1
EXHIBIT 2.2
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger entered into as of June 16, 1996
by and among Bay Networks, Inc., a Delaware corporation (the "Buyer"),
Beta Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Buyer (the "Transitory Subsidiary"), and Penril
DataComm Networks, Inc., a Delaware corporation (the "Company"). The
Buyer, the Transitory Subsidiary and the Company are referred to
collectively in this Agreement as the "Parties".
This Agreement contemplates a merger of the Transitory Subsidiary
into the Company, which merger will qualify as a tax-free
reorganization described in Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"). In such merger, the
stockholders of the Company will receive solely voting capital stock of
the Buyer in exchange for their capital stock of the Company.
The Parties acknowledge that in the event that the transactions
contemplated by this Agreement are not consummated, the Company would
experience a substantial loss and hardship; therefore, to minimize the
potential for such (i) failure to consummate the transactions and (ii)
loss and hardship, the Parties have knowingly agreed not to include in
this Agreement many otherwise normal conditions to closing the
transaction, including but not limited to, a condition that there shall
be no material adverse change prior to the Effective Time (as defined
below) to the Company, its business, financial condition, results of
operations, or prospects, to the Company's industry or to the general
business conditions.
Now, therefore, in consideration of the representations,
warranties and covenants in this Agreement contained, the Parties agree
as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement, the Transitory Subsidiary shall merge with and into the
Company (with such merger referred to in this Agreement as the
"Merger") at the Effective Time (as defined below). From and after the
Effective Time, the separate corporate
2
existence of the Transitory Subsidiary shall cease and the Company
shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time at
which the Company and the Transitory Subsidiary file the certificate of
merger or other appropriate documents prepared and executed in
accordance with the relevant provisions of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of
State of the State of Delaware. The Merger shall have the effects set
forth in Section 259 of the Delaware General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at a mutually agreed
upon location, commencing at 9:00 a.m. local time on a mutually
agreeable date as soon as practicable after the date on which all of
the conditions to the obligations of the Parties to consummate the
transactions contemplated by this Agreement have been satisfied or
waived (the "Closing Date"), but in no event later than 150 days from
the date hereof.
1.3 Actions at the Closing. At the Closing, (a) the Company shall
deliver to the Buyer and the Transitory Subsidiary the various
certificates, instruments and documents referred to in Section 5.2, (b)
the Buyer and the Transitory Subsidiary shall deliver to the Company
the various certificates, instruments and documents referred to in
Section 5.3, (c) the Company and the Transitory Subsidiary shall file
with the Secretary of State of the State of Delaware the Certificate of
Merger, and (d) the Buyer shall deliver a certificate for the Merger
Shares (as defined below) to a bank, trust company or other entity
reasonably satisfactory to the Company appointed by the Buyer to act as
the exchange agent (the "Exchange Agent") in accordance with Section
1.7.
1.4 Additional Action. The Surviving Corporation may, at any time
after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the
Company or the Transitory Subsidiary, in order to consummate the
transactions contemplated by this Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any Party or the holder of
any of the following securities:
(a) Each share of common stock, $0.01 par value per share, of
the Company ("Company Shares") issued and outstanding immediately prior
to the Effective Time (other than Company Shares owned beneficially by
the Buyer or the Transitory Subsidiary,
-2-
3
Dissenting Shares (as defined below) and Company Shares held in the
Company's treasury) shall be converted into and represent the right to
receive (subject to the provisions of Section 1.9) such number of
shares of common stock, $0.01 par value per share, of the Buyer ("Buyer
Common Stock") as is equal to the Conversion Ratio (as defined below).
The "Conversion Ratio" shall mean the number determined by dividing (i)
$10.00 (ii) by the Buyer Stock Market Price. The "Buyer Stock Market
Price" shall mean the average of the closing prices of the Buyer's
Common Stock on the New York Stock Exchange (the "NYSE") five (5)
consecutive trading days immediately preceding the second business day
immediately preceding to the Closing Date. Stockholders of record of
the Company ("Company Stockholders") shall be entitled to receive
immediately all of the shares of Buyer Common Stock into which their
Company Shares were converted pursuant to this Section 1.5(a) (the
"Merger Shares").
(b) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be
cancelled and retired without payment of any consideration therefor.
(c) Each share of common stock, $0.01 par value per share, of
the Transitory Subsidiary issued and outstanding immediately prior to
the Effective Time shall be converted into and thereafter evidence one
share of common stock, $0.01 par value per share, of the Surviving
Corporation.
1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Stockholder
who has not voted such Company Shares in favor of the adoption of this
Agreement and the Merger and with respect to which appraisal shall have
been duly demanded and perfected in accordance with Section 262 of the
Delaware General Corporation Law and not effectively withdrawn or
forfeited prior to the Effective Time. Dissenting Shares shall not be
converted into or represent the right to receive Merger Shares, unless
such Company Stockholder shall have forfeited his right to appraisal
under the Delaware General Corporation Law or withdrawn, with the
consent of the Company, his demand for appraisal. If such Company
Stockholder has so forfeited or withdrawn his right to appraisal of
Dissenting Shares, then (i) as of the occurrence of such event, such
holder's Dissenting Shares shall cease to be Dissenting Shares and
shall be converted into and represent the right to receive the Merger
Shares issuable in respect of such Company Shares pursuant to Section
1.5(a), and (ii) promptly following the
-3-
4
occurrence of such event, the Buyer shall deliver to the Exchange Agent
a certificate representing the Merger Shares to which such holder is
entitled pursuant to Section 1.5(a).
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of
such demands, and any other instruments that relate to such demands
received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal
under the Delaware General Corporation Law. The Company shall not,
except with the prior written consent of the Buyer, make any payment
with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
1.7 Exchange of Shares
(a) Prior to the Effective Time, the Buyer shall appoint the
Exchange Agent to effect the exchange for the Merger Shares of
certificates that, immediately prior to the Effective Time, represented
Company Shares converted into Merger Shares pursuant to Section 1.5
(including any Company Shares referred to in the last sentence of
Section 1.6(a)) ("Certificates"). On the Closing Date, the Buyer shall
deliver to the Exchange Agent, in trust for the benefit of holders of
Certificates, a stock certificate (issued in the name of the Exchange
Agent or its nominee) representing the Merger Shares, as described in
Section 1.5(a). As soon as practicable after the Effective Time, the
Buyer shall cause the Exchange Agent to send a notice and a transmittal
form to each holder of a Certificate (other than those surrendered and
paid for at the Closing) advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent
such Certificate in exchange for the Merger Shares issuable pursuant to
Section 1.5(a). Each holder of a Certificate, upon proper surrender
thereof to the Exchange Agent in accordance with the instructions in
such notice, shall be entitled to receive in exchange therefor (subject
to any taxes required to be withheld) the Merger Shares issuable
pursuant to Section 1.5(a). Until properly surrendered, each such
Certificate shall be deemed for all purposes to evidence only the right
to receive the Merger Shares issuable pursuant to Section 1.5(a).
Holders of Certificates shall not be entitled to receive certificates
for the Merger Shares to which they would otherwise be entitled until
such Certificates are properly surrendered.
(b) If any Merger Shares are to be issued in the name of a
person other than the person in whose name the Certificate surrendered
in exchange therefor is registered, it shall be a condition to the
issuance of such Merger Shares that (i) the Certificate so surrendered
shall be transferable, and shall be
-4-
5
properly assigned, endorsed or accompanied by appropriate stock powers,
(ii) such transfer shall otherwise be proper and (iii) the person
requesting such transfer shall pay to the Exchange Agent any transfer
or other taxes payable by reason of the foregoing or establish to the
satisfaction of the Exchange Agent that such taxes have been paid or
are not required to be paid. Notwithstanding the foregoing, neither the
Exchange Agent nor any Party shall be liable to a holder of Company
Shares for any Merger Shares issuable to such holder pursuant to
Section 1.5(a) that are delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed, the
Buyer shall issue in exchange for such lost, stolen or destroyed
Certificate the Merger Shares issuable in exchange therefor pursuant to
Section 1.5(a). The Board of Directors of the Buyer may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to give
the Buyer a bond in such sum as it may reasonably direct as indemnity
against any claim that may be made against the Buyer with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(d) Promptly following the date which is six months after the
Closing Date, the Exchange Agent shall return to the Buyer all Merger
Shares in its possession, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Buyer and, subject to applicable abandoned property,
escheat and similar laws, receive in exchange therefor the Merger
Shares issuable with respect thereto pursuant to Section 1.5(a).
1.8 Dividends. No dividends or other distributions that are
payable to the holders of record of Buyer Common Stock as of a date on
or after the Closing Date shall be paid to former Company Stockholders
entitled by reason of the Merger to receive Merger Shares until such
holders surrender their Certificates in accordance with Section 1.7.
Upon such surrender, the Buyer shall pay or deliver to the persons in
whose name the certificates representing such Merger Shares are issued
any dividends or other distributions that are payable to the holders of
record of Buyer Common Stock as of a date on or after the Closing Date
and which were paid or delivered between the Effective Time and the
time of such surrender; provided that no such person shall be entitled
to receive any interest on such dividends or other distributions.
-5-
6
1.9 Fractional Shares. No certificates or scrip representing
fractional Merger Shares shall be issued to former Company Stockholders
upon the surrender for exchange of Certificates, and such former
Company Stockholders shall not be entitled to any voting rights, rights
to receive any dividends or distributions or other rights as a
stockholder of the Buyer with respect to any fractional Merger Shares
that would otherwise be issued to such former Company Stockholders. In
lieu of any fractional Merger Shares that would otherwise be issued,
each former Company Stockholder that would have been entitled to
receive a fractional Merger Share shall, upon proper surrender of such
person's Certificates, receive a cash payment equal to the closing
price per share of the Buyer Common Stock on the NYSE, on the business
day immediately preceding the business day prior to the Closing Date,
multiplied by the fraction of a share that such Company Stockholder
would otherwise be entitled to receive. The fractional share interests
of each Company Stockholder will be aggregated, and no Company
Stockholder will receive cash in an amount equal to or greater than the
value of one full share of Buyer Common Stock.
