acquired after the date of the Financial Statements, except those disposed of since the date of the Financial Statements and the other real property leased by the Company are in good operating condition and in a state of maintenance and repair deemed adequate and suitable by the Company for the purposes for which such buildings, structures and appurtenances are presently being used. With respect to each such building, structure and appurtenance, the Company has adequate rights of ingress and egress for operating its business in the ordinary course. To the Knowledge of the Seller and Olicom, the Company has not received any notice that any such building, structure or appurtenance: (i) violates any restrictive covenant or any provision of any applicable law; or (ii) encroaches on any property owned by others. (c) The Company has delivered to Buyer correct and complete copies of the leases and subleases listed in Schedule 4.10(c) (as amended to date). With respect to each lease and sublease listed in Schedule 4.10(c): (i) The lease or sublease is legal, valid, binding, enforceable, and in full force and effect; (ii) The lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the Closing; (iii) No party to the lease or sublease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder; (iv) No party to the lease or sublease has repudiated any provision thereof; 7 8 (v) There are no disputes, oral agreements or forbearance programs in effect as to the lease or sublease; (vi) With respect to each sublease, the representations and warranties set forth in subsections (i) through (v) above are true and correct with respect to the underlying leases; (vii) The Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; (viii) All facilities leased or subleased thereunder have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules and regulations; (ix) All facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of said facilities; (x) There are no parties (other than the Company) in possession of such leased property, other than tenants under any leases disclosed in Schedule 4.10(c) who are in possession of space to which they are entitled; and (xi) There are no pending or, to the Knowledge of Seller and Olicom threatened condemnation proceedings, lawsuits or administrative actions relating to the properties or other matters affecting materially and adversely the current use, occupancy, or value thereof. 4.11 Accounts Receivable. Except for the Company's accounts receivable from Buyer and its affiliate, all accounts receivable of the Company reflected on the Financial Statements, and as incurred in the normal course of business since the date thereof (the "Accounts Receivable"), represent arm's length sales actually made in the ordinary course of business; are collectible (net of the reserve for doubtful accounts reflected on the Most Recent Balance Sheet which shall be consistent with prior practices and in accordance with Danish GAAP) in the ordinary course of business without the necessity of commencing legal proceedings; are not subject to counterclaim or setoff; and are not in dispute. The Company has previously delivered to Buyer an aged schedule of Accounts Receivable included in the Financial Statements. 4.12 Inventory. All inventory of the Company reflected on the Financial Statements consists of a quality and quantity useable and saleable in the ordinary course of business and at normal profit levels; had a commercial value at least equal to the value shown on the Financial Statements; and is valued in accordance with Danish GAAP at the lower of average cost (on a LIFO basis); was not slow-moving as determined in accordance with past practices; obsolete or damaged. All inventory purchased since the date of the Financial Statements consists of a quality and quantity useable and saleable in the ordinary course of business. 4.13 Absence of Certain Change. Since April 30, 1999, there has not been any adverse change in the business, financial condition, operations, results of operations or future prospects 8 9 of the Company. Without limiting the generality of the foregoing, except as set forth in Schedule 4.13, since April 30, 1999: (a) The Company has not sold, leased, transferred, assigned or otherwise disposed of any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business; (b) The Company has not entered into any agreement, contract, lease or license (or series of related agreements, contracts, leases and licenses) either involving more than Twenty-Five Thousand U.S. Dollars ($25,000) or outside the ordinary course of business or other than as listed on Schedule 4.l5(c) or Schedule 4.24; (c) No person (including the Company) has accelerated, terminated, modified or canceled any agreement, contract, lease, or license (or series of related agreements, contracts, teases and licenses) involving more than Twenty-Five Thousand U.S. Dollars ($25,000) to which the Company is a party or by which it is bound except in the ordinary course of business; (d) The Company has not imposed any security interest upon any of its assets, tangible or intangible; (e) The Company has not made any capital expenditure (or series of related capital expenditures) outside the ordinary course of business; (f) The Company has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other person (or series of related capital investments, loans and acquisitions) outside the ordinary course of business; (g) The Company has not issued any note, bond or other debt security or created, incurred, assumed or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than Twenty-Five Thousand U.S. Dollars ($25,000) singly or Fifty Thousand U.S. Dollars ($50,000) in the aggregate; (h) The Company has not delayed or postponed the payment of accounts payable or other liabilities outside the ordinary course of business; (i) The Company has not canceled, compromised, waived or released any right or claim (or series of related rights and claims) outside the ordinary course of business; (j) The Company has not granted any license or sublicense of any rights under or with respect to any intellectual property except as set forth on Schedule 4.15(c) or Schedule 4.24; (k) The Company has not made or authorized any change in its Articles of Association or Rules of Procedure for the Board of Directors; (l) The Company has not issued, sold or otherwise disposed of any of its capital stock, or granted any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock; 9 10 (m) The Company has not declared, set aside or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased or otherwise acquired any of its capital stock; (n) The Company has not experienced any damage, destruction or loss (whether or not covered by insurance) to its property in excess of Ten Thousand U.S. Dollars ($10,000); (o) The Company has not made any loan to, or entered into any other transaction with, any of its affiliates, directors, officers, employees or Olicom or any affiliate thereof outside the ordinary course of business; (p) The Company has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement outside the ordinary course of business; (q) The Company has not granted or agreed to make any increase in the base compensation of any of its directors, officers and employees outside the ordinary course of business except as specifically described in Section 8.1(j) and Section 8.1(k) below; (r) The Company has not adopted, amended, modified or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract or commitment for the benefit of any of its directors, officers and employees (or taken any such action with respect to any other employee benefit plan), except as specifically described in Section 8.1(j) and Section 8.1(k) below; (s) The Company has not made any other change in employment terms for any of its directors, officers or employees, or otherwise terminated any such person and no such person has resigned from the Company, in each case, outside the ordinary course of business; (t) The Company has not incurred any liability to taxation (other than in respect of trading profits arising or transactions entered into in the ordinary course of business or except as provided for in the Financial Statements); (u) The Company has not made or pledged to make any charitable or other capital contribution outside the ordinary course of business; (v) There has not been any other occurrence, event, incident, action, failure to act or transaction outside the ordinary course of business involving the Company; and (w) The Company has not committed to any of the foregoing. 4.14 Undisclosed Liabilities. The Company does not have any liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against any of them giving rise to any liability), except for: (a) liabilities included in the most recent Financial Statements including the notes thereto; and (b) liabilities which have arisen after the Financial Statements in the ordinary course of business (none of which results from, arises out of, relates to, is in the nature of or was caused by any breach of 10 11 contract, breach of warranty, tort, infringement or violation of law, all of which are usual and normal in amount both individually and in the aggregate). 4.15 Intellectual Property. (a) Schedule 4.15(a) lists all of the Company's foreign and United States: (i) patents and patent applications (including provisional applications); (ii) registered or unregistered trademarks, applications to register trademarks, intent to use applications or other registrations related to trademarks; (iii) registered copyrights and applications for copyright registration; (iv) mask work registrations and applications to register mask works; and (v) any other Intellectual Property of the Company that is the subject of an application, certificate or registration filed with, issued by or recorded by, any state, government or other public legal authority (and all trade secrets and unregistered copyrights, whether or not listed on Schedule 4.15(a)) (the "Intellectual Property"). (b) Each patent, registered trademark, registered copyright and mask work registration which is an item of Intellectual Property is valid and subsisting, and all necessary registration, maintenance and renewal fees in connection with such Intellectual Property have been made and all necessary documents and certificates in connection with such Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Intellectual Property. (c) The contracts, licenses and agreements listed on Schedule 4.15(c) include all contracts, licenses and agreements currently in effect relating to any Intellectual Property arising from or relating to Bluetooth or Mobile Hands Free Solutions to which the Company is a party other than: (i) "shrink wrap" software; (ii) rights to use Intellectual Property granted by the Company in the ordinary course of the Company's business in connection with sales of products or services; (iii) third party software (including software development tools) generally available to the public at a cost to the Company of less than Twenty-Five Thousand U.S. Dollars ($25,000); and (iv) contracts, licenses or agreements which the Company has no continuing obligations (other than customary provisions for infringement) or for which liability is contractually limited to less than Twenty-Five Thousand U.S. Dollars ($25,000) (collectively, such exceptions being referred to as "Excluded Licenses"). (d) With respect to Bluetooth and Mobile Hands Free Solutions, except as disclosed on Schedule 4.15(d), the contracts, licenses and agreements listed on Schedule 4.15(c) are in full force and effect. Except as disclosed on Schedule 4.15(d), the consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination or suspension of any term of any contracts, licenses and agreements listed on Schedule 4.15(c). Except as disclosed in Schedule 4.15(d), the Company is in compliance in all material respects with and has not breached any material term of the contracts, licenses and agreements listed on Schedule 4.15(c) and, to the Knowledge of Seller and Olicom, all other parties to the contracts, licenses and agreements listed on Schedule 4.15(c) are in compliance with and have not breached any term of the contracts, licenses and agreements. Except as disclosed in Schedule 4.15(d), following the Closing Date, the Company will be permitted to exercise all of its rights under the contracts, licenses and agreements listed in 11 12 Schedule 4.15(c) without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company would otherwise be required to pay. (e) Except as set forth in Schedule 4.15(e) and other than Excluded Licenses or other agreements which are not currently in effect: (i) no Person other than the Company has any rights to use the Intellectual Property other than immaterial rights granted from time to time in the ordinary course of business which do not individually or in aggregate materially affect the value of the Intellectual Property in question; and (ii) the Company has not granted to any Person, nor authorized any Person to retain any rights or interests of any nature in or with respect to the Intellectual Property. (f) Except as set forth in Schedule 4.15(f): (i) the Company owns and has good and exclusive title to each item of the Intellectual Property of the Company listed on Schedule 4.15(a), free and clear of any encumbrance; and (ii) the Company owns, or has the right pursuant to a valid contract, to use, transfer, license, sublicense or operate under, all other Intellectual Property of the Company. (g) Except as set forth on Schedule 4.15(g), the operation of the Company's business, to the Knowledge of Seller and Olicom, including the design, development, manufacture and