1.10 Options and Rights.
(a) As of the Effective Time, all obligations of the Company
with respect to options to purchase Company Shares issued by the
Company to the employees of the Company listed on Schedule 1.10
pursuant to its stock option plans ("Options"), whether vested or
unvested, shall be assumed by the Buyer.
(b) Immediately after the Effective Time, each Option
outstanding immediately prior to the Effective Time shall be deemed to
constitute an option to acquire, on the same terms and conditions as
were applicable under such Option at the Effective Time, such number of
shares of Buyer Common Stock as is equal to the number of Company
Shares subject to the unexercised portion of such Option multiplied by
the Conversion Ratio (with any fraction resulting from such
multiplication to be rounded up or down to the nearest whole number or,
in the case of .5, to the nearest odd number). The exercise price per
share of each such Option shall be equal to the exercise price of such
Option immediately prior to the Effective Time, divided by the
Conversion Ratio. The term, exercisability, vesting schedule, status as
an "incentive stock option" under Section 422 of the Code, if
applicable, and all of the other terms of the Options shall otherwise
remain unchanged. In addition to the foregoing, the applicable
provisions of each award agreement for Options to be outstanding after
the Effective Time will be equitably adjusted after the Spin-off
Transaction and prior to the Closing by the Company's Board of
Directors to reflect the Spin-off Transaction (as defined herein).
-6-
7
(c) As soon as practicable after the Effective Time, the
Buyer or the Surviving Corporation shall deliver to the holders of
Options appropriate notices setting forth such holders' rights pursuant
to such Options, as amended by this Section 1.10, and the agreements
evidencing such Options shall continue in effect on the same terms and
conditions (subject to the amendments provided for in this Section 1.10
and such notice).
(d) The Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common
Stock for delivery upon exercise of the Options. As soon as practicable
after the Effective Time, the Buyer shall file a Registration Statement
on Form S-8 (or any successor form) under the Securities Act of 1933,
as amended (the "Securities Act") with respect to all shares of Buyer
Common Stock subject to such Options that may be registered on a Form
S-8, and shall use its best efforts to maintain the effectiveness of
such Registration Statement for so long as such Options remain
outstanding.
(e) The Company shall obtain, prior to the Closing, the
consent from each holder of an Option to the adjustment or amendment,
as the case may be, of such Option or Right pursuant to this Section
1.10 (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
1.11 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of the Transitory Subsidiary immediately
prior to the Effective Time, except that the name of the corporation
set forth therein shall be changed to the name of the Company.
1.12 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of the Transitory Subsidiary immediately prior
to the Effective Time, except that the name of the corporation set
forth therein shall be changed to the name of the Company.
1.13 Directors and Officers. The directors of the Transitory
Subsidiary shall become the directors of the Surviving Corporation as
of the Effective Time. The officers of the Company shall remain as
officers of the Surviving Corporation after the Effective Time,
retaining their respective positions, except as specified by the Buyer
pursuant to Section 5.2(g).
1.14 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of
Certificates shall cease to have any rights with respect thereto,
except as provided in this Agreement or by law.
-7-
8
1.15 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of
Company Shares shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange
Agent, they shall be cancelled and exchanged for Merger Shares in
accordance with Section 1.5(a), subject to applicable law in the case
of Dissenting Shares.
1.16 Tax-Free Reorganization. The Parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the
Merger in accordance with the provisions of Section 368(a)(1)(B) of the
Code. The Buyer represents and covenants that:
(a) The Surviving Corporation will pay its dissenting
stockholders the value of their Dissenting Shares out of its own funds.
No funds will be supplied for that purpose, directly or indirectly, by
the Buyer, nor will the Buyer directly or indirectly reimburse the
Surviving Corporation for any payments for Dissenting Shares.
(b) The Buyer presently intends, and at the Effective Time it
will intend, to continue the Company's historic business or use a
significant portion of the Company's historic business assets in a
business.
(c) The Buyer has no plan or intention to liquidate the
Surviving Corporation; to merge the Surviving Corporation into another
corporation; to cause the Surviving Corporation to sell or otherwise
dispose of any of its assets, except for dispositions made in the
ordinary course of the Surviving Corporation's business; or to sell or
otherwise dispose of any of the Company Shares acquired in the Merger,
except for transfers described in Section 368(a)(2)(C) of the Code.
(d) The Buyer has no plan or intention to reacquire any Buyer
Common Stock issued in the Merger.
(e) Neither the Buyer nor the Transitory Subsidiary is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv)) of
the Code.
(f) The payment of cash in lieu of fractional shares of Buyer
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to the Buyer of issuing fractional shares and shall not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to the Company
Stockholders instead of issuing fractional shares of Buyer Common Stock
will not exceed one
-8-
9
percent of the total consideration that will be issued in the Merger to
the Company Stockholders in exchange for their Company Shares. The
fractional share interests of each Company Stockholder will be
aggregated, and no Company Stockholder will receive cash in an amount
equal to or greater than the value of one full share of Buyer Common
Stock.
(g) The Transitory Subsidiary is solely and directly
owned by the Buyer.
(h) Neither the Buyer nor an affiliate of the Buyer has
acquired Company Shares since June 1, 1991. The Buyer and its
affiliates own no Company Shares. During the period from the date of
this Agreement to the Effective Time, other than pursuant to this
Agreement, neither the Buyer nor any affiliate of the Buyer shall
acquire any Company Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the
statements contained in this Article II are true and correct, except as
set forth in the disclosure schedule attached hereto (the "Disclosure
Schedule"). The Disclosure Schedule shall be initialed by the Parties
and shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures
in any paragraph of the Disclosure Schedule shall qualify only the
corresponding paragraph in this Article II.
2.1 Organization, Qualification and Corporate Power. The Company
is a corporation duly organized, validly existing and in corporate and
tax good standing under the laws of the state of its incorporation. The
Company is duly qualified to conduct business and is in corporate and
tax good standing under the laws of each jurisdiction in which the
nature of the business described on Section 2.1 of the Disclosure
Schedule (the "Modem Business") or the ownership or leasing of its
properties relating to the Modem Business requires such qualification
except where the failure to be so qualified would not have a material
adverse effect on the Company and its Modem Subsidiaries (as defined
below) taken as a whole. The Company has all requisite corporate power
and authority to carry on the Modem Business in which it is engaged and
to own and use the properties owned and used by it in the Modem
Business. The Company has furnished to the Buyer true and complete
copies of its Certificate of Incorporation and By-laws, each as amended
and as in effect on the date hereof. The Company
-9-
10
is not in violation of any provision of its Certificate of
Incorporation or By-laws.
2.2 Capitalization. The authorized capital stock of the Company
consists of 20,100,000 shares, comprised of 20,000,000 shares of common
stock, $.01 par value per share, of which 10,543,369 shares are issued
and outstanding and no shares are held in the treasury of the Company,
all as of June 6, 1996, and 100,000 shares of preferred stock, $0.01
par value per share, of which no shares are designated or outstanding.
Section 2.2 of the Disclosure Schedule sets forth a complete and
accurate list as of June 6, 1996, of (i) all stockholders of record of
the Company, indicating the number of Company Shares held by each
stockholder, and (ii) all holders of Options, indicating the number of
Company Shares subject to Options held by such holders. All of the
issued and outstanding Company Shares are, and all Company Shares that
may be issued upon exercise of Options in accordance with the terms
thereof will be, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. There are no
outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company is a party or which are binding upon
the Company providing for the issuance, disposition or acquisition of
any of its capital stock, other than as listed in Section 2.2 of the
Disclosure Schedule. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the
Company. Except pursuant to this Agreement or the Affiliate Agreement
(as defined herein), there are no agreements, voting trusts, proxies,
or understandings with respect to the voting, or registration under the
Securities Act, of any Company Shares other than as set forth in
Section 2.2 of the Disclosure Schedule. All of the issued and
outstanding Company Shares were issued in compliance with applicable
federal and state securities laws.
2.3 Authorization of Transaction. The Company has all requisite
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement and, subject to the adoption of this Agreement and the
approval of the Merger by a majority of the votes represented by the
outstanding Company Shares entitled to vote on this Agreement and the
Merger (the "Requisite Stockholder Approval"), the performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
-10-
11
2.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities
laws, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "Xxxx-Xxxxx-Xxxxxx Act"), the filing of the Certificate of
Merger as required by the Delaware General Corporation Law, and the
filing of requisite forms relating to the transfer of certain
intellectual property rights of the Company (as contemplated by this
Agreement) neither the execution and delivery of this Agreement by the
Company, nor the consummation by the Company of the transactions
contemplated by this Agreement (and, for clauses (b) and (d) of this
Section 2.4, other than Spin-off Transaction), will (a) conflict with
or violate any provision of the charter or By-laws of the Company, (b)
require on the part of the Company or any corporation with respect to
which the Company, directly or indirectly, has the power to vote or
direct the voting of sufficient securities to elect a majority of the
directors (a "Subsidiary") any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity"), other than
any filing, permit, authorization, consent or approval which if not
obtained or made would not have a material adverse effect on the
assets, business, financial condition, results of operations or future
prospects of the Company and its Subsidiaries relating to the Modem
Business, taken as a whole, or on the ability of the Parties to
consummate the transactions contemplated by this Agreement, (c), except
as set forth in Section 2.4 to the Disclosure Schedule, conflict with,
result in a breach of, constitute (with or without due notice or lapse
of time or both) a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security
Interest (as defined below) or other arrangement to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary
is bound or to which any of their assets is subject, other than any
conflict, breach, default, acceleration, termination, modification or
cancellation which individually or in the aggregate would not have a
material adverse effect on the assets, business, financial condition,
results of operations or future prospects of the Company and its
Subsidiaries, taken as a whole, or on the ability of the Parties to
consummate the transactions contemplated by this Agreement, (d) result
in the imposition of any Security Interest upon any assets of the
Company or any Subsidiary relating to the Modem Business or (e) violate
any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any
-11-
12
Subsidiary or any of their properties or assets relating to the Modem
Business. For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge, or other lien
(whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under
worker's compensation, unemployment insurance, social security,
retirement, and similar legislation, and (iii) liens on goods in
transit incurred pursuant to documentary letters of credit, in each
case arising in the ordinary course of business consistent with past
custom and practice (including with respect to frequency and amount)
("Ordinary Course of Business") of the Company and not material to the
Company.
2.5 Subsidiaries. Section 2.5 of the Disclosure Schedule lists
each Subsidiary and each Modem Subsidiary and sets forth for each Modem
Subsidiary (a) its jurisdiction of incorporation, (b) the number of
shares of authorized capital stock of each class of its capital stock,
(c) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof and the number of
shares held by each such holder, (d) the number of shares of its
capital stock held in treasury, and (e) its directors and officers.
Each Modem Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation. Each Modem Subsidiary is duly qualified to conduct
business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification
except where the failure to be so qualified would not have a material
adverse effect on the Company and the Modem Subsidiaries taken as a
whole. Each Modem Subsidiary has all requisite corporate power and
authority to carry on the Modem Business in which it is engaged and to
own and use the properties owned and used by it in the Modem Business.
The Company has delivered or made available to the Buyer correct and
complete copies of the charter and By-laws of each Modem Subsidiary, as
amended to date. No Modem Subsidiary is in violation of any provision
of its charter or By-laws. All of the issued and outstanding shares of
capital stock of each Modem Subsidiary are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. All
shares of each Modem Subsidiary that are held of record or owned
beneficially by either the Company or any Modem Subsidiary are held or
owned free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws or as
set forth in Section 2.5 of the Disclosure Schedule), claims, Security
Interests, options, warrants, rights, contracts, calls, commitments,
equities and demands. There are no outstanding or authorized options,
-12-
13
warrants, rights, agreements or commitments to which the Company or any
Modem Subsidiary is a party or which are binding on any of them
providing for the issuance, disposition or acquisition of any capital
stock of any Modem Subsidiary. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to any Modem
Subsidiary. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
Modem Subsidiary, except as set forth in Section 2.5 of the Disclosure
Schedule. The Company does not control directly or indirectly or have
any direct or indirect equity participation in any corporation,
partnership, trust, or other business association which is not a
Subsidiary.
2.6 Reports and Financial Statements. The Company has previously
furnished or made available to the Buyer complete and accurate copies,
as amended or supplemented, of its (a) Annual Report on Form 10-K for
the fiscal years ended July 31, 1994, and July 31, 1995, as filed with
the Securities and Exchange Commission (the "SEC"), (b) proxy
statements relating to all meetings of its stockholders (whether annual
or special) since July 31, 1994, and (c) all other reports or
registration statements, other than Registration Statements on Form
S-8, filed by the Company with the SEC since July 31, 1994 (such annual
reports, proxy statements, registration statements and other filings,
together with any amendments or supplements thereto, are collectively
referred to in this Agreement as the "Company Reports"). The Company
Reports constitute all of the documents filed or required to be filed
by the Company with the SEC since July 31, 1994, other than any
Registration Statement on Form S-8. As of their respective dates, the
Company Reports filed since July 31, 1994, did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The audited financial statements and unaudited interim financial
statements of the Company included in the Company Reports filed since
July 31, 1994 (together, the "Financial Statements"), (i) comply as to
form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, (ii) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby (except as may
be indicated therein or in the notes thereto, and in the case of
quarterly financial statements, as permitted by Form 10-Q under the
Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Company and the
Subsidiaries as of the respective dates thereof and for the periods
referred to
-13-
14
therein, and (iv) are consistent with the books and records of the
Company and the Subsidiaries.
2.7 Undisclosed Liabilities. As of the date hereof, none of the
Company and its Subsidiaries has any material liability (whether known
or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a)
liabilities shown on the balance sheet included in the Company's most
recent Quarterly Report on Form 10-Q filed with the SEC on March 15,
1996 (the "Most Recent Balance Sheet"), (b) liabilities which have
arisen since January 31, 1996, in the Ordinary Course of Business, (c)
contractual liabilities incurred in the Ordinary Course of Business
which are not required by GAAP to be reflected on a balance sheet and
(d) liabilities disclosed in Section 2.18 of the Disclosure Schedule.
As used in this Section 2.7, "material liability" is deemed to mean a
liability in excess of $100,000.
2.8 Tax Matters.
(a) Each of the Company and the Subsidiaries has filed all
material Tax Returns (as defined below) that it was required to file
(taking into account extensions) and to the knowledge of the Company no
material position is reflected in a Tax Return for which there was not
substantial authority (as defined in Section 6662 of the Code) or
comparable foreign, federal, state or local law. Each of the Company
and the Subsidiaries has paid all Taxes (as defined below) that are
shown to be due on any such Tax Returns. The unpaid Taxes of the
Company and the Subsidiaries for tax periods through the date of the
Most Recent Balance Sheet are appropriately accrued or reserved for on
the Most Recent Balance Sheet. Neither the Company nor any Subsidiary
has any actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of
corporations or other entities that included the Company or any
Subsidiary during a prior period) other than the Company and the
Subsidiaries. All material Taxes that the Company or any Subsidiary is
or was required by law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Entity. For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts, ad
valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, payroll and
franchise taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting
from,
-14-
15
attributable to or incurred in connection with any tax or any contest
or dispute thereof. For purposes of this Agreement, "Tax Returns" means
all reports, returns, declarations, statements or other information
required to be supplied to a taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports
and statements of deficiencies assessed against or agreed to by any of
the Company or any Subsidiary between January 1, 1989 and the date
hereof. The federal income Tax Returns of the Company have been audited
by the Internal Revenue Service (the "IRS") or are closed by the
applicable statute of limitations for all taxable years through July
31, 1986. As of the date hereof, no federal or state income tax
examination or audit of any Tax Returns of the Company or any
Subsidiary by any Governmental Entity is currently in progress or, to
the knowledge of the Company and the Subsidiaries, threatened or
contemplated. As of the date hereof, neither the Company nor any
Subsidiary has waived any statute of limitations with respect to taxes
or agreed to an extension of time with respect to a tax assessment or
deficiency.
(c) Neither the Company nor any Subsidiary is a "consenting
corporation" within the meaning of Section 341(f) of the Code and none
of the assets of the Company or the Subsidiaries are subject to an
election under Section 341(f) of the Code. Neither the Company nor any
Subsidiary has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
Neither the Company nor any Subsidiary is a party to any Tax allocation
or sharing agreement.
(d) Neither the Company nor any Subsidiary is or has ever
been a member of an "affiliated group" of corporations (within the
meaning of Section 1504 of the Code), other than a group of which only
the Company and the Subsidiaries are members. Neither the Company nor
any Subsidiary has made an election under Treasury Reg. Section
1.1502-20(g). Neither the Company nor any Subsidiary is or has been
required to make a basis reduction pursuant to Treasury Reg. Section
1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
2.9 Assets. Each of the Company and the Subsidiaries owns or
leases all tangible assets necessary for the conduct of the Modem
Business as presently conducted and as presently proposed by the
Company to be conducted. Each such tangible asset is free from material
defects, has been maintained in accordance with normal industry
practice, is in good operating condition and
-15-
16
repair (subject to normal wear and tear) and is suitable for the
purposes for which it presently is used. Except as set forth in
Section 2.9 of the Disclosure Schedule, no material asset of the
Company (tangible or intangible) is subject to any Security Interest.
2.10 Owned Real Property. Neither the Company nor any Modem
Subsidiary owns any real property.
2.11 Intellectual Property.
(a) Each of the Company and the Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights under all
patents and patent applications listed in Section 2.11 of the
Disclosure Schedule and the right to use all trademarks, trade names,
service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, schematics, technology,
know-how, computer software programs or applications and tangible or
intangible proprietary information or material listed in Section 2.11
of the Disclosure Schedule that are used to conduct its Modem Business
as currently conducted or as currently planned by the Company to be
conducted (collectively, "Intellectual Property") and, except as
qualified by or disclosed in Section 2.11 of the Disclosure Schedule,
is aware of no intellectual property right of any third party that may
prevent the Company or its Subsidiaries from conducting its Modem
Business as currently conducted or as planned by the Company to be
conducted. Section 2.11 of the Disclosure Schedule lists (i) all
patents and patent applications and all trademarks, registered
copyrights, trade names and service marks which are both owned by and
used in the Modem Business, including the jurisdictions in which each
such Intellectual Property right has been issued or registered or in
which any such application for such issuance or registration has been
filed, (ii) all material written licenses, sublicenses and other
agreements to which the Company or a Subsidiary is a party and pursuant
to which any person is authorized to use any Intellectual Property
rights, and (iii) all material written licenses, sublicenses and other
agreements as to which the Company or a Subsidiary is a party and
pursuant to which the Company or a Subsidiary is authorized to use any
third party patents, trademarks or copyrights, including software,
which are used in the Modem Business or which form a part of any
product or service relating to the Modem Business ("Third Party
Intellectual Property Rights"). Neither the Company nor any Subsidiary
is a party to any oral license, sublicense or agreement which, if
reduced to written form, would be required to be listed in Section 2.11
of the Disclosure Schedule under the terms of this Section 2.11.