sale of its products (including with respect to products currently under development) and provision of services, does not infringe or misappropriate the Intellectual Property of any other person, violate the rights of any Person (including rights to privacy or publicity) or constitute unfair competition. (h) In the last three (3) years, except as set forth on Schedule 4.15(h), the Company has not received notice from any Person that the operation of the business of the Company, including its design, development, manufacture and sale of its products (including with respect to products currently under development) and provision of its services, infringes or misappropriates the Intellectual Property of any person, violates the rights of any person (including rights to privacy or publicity) or constitutes unfair competition. (i) With respect to Bluetooth and Mobile Hands Free Solutions, except as disclosed in Schedule 4.15(i), the Company owns or has the right to all material Intellectual Property necessary to the conduct of the business of the Company as it currently is conducted, including its design, development, manufacture and sale of its products, including with respect to products currently under development and provision of services. (j) To the Knowledge of Olicom and Seller, the Company has provided true and accurate copies of all contracts, licenses and agreements between the Company and any other person, which involve the annual payment or receipt of funds in excess of Twenty-Five Thousand U.S. Dollars $25,000) per year, and wherein or whereby the Company has agreed to, or assumed, any obligation or duty to indemnify, hold harmless or otherwise assume or incur any obligation or liability with respect to the infringement by the Company or such other person of the Intellectual Property rights of any other person; provided that the foregoing only applies to agreements for which the Company's obligations are continuing as of the date of this Agreement and does not apply to contracts, licenses or agreements for which liability of the Company is contractually limited to less than Twenty-Five Thousand U.S. Dollars ($25,000). 12 13 (k) Except as listed on Schedule 4.15(k), there are no contracts, licenses and agreements between the Company and any other person with respect to the Company's Intellectual Property with respect to which the Company has received notice of any dispute which could be reasonably considered to be a material dispute regarding the scope of such agreement, or performance under such agreement including with respect to any payments to be made or received by the Company thereunder. (l) Except as listed on Schedule 4.15(l), to the Knowledge of, Seller and Olicom, no person is infringing or misappropriating any the Intellectual Property. (m) Except as listed on Schedule 4.15(m), there are no claims asserted against the Company, or to the Knowledge of Seller and Olicom, against any customer of the Company, related to any product or service of the Company. (n) No Intellectual Property or product or service of the Company, is subject to any outstanding decree, order, judgment, or stipulation restricting in any manner the use or licensing thereof by the Company. (o) With respect to Bluetooth and Mobile Hands Free Solutions, except for software to the extent that it is considered proprietary information of the Company and which is protected as such under applicable Danish law, or except as disclosed in Schedule 4.15(o), the Company has, and enforces, a policy requiring each contractor and third party to execute proprietary information and confidentiality agreements previously delivered to Buyer, and all current and former contractors and third parties of the Company have executed such an agreement. (p) To the Knowledge of Seller and Olicom, no: (i) product, service or publication of the Company; (ii) material published or distributed by the Company; or (iii) conduct or statement of the Company, violates the Danish Markedsfocringslov or any other Danish law concerning proper business conduct. (q) Schedule 4.15(g) lists all the Software Authors (as hereinafter defined) with respect to Bluetooth and Mobile Hands Free Solutions who were not employees of the Company. Each Software Author made his or her contribution to the Bluetooth and Mobile Hands Free Solutions within the scope of employment with the Company as an employee or independent contractor, as a "work made for hire," and was directed by the Company to work on the Bluetooth and Mobile Hands Free Solutions. In addition, any other Intellectual Property created by such Software Authors with respect to Bluetooth and Mobile Hands Free Solutions is owned by the Company. (r) To the Knowledge of Seller and Olicom, the Company has not, by any of its acts or omissions, or by acts or omissions of its directors, officers, employees, agents or representatives caused any of its proprietary rights in the Bluetooth and Mobile Hands Free Solutions, including copyrights, trademarks, patents and trade secrets to be diminished or adversely affected to any material extent. 13 14 (s) Except as set forth in Schedule 4.15(s) and with respect to (i), (ii) and (iii) as the same shall be limited to Bluetooth and Mobile Hands Free Solutions and third party warranty claims: (i) to the Knowledge of Seller and Olicom, there are no defects in the Bluetooth and Mobile Hands Free Solutions, and there are no errors in any accompanying design documentation, which defects or errors would in any material respect affect Buyer's or its licensees' use of the Bluetooth and Mobile Hands Free Solutions or the functioning of the Bluetooth and Mobile Hands Free Solutions in accordance with the specification for the Bluetooth and Mobile Hands Free Solutions published by the Company; to the Knowledge of Seller and Olicom, the Bluetooth and Mobile Hands Free Solutions have all the material features described in the user manuals made available to the Company's customers; (ii) each of the Bluetooth and Mobile Hands Free Solutions does not contain any "back door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus" (as these terms are commonly used in the computer software industry) or other software routines or hardware components designed to permit unauthorized access, to disable or erase software, hardware, or data or to perform any other similar type of functions; (iii) each of the Bluetooth and Mobile Hands Free Solutions: (A) shall not fail to perform any function specified in the product specifications therefor or otherwise be adversely affected in any material respect as a result of the date change from December 31, 1999 to January 1, 2000; and (B) to ensure Year 2000 compatibility includes, without limitation, date data century recognition, calculations which accommodate same century and multi-century formulas and date values, and date data interface values which reflect the correct century, (iv) no government funding or university or college facilities were used in the development of the Bluetooth and Mobile Hands Free Solutions; and the Bluetooth and Mobile Hands Free Solutions were not developed pursuant to a contract with any Person or entity, and no situation, matter, or agreement exists that would preclude Buyer from making any change to the Bluetooth and Mobile Hands Free Solutions or combining either of them with other software in any lawful manner; and (v) except for technology supplied by third party vendors disclosed in Schedule 4.15(r), no third party has any interest in, or right to compensation from the Company by reason of, the use, exploitation or sale of the Bluetooth and Mobile Hands Free Solutions, there are no restrictions on the ability of the Company (or any successor or assignee of the Company) to use or otherwise exploit the Bluetooth and Mobile Hands Free Solutions, and such use or exploitation does not and will not obligate the Company (or any successor or assign of the Company) to pay any royalty, fee or other compensation to any person or entity; and the Company has not received any notice and does not have any knowledge of any complaint, assertion, threat or allegation inconsistent with the preceding statements in this paragraph. (t) (i) No Person employed with or previously employed with the Company has notified the Company since the day of the Company's formation orally, in writing or in any other way, that any Person alone or together with others has made an invention, which 14 15 is patentable or registerable, cf. Section 6 and 7 of Executive Act no. 131 of 18 March 1986 of the Kingdom of Denmark; (ii) Excluding the Company's Intellectual Property, no Person employed with or previously employed with the Company has filed an application for a patent or a utility model related to Bluetooth or Mobile Hands Free Solutions, alone or together with others indicating to be an inventor and/or applicant/proprietor of the rights in said application and no Person has indicated that they intend to do so and, (iii) No Person has registered as his or its own any other intellectual property rights of the Company, 4.16 Taxes. (a) The Company has properly completed and timely filed all Tax Returns (as herein after defined) required to be filed by it and has paid all Taxes (as herein after defined) shown thereon to be due. The Company's Financial Statements reflect any accrued Taxes that have not been paid through the dates thereof. The Company has no material liability for unpaid Taxes accruing after the date of the latest Company Financial Statements, other than Taxes arising in the ordinary course of its business. There is no material claim for Taxes that is a lien against the property of the Company or is being asserted against the Company. The Company has not been notified and the Seller or Olicom have no other Knowledge that any audit of any Tax Return of the Company is being conducted by a Tax Authority (as hereinafter defined). The Company has not been and will, to the Knowledge of Seller and Olicom, not be required to include any material adjustment in Taxable income for any Tax period (or portion thereof) under any applicable Tax laws as a result of transactions, events or accounting methods employed prior to this Agreement. The Company has not filed any correspondence to prevent the imposition of penalties with respect to any Tax reporting position taken on any Tax Return. The Company has in its possession receipts for any Taxes paid to Tax authorities. There are no pending or, to the Knowledge of Seller and Olicom, threatened actions or proceedings for the assessment or collection of Taxes against the Company or, to the Knowledge of Seller and Olicom, any corporation that was included in the filing of a Return with the Company on a consolidated, combined or unitary basis with respect to any period for which such corporation was so included. For purposes of this Agreement, the following terms have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means: (i) any net income, alternative or add-on tax, gross income, gross receipts, sales, use, transfer, franchise, profits, license, withholding (including social security contributions to labour market fund), payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, in addition to tax or additional amount imposed by any governmental entity (a "Tax Authority") responsible for the imposition of any such Tax (domestic or foreign); (ii) any liability for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period; and (iii) any liability for the payment of any amounts of the type described in (i) or (ii) as a result of being a transferee of or successor to any person or as a result of any express or implied obligation to indemnify any other person. As used herein, "Tax Return" shall mean any return, statement, report or form (including without limitation, estimated tax returns and 15 16 reports, withholding tax returns and reports and information reports and returns) required to be filed with respect to Taxes. (b) (i) Schedule 4.16(b) indicates the most recent Danish income Tax Return for which a review has been conducted and indicates all such Danish income Tax Returns that currently to the Knowledge of Seller and Olicom are the subject of review; and (ii) the Company has provided Buyer with an accurate description of any tax allocation arrangement to which the Company is a party. 4.17 Customers. Seller and Olicom do not have Knowledge that any of the ten (10) largest customers and suppliers of the Company (based on annual sales volume) for the last two (2) full fiscal years and the Most Recent Balance Sheet Date will cease to do business with the Company after the consummation of the transactions contemplated hereby in the same manner as previously conducted with the Company. The Seller and Olicom do not have Knowledge that the Company has received any notice of any disruption (including delayed deliveries or allocations by suppliers) in the availability of the materials or products used by the Company nor is any Company aware of any facts which could lead it to believe that the business of any Company will be subject to any such disruption which would cause a Material Adverse Effect. 4.18 Certain Business Practices and Regulations. Neither the Company nor any of its officers, directors, stockholders, employees or agents has, on behalf of or for the benefit of the Company: (i) established or maintained any unrecorded fund or asset for any purpose or made any false entries on its books and records for any reason; or (ii) made or agreed to make any contribution, or reimbursed any political gift or contribution made by violation of any Law, In addition, the Company has: (a) complied with all applicable Laws relation to employee and civil rights and relating the employment opportunities; and (b) filed in a timely manner all reports and documents required to be filed with Governmental Entities (and the information contained therein was correct and complete in all material respects) under such laws, except (in either case) where the failure to so comply or file would not have a Material Adverse Effect. 4.19 Product Warranty. Each product manufactured, sold, leased, supplied or delivered by the Company has been in conformity with all applicable contractual commitments and all express and implied warranties and all applicable regulations in respect thereof, and the Company does not have any liability (and there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company giving rise to any Liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims included in the Financial Statements and the notes thereto as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and an additional expense of up to Fifty Thousand U.S. Dollars ($50,000) for all such contracts, commitments and warranties relating to products and services sold or performed prior to the Closing Date. Except as set forth on Schedule 4.19, no product manufactured, sold, leased, supplied or delivered by the Company is subject to any guaranty, warranty or other indemnity beyond the general terms and conditions of sale or lease described on Schedule 4.19. Without prejudice to the above, the Company has incurred no liability in excess of Fifty Thousand U.S. Dollars ($50,000) (when aggregated with all other warranty claims described above) under the Liability for Defective Products Act 1991 of Ireland. 16 17 4.20 Environmental, Health and Safety Matters. (a) The Company has at all times complied and is in compliance with all environmental, health and safety requirements of all Governmental Entities. (b) Without limiting the generality of the foregoing, the Company and its respective affiliates have obtained and complied with, and are in compliance with, all permits, licenses and other authorizations that are required pursuant to environmental, health and safety requirements for the occupation of their facilities and the operation of their business. A list of all such permits, licenses and other authorizations is set forth on Schedule 4.20. (c) The Company has not received any written or oral notice, report or other information regarding any actual or alleged violation of environmental, health and safety requirements, or any liabilities or potential liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to any of them or their facilities arising under environmental, health and safety requirements. (d) None of the following exists at any property or facility owned or operated by the Company: (i) underground storage tanks; (ii) asbestos-containing material in any form or condition that might require remediation or other corrective action under applicable law; (iii) materials or equipment containing polychlorinated biphenyls that might require remediation or other corrective action under applicable law; or (iv) landfills, surface impoundments or disposal areas. (e) The Company, its affiliates and its corporate predecessors have not treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any substance, including without limitation an), hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to liabilities, including any liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees. (f) Neither this Agreement nor the consummation of the transactions that are the subject of this Agreement will result in any obligations for site investigation or cleanup, or notification to or consent of Governmental Entities or third parties, pursuant to any Applicable Laws. (g) The Company has not, either expressly or by operation of law, assumed or undertaken any liability, including without limitation any obligation for corrective or remedial action, of any other person relating to environmental, health and safety requirements. (h) No facts, events or conditions relating to the past or present facilities, properties or operations of the Company will prevent, hinder or limit continued compliance with environmental, health and safety requirements, give rise to any investigatory, remedial or corrective obligations pursuant to environmental, health and safety requirements, or give rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to environmental, health and safety requirements, including without limitation any relating to 17 18 onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage. 4.21 Loan Agreements. The Company is not obligated under any loan agreement, promissory note, letter of credit or other evidence of indebtedness as a signatory, guarantor or otherwise and there is no prohibition on repayment or any penalty, premium or fee that would become payable upon prepayment of any such indebtedness. The Company has not guaranteed the payment or performance of any person, firm or corporation, or agreed to indemnify any person or act as a surety or otherwise agreed to be continently or secondarily liable for the obligations of any person. To the Knowledge of Seller and Olicom, no third party is in default under any lease, contract or commitment to which the Company is a party, nor has any event or omission occurred which, through the passage of time or the giving of notice, or both, would constitute a default thereunder or give rise to an automatic termination, or the right of discretionary termination, thereof. 4.22 Burdensome or Restrictive Agreements. With respect to Bluetooth and Mobile Hands Free Solutions, except as disclosed in Schedule 4.22, the Company is not a party to or is not bound by any agreement requiring the Company to assign any interest in any trade secret or proprietary information, or prohibiting or to the Knowledge of Seller or Olicom, restricting the Company from competing in any business or geographical area or soliciting customers or otherwise restricting the Company from carrying on its businesses anywhere in the world. 4.23 Bank Accounts. Seller and Olicom have provided Buyer with a complete and accurate listing of the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Company maintains a safe deposit box. lock box or checking, savings, custodial or other account of any nature, the type and number of each such account and a description of any compensating balance arrangements. 4.24 Contracts. To the Knowledge of Seller, Schedule 4.24 lists all material contracts, licenses and other Agreements to which the Company is a party (collectively, "agreements"). (a) The Company has delivered to Buyer a correct and complete copy of each written agreement listed in Schedule 4.24 (as amended to date) and a written summary setting forth the terms and conditions of each oral agreement referred to in Schedule 4.24. (b) With respect to each such agreement other than the ____________ Agreement (as described below): (i) the agreement is legal, valid, binding, enforceable and in full force and effect, (ii) the agreement will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the consummation of the Agreement; (iii) no party is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default, 18 19 (iv) except at the option of either party or upon expiration, as provided in any agreement, no party may terminate, modify or accelerate any agreement; and (v) no party has repudiated any provision of the agreement. (c) (i) (ii) (iii) (iv) (v) 4.25 Employee Benefit Matters. (a) Copies of all material and general employee benefit plans and arrangements have been delivered to Buyer. (b) Each loan to non-officer employee, consultant, executive officer or director, and any stock option, stock purchase, phantom stock, stock appreciation right, supplemental retirement, severance, surplus sabbatical, employees relocation, dental, vision care, disability, employee relocation or dependent care, life insurance or accident insurance plans, programs or other arrangements have been delivered to Buyer. (c) All bonus, Company paid pension, profit sharing, savings, deferred compensation or incentive plans (including stock incentive plans), programs or arrangements have been delivered to Buyer. (d) All other fringe or employee benefit plans, programs or arrangements that apply to executive officers of the Company and that do not generally apply to all employees have been delivered to Buyer in the form of the executive officers' employment contract. (e) Any current employment or executive compensation or severance agreements, written or otherwise, relating to any present employee, consultant or executive 19 20 officer of the Company and a list of all employees and executive officers are set forth in Schedule 4.25(c), and there are no claims or unfulfilled severance or compensation agreement towards former employees or consultants of the Company. (f) None of the Employment Contracts promises or provides retiree medical or other retiree welfare benefits to any person, except as required by applicable law. (g) With respect to the laws of Ireland: (i) There are no subsisting contracts of service to which the Subsidiary is a party which are not terminable without giving rise to any claim for damages or compensation or other redress (other than a statutory redundancy payment or compensation for unfair dismissal under the Unfair Dismissals Act 1977 to 1993) by twelve weeks notice or less. And there are no claims whatsoever against the Subsidiary arising out of any contract of service to which the Subsidiary was a party. (ii) The Subsidiary is not and has never been liable to make any payment to any person under the Redundancy Payments Acts 1967 to 1991 or pursuant to the Protection of Employees (Employers Insolvency) Acts 1984 to 1991. (iii) No employment regulation order affecting the terms of employment of any employees or former employees of the Subsidiary has been made by the Labour Court under the Industrial Relations Acts 1946 to 1990. (iv) The Subsidiary has not entered into any recognition agreement with a trade union nor has it done any act which might be construed as recognition. 4.26 Affiliate Relationships and Conflicts of Interest. There are no contracts or other arrangements involving the Company (or any firm or entity with which the Company has a business relationship) in which any of the Company's officers, directors, stockholders or affiliates, or any member of their respective immediate families, have a financial interest, including indebtedness owed to the Company or by the Company. To the Knowledge of Seller and Olicom, none of the officers or directors of the Company, or any members of their immediate families, have any direct or indirect ownership interest in any firm or corporation which competes with the Company, except that officers and directors of the Company may own less than one percent (1%) of the outstanding capital stock of publicly traded companies which may compete with the Company. The Company is not a guarantor or Indemnitor of any indebtedness of any other person, firm or corporation. 4.27 Status of Shares. The sale of the Shares has been duly authorized by all necessary corporate action on the part of the Seller. The Shares, when delivered to Buyer at the Closing in exchange for the Purchase Price (less any portion of the Escrow Amount), all as described herein, will be validly issued, fully paid and non-assessable. The sale of the Shares is not, and will not be, subject to any preemptive rights or any rights of first refusal of any other holder of capital stock of the Company except as set forth in Schedule 4.27, and will be free from any restrictions on transfer, except for restrictions on transfer imposed by the Shareholders' Agreement. Upon the sale and delivery of the Shares to Buyer at Closing, the Shares will 20 21 represent at least 66.85% of the outstanding capital stock of the Company, on a fully-diluted basis. 4.28 Year 2000 Compliance. All of the property, equipment or assets owned or utilized by the Company, including but not limited to computer software, databases, hardware, controls and peripherals, will, on or prior to December 31, 1999: (i) perform in all material respects in accordance with their specification and documentation regardless of which century or century dates are encountered in the use of such equipment or software; (ii) accurately and correctly manage and manipulate data in accordance with their intended use involving all dates, whether single century or multi-century, regardless of the format in which such dates are expressed; and (iii) not require any repair, rewrite, conversion or other adaptation with an expense paid or incurred by Buyer because of or due in any way to the use of century dates. The Company has taken adequate steps to verify that all computer hardware and software of the Company's suppliers, customers and other persons or entities whose internal computer failures may reasonably be expected to have a Material Adverse Effect on the Company, will comply with the representations and warranties stated in this Section on or prior to December 31, 1999. 4.29 Books and Records. All the books and records of the Company are true, correct and complete in all material respects, have been maintained in accordance with good business practice and in accordance with all laws, regulations and other requirements applicable to the Company and its operations and accurately reflect the basis for the financial condition and results of operations set forth in the Financial Statements. 4.30 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the Company. 