-16-
17
(b) Neither the Company nor any of the Subsidiaries is, nor
will any of them be as a result of the execution and delivery of this
Agreement or the performance of the Company's obligations under this
Agreement, knowingly infringing upon any intellectual property rights
of others or in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual
Property Rights, except as qualified by or disclosed in Section 2.11 of
the Disclosure Schedule.
(c) Except as set forth in Section 2.11 of the Disclosure
Schedule, neither the Company nor any of the Subsidiaries has been
named in any suit, action or proceeding which involves a claim of
infringement of any Intellectual Property right of any third party.
Except as qualified by or disclosed in Section 2.11 of the Disclosure
Schedule, the manufacturing, marketing, licensing or sale of the
products or performance of the service offerings of the Company and the
Subsidiaries relating to the Modem Business do not infringe any
Intellectual Property right of any third party; and to the knowledge of
the Company and the Subsidiaries, the Intellectual Property rights of
the Company and the Subsidiaries are not being infringed by activities,
products or services of any third party.
2.12 Inventory. All inventory of the Company and the Subsidiaries
relating to the Modem Business, whether or not reflected on the Most
Recent Balance Sheet, consists of a quality and quantity usable and
saleable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which were, as of the date
of the Most Recent Balance Sheet, written-off or written-down to net
realizable value or for which reserves were established and set forth
on the Most Recent Balance Sheet or which became such in the Ordinary
Course of Business after the date of the Most Recent Balance Sheet.
2.13 Real Property Leases. Section 2.13 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to
the Company or any Subsidiary and lists the term of such lease, any
extension and expansion options, and the rent payable thereunder. The
Company has delivered or made available to the Buyer correct and
complete copies of the leases and subleases (as amended to the date
hereof) listed in Section 2.13 of the Disclosure Schedule.
2.14 Contracts. Section 2.14 of the Disclosure Schedule lists the
following written arrangements (including without limitation written
agreements) to which the Company or any Subsidiary is a party:
-17-
18
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third
parties providing for lease payments in excess of $200,000.00 per
annum;
(b) any written arrangement (or group of related written
arrangements) relating to the Modem Business for the purchase or sale
of raw materials, commodities, supplies, products or other personal
property or for the furnishing or receipt of services (i) which calls
for performance over a period of more than one year, (ii) which
involves more than the sum of $200,000.00, to be paid from and after
the date hereof as to any part or item for the Modem Business or (iii)
in which the Company or any Subsidiary has granted manufacturing
rights, "most favored nation" pricing provisions or marketing or
distribution rights relating to any products or territory related to
the Modem Business or has agreed to purchase a minimum quantity of
goods or services or has agreed to purchase goods or services related
to the Modem Business exclusively from a certain party;
(c) any written arrangement establishing a partnership
or joint venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) indebtedness
(including capitalized lease obligations) involving more than
$200,000.00 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(e) any written arrangement concerning noncompetition
relating to the Modem Business;
(f) any written arrangement with any affiliates, as
defined in Rule 12b-2 under the Exchange Act, of the Company
("Affiliates");
(g) any other written arrangement (or group of related
written arrangements) relating to the Modem Business not entered into
in the Ordinary Course of Business; and
(h) any other written arrangement (or group of related
arrangements) involving more than $200,000.00 per annum to be paid from
and after the date hereof, other than contracts, records and documents
not relating to the Modem Business that the Company reasonably and in
good faith determines is of a confidential and competitive nature.
-18-
19
The Company has delivered or made available to the Buyer a correct and
complete copy of each written arrangement (as amended to the date
hereof) listed in Section 2.14 of the Disclosure Schedule. With respect
to each written arrangement so listed: (i) the written arrangement is
legal, valid, binding and enforceable and in full force and effect as
to the Company, and (ii) neither the Company nor, to the Company's
knowledge, the other parties thereto 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, by the Company or, to the Company's knowledge, by the
other parties thereto, under the written arrangement. Neither the
Company nor any Subsidiary is a party to any oral contract, agreement
or other arrangement which, if reduced to written form, would be
required to be listed in Section 2.14 of the Disclosure Schedule under
the terms of this Section 2.14.
2.15 Accounts Receivable. All accounts receivable of the
Company and the Subsidiaries relating to the Modem Business
reflected on the Most Recent Balance Sheet arose in the Ordinary
Course of Business.
2.16 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company or any Modem
Subsidiary.
2.17 Insurance. Section 2.17 of the Disclosure Schedule lists all
insurance policies of the Company relating to the Modem Business.
Neither the Company nor any Subsidiary has incurred any loss, damage,
expense or liability relating to the Modem Business covered by any such
insurance policy for which it has not properly asserted a claim under
such policy. Each of the Company and the Modem Subsidiaries is covered
by insurance in scope and amount customary and reasonable for the Modem
Business.
2.18 Litigation. Section 2.18 of the Disclosure Schedule
identifies, and contains a brief description of, (a) any unsatisfied
judgement, order, decree, stipulation or injunction and (b) any claim,
complaint, action, suit, proceeding, hearing or investigation of or in
any Governmental Entity or before any arbitrator to which the Company
or any Subsidiary is a party or, to the knowledge of the Company and
the Subsidiaries, is threatened to be made a party.
2.19 Product Warranty. No product manufactured, sold, leased,
licensed or delivered by the Company or any Subsidiary relating to the
Modem Business is subject to any guaranty, warranty, right of return or
other indemnity beyond in any material respect the applicable standard
terms and conditions of
-19-
20
sale or lease, which are set forth in Section 2.19 of the
Disclosure Schedule.
2.20 Employees. Part I of Section 2.20 of the Disclosure Schedule
contains a list of all employees of the Company and each Subsidiary who
are employed in connection with the Modem Business, along with the
position. The Company has delivered to the Buyer a list setting forth
the annual compensation of each such person. Each employee of the
Company and each Subsidiary listed in Part II of Section 2.20 of the
Disclosure Schedule has entered into an agreement relating to the
confidentiality and/or assignment of inventions with the Company or a
Subsidiary set forth opposite the employee's name, a copy of which has
previously been delivered to the Buyer. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining
disputes within the last two years. The Company and the Subsidiaries
have no knowledge of any organizational effort made or threatened,
either currently or within the past two years, by or on behalf of any
labor union with respect to employees of the Company or any Subsidiary
who are employed in connection with the Modem Business.
2.21 Employee Benefits.
(a) Section 2.21(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as defined
below). For purposes of this Agreement, "Employee Benefit Plan" means
any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
any "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and any other written or oral plan, agreement or arrangement
involving direct or indirect severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation maintained or contributed by the Company,
any Subsidiary or any ERISA Affiliate (as defined below). For purposes
of this Agreement, "ERISA Affiliate" means any entity which is a member
of (i) a controlled group of corporations (as defined in Section 414(b)
of the Code), (ii) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes
the Company or a Subsidiary. Complete and accurate copies of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related
trust agreements, insurance contracts and summary plan descriptions,
and
-20-
21
(iv) all annual reports filed on IRS Form 5500, 5500C or 5500R for the
last three plan years for each Employee Benefit Plan, have been
delivered or made available to the Buyer. Each Employee Benefit Plan
has been administered in all material respects in accordance with its
terms and each of the Company, the Subsidiaries and the ERISA
Affiliates has in all material respects met its obligations with
respect to such Employee Benefit Plan and has made all required
contributions thereto. The Company has made no commitments to make any
voluntary contributions to or to voluntarily fund any Employee Benefit
Plans with the exception of 401(k) matching contribution commitments
previously communicated to employees. The Company and all Employee
Benefit Plans are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the
regulations thereunder.
(b) There are no investigations by any Governmental Entity,
termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders), suits
or proceedings against or involving any Employee Benefit Plan or
asserting any rights or claims to benefits under any Employee Benefit
Plan that could give rise to any material liability.
(c) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such
Employee Benefit Plans are qualified and the plans and the trusts
related thereto are exempt from federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, no such determination
letter has been revoked and, to the knowledge of the Company, such
revocation has not been threatened, and no such Employee Benefit Plan
has been amended since the date of its most recent determination letter
or application therefor in any respect, and, to the knowledge of the
Company, no act or omission has occurred, that would adversely affect
its qualification or materially increase its cost.
(d) Neither the Company, any Subsidiary, nor any ERISA
Affiliate has, during the six years preceding the Effective Time,
maintained an Employee Benefit Plan subject to Section 412 of the Code
or Title IV of ERISA.
(e) At no time has the Company, any Subsidiary or any ERISA
Affiliate been obligated to contribute to any "multi-employer plan" (as
defined in Section 4001(a)(3) of ERISA).
(f) There are no unfunded obligations under any
Employee Benefit Plan providing benefits after termination of
-21-
22
employment to any employee of the Company or any Subsidiary (or to any
beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the
Code or state insurance law.
(g) To the knowledge of the Company, no act or omission has
occurred and no condition exists with respect to any Employee Benefit
Plan maintained by the Company, any Subsidiary or any ERISA Affiliate
that would subject the Company, any Subsidiary or any ERISA Affiliate
to any material fine, penalty, tax or liability of any kind imposed
under ERISA or the Code.
(h) Except as set forth on Section 2.21(h) of the Disclosure
Schedule, no Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication
distributed generally to employees by its terms prohibits the Company
or, if applicable, the Subsidiary or ERISA Affiliate, from amending or
terminating any such Employee Benefit Plan.