4.31 Private Offering. Assuming the accuracy of the representations and warranties of Buyer contained in Article 5 hereof, the offer and sale of the Shares in accordance with the terms of this Agreement, have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable securities laws. 4.32 Brokers or Finders. Neither the Company nor the Buyer have incurred, and will not incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or the other Transaction Documents or any transaction contemplated hereby or thereby with respect to fees, commissions or charges to any broker or finder engaged by or on behalf of Seller or Olicom. 4.33 Disclosure. No representation or warranty by Olicom or the Seller contained in this Agreement or in any certificate furnished pursuant to this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary, in light of the circumstances under which it is made, in order to make the statements herein or therein not misleading. 21 22 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to the Seller and Olicom as follows (with the understanding that the Seller and Olicom are relying on such representations and warranties in entering into and performing this Agreement): 5.1 Organization, Standing and Power. Buyer is a corporation duty organized, validly existing and in good standing under the laws of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. 5.2 Authority. Buyer has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is to be a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and the other Transaction Documents to which Buyer is to be a party and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered and constitutes, and when duly executed and delivered by Buyer the other Transaction Documents to which Buyer is to be a party will constitute, the valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 5.3 No Conflicts. The execution and delivery of this Agreement and the other Transaction Documents to which Buyer is to be a party does not, and the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to a loss of a material benefit under, any provision of any loan or credit agreement, note, bond, mortgage, indenture, lease, or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or its properties or assets, except for any such conflicts, violations, defaults, terminations, cancellations or accelerations which individually or in the aggregate do not have a material adverse effect on Buyer's ability to perform its obligations hereunder. 5.4 Consents. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Buyer in connection with the execution and delivery by Buyer of this Agreement and the other Transaction Documents to which Buyer is to be a party or the consummation by it of the transactions contemplated hereby, except for applicable requirements, if any, of the Securities Act and the rules and regulations thereunder and state securities or blue sky laws. 5.5 Litigation. As of the date hereof, there is no action, suit, inquiry, judicial or administrative proceeding pending or, to the knowledge of Buyer, threatened against the Buyer relating to the transactions contemplated by this Agreement or by the other Transaction Documents. 22 23 5.6 Brokers or Finders. Neither Seller nor Olicom will incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or the other Transaction Documents or any transaction contemplated hereby or thereby with respect to fees, commissions or charges to any broker or finder engaged by or on behalf of Buyer. ARTICLE 6 PRE-CLOSING COVENANTS The parties to this Agreement agree as follows with respect to the period between the execution of this Agreement and the Closing. 6.1 General. Each of the parties will use its reasonable best efforts to take all action and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Article 8 below). 6.2 Notices and Consents. The Seller shall cause the Company to give ally notices to third parties, and will use commercially reasonable efforts to obtain any third party consents that are necessary to vest all rights, title and interest of the Company or that Buyer may reasonably request in connection with the matters referred to herein. The Seller shall cause the Company to give any notices to, make any filings with and use commercially reasonable efforts to obtain any authorizations, consents and approvals of Government Entities necessary or desirable in connection with the matters referred to herein. 6.3 Operation of Business. The Seller shall not permit the Company to engage in any practice, take any action or enter into any transaction outside the ordinary course of business. Without limiting the generality of the foregoing, the Seller shall use reasonable efforts not to permit the Company to: (a) enter into any material contract or transaction outside the ordinary course of business; (b) lease, mortgage or encumber or otherwise grant any interest in any of its assets or properties or any contract with an affiliate; (c) sell, license or otherwise dispose of any assets of the Company having a value greater than Twenty-Five Thousand U.S. Dollars ($25,000) or an aggregate book value greater than Twenty-Five Thousand U.S. Dollars ($25,000) (other than any such disposition which is in the ordinary course of business); (d) issue any capital stock or grant any additional options, warrants or rights to acquire any capital stock of the Company; (e) take any action to declare or pay a dividend or other distribution upon or redeem or purchase any shares of capital stock of the Company, or change or affect the voting powers, designations, preferences, rights, qualifications, limitations or restrictions of any class or series of capital stock of the Company; (f) propose or adopt any amendments to the Company's Articles of Association and Rules of Procedure or any other governing document; (g) enter into any employment, termination or severance pay agreement with any director, officer, consultant or employee; (h) waive any rights or forgive or cancel any debts or claims of value; or (i) maintain the Company's books or records other than in the ordinary course, 6.4 Preservation of Business. Seller will use reasonable efforts to cause the Company to keep its business and properties substantially intact, including its present operations, physical 23 24 facilities, working conditions and relationships with lessors, licensors, suppliers, customers and employees. 6.5 Full Access. Seller will permit representatives of Buyer to have full access to the Company upon reasonable notice and during normal working hours to all premises, properties, personnel, books, records (including tax records), contracts and documents of or pertaining to the Company. The Company will cause its accountants to cooperate with Buyer and its agents in making available all financial information requested. 6.6 Notice of Developments. Seller will give prompt written notice to Buyer of: (a) any material adverse development which would render any representation or warranty of Seller or Olicom in this Agreement, if made on or as of the date of such event, untrue or inaccurate in any material respect; and (b) any material adverse effect with respect to the Company. No disclosure by any party pursuant to this Section 6.6, however, shall be deemed to amend or supplement the schedules of disclosure or to prevent or cure any misrepresentation. breach of warranty or breach of covenant. 6.7 Publicity. No party hereto shall make any news release or any other public disclosure (including disclosure to public officials) pertaining to this Agreement or the transactions contemplated hereunder without the prior approval of the other parties hereto, which approval shall not be unreasonably withheld; provided that Buyer and Olicom may, if considered necessary by its counsel to fulfill their obligations as publicly traded corporations, respond to inquiries and make such releases as they consider appropriate upon giving the other parties hereto such notice as is reasonable in the circumstances. 6.8 Exclusivity. Between the date hereof and the date this Agreement is terminated pursuant to Article 11 hereof, Seller and Olicom shall not, directly or indirectly, through any officer, director, employee, representative or otherwise, solicit, or entertain offers from, negotiate with, or in any manner encourage, discuss, accept or consider any acquisition proposal of any person or entity, other than Buyer. Seller and Olicom will promptly notify Buyer regarding any contact between Seller and one of its respective officers, directors, employees or representatives and any other person regarding any acquisition proposal. ARTICLE 7 POST-CLOSING COVENANTS The parties hereto agree as follows with respect to the period following the Closing: 7.1 General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties hereto will take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefor under Article 9 below). 7.2 Litigation Support. In the event and for so long as any party is actively contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand in connection with: (a) any transaction contemplated under this Agreement; or (b) any 24 25 fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction on or prior to the Closing Date involving the Company, each of the other parties hereto will cooperate with it and its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (unless the contesting or defending party is entitled to indemnification therefor under Article 9 below). 7.3 Transition. The Seller will not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier or other business associate of the Company from maintaining the same business relationships with the Company after the Closing as it maintained with the Company prior to the Closing. 7.4 Confidentiality. Olicom, Seller and Buyer will comply with the terms of the Confidentiality Undertaking described in Section 14.7. In addition, Olicom, Seller and the Company will treat and hold as such all of the confidential information, refrain from using any of the confidential information except in connection with this Agreement, and deliver promptly to Buyer or destroy, at the request and option of Buyer, all tangible embodiments (and all copies) of the confidential information which are in its possession. In the event that Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process) to disclose any confidential information, it will notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 7.4. If, in the absence of a protective order or the receipt of a waiver hereunder, the Seller or Olicom is, on the advice of counsel, compelled to disclose any confidential information to any tribunal or else stand liable for contempt, it may disclose the confidential information to the tribunal; provided, however, that the disclosing part), shall use its best efforts to obtain, at the reasonable request the other party, an order or other assurance that confidential treatment will be accorded to such portion of the confidential information required to be disclosed as Buyer shall designate. The foregoing provisions shall not apply to any confidential information that is generally available to the public immediately prior to the time of disclosure. 7.5 25 26 ARTICLE 8 CLOSING CONDITIONS 8.1 Conditions to Obligation of Buyer. The obligation of Buyer to consummate the transactions to be performed by it in connection with the Closing are subject to satisfaction of the following conditions: (a) Representations True at Closing. The representations and warranties set forth in Article 4 above shall be true and correct in all material respects at and as of the Closing Date; (b) Covenants Performed. Each of Olicom and Seller shall have performed or caused the Company to perform and complied with all of their covenants hereunder in all material respects through the Closing; (c) Third Party Consents. Seller shall have caused the Company to have procured all of the third party consents specified in Section 4.4 (except the _________ Agreement) above; (d) No Litigation. No action, suit, or proceeding shall be pending or threatened before any court or quasi judicial or administrative agency of any federal, state, local, provincial or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (i) prevent consummation of any of the transactions contemplated by this Agreement; (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; (iii) affect adversely the right of Buyer to own the Shares and to control the Company; or (iv) affect adversely the right of the Company to own its assets and to operate its businesses (and no such injunction, judgment, order, decree, ruling or charge shall be in effect); (e) Material Adverse Effect. Since the execution of this Agreement, no Material Adverse Effect on the Company shall have occurred; (f) Closing Certificate. Each of Seller and Olicom shall have delivered to Buyer a certificate to the effect that each of the conditions specified above in Section 8.1 (a)-(e) is satisfied in all respects; (g) Put and Call Option Agreement. The Buyer and OJ shall have entered into a Put and Call Option Agreement on terms and conditions satisfactory to Buyer; (h) Resignations of Directors. Buyer shall have received the resignations, effective as of the Closing, of each director of Digianswer other than Ole Jensen; (i) Delivery of Certificates. Seller will surrender to Buyer at the Closing any and all original certificates representing the Shares duly endorsed in blank or with appropriate assignments separate from certificate; (j) Agreements of Employment. Each of the employees set forth on Schedule 8.1(j) shall have entered into an agreement of employment with the Company in form and substance acceptable to Buyer; 26 27 (k) Contract of Employment with OJ. Buyer and OJ shall have entered into a Contract of Employment on terms and conditions satisfactory to Buyer; (l) Transfer of Title. Seller and Olicom shall procure that the Company has, good and marketable title, free from Liens to the properties it occupies; (m) Shareholders' Agreement. Buyer and OJ shall have entered into a Shareholders' Agreement, all on terms and conditions satisfactory to Buyer; (n) Termination of Right. OJ and Olicom, shall have each terminated all rights under each of the Shareholders' Agreement, dated June 17, 1999, between OJ and Seller and the Put and Call Option Agreement, dated June 15, 1999, between OJ, Seller and Olicom; (o) Intellectual Property and Technology License Agreement. Buyer and the Company shall have entered into an Intellectual Property and Technology License Agreement and other documents related thereto on terms and conditions satisfactory to Buyer related to the "Bluetooth" technology; (p) Director Approval. Seller's and Olicom's board of directors shall have approved this Agreement and the transactions contemplated thereby and in the Transaction Documents; and (q) General Satisfaction of Closing Conditions. All actions to be taken by the Seller and the Company in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Buyer. 8.2 Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (a) Representations True at Closing. The representations and warranties set forth in Article 5 above shall be true and correct in all material respects at and as of the Closing Date; (b) Performance of Covenants. Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (c) No Litigation. No action, suit, or proceeding shall be pending or threatened before any court or quasi judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would: (i) prevent consummation of any of the transactions contemplated by this Agreement; or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect); 27 28 (d) Closing Certificate. Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Section 8.2(a)-(c) has been satisfied; and (e) General Satisfaction of Closing Conditions. All actions to be taken by Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. ARTICLE 9 REMEDIES FOR BREACHES OF THIS AGREEMENT 9.1 Survival of Representations and Warranties. All of the representations and warranties and agreements of the parties contained in this Agreement (including, without limitation, the representations and warranties of the Seller and Olicom contained in Article 4 above and the indemnification obligations of the parties set forth in Sections 9.2 and 9.3 below) shall survive the Closing and continue in full force and effect for a period of two (2) years thereafter (even if the damaged party knew or had reason to know of any misrepresentation or breach of warranty at the time of the Closing) (except to the extent that any such agreement is limited by its terms to a different period and except to the extent a claim for indemnity is then pending). The foregoing sentence notwithstanding, any liability which results: (a) from any liability of Buyer or its subsidiaries, Buyer's successors or assigns to any taxing authorities which will survive the Closing as provided in (b) below; (b) under Section 4.1 (organization), Section 4.2 (capitalization), Section 4.10 (title to assets), Section 4.16 (taxes), Section 4.20 (environmental) and Section 4.27 (status of shares) of Article 4, will survive the Closing for the applicable statute of limitations (including any extensions or waivers thereof); (c) from a breach of any covenant or agreement, will survive the Closing for the term of such covenant or agreement; or (d) from fraud on the part of the other party, for which indemnity would otherwise be available under Section 9.2 may be asserted at any time subject to the other provisions of Article 9. The representations, warranties, covenants and obligations of the Seller and the rights and remedies of Buyer shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of Buyer or any of its representatives. 9.2 Indemnification Provisions for Benefit of Buyer and the Company. (a) In the event Seller or Olicom breach (or in the event any third party alleges facts that, if true, would mean either Seller or Olicom has breached) any of its representations, warranties and covenants contained herein (including without limitation the representations and warranties set forth in Article 4 and the covenants set forth in Articles 6 and 7) and, provided that Buyer makes a written claim for indemnification against Seller or Olicom pursuant to Section 9.5 below within the survival period set forth in Section 9.1, then each of Seller or Olicom shall jointly and severally indemnify Buyer from and against 66.85% of the entirety of any Adverse Consequences that Buyer may suffer through and after the date of the claim for indemnification (including any Adverse Consequences Buyer may suffer after the end 28 29 of the survival period) resulting from, arising out of, relating to, in the nature of or caused by the breach (or the alleged breach). (b) In addition, Seller and Olicom shall jointly and severally indemnify Buyer from and against 66.85% of the entirety of any Adverse Consequences Buyer may suffer resulting from, arising out of, relating to, in the nature of or caused by any liability of the Company for any current or past indebtedness, penalties or other obligations in connection with any of the Company's borrowings from the Business Development Finance (Vaekstfonden), 9.3 Indemnification Provisions for Benefit of Setter and Olicom. In the event Buyer breaches (or in the event any third party alleges facts that, if true, would mean Buyer has breached) any of its representations, warranties and covenants contained herein, and provided that Seller or Olicom makes a written claim for indemnification against Buyer pursuant to Section 9.5 below within the survival period set forth in Section 9.1, then Buyer agrees to indemnify the Seller and Olicom from and against the entirety of any Adverse Consequences Seller or Olicom may suffer through and after the date of the claim for indemnification (including any Adverse Consequences Seller or Olicom may suffer after the end of ally applicable survival period) resulting from, arising out of, relating to, in the nature of or caused by the breach (or the alleged breach). 9.4 Matters Involving Third Parties. (a) If any third party shall notify any party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other party (the "Indemnifying Party") under this Article 9, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay an the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced. (b) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party notifies the Indemnified Party in writing within thirty (30) days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of or caused by the Third Party Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder; (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; (iv) settlement of, or all adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party; and (v) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. 29 30 (c) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 9.4(b) above: (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld); and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld). (d) In the event any of the conditions in Section 9.4(b) above is or becomes unsatisfied, however: (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith); (ii) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys' fees and expenses); and (iii) the Indemnifying Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of or caused by the Third Party Claim to the fullest extent provided in this Article 9. 9.5 Determination of Adverse Consequences and Claims Process. (a) All Adverse Consequences hereunder shall be payable in U.S. Dollars. (b) In the event that Buyer shall have incurred any Adverse Consequences for which it wishes to seek adjustment to the Escrow Amount pursuant to this Section 9.5, Buyer shall deliver to the Seller an officer's certificate: (i) stating that Buyer has paid or properly accrued or reasonably anticipates that it will have to pay or accrue Adverse Consequences, (ii) specifying in reasonable detail the individual items of Adverse Consequences included in the amount so stated, the date each such item was paid or properly accrued or the basis for such anticipated liability, and the nature of the misrepresentation, breach of warranty or covenant or other adjustment to the Escrow Amount to which such item is related; and (iii) indicating that Buyer is seeking adjustment to the Escrow Amount under this Article 9. (c) In the event that Buyer has elected to pursue an adjustment to the Escrow Amount under this Article 9, the Escrow Amount shall be reduced by the amount stated in the officer's certificate unless Seller contests such claim. 9.6 Damage Claim Amounts. (a) 30 31 (i) (ii) (b) (c) (d) (e) 9.7 9.8 ARTICLE 10 CLOSING DELIVERIES 10.1 Olicom and Seller Deliveries. At the Closing, Olicom and Seller shall cause the Company to deliver to Buyer the following: (a) [Intentionally Reserved]; (b) Agreements of Employment. At the Closing, the Company and the individuals listed on Schedule 8.1(j) shall execute, deliver and enter into the Agreements of Employment referenced in Section 8.1(j); 31 32 (c) Contract of Employment. At the Closing, the Company and OJ shall execute, deliver and enter into the Contract of Employment referenced in Section 8.1(j). (d) September 30, 1999 Balance Sheet. Seller shall have delivered the Most Recent Financial Statements three (3) days prior to the Closing Date; (e) Third Party Consents. All third party consents referenced in Section 8.1(c). (f) Certificate. The certificate referenced in Section 8.1(f); (g) Resignation. Resignations referenced in Section 8.1(h); (h) Shares. The Certificates for the Shares; and (i) Other. Such other documents, certificates and instruments as listed on the closing agenda delivered to Seller and Olicom as of date of execution of this Agreement (the "Closing Agenda"). 10.2 Buyer Deliveries. At the Closing, Buyer shall deliver the following to Seller: (a) Purchase Price. The Purchase Price (less the Escrow Amount); (b) Certificate. The Certificate referenced in Section 8.2(d); and (c) Other. Such other documents, certificates and instruments as listed on the Closing Agenda. ARTICLE 11 TERMINATION 11.1 Termination of Agreement. This Agreement may not be terminated by the parties except as provided below: (a) Buyer and Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (b) Buyer may terminate this Agreement by giving written notice to Seller at any time prior to the Closing: (i) in the event Seller has breached any representation, warranty or covenant contained in this Agreement in any material respect, Buyer has notified Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach; or (ii) if the Closing shall not have occurred ten (10) days after the date of this Agreement, by reason of the failure of any condition precedent under Section 8.1 hereof (unless the failure results primarily from Buyer itself breaching any representation, warranty or covenant contained in this Agreement), 32 33 (c) Seller may terminate this Agreement by giving written notice to Buyer at any time prior to the Closing: (i) in the event Buyer has breached any representation, warranty or covenant contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach; or (ii) if the Closing shall not have occurred ten (10) days after the date of this Agreement, by reason of the failure of any condition precedent under Section 8.2 hereof (unless the failure results primarily from any of Seller itself breaching any representation, warranty or covenant contained in this Agreement); and (d) By either Buyer or Seller if any governmental entity shall have issued an order, injunction, decree or ruling or taken any other action permanently or temporarily restraining or otherwise prohibiting the transactions contemplated hereby, which shall have become final and non-appealable. 11.2 Effect of Termination. If any party terminates this Agreement pursuant to Section 11.1 above, all rights and obligations of the parties hereunder shall terminate without any liability of any party to any other party (except for any liability of any party then in breach); provided, however, that notwithstanding anything to the contrary in this Agreement or otherwise, the provisions of Section 7.4 of the Agreement shall survive any termination of this Agreement. 11.3 Certain Effects of Termination. In the event of the termination of this Agreement by either Buyer or Seller as provided in Section 11.1 hereof, each party, if so requested by the other party, will: (i) return promptly every document (other than documents publicly available and other than one copy thereof to be retained by counsel for such party) furnished to it by the other party (or any subsidiary, division, associate or affiliate of such other party) in connection with the transactions contemplated hereby, whether so obtained before or after the execution of this Agreement, and any copies thereof which may have been made, and will cause its representatives and any representatives of financial institutions and investors and others to whom such documents were furnished promptly to return such documents and any copies thereof any of them may have made; or (ii) destroy such documents and cause its representatives and such other representatives to destroy such documents, and such party shall deliver a certificate executed by its president or vice president stating to such effect. ARTICLE 12 TAX COVENANTS 12.1 Cooperation on Tax Matters. (a) The Company, Buyer and Seller shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Section and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. 33 34 (b) Buyer and Seller further agree, upon request, to use their reasonable efforts to obtain any certificate or other document from any governmental authority or any other person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby). (c) Buyer and Seller further agree, upon request, to provide the other party with all information that either party may be required to report pursuant to Section 6043 of the Code and all Treasury Department Regulations promulgated thereunder and relevant Danish tax statutory law. ARTICLE 13 DISPUTES 13.1 Amicable Resolution. The parties mutually desire that friendly collaboration will develop between themselves. Accordingly, they shall try to resolve in a friendly manner all disagreements and misunderstandings connected with their respective rights and obligations under this Agreement, including any amendments hereof. 13.2 Mediation and Alternative Dispute Resolution. (a) Excluding Intellectual Property disputes which must be brought before a court of competent jurisdiction, to the extent that any misunderstanding or dispute cannot be resolved agreeably in a friendly manner, the dispute will be mediated by a mutually acceptable mediator to be chosen by Buyer and Seller within forty-five (45) days after written notice by one of the parties demanding mediation. Neither party may unreasonably withhold consent to the selection of a mediator, however, by mutual agreement Buyer and Seller may postpone mediation until each has completed specified but limited discovery with respect to a dispute. The parties may also agree to attempt some other form of alternative dispute resolution ("ADR") in lieu of mediation, including by way of example and without limitation neutral fact-finding or a mini-trial. (b) Any dispute which the parties cannot resolve through negotiation, mediation or other form of ADR within six (6) months of the date of the initial demand for it by one of the parties may then be submitted to the courts for resolution. The use of any ADR procedures will not be construed under the doctrines of laches, waiver or estoppel to affect adversely the rights of either party. Nothing in this Article 13 will prevent either party from resorting to judicial proceedings if: (i) good faith efforts to resolve the dispute under these procedures have been unsuccessful; or (ii) interim relief from a court is necessary to prevent serious and irreparable injury to one party or to others. 13.3 Costs. Each of the parties shall bear its costs of mediation, but Buyer and Seller agree to share the costs of the mediator equally. 34 35 ARTICLE 14 MISCELLANEOUS 14.1 Expenses and Obligations. Except as otherwise expressly provided in this Agreement or as provided by law, all costs and expenses incurred by the parties hereto in connection with the transactions contemplated in this Agreement or in the other Transaction Documents shall be borne solely and entirely by the party which has incurred such expenses. 14.2 Expenses to be Paid by Seller. The Seller and Olicom shall pay, and shall indemnify, defend and hold the Buyer and the Company harmless from and against, each of the following: (a) Transfer Taxes. Any sales, use, excise, transfer or other similar tax imposed by Irish and Danish authorities with respect to the transactions provided for in this Agreement, and any interest or penalties related thereto. (b) Professional Fees. All fees and expenses of the Seller's and Olicom's legal, accounting, investment banking and other professional counsel in connection with the transactions contemplated hereby. 14.3 Parties in Interest. This Agreement shall be binding upon and, except as provided below, inure solely to the benefit of each party hereto and their successors and assigns, and nothing in this Agreement, except as set forth below, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 14.4 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given: (i) when delivered, if delivered in person or by commercial messenger service; or (ii) two days following deposit with a recognized overnight courier service, provided that such deposit occurs prior to such deadline as has been imposed by such service for overnight delivery; or (iii) when transmitted, if sent by telefacsimile copy, provided confirmation of receipt is received by the sender, in each case provided that such communication is addressed to the intended recipient thereof as set forth below: If to Buyer, to: Motorola, Inc. 5401 W. Beach Street Ft. Worth, Texas 76137-2794 Attn: John E. Steadman Facsimile: (817) 245-2702 with a copy to: Motorola, Inc. 1303 East Algonquin Schaumburg, IL 60196 Attn: Donald F. McLellan, Esq. Facsimile: (847) 576-3628 35 36 If to Seller, to: Olicom Ventures A/S Nybrovej 110 DK-2800 Lyngby Denmark with a copy to: Olicom A/S Nybrovej 110 DK-2800 Lyngby Denmark Attn: CEO Facsimile: 45 45 27 01 80 Any party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 14.5 Interpretation. All references in this Agreement to Exhibits, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections or other subdivision of this Agreement are for convenience only, do not constitute any part of such Articles, Sections, subsections or other subdivisions, and shall be disregarded in construing the language contained therein. The words "this Agreement," "herein," "hereby," "hereunder," and "hereof" and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words "this Section" and "this subsection" and words of similar import, refer only to the Sections or subsections hereof in which such words occur. The word "or" is not exclusive, and the word "including" (in its various forms) means "including without limitation." Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise expressly requires. Unless the context otherwise requires, all defined terms contained herein shall include the singular and plural and the conjunctive and disjunctive forms of such defined terms. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Unless indicated otherwise in this Agreement, all dollar amounts shall be in United States Dollars. 14.6 Counterparts and Facsimile Signatures. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being 36 37 understood that all parties need not sign the same counterpart. Notwithstanding the laws of any jurisdiction in which this Agreement is executed or delivered, a facsimile signature shall for all purposes be deemed an original and shall bind the signor as if such facsimile were an original. Each party hereto undertakes to deliver to each of the other parties hereto original copies of any facsimile signature by overnight courier to the addresses set forth in Section 14.4 above. 14.7 Entire Agreement. This Agreement (which term shall be deemed to include the Exhibits and Schedules hereto and the other certificates, documents and instruments delivered hereunder) constitutes the entire agreement of the parties hereto and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof other than the Confidentiality Undertaking between Buyer, Olicom and OJ dated July 9, 1999, including but not limited to the Letter of Intent and Exclusivity Agreement by Seller, Enskilda Securities and OJ dated September 3, 1999. There are no representations or warranties, agreements or covenants relating to the matters contemplated in this Agreement and in the other Transaction Documents other than those expressly set forth in this Agreement and the other Transaction Documents. 14.8 WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON-CONENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 14.8. EACH OF THE PARTIES HERETO WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF THE PARTIES HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 14.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICT OF LAW PRINCIPLES. ANY SUIT OR PROCEEDING BROUGHT HEREUNDER SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION OF THE COURTS LOCATED IN NEW YORK. 14.10 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by Seller or Buyer, whether by operation of law or otherwise, without the prior written consent of Buyer. Buyer may assign this Agreement to an "affiliate," as defined in the Securities Act of 1933, as amended. 14.11 Further Assurances. From time to time following the Closing, the parties hereto shall execute and deliver such other instruments of assignment, transfer and delivery and shall take such other actions as the other reasonably may request in order to consummate, complete and carry out the transactions contemplated by this Agreement. 37 38 14.12 Certain Definitions. For purposes of this Agreement, the term: (a) "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, Taxes, liens, losses, expenses and fees, including court costs and reasonable attorneys' fees and expenses, (b) "Basis" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction that forms or could form the basis for any specified consequence. (c) "Bluetooth" means all hardware, Software, other technology or any combination thereof in or relating to the "Bluetooth" industry standard as the same may be enhanced, supplemented or modified from time to time and such other hardware Software or technology used or useful in connection therewith. (d) "Company Intellectual Property" shall mean any Intellectual Property that is owned by or exclusively licensed the Company. (e) "Mobile Hands Free Solutions" means all technology, hardware, Software and other technology generally referenced by the company as Mobile Hands Free Solutions. (f) "Knowledge of Seller and Olicom" or "Knowledge" means: (a) actual knowledge of Seller and Olicom after due inquiry of those persons set forth on Schedule l4.12(d) as specified by Buyer; and (b) that which a reasonably prudent person could be expected to discover or otherwise become aware of in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter. (g) "Intellectual Property" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (i) all United States and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisional, continuations and continuations in part thereof; (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists and all documentation relating to any of the foregoing; (iii) all copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world; (iv) all mask works, mask work registrations and applications therefor, and all other rights corresponding thereto throughout the world; (v) all industrial designs and any registrations and applications therefor throughout the world; (vi) all trade names, logos, common law trademarks and service marks trademark and service mark registrations and applications therefor throughout the world; (vii) all databases and data collections and all rights therein throughout the world; and (viii) all computer software including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded and all documentation related to any of the foregoing throughout the world; (h) "Person" means an individual, corporation, limited liability company, partnership, limited partnership, syndicate, person (including, without limitation, a "person" as 38 39 defined in Section 13(d)(3) of the Securities Exchange Act of 1934), trust, association or other legal entity or government, political subdivision, agency or instrumentality of a government; (i) "Software" shall mean all computer code and data in source code, object code or other form incorporated in the products created or used by the Company in the preparation or support of its products; (j) "Software Authors" shall mean all authors of the Software, or any other Person or entity who participated in the development of the Software or any portion thereof or performed any work related to the Software; provided, however, that Software Authors shall not include any Persons who are not involved in the development or modification of Software source code; and (k) "Subsidiary" or "subsidiaries" of any person means any corporation, partnership, joint venture or other legal entity of which such person (either alone or through or together with any other subsidiary), owns or has rights to acquire, directly or indirectly, fifty percent (50%) or more of the capital stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. [REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK] 39 40 IN WITNESS WHEREOF, Buyer, Seller and Olicom have each caused this Agreement to be executed on their behalf by their respective duly authorized officers as of the date first written above. BUYER: MOTOROLA, INC. By: /s/ John Steadman --------------------------------------------- Name: John Steadman Title: Vice President and Director, Licensing and Strategic Alliances, Personal Network Group, PCS, CE SELLER: OLICOM VENTURES A/S By: /s/ Boje Rinhart --------------------------------------------- Name: Boje Rinhart by Power of Attorney Title: ------------------------------------------ OLICOM: OLICOM A/S By: /s/ Boje Rinhart --------------------------------------------- Name: Boje Rinhart by Power of Attorney Title: ------------------------------------------ 40 41 Exhibit 2.2 FORM OF ESCROW AGREEMENT 42 ESCROW AGREEMENT This Escrow Agreement ( this "Escrow Agreement") dated as of October ___, 1999 is made and entered into by and among Motorola, Inc., a Delaware corporation (the "Buyer"), Olicom Ventures A/S, a corporation organized and existing under the laws of the Kingdom of Denmark (the "Seller"); Olicom A/S, a corporation organized and existing under the laws of the Kingdom of Denmark ("Olicom"); and Unibank A/S, as Escrow Agent (the "Escrow Agent"). All capitalized terms used and not defined herein shall have the meanings contained in that certain Stock Purchase Agreement dated October 26, 1999 by and among the Buyer, Seller and Olicom (the "Purchase Agreement"). RECITALS: WHEREAS, pursuant to the Purchase Agreement, the Buyer, the Seller and Olicom have agreed to the terms of the Purchase Agreement providing for the sale by the Seller to the Buyer of the Shares; WHEREAS, Section 2.2 of the Purchase Agreement provides for the execution and delivery of an escrow agreement, and the Buyer and the Seller have agreed that the execution and delivery of this Escrow Agreement shall satisfy the obligations of the parties hereto to execute and deliver such an escrow agreement; and WHEREAS, Section 2.2 of the Purchase Agreement further provides that the Buyer shall pay 10% of the Purchase Price to the Escrow Agent for release as set forth herein and in the Purchase Agreement. NOW, THEREFORE, in consideration of the consummation of the transactions contemplated by the Purchase Agreement, the covenants and agreements herein set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Appointment and Agreement of the Escrow Agent. The Buyer, the Seller and Olicom hereby appoint and designate the Escrow Agent as the escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment under the terms and subject to the conditions set forth herein. 2. Deposit of the Escrow Funds. Pursuant to Section 2.2 of the Purchase Agreement, at the Closing, the Buyer shall withhold and deliver to the Escrow Agent cash in the original principal amount of ten percent (10%) of the Purchase Price by wire transfer of immediately available funds (the "Escrow Funds") to be held in an interest bearing trust account number 5005905135 (the "Escrow Account"). The cost of establishing the Escrow Account (which shall be approximately 20,000 DKK) shall be borne by the Buyer. The ongoing expenses related to such Escrow Account, if any, shall be split equally between the Buyer and the Seller. Except as otherwise specifically set forth herein, each party hereto shall bear its own legal fees and other expenses in connection with the Escrow Account and this Escrow Agreement. The funds deposited in the Escrow Account shall be held and invested as set forth in Section 5 hereof. 43 3. Establishment of Escrow. 3.1 Escrow Funds. The Escrow Agent shall establish and hold in escrow the Escrow Funds. 3.2 Use of Escrow Funds. The Escrow Funds shall be held and disbursed for the purposes of satisfying the Buyer's remedies for breaches of the Purchase Agreement under Article 9 of the Purchase Agreement, as set forth in Section 4 hereof. 4. Disbursements from the Escrow Funds. 4.1 If the Buyer believes in good faith that it has a claim for indemnification under Article 9 of the Purchase Agreement, the Buyer shall deliver to the Escrow Agent and the Seller an officer's certificate setting forth the facts and basis for such claim as provided in Section 9.5 of the Purchase Agreement (a "Claim"). Within thirty-five (35) calendar days of receipt of such certificate by the Escrow Agent and without any further inquiry by the Escrow Agent or further instruction to the Escrow Agent, the Escrow Agent shall pay to the Buyer the amount of each such Claim as indicated in such officer's certificate and the accrued interest thereon from the Escrow Funds unless the Seller shall have delivered to the Escrow Agent a notice of the Seller's objection to such Claim within thirty (30) calendar days of the Seller's receipt of such Claim. If the Seller does not deliver such notice of objection to the Buyer's Claim within sixty (60) calendar days of receiving the Claim, the Seller shall have approved such Claim and shall waive any objection at a later date. If it is subsequently determined that the Buyer is not entitled to any portion of the Escrow Account which has been paid out pursuant to a Claim, then within five (5) calendar days of such determination, the Buyer shall promptly return to the Escrow Agent the excess amount withdrawn from the Escrow Account plus accrued interest thereon. In the event that the parties hereto dispute such Claim, the parties shall endeavor to resolve any dispute regarding disbursement of the Escrow Funds in the manner provided by Article 13 of the Purchase Agreement. 4.2 If the Escrow Funds are insufficient to fully satisfy claims for indemnification, the Buyer shall have a right to pursue such claims against the Seller and Olicom pursuant to Article 9 of the Purchase Agreement, subject to the limitation of indemnification of the Seller and Olicom contained in Section 9.6 of the Purchase Agreement. 4.3 Unless there has been a Claim made for such funds in the Escrow Account by the Buyer, the balance of all remaining funds, if any, in the Escrow Account plus all accrued interest thereon (the "Balance") will be released from the Escrow Account to the Seller without further inquiry or instruction eighteen (18) months from Closing. 5. Investment of Funds. Subject to the terms and conditions set forth herein, the Escrow Agent shall invest the Escrow Funds as shall be directed, in a writing signed by the Buyer and the Seller to be delivered to the Escrow Agent from time to time, in any of the following investments (the "Permitted Investments"): (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full 2 44 faith and credit of the United States of America, in each case maturing within three (3) months from the date of acquisition thereof; and (ii) certificates of deposit, other time deposits, and bankers' acceptances maturing within three (3) months from the date of acquisition thereof issued by the Escrow Agent or any bank operating under the laws of the United States of America or any state thereof or the District of Columbia which has combined capital and surplus of not less than $500,000,000. If the Escrow Agent has not received written direction from time to time that an investment decision has been made. The Escrow Agent shall invest the Escrow Funds, or such portion thereof, as to which no written direction has been received, in investments described in clause (ii) above. Each of the foregoing investments shall be made in the name of Olicom Ventures A/S for the benefit of the parties hereto. No investment shall be made in any instrument or security that has a maturity of greater than six (6) months from the date of investment. Notwithstanding anything to the contrary contained herein, the Escrow Agent may, without notice to the Buyer or the Seller, sell or liquidate any of the foregoing investments at any time if the proceeds thereof are required for any release of funds permitted or required hereunder, and the Escrow Agent shall not be liable or responsible for any loss, cost or penalty resulting from any such sale or liquidation, except to the extent of the Escrow Agent's gross negligence or willful misconduct. With respect to any funds received by the Escrow Agent for deposit into the Escrow Account or a written direction received by the Escrow Agent with respect to investment of any funds in the Escrow Account, the Escrow Agent shall not be required to invest such funds or to effect such investment instruction until the next day upon which financial institutions in the Kingdom of Denmark are open for business. This Escrow Agreement shall treat the Escrow Funds as a trust fund in accordance with the terms hereof. In no event shall any part of the Escrow Account be commingled with any other funds held by the Escrow Agent or any of its affiliates. It is expressly agreed that any Permitted Investments may be purchased by the Escrow Agent notwithstanding that an affiliate of the Escrow Agent has underwritten, privately placed or made a market for, any such Permitted Investments, or may in the future underwrite, privately place or make a market in any such Permitted Investments. Any income that accrues to the Escrow Funds and is received by the Escrow Agent as a result of the Permitted Investments shall be deposited into the Escrow Account and shall be available for the uses and purposes for which the Escrow Account has been established. The party entitled to the receipt of any portion of the funds in the Escrow Account shall receive the accrued interest allocable to that portion of the funds. The Escrow Agent shall have no authority or duty to invest the funds in the Escrow Account in any other obligations except as provided in this Section. The Escrow Agent shall, promptly following the end of each calendar month, send the Buyer and the Seller a statement of holdings and transactions with respect to the Escrow Account in form and substance customarily provided to clients, which statement shall include, without limitation, interest or other income received during such calendar month in respect of the Escrow Account and shall identify the type(s) and source(s) of such income. 3 45 6. Termination of Escrow. 6.1 Subject to disbursements from time to time in accordance with the terms and subject to the conditions hereof, unless the Buyer shall have notified the Escrow Agent of a dispute in accordance with Section 1.3 of the Purchase Agreement, the Escrow Agent shall deliver the Balance (as defined in Section 4 hereof) to the Seller, without further inquiry by the Escrow Agent or further instruction to the Escrow Agent eighteen (18) months from Closing. 6.2 This Escrow Agreement shall automatically terminate if and when the entire Escrow Funds shall have been released by the Escrow Agent in accordance with the terms and subject to the conditions of this Escrow Agreement. Thereafter. The Escrow Agent shall be deemed to have discharged all of its obligations hereunder. 7. Matters Affecting the Escrow Agent. 7.1 Indemnification of the Escrow Agent. From and at all times after the date of this Escrow Agreement, the Buyer and the Seller shall, to the fullest extent permitted by law and to the extent provided herein, indemnify and hold harmless the Escrow Agent and each director, officer, employee, attorney, agent and affiliate of the Escrow Agent (collectively, the "Indemnified Panics") against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees, costs and expenses actually incurred) incurred by or asserted against any of the Indemnified Parties from and after the date hereof, whether direct, indirect or consequential, as a result of or arising from or in any way relating to any claim, demand, suit, action or proceeding (including any inquiry or investigation) by any person, including, without limitation, the Buyer or the Seller, whether threatened or initiated, asserting a claim for any legal or equitable remedy against any person under any statute or regulation, including, but not limited to, any applicable securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation, preparation, execution, performance or failure of performance of this Escrow Agreement or any transactions contemplated herein, whether or not any such Indemnified Party is a party to any such action, proceeding, suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Indemnified Party. If any such action or claim shall be brought or asserted against any Indemnified Party, such Indemnified Party shall promptly notify the Buyer and the Seller in writing, and the Buyer and the Seller shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Such Indemnified Party shall, in its sole discretion, have the right to employ separate counsel (who may be selected by such Indemnified Party in its sole discretion) in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be paid by such Indemnified Party, except that the Buyer and the Seller shall be required to pay such fees and expenses if: (a) the Buyer and the Seller agree to pay such fees and expenses; (b) the Buyer and the Seller shall fail to assume the defense of such action or proceeding or shall fail to employ counsel reasonably satisfactory to the Indemnified Party in any such action or proceeding; or (c) the Indemnified Party, the Buyer and the Seller are the plaintiffs in any such action or proceeding (including any potentially impleaded parties), and the Indemnified Party shall have been advised by counsel that 4 46 there may be one or more legal defenses available to it which are different from or additional to those available to the Buyer or the Seller. Each of the Buyer, on the one hand, and the Seller. on the other hand, shall be responsible for one-half (1/2) of each such indemnification responsibility. All such reasonable fees and expenses payable by the Buyer and/or the Seller pursuant to the foregoing sentence shall be paid from time to time as incurred, both in advance of and after the final disposition of such action or claim. The obligations of the Buyer and the Seller under this Section 7.1 shall survive any termination of this Escrow Agreement and the resignation or removal of the Escrow Agent shall be independent of any obligation of the Escrow Agent. The parties agree that neither the payment by the Buyer or the Seller of any claim by the Escrow Agent for indemnification hereunder nor the disbursement of any amounts to the Escrow Agent from the Escrow Account in respect of a claim by the Escrow Agent for identification shall impair, limit, modify or affect, as between the Buyer and the Seller, the respective rights and obligations of the Buyer, on the one hand, and the Seller, on the other hand, under the Purchase Agreement. 7.2 Duties and Liability of the Escrow Agent. The Escrow Agent's sole responsibility shall be for the safekeeping, investment, and disbursement of the Escrow Funds in accordance with the terms of this Escrow Agreement. The Escrow Agent shall have no implied duties or obligations and shall not be charged with knowledge or notice of any fact not specifically set forth herein. The Escrow Agent may rely upon any instrument, not only as to its due execution, validity and effectiveness. but also as to the truth and accuracy of any information contained therein, which the Escrow Agent shall in good faith believe to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Escrow Agreement. Except to the extent of gross negligence or willful misconduct, in no event shall the Escrow Agent be liable for incidental, indirect, special, consequential or punitive damages. The Escrow Agent shall not be obligated to take any legal action or commence any proceeding in connection with the Escrow Account, any account in which the Escrow Funds are deposited, this Escrow Agreement or the Purchase Agreement, or to appear in, prosecute or defend any such legal action or proceeding. The Escrow Agent may consult legal counsel selected by it in the event of any dispute or question as to the construction of any of the provisions hereof or of any other agreement or of its duties hereunder, or relating to any dispute involving any party hereto. The Buyer and the Seller, jointly and severally, shall promptly pay, upon demand, the reasonable fees and expenses actually incurred of any such counsel. 7.3 Fees. The Buyer, on the one hand, and the Seller, on the other hand shall equally reimburse the Escrow Agent For all of its reasonable out-of-pocket expenses actually incurred, including reasonable attorneys' fees, travel expenses, telephone and facsimile transmission costs, postage (including express mail and overnight delivery charges), copying charges and the like. Notwithstanding the above, any expenses in an amount greater than 3,500 DKK must be preapproved by the Buyer and the Seller upon submission of a detailed invoice by the Escrow Agent to the Buyer and the Seller or such expenses will not be the responsibility of either the Buyer or the Seller. All of the compensation and reimbursement obligations set forth in this Section 7.3 shall be payable by the Buyer and the Seller, in equal amounts, upon demand by the Escrow Agent. The obligations of the Buyer and the Seller under this Section 7.3 shall survive any termination of this Escrow Agreement and the resignation or removal of the Escrow 5 47 Agent. The Buyer and the Seller shall promptly pay such amounts to the Escrow Agent or any Indemnified Party upon receipt of an itemized invoice. 7.4 Escrow Agent to Follow Instructions of the Buyer and the Seller. Except for matters covered by Section 4 hereof, the Escrow Agent shall at any time and from time to time take such action hereunder with respect to the Escrow Funds as shall be agreed to in writing by the Buyer and the Seller. 7.5 Removal and Resignation Of the Escrow Agent. The Buyer and the Seller, acting jointly, may remove the Escrow Agent at any time upon thirty (30) calendar days' prior written notice, signed by both the Buyer and the Seller, to the Escrow Agent. The Escrow Agent may resign at any time upon thirty (30) calendar days prior written notice (unless waived) to the Buyer and the Seller. Within thirty (30) calendar days after giving the foregoing notice of resignation from the Escrow Agent, the Buyer and the Seller shall jointly agree on and appoint a successor escrow agent. The successor escrow agent shall be a bank having combined capital and surplus of at least 3,500.000,000 DKK as shall be mutually selected by the Buyer and the Seller. Any such successor escrow agent shall be appointed by a written instrument mutually satisfactory to and executed by the Buyer and the Seller, the Escrow Agent and the successor escrow agent. If a successor escrow agent has not accepted such appointment by the end of such thirty (30) calendar day period, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief. The reasonable costs and expenses (including reasonable attorneys' fees and expenses actually incurred) incurred by the Escrow Agent in connection with such proceeding shall be paid by, and be deemed a joint and several obligation of, the Buyer, on the one hand, and the Seller, on the other hand. Any successor escrow agent appointed under the provisions of this Escrow Agreement shall have all of the same rights, powers, privileges, immunities and authority with respect to the matters contemplated herein as are granted herein to the original Escrow Agent. It is understood and agreed that no resignation of the Escrow Agent shall be effective until a successor escrow agent agrees to act hereunder. If the Escrow Agent submits a notice of resignation, its only duty, until a successor escrow agent shall have been appointed and shall have accepted such appointment, shall be to hold, invest and dispose of the Escrow Funds in accordance with this Escrow Agreement, but without regard to any notices, requests, instructions, demands or the like received by it from the other parties hereto after such notice of resignation shall have been given, unless the same is a direction that the Escrow Funds be paid or delivered in its entirety to one of the other parties hereto. 8. Other Provisions. 8.1 Security Interest. (a) The Seller hereby grants to the Buyer a first priority perfected security interest in the Escrow Funds and all other amounts from time to time in the Escrow Account (including all interest accrued thereon and all proceeds thereof) to secure the 6 48 Buyer's fights to indemnification under Article 9 of the Purchase Agreement. This Escrow Agreement shall constitute a security agreement under applicable law. (b) The parties agree that this security interest shall attach as of the execution of this Escrow Agreement. The parties further agree that, for the purpose of perfecting the Buyer's security interest in the Escrow Funds held by the Escrow Agent pursuant to this Escrow Agreement, the Buyer designates the Escrow Agent to acquire and maintain possession of the Escrow Funds. The Seller and Olicom shall take ail other actions requested by the Buyer to maintain the perfection and priority of the security interest in the Escrow Funds. (c) The Buyer's security interest herein granted shall be automatically terminated to the extent of any adjustment. offset or disbursement of the Escrow Funds hereunder by the Escrow Agent in accordance with the terms of this Escrow Agreement. Upon final disbursement of the Escrow Funds to the Seller or to the Buyer, the Buyer shall do all acts and things reasonably necessary to release and extinguish such security interest. 8.2 Amendment and Waiver. This Escrow Agreement may not be amended or waived except in a writing executed by the party against which such amendment or waiver is sought to be enforced. No course of dealing between or among any persons having any interest in this Escrow Agreement will be deemed effective to modify or amend any part of this Escrow Agreement or any rights or obligations of any person under or by reason of this Escrow Agreement. 8.3 Notices. All notices. requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given: (i) when delivered, if delivered in person or by commercial messenger service; or (ii) two days following deposit with a recognized overnight courier service, provided that such deposit occurs prior to such deadline as has been imposed by such service for overnight delivery; or (iii) when transmitted. If sent by telefacsimile copy, provided confirmation of receipt is received by the sender, in each case provided that such communication is addressed to the intended recipient thereof as set forth below: If to Buyer, to: Motorola, Inc. 5401 W. Beach Street Ft. Worth, Texas 76137-2794 Attn: John E. Steadman Facsimile: (817) 245-2702 with a copy to: Motorola, Inc. 1301 East Algonquin Schaumburg, IL 60196 Attn: Donald F. McLellan. Esq. Facsimile: (847) 576-3628 7 49 If to Seller, to: Olicom Ventures AJS Nybrovej 110 DK-2800 Lyngby Denmark Attn: Lars Larsen & Mette Fogt Facsimile: 011-45-45-27-0180 If to Olicom, to: Olicom A/S Nybrovej 110 DK-2800 Lyngby Denmark Attn: CFO Facsimile: 011-45-45-27-0180 If to Escrow Agent, To: Unibank A/S Niels Hemmingsens Gade 24 DK-1001 Copenhagen K Denmark Attn: Lars Hilstroem Facsimile: 011-45-33-13-1959 Any party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 8.4 Binding Effect and Assignment. This Escrow Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Escrow Agreement nor any of the rights, interests or obligations hereunder may be assigned by the Seller, Olicom or the Escrow Agent without the prior written consent of the Buyer. 8.5 Severability. Whenever possible, each provision of this Escrow Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Escrow Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Escrow Agreement. 8.6 Complete Agreement; No Third Party Beneficiaries. Subject to the terms of the Purchase Agreement, this Escrow Agreement contains the complete agreement between the parties and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. Nothing in this Escrow Agreement, expressed or implied, is intended to confer upon any person 8 50 or entity, other than the parties hereto and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Escrow Agreement. 8.7 Governing Law. This Escrow Agreement shall be construed, governed and enforced according to the internal laws of the Kingdom of Denmark, without regard to conflicts of law principles. Any suit or proceeding brought hereunder shall be subject to the exclusive jurisdiction of the courts located in the Kingdom of Denmark. 9. Mediation and Alternative Dispute Resolution. (a) To the extent that any misunderstanding or dispute cannot be resolved agreeably in a friendly mariner, the dispute will be mediated by a mutually acceptable mediator to be chosen by Buyer, Seller, and if applicable, the Escrow Agent within forty-five (45) days after written notice by one of the parties demanding mediation. Neither party may unreasonably withhold consent to the selection of a mediator, however, by mutual agreement Buyer, Seller, and if applicable. The Escrow Agent may postpone mediation until each has completed specified but limited discovery with respect to a dispute. The parties may also agree to attempt some other form of alternative dispute resolution ("ADR") in lieu of mediation, including by way of example and without limitation neutral fact-finding or a mini-trial. (b) Any dispute which the parties cannot resolve through negotiation, mediation or other form of ADR within six (6) months of the date of the initial demand for it by one of the parties may then be submitted to the courts for resolution. The use of any ADR procedures will not be construed under the doctrines of laches, waiver or estoppel to affect adversely the rights of either party. Nothing in this Section 9 will prevent either party from resorting to judicial proceedings if: (i) good faith efforts to resolve the dispute under these procedures have been unsuccessful; or (ii) interim relief from a court is necessary to prevent serious and irreparable injury to one party or to others. 10. Attorneys' Fees. Should any litigation be commenced between the Buyer, on one hand, and either the Seller or Olicom, on the other hand, concerning this Escrow Agreement or the rights and duties of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such other relief as may be granted, to receive reimbursement from the opposing party or parties, as applicable, for such first party's attorneys' fees in such litigation, which shall be determined by the court in that litigation. 11. Waiver of Trial by Jury. EACH OF THE PARTIES HERETO WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON-CONENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11. EACH OF THE PARTIES HERETO WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF THE PARTIES HERETO REPRESENTS THAT IT RAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF 9 51 LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 12. Confirmation of Transfer Instructions. If fund transfer instructions are given (other than in writing at the time of execution of the Purchase Agreement), whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Schedule A attached hereto, and the Escrow Agent may rely upon the confirmations of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. The parties to this Escrow Agreement acknowledge that such security procedure is commercially reasonable. 13. Counterparts and Facsimile Signature. This Escrow Agreement may be executed in one or more counterparts, each of which shall be deemed an original. but all of which together shall constitute one and the same instrument. Notwithstanding the laws of any jurisdiction in which this Agreement is executed or delivered. A facsimile signature shall for all purposes be deemed an original and shall bind the signer as if such facsimile were an original. Each party hereto undertakes to deliver to each other party hereto original copies of any facsimile signature by overnight courier to the addresses set forth in Section 8.3 above. [Signature Page Follows] 10 52 IN WITNESS WHEREOF. The parties hereto have caused this Escrow Agreement to be executed effective as of the date first written above. BUYER: MOTOROLA, INC. By: ---------------------------------------------- Name: John Steadman Title: Vice President and Director. Licensing and Strategic Alliances. Personal Network Group, PCS. CE SELLER: OLICOM VENTURES A/S By: ---------------------------------------------- Name: -------------------------------------------- Its: --------------------------------------------- OLICOM: OLICOM A/S By: ---------------------------------------------- Name: -------------------------------------------- Its: --------------------------------------------- ESCROW AGENT: UNIBANK A/S By: ---------------------------------------------- Name: -------------------------------------------- Its: --------------------------------------------- 11 -----END PRIVACY-ENHANCED MESSAGE-----