(j) Section 2.21(j) of the Disclosure Schedule discloses
each: (i) agreement with any director, executive officer or other key
employee of the Company or any Subsidiary (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any Subsidiary of
the nature of any of the transactions contemplated by this Agreement,
(B) providing any term of employment or compensation guarantee or (C)
providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii)
agreement, plan or arrangement under which any person may receive
payments from the Company or any Subsidiary that may be subject to the
tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G
of the Code; and (iii) agreement or plan binding the Company or any
Subsidiary, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan,
severance benefit plan, or any Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
-22-
23
2.22 Environmental Matters.
(a) Each of the Company and the Subsidiaries has complied
with all applicable Environmental Laws (as defined below), except for
violations of Environmental Laws that do not, individually or in the
aggregate, have a material adverse effect on the assets, business,
financial condition, or results of operations of the Company and the
Subsidiaries. To the knowledge of the Company and the Subsidiaries,
there are no pending, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental
Entity, relating to any Environmental Law involving the Company or any
Subsidiary, except for litigation, notices of violations, formal
administrative proceedings or investigations, inquiries or information
requests that will not, individually or in the aggregate, have a
material adverse effect on the assets, business, financial condition or
results of operations of the Company and the Subsidiaries. For purposes
of this Agreement, "Environmental Law" means any federal, state or
local law, statute, rule or regulation or the common law currently in
existence and relating to the environment or occupational health and
safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and
transportation of toxic or hazardous substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or
hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or
chemicals; (v) the protection of wild life, marine sanctuaries and
wetlands; (vi) underground and other storage tanks or vessels; and
(vii) manufacture, processing, use, distribution, treatment, storage,
disposal, transportation or handling of pollutants, contaminants,
chemicals or toxic or hazardous substances or oil or petroleum products
or solid or hazardous waste. As used in this Section 2.22, the terms
"release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Compensation, Liability and
Response Act of 1980 ("CERCLA").
(b) Except as disclosed in Section 2.22(b) of the Disclosure
Schedule, to the knowledge of the Company and the Subsidiaries, there
have been no releases of any Materials of Environmental Concern (as
defined below) into the environment at any parcel of real property or
any facility formerly or currently owned, operated or controlled by the
Company or a Subsidiary. With respect to any such releases of Materials
of Environmental Concern, the Company or such Subsidiary has given all
required
-23-
24
notices to Governmental Entities (copies of which have been provided to
the Buyer). Neither the Company nor any Subsidiary has any knowledge of
any releases of Materials of Environmental Concern at any adjacent,
adjoining or contiguous parcels of real property or facilities that
could reasonably be expected to have a material adverse effect on the
real property or facilities owned, operated or controlled by the
Company or a Subsidiary. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid
wastes and hazardous wastes (as such terms are defined under the
federal Resources Conservation and Recovery Act), toxic materials, oil
or petroleum and petroleum products, or any other material subject to
regulation under any Environmental Law.
(c) Set forth in Section 2.22(c) of the Disclosure Schedule
is a list of all formal, written environmental reports, investigations
and audits relating to premises currently or previously owned or
operated by the Company or a Subsidiary (whether conducted by or on
behalf of the Company or a Subsidiary or a third party, and whether
done at the initiative of the Company or a Subsidiary or directed by a
Governmental Entity or other third party) which were issued or
conducted during the past five years and which the Company has
possession of. Complete and accurate copies of each such report, or the
results of each such investigation or audit, have been provided to the
Buyer and any reliance by the Buyer on such reports, investigations or
audits is at the Buyer's sole risk.
2.23 Legal Compliance. Each of the Company and the Modem
Subsidiaries, and the conduct and operations of their respective
businesses, are in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign
government, or any Governmental Entity, which (a) affects or relates to
this Agreement or the transactions contemplated by this Agreement or
(b) is applicable to the Company or such Modem Subsidiary or such
business, except for any violation of or default under a law referred
to in clause (b) above which reasonably may be expected not to have a
material adverse effect on the assets, business, financial condition,
results of operations or future prospects of the Company and the Modem
Subsidiaries taken as a whole.
2.24 Permits. Section 2.24 of the Disclosure Schedule sets forth a
list of all permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity (including without limitation
those issued or required under Environmental Laws and those relating to
the occupancy or use of owned or leased real property) ("Permits")
issued to or held by
-24-
25
the Company or any Subsidiary relating to the Modem Business. Such
listed Permits are the only Permits that are required for the Company
and the Subsidiaries to conduct the Modem Business as presently
conducted or as proposed by the Company to be conducted, except for
those the absence of which would not have any material adverse effect
on the assets, business, financial condition, results of operations or
future prospects of the Company and the Modem Subsidiaries taken as a
whole. Each such Permit is in full force and effect and, to the best of
the knowledge of the Company or any Subsidiary, no suspension or
cancellation of such Permit is threatened and there is no basis for
believing that such Permit will not be renewable upon expiration. Each
such Permit will continue in full force and effect following the
Closing.
2.25 Certain Business Relationships With Affiliates. Except as set
forth in Section 2.25 of the Disclosure Schedule, no Affiliate of the
Company (a) owns any property or right, tangible or intangible, which
is used in the Modem Business, (b) has any claim or cause of action
against the Company or any Modem Subsidiary other than in the Ordinary
Course of Business, or (c) owes any money to the Company or any Modem
Subsidiary. Section 2.25 of the Disclosure Schedule describes any
transactions or relationships other than in the Ordinary Course of
Business between the Company and any Affiliate thereof which are not
reflected in the statements of operations of the Company included in
the Financial Statements.
2.26 Brokers' Fees. Except for the obligations of the Company to
Broadview Associates, L.L.C. ("Broadview") pursuant to that certain
Letter Agreement dated March 18, 1996, neither the Company nor any
Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.27 Books and Records. The minute books and other similar records
of the Company and each Modem Subsidiary contain true and complete
records of all actions taken at any meetings of the Company's or such
Subsidiary's stockholders, Board of Directors or any committee thereof
and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company and each Modem Subsidiary
accurately reflect in all material respects the assets, liabilities,
business, financial condition and results of operations of the Company
or such Subsidiary and have been maintained in accordance with good
business and bookkeeping practices.
-25-
26
2.28 Company Action.
(a) The Board of Directors of the Company, at a meeting duly
called and held, has by the requisite vote of the directors (i)
determined that the Merger is fair and in the best interests of the
Company and its stockholders, (ii) adopted this Agreement in accordance
with the provisions of the Delaware General Corporation Law, and (iii)
directed that this Agreement and the Merger be submitted to the Company
Stockholders for their adoption and approval and resolved to recommend
that Company Stockholders vote in favor of the adoption of this
Agreement and the approval of the Merger.
(b) The Company has received the written opinion of
Broadview, dated the date hereof, to the effect that the consideration
to be received by the Company Stockholders in the Merger is fair from a
financial point of view to the Company Stockholders. A copy of such
opinion has been previously furnished to the Buyer.
2.29 Disclosure. No representation or warranty by the Company
contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other
instrument delivered to or to be delivered by or on behalf of the
Company pursuant to this Agreement, and no other written statement made
by the Company or any of its representatives in connection with this
Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order
to make the statements in this Agreement or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary, jointly and severally,
represent and warrant to the Company as follows:
3.1 Organization. Each of the Buyer and the Transitory Subsidiary
is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation.
3.2 Capitalization. The authorized capital stock of the Buyer
consists of 300,000,000 shares of Buyer Common Stock, of which
188,452,729 shares were issued and outstanding and 21,620 shares were
held in the treasury of the Buyer as of May 31, 1996. All of the issued
and outstanding shares of Buyer Common Stock are
-26-
27
duly authorized, validly issued, fully paid, nonassessable and free of
all preemptive rights. All of the Merger Shares will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights.
3.3 Authorization of Transaction. Each of the Buyer and the
Transitory Subsidiary has all requisite power and authority to execute
and deliver this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement by the Buyer and the
Transitory Subsidiary and the performance of this Agreement and the
consummation of the transactions contemplated by this Agreement by the
Buyer and the Transitory Subsidiary have been duly and validly
authorized by all necessary corporate action on the part of the Buyer
and Transitory Subsidiary. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the
Transitory Subsidiary, enforceable against them in accordance with its
terms.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities
laws, the Exchange Act, the Xxxx-Xxxxx-Xxxxxx Act and the filing of the
Certificate of Merger as required by the Delaware General Corporation
Law, neither the execution and delivery of this Agreement by the Buyer
or the Transitory Subsidiary, nor the consummation by the Buyer or the
Transitory Subsidiary of the transactions contemplated by this
Agreement, will (a) conflict or violate any provision of the charter or
By-laws of the Buyer or the Transitory Subsidiary, (b) require on the
part of the Buyer or the Transitory Subsidiary any filing with, or
permit, authorization, consent or approval of, any Governmental Entity,
other than any filing, permit, authorization, consent or approval which
if not obtained or made would not have a material adverse effect on the
assets, business, financial condition, results of operations or future
prospects of the Buyer or on the ability of the Parties to consummate
the transactions contemplated by this Agreement, (c) conflict with,
result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in
any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement
or mortgage for borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which the Buyer or Transitory
Subsidiary is a party or by which either is bound or to which any of
their assets are subject, other than any conflict, breach, default,
acceleration, termination, modification or cancellation which
individually or in the aggregate would not have a material adverse
effect on the assets, business, financial
-27-
28
condition, results of operations or future prospects of the Buyer or on
the ability of the Parties to consummate the transactions contemplated
by this Agreement, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer or the Transitory
Subsidiary or any of their properties or assets.
3.5 Reports and Financial Statements. The Buyer has previously
furnished to the Company complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-K for the fiscal
years ended June 30, 1994, and June 30, 1995, as filed with the SEC,
and (b) all other reports or statements filed by the Buyer under
Section 13 or 14 of the Exchange Act with the SEC since June 30, 1994
(such reports are collectively referred to in this Agreement as the
"Buyer Reports"). The Buyer Reports constitute all of the documents
required to be filed by the Buyer under Section 13 or 14 of the
Exchange Act with the SEC since June 30, 1994. As of their respective
dates, the Buyer Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of the
Buyer included in the Buyer Reports (i) comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii)
have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange
Act), (iii) fairly present the consolidated financial condition,
results of operations and cash flows of the Buyer as of the respective
dates thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer.
3.6 Brokers' Fees. Except for the obligations of the Buyer to
Alex. Xxxxx & Sons, Inc., neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.7 Disclosure. No representation or warranty by the Buyer
contained in this Agreement, and no statement contained in any other
document, certificate or other instrument delivered to or to be
delivered by or on behalf of Buyer pursuant to this Agreement, and no
other written statement made by the Buyer or any of its representatives
in connection with this Agreement, contains or will contain any untrue
statement of a material fact or omits or
-28-
29
will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements in this Agreement or therein not misleading.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Subject to the Company Board Fiduciary Duties
(as defined below), each of the Parties shall use its best efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement; provided,
however, that notwithstanding anything in this Agreement to the
contrary, the Buyer shall not be required to sell or dispose of or hold
separately (through a trust or otherwise) any assets or businesses of
the Buyer or its Affiliates.
4.2 Notices and Consents. Each of the Parties shall use its best
efforts to obtain, at its expense, all such waivers, permits, consents,
approvals or other authorizations from third parties and Governmental
Entities, and to effect all such registrations, filings and notices
with or to third parties and Governmental Entities, as may be required
by or with respect to such Party in connection with the transactions
contemplated by this Agreement.
4.3 Spin-off Transaction; Closing Balance Sheet.
(a) Following the execution of this Agreement and prior to
the Closing, the Company shall (i) transfer to one or more third
parties or to one of its Subsidiaries (the "Spin-off Company") (other
than to Penril International, Ltd. and Penril DataComm, Ltd. (such two
Subsidiaries being collectively referred to as the "Modem
Subsidiaries")) any and all assets, whether tangible or intangible, and
liabilities of the Company related to all of its businesses except for
the Modem Business (provided, however, it is acknowledged that the
stock or assets of Electro-Metrics, Inc., Constant Power, Inc. and
Technipower, Inc., may be transferred to the Spin-off Company or, in
the alternative, may be sold, liquidated or otherwise transferred by
the Company prior to the Closing upon terms and conditions consented to
by the Buyer, which consent will not be unreasonably withheld), (ii)
acquire from its Subsidiaries (other than the Modem Subsidiaries) any
and all assets, whether tangible or intangible, and liabilities of such
Subsidiaries related solely to the Modem Business and (iii) distribute
and transfer to its stockholders, in a transaction intended to be a tax
free transaction, all of the capital stock of
-29-
30
the Spin-off Company, which owns at that time all of the assets of the
Company and its Subsidiaries not related to the Modem Business
(collectively, the "Spin-off Transaction"). The assets and liabilities
that the Company shall transfer to the Spin-off Company in connection
with the Spin-off Transaction are more fully described by the Company
on Schedule 4.3(a). In connection with the Spin-off Transaction, the
Spin-off Company and its subsidiaries shall have the right to employ
all employees of the Company except as set forth on Section 4.3(a) of
the Disclosure Schedule.
(b) The assets and liabilities of the Modem Business after
the Spin-off Transaction are more fully described by the Company on
Schedule 4.3(b).
(c) Five business days prior to the Closing, the Company
shall deliver to the Buyer an unaudited balance sheet of the Company as
at the Closing Date and reflecting the consummation of the Spin-off
Transaction (the "Closing Balance Sheet"). The Closing Balance Sheet
shall be accompanied by a certificate of the chief financial officer of
the Company stating that the Closing Balance Sheet was prepared in
accordance with GAAP (except as noted) and will fairly present the
financial condition of the Company at the Closing Date. The Company
agrees that the Closing Balance Sheet shall reflect that, on the basis
of the book value of the assets and liabilities retained by the Company
on the Closing Date, the Company shall have a tangible net worth of not
less than One Dollar ($1).
4.4 Special Meeting, Prospectus/Proxy Statement and
Registration Statement.
(a) The Buyer and the Company shall jointly prepare, and the
Company shall file with the SEC under the Exchange Act, preliminary
proxy materials for the purpose of soliciting proxies from Company
Stockholders to vote in favor of the adoption of this Agreement
(including without limitation the matters referred to in Article VI)
and the approval of the Merger and the approval of the Spin-off
Transaction at a special meeting of Company Stockholders to be called
and held for such purpose (the "Special Meeting"). Such proxy materials
shall be in the form of a prospectus/proxy statement to be used for the
purpose of offering the Merger Shares to Company Stockholders and
soliciting such proxies from Company Stockholders (such
prospectus/proxy statement, together with any accompanying letter to
stockholders, notice of meeting and form of proxy, shall be referred to
in this Agreement as the "Prospectus/ Proxy Statement"). The Company,
with the assistance of the Buyer, shall promptly respond to any SEC
comments on the Prospectus/Proxy Statement and shall otherwise use its
best efforts to resolve as
-30-
31
promptly as practicable all SEC comments to the satisfaction of
the SEC.
(b) Promptly following the resolution to the satisfaction of
the SEC of all SEC comments on the Prospectus/ Proxy Statement (or the
expiration of the ten-day period under Rule 14a-6(a) under the Exchange
Act, if no SEC comments are received by such date), the Company shall
distribute the Prospectus/Proxy Statement to its stockholders and,
pursuant thereto, solicit proxies from Company Stockholders to vote in
favor of the adoption of this Agreement and the approval of the Merger
at the Special Meeting and shall hold the Special Meeting in accordance
with the Delaware General Corporation Law.
(c) Promptly following the resolution to the satisfaction of
the SEC of all SEC comments on the Prospectus/ Proxy Statement (or the
expiration of the ten-day period under Rule 14a-6(a) under the Exchange
Act, if no SEC comments are received by such date), the Buyer shall
file with the SEC under the Securities Act a Registration Statement on
Form S-4 (the "Registration Statement"), which shall include the
Prospectus/ Proxy Statement as a part thereof. The Buyer, with the
assistance of the Company, shall promptly respond to any SEC comments
on the Registration Statement and shall otherwise use its best efforts
to cause the Registration Statement to be declared effective as
promptly as practicable. The Buyer shall also take any and all such
actions as may be necessary or as it may deem advisable for the purpose
of complying with all applicable state securities laws in connection
with the offering and issuance of the Merger Shares.
(d) The Company shall comply with all applicable provisions
of and rules under the Exchange Act and all applicable provisions of
the Delaware General Corporation Law in the preparation, filing and
distribution of the Prospectus/Proxy Statement, the solicitation of
proxies thereunder, and the calling and holding of the Special Meeting.
Without limiting the foregoing, the Company shall ensure that the
Prospectus/Proxy Statement does not, as of the date on which it is
distributed to Company Stockholders, and as of the date of the Special
Meeting, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not
misleading (provided that the Company shall not be responsible for the
accuracy or completeness of any information furnished by the Buyer in
writing for inclusion in the Prospectus/Proxy Statement, as to which
information the Buyer shall ensure that the Prospectus/Proxy Statement
does not, as of the date on which the Prospectus/Proxy Statement is
distributed to Company Stockholders, and as of the date of the Special
Meeting, contain any untrue
-31-
32
statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances
under which they were made, not misleading).
(e) The Buyer shall comply with all applicable provisions of
and rules under the Securities Act and state securities laws in the
preparation and filing of the Registration Statement and the offering
and issuance of the Merger Shares. Without limiting the foregoing, the
Buyer shall ensure that the Registration Statement does not, as of its
effective date, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (provided that the Buyer
shall not be responsible for the accuracy or completeness of any
information furnished by the Company in writing for inclusion in the
Registration Statement, as to which information the Company shall
ensure that the Registration Statement does not, as of its effective
date, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading).
(f) Subject to the Company Board Fiduciary Duties (as defined
below), the Company, acting through its Board of Directors, shall
include in the Prospectus/Proxy Statement the recommendation of its
Board of Directors that the Company Stockholders vote in favor of the
adoption of this Agreement and the approval of the Merger, and shall
otherwise use its best efforts to obtain the Requisite Stockholder
Approval.
4.5 Xxxx-Xxxxx-Xxxxxx Act. Each of the Parties shall promptly file
any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the
Xxxx-Xxxxx-Xxxxxx Act, shall use its best efforts to obtain an early
termination of the applicable waiting period, and shall make any
further filings or information submissions pursuant thereto that may be
necessary, proper or advisable.
4.6 Operation of Business. Except as contemplated by this
Agreement or related to the Spin-off Transaction or as set forth in
Section 4.6 of the Disclosure Schedule, during the period from the date
of this Agreement to the Effective Time, the Company shall (and shall
cause each Subsidiary to) conduct its operations in the Ordinary Course
of Business and in compliance with all applicable laws and regulations
and, to the extent consistent therewith, use all reasonable efforts,
solely as to the Modem Business (i) to preserve intact its current
business organization,
-32-
33
(ii) keep its physical assets in good working condition, (iii) keep
available the services of its current employees listed on Section 4.6
of the Disclosure Schedule, and (iv) preserve its relationships with
customers, suppliers and others having business dealings with it to the
end that its goodwill and ongoing business relating to the Modem
Business shall not be impaired in any material respect. Without
limiting the generality of the foregoing, prior to the Effective Time,
neither the Company nor any Modem Subsidiary shall, without the written
consent of the Buyer (except as contemplated by this Agreement or
related to the Spin-off Transaction or as set forth in Section 4.6 of
the Disclosure Schedule), which consent shall not be unreasonably
withheld:
(a) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or
authorize the issuance, sale or delivery of, or redeem or repurchase,
any stock of any class or any other securities or any rights, warrants
or options to acquire any such stock or other securities (except
pursuant to the conversion or exercise of convertible securities or
Options outstanding on the date hereof), or amend any of the terms of
any such convertible securities or Options (other than in connection
with a sale, liquidation or transfer referred to and in accordance with
clause (e) below);
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock;
(c) create, incur or assume any debt not currently
outstanding that would cause or result in the debt reflected on the
Closing Balance Sheet to exceed $4,000,000; assume, guarantee, endorse
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or
entity; or make any loans, advances (other than in the Ordinary Course
of Business) or capital contributions to, or investments in, any other
person or entity in an amount greater than $200,000.00;
(d) enter into, adopt or amend any Employee Benefit Plan or
any employment or severance agreement or arrangement of the type
described in Section 2.22(j) or (except for normal increases in the
Ordinary Course of Business) materially increase in any manner the
compensation or fringe benefits of, or materially modify the employment
terms of, its directors, officers or employees, generally or
individually, or pay any benefit not
-33-
34
required by the terms in effect on the date hereof of any existing
Employee Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any assets
or property (including without limitation any shares or other equity
interests in or securities of any Modem Subsidiary), other than
purchases and sales of assets in the Ordinary Course of Business;
provided, however, that the Company may sell, liquidate or otherwise
transfer the stock or assets of Technipower, Inc., Electro-Metrics,
Inc. and Constant Power, Inc. (or any portion thereof) upon terms and
conditions consented to by the Buyer, which consent shall not be
unreasonably withheld;
(f) amend its charter or By-laws;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a
generally applicable change in GAAP or by the SEC;
(h) discharge or satisfy any Security Interest or pay any
material obligation or liability related to the Modem Business other
than in the Ordinary Course of Business;
(i) mortgage or pledge any of its property or assets relating
to the Modem Business or take any action that subjects any such assets
to any Security Interest;
(j) sell, assign, transfer or license any Intellectual
Property relating to the Modem Business, other than (i) sales of
tangible products through resellers in the Ordinary Course of Business,
(ii) as consented to by the Buyer, which consent shall not be
unreasonably withheld and (iii) pursuant to a license agreement between
the Company and the Spin-off Company, substantially in the form of
Exhibit A hereto;
(k) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive
any rights under, any material contract or agreement relating to the
Modem Business if such action would have a material adverse effect on
the Modem Business;
(l) make or commit to make any capital expenditure
relating to the Modem Business in excess of $50,000.00 per item;
(m) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take
action would result in (i) any of the representations and warranties of
the Company contained in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.7, 2.8,
2.10, 2.16 and 2.26 of
-34-
35
this Agreement becoming untrue or (ii) any of the conditions of
the Merger set forth in Article V not being satisfied; or
(n) agree in writing or otherwise to take any of the
foregoing actions.
4.7 Full Access.
The Company shall (and shall cause each Subsidiary to) permit
representatives of the Buyer to have full access (at all reasonable
times, upon prior notice and in a manner so as not to interfere with
the normal business operations of the Company and the Subsidiaries) to
all premises, properties, financial and accounting records, contracts,
other records and documents, and personnel, of or pertaining to the
Company and each Subsidiary other than contracts, records and documents
not relating to the Modem Business that the Company reasonably and in
good faith determines is of a confidential and competitive nature. The
Buyer shall hold, and shall cause its respective employees and agents
to hold, in confidence all such information in accordance with the
terms of the Confidentiality Agreement dated March 18, 1996 between the
Buyer and the Company.
4.8 Notice of Breaches. The Company shall promptly deliver to the
Buyer written notice of any event or development that would (a) render
any representation or warranty of the Company contained in Sections
2.1, 2.2, 2.3, 2.4, 2.5, 2.7, 2.8, 2.10, 2.16, and 2.26 (including the
Disclosure Schedule) inaccurate or incomplete in any material respect,
or (b) constitute or result in a breach by the Company of, or a failure
by the Company to comply with, any agreement or covenant in this
Agreement applicable to such party. The Buyer or the Transitory
Subsidiary shall promptly deliver to the Company written notice of any
event or development that would (i) render any statement,
representation or warranty of the Buyer or the Transitory Subsidiary in
this Agreement inaccurate or incomplete in any material respect, or
(ii) constitute or result in a breach by the Buyer or the Transitory
Subsidiary of, or a failure by the Buyer or the Transitory Subsidiary
to comply with, any agreement or covenant in this Agreement applicable
to such party. No such disclosure shall be deemed to avoid or cure any
such misrepresentation or breach.
4.9 Exclusivity. The Company shall not, and the Company shall use
its best efforts to cause its Affiliates and each of its officers,
directors, employees, representatives and agents not to, directly or
indirectly, (a) encourage, solicit, initiate, engage or participate in
discussions or negotiations with any person or entity (other than the
Buyer) concerning any merger, consolidation, sale or license of
material assets or property
-35-
36
relating to the Modem Business, tender offer, recapitalization,
accumulation of Company Shares, proxy solicitation or other business
combination involving the Company, any Modem Subsidiary or any division
of the Company or any Subsidiary, in each case relating to the Modem
Business or (b) provide any non-public information concerning the
business, properties or assets of the Company or any Subsidiary
relating to the Modem Business to any person or entity (other than (i)
to the Buyer, (ii) as contemplated by this Agreement, or (iii) as
required by law or court order). Notwithstanding the foregoing or any
other provision of this Agreement, neither the provisions contained in
this Section 4.9 or elsewhere in this Agreement shall prohibit the
Board of Directors of the Company from (i) furnishing information to or
entering into discussions or negotiations with, any person or entity
that makes an unsolicited bona fide written proposal to acquire the
Company (or the Modem Business) pursuant to a merger, consolidation,
share exchange, purchase of a substantial portion of the assets,
business combination or other similar transaction, if the Board of
Directors of the Company determines in good faith, based as to legal
matters on the advice of counsel, that such action is required for the
Board of Directors to comply with its fiduciary duties to stockholders
imposed by law (the "Company Board Fiduciary Duties") and (ii)
complying with Rule 14c-2 of the Exchange Act with regard to any
Acquisition Proposal, if applicable, "Acquisition Proposal" shall mean
any proposed (A) merger, consolidation or similar transaction involving
the Company, (B) sale, lease or other disposition directly or
indirectly by merger, consolidation, share exchange or otherwise of
assets of the Company or the Subsidiaries representing 30% or more of
the Modem Business or of the consolidated assets of the Company and the
Subsidiaries, (C) issue, sale, or other disposition of (including by
way of merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing 30% or more
of the voting power of the Company or (D) transaction in which any
person shall acquire beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act), or the right to acquire beneficial
ownership, or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to
acquire beneficial ownership, of 30% or more of the outstanding Company
Common Stock. The exercise of the Company Board Fiduciary Duties,
notwithstanding any other provision of this Agreement, shall not
constitute a breach or violation of any provision of this Agreement.
The Company shall immediately notify the Buyer of, and shall disclose
to the Buyer all details of, any inquiries, discussions or negotiations
of the nature described in this Section 4.9.
-36-
37
4.10 Agreements from Certain Affiliates of the Company.
Concurrently with or prior to the execution of this Agreement, the
Company shall deliver to the Buyer a list of all persons or entities
who are at such time "affiliates" of the Company as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Company Affiliates"). In order to help ensure that the issuance of
Merger Shares will comply with the Securities Act and that the Merger
will be treated as a tax-free reorganization, the Company shall use all
reasonable efforts to cause each Company Affiliate to execute and
deliver to the Buyer, prior to the distribution of the Prospectus/Proxy
Statement in accordance with Section 4.4(b), a written agreement
substantially in the form attached hereto as Exhibit B (the "Affiliate
Agreement"). If any Company Affiliate fails to execute and deliver an
Affiliate Agreement, the Buyer shall be entitled to place appropriate
legends on the certificates evidencing the Merger Shares to be issued
to such person or entity and any other shares of Buyer Common Stock
issued to such person or entity upon exercise of an Option or Other
Right, and to issue appropriate stock transfer instructions to the
transfer agent for the Buyer Common Stock, to the effect that such
shares may be sold publicly only in compliance with Rule 145 under the
Securities Act.
4.11 Listing of Merger Shares. The Buyer shall list the
Merger Shares on the NYSE.
4.12 Indemnification; Release.
(a) From and after the Effective Time, the Buyer shall
indemnify, defend and hold harmless the officers, directors and
employees of the Company and the Subsidiaries (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties")
against all losses, expenses, claims, damages or liabilities ("Claims")
based on the fact that such person is or was such officer, director or
employee of the Company or the Subsidiaries (including arising out of
the transactions contemplated by this Agreement) to the fullest extent
permitted or required under applicable law; provided, however, that no
Indemnified Party shall be entitled to indemnification pursuant to this
Section 4.12 for Claims based on the fact that such person is or was a
stockholder of the Company. The Buyer agrees that all rights to
indemnification existing in favor of the directors, officers or
employees of the Company as provided in the Company's or the
Subsidiaries' respective Articles or Certificate of Incorporation or
By-Laws or Code of Regulations, as in effect as of the date hereof,
with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Time and the Buyer
hereby guaranties unconditionally the
-37-
38
satisfaction of all such rights to indemnification (and shall pay
expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted
under Delaware law, upon receipt from the Indemnified Party to whom
expenses are advanced of the undertaking to repay such advances
contemplated by Section 145(e) of the Delaware General corporation
Law). Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Indemnified Parties
may retain the Company's regularly engaged independent legal counsel or
other independent legal counsel satisfactory to them, provided that
such other counsel shall be reasonably acceptable to the Buyer, (ii)
the Buyer shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are
received and (iii) the Buyer shall use its reasonable efforts to assist
in the defense of any such matter, provided that the Buyer shall not be
liable for any settlement of any Claim effected without its written
consent, which consent shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section
4.12, upon learning of any such Claim shall notify the Buyer (although
the failure to so notify the Buyer shall not relieve the Buyer from any
liability which the Buyer may have under this Section 4.12, except to
the extent such failure materially prejudices the Buyer) and shall
deliver to the Buyer the undertaking contemplated by Section 145(e) of
the Delaware General Corporation Law. The Indemnified Parties as a
group may retain no more than one law firm (in addition to local
counsel) to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct (as
determined by counsel to the Indemnified Parties), a conflict on any
significant issue between the positions of any two or more Indemnified
Parties, in which event such additional counsel as may be required may
be retained by the Indemnified Parties and will be paid by the Buyer.
(b) The Buyer hereby remises and releases the directors,
officers and employees of the Company from any and all claims it may
have against them, other than claims based solely on fraud.
(c) The Company hereby remises and releases the directors,
officers and employees of the Buyer from any and all claims it may have
against them, other than claims based solely on fraud.
4.13 Employee Matters.
(a) With respect to benefit plans available to
employees of the Company or the Modem Subsidiaries generally, for
-38-
39
at least one year from and after the Effective Time, the Buyer shall
cause the Surviving Corporation to either (i) maintain all employee
benefits of the Company or the Modem Subsidiary, as the case may be,
including, without limitation, benefits under employee benefit plans,
policies and arrangements, existing on the Effective Time or (ii)
provide benefits to employees of the Surviving Corporation that are,
taken as a whole, substantially equivalent to or better than the
benefits offered to such persons by the Company or applicable Modem
Subsidiary, as the case may be, immediately prior to the Effective
Time.
(b) The Parties acknowledge and agree that the Surviving
Corporation and the Modem Subsidiaries shall have the benefit of any
confidentiality and/or nondisclosure agreement executed by employees of
the Company or the Modem Subsidiaries. The Parties shall cause any
employee of the Surviving Corporation who was an employee of the
Company immediately prior to the Spin- off to agree to hold in
confidence and to not use contrary to the interests of the Spin-off
Company any confidential information concerning the Spin-off Company
that is in such individual's possession at the Effective Time as a
result of such individual's employment by the Company. The Surviving
Corporation agrees to release any employee of the Spin-off Company who
was an employee of the Surviving Corporation immediately prior to the
Spin-off from any agreement not to compete with the Surviving
Corporation or from any agreement that would prohibit such employee
from being employed by the Spin-off Company.
4.14 Corporate Name. From and after the Closing Date, the Buyer
shall not, and shall cause the Surviving Corporation and all other
Affiliates of the Buyer to not, use the name "Penril" other than in the
Modem Business.
4.15 Non-Interference.
(a) The Company agrees to cause the Spin-off Company to agree
that between the date hereof and the Closing, and for eighteen (18)
months after the Closing, it will not and will cause its Affiliates to
not, induce any person who is, on the date hereof, or who becomes after
the date hereof, an employee, officer or agent of the Buyer or any
Affiliate of the Buyer (i) to terminate such relationship or (ii) to
employ, or assist in employing, directly or indirectly, any such
person.
(b) The Buyer agrees that between the date hereof and the
Closing, with respect to the Company and its respective Affiliates, and
for eighteen (18) months after the Closing with
-39-
40
respect to the Spin-off Company, the Buyer will not and will cause its
Affiliates to not, induce any person who is, on the date hereof, or who
becomes after the date hereof, an employee, officer or agent of the
Company or the Spin-off Company and their respective Affiliates (i) to
terminate such relationship or (ii) to employ or assist in employing,
directly or indirectly, any such person.
4.16 Vote of Company Shares. The Buyer covenants and agrees to
vote, and to cause its Affiliates to vote, all Company Shares held or
controlled by them in favor of approval of this Agreement and the
Merger, and the transactions contemplated hereby at the Special
Meeting.
4.17 Non-Solicitation. The Buyer hereby covenants and agrees to
request that its direct sales force not solicit any business from any
of the resellers listed on Schedule 4.17 for a period of 18 months
after the Closing, which business relates to the business to be
transferred by the Company to the Spin-off Company in the Spin-off
Transaction
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective
obligations of each Party to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received
the Requisite Stockholder Approval;
(b) all applicable waiting periods (and any extensions
thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated;
(c) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and remain in effect;
(d) no Party hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the
event any such order or injunction shall have been issued, each Party
agrees to use its best efforts to have any such order or injunction
lifted; and
-40-
41
(e) the Spin-off Transaction shall have been consummated in
accordance with Section 4.3 and with Schedule 4.3(a) and Schedule
4.3(b).
5.2 Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory
Subsidiary to consummate the Merger is subject to the satisfaction of
the following additional conditions:
(a) the Company and the Subsidiaries shall have obtained all
of the waivers, permits, consents, approvals or other authorizations,
and effected all of the registrations, filings and notices, referred to
in Section 4.2, except for any which if not obtained or effected would
not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company and
the Modem Subsidiaries, taken as a whole, or on the ability of the
Parties to consummate the transactions contemplated by this Agreement;
(b) the representations and warranties of the Company set
forth in Article II shall be true and correct when made on the date
hereof and, solely as to those contained in Sections 2.1, 2.2, 2.3,
2.4, 2.5, 2.7, 2.8, 2.10, 2.16 and 2.26, shall be true and correct in
all material respects as of the Effective Time as if made as of the
Effective Time;
(c) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective
Time;
(d) There shall have been no material breach of the
representations and warranties of the Company contained in Article II
of which officers of the Company had knowledge prior to the date
hereof;
(e) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate (without qualification as to
knowledge or materiality or otherwise) to the effect that each of the
conditions specified in clauses (a) and (e) of Section 5.1 and clauses
(a) through (d) of this Section 5.2 is satisfied in all respects;
(f) the Buyer shall have received a "cold comfort" letter
dated as of a date not more than two days prior to the date that the
Registration Statement is declared effective and shall have received a
subsequent similar letter dated as of a date not more than two days
prior to the Effective Time, from Deloitte &
-41-
42
Touche LLP, auditors for the Company, addressed to the Buyer in a
customary form reasonably satisfactory to the Buyer;
(g) the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Effective Time, of each
director and officer of the Company and the Modem Subsidiaries
specified by the Buyer in writing on or prior to the Closing; and
(h) the Company and the Spin-off Company shall have executed
and delivered an indemnification agreement substantially in the form of
Exhibit C.
5.3 Conditions to Obligations of the Company. The obligation of
the Company to consummate the Merger is subject to the satisfaction of
the following additional conditions:
(a) the Buyer and the Transitory Subsidiary shall have
obtained all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and
notices, referred to in Section 4.2, except for any which if not
obtained or effected would not have a material adverse affect on the
assets, business, financial condition, results of operations or future
prospects of the Buyer or on the ability of the Parties to consummate
the transactions contemplated by this Agreement.
(b) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Article III and Section 1.16 shall
be true and correct when made on the date hereof and shall be true and
correct in all material respects as of the Effective Time as if made as
of the Effective Time, except for representations and warranties made
as of a specific date, which shall be true and correct as of such date;
(c) each of the Buyer and the Transitory Subsidiary shall
have performed or complied with in all material respects its agreements
and covenants required to be performed or complied with under this
Agreement as of or prior to the Effective Time;
(d) each of the Buyer and the Transitory Subsidiary shall
have delivered to the Company a certificate (without qualification as
to knowledge or materiality or otherwise) to the effect that each of
the conditions specified in clause (c) of Section 5.1 and clauses (a)
through (c) of this Section 5.3 is satisfied in all respects; and
(e) the Merger Shares shall have been authorized for listing
on the NYSE upon official notice of issuance.
-42-
43
ARTICLE VI
TERMINATION
6.1 Termination of Agreement. The Parties may terminate this
Agreement prior to the Effective Time (whether before or after
Requisite Stockholder Approval) as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company in the event the Company is in breach, and the
Company may terminate this Agreement by giving written notice to the
Buyer and the Transitory Subsidiary in the event the Buyer or the
Transitory Subsidiary is in breach, of any material representation,
warranty or covenant contained in this Agreement, and such breach is
not remedied within 10 days of delivery of written notice thereof;
(c) any Party may terminate this Agreement by giving written
notice to the other Parties at any time after the Company Stockholders
have voted on whether to approve this Agreement and the Merger in the
event this Agreement and the Merger failed to receive the Requisite
Stockholder Approval;
(d) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred (i) on or
before the 120th day following the date of this Agreement by reason of
the failure of any condition precedent under Section 5.1 (other than
Sections 5.1(c) and 5.1(e)) or 5.2 hereof or (ii) on or before the
150th day following the date of this Agreement by reason of the failure
of any condition under Sections 5.1(c) and 5.1(e) hereof (in either
case (i) or (ii) above, unless the failure results primarily from a
breach by the Buyer or the Transitory Subsidiary of any representation,
warranty or covenant contained in this Agreement);
(e) the Company may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary if the
Closing shall not have occurred (i) on or before the 120th day
following the date of this Agreement by reason of the failure of any
condition precedent under Section 5.1 (other than Sections 5.1(c) and
5.1(e)) or 5.3 hereof or (ii) on or before the 150th day following the
date of this Agreement by reason of the failure of any condition under
Sections 5.1(c) and 5.1(e) hereof (in either case (i) or (ii) above,
unless the failure results primarily from a breach by the Company of
any representation, warranty or covenant contained in this Agreement);
or
-43-
44
(f) any Party may terminate this Agreement if the Board of
Directors of the Company shall have withdrawn or modified in a manner
adverse to the Buyer its approval or recommendation to the Company
Stockholders of this Agreement or the Merger or shall have approved or
recommended to the Company Stockholders that they accept the terms of
any Acquisition Proposal or shall have resolved to take any of the
foregoing actions; provided, however, that reasonable delay required to
comply with the Company Board Fiduciary Duties shall not be deemed to
be a withdrawal or a modification adverse to the Buyer.
6.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 6.1, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except
for any liability of any Party for willful breaches of this Agreement
and except as provided in the last sentence of Section 4.7), provided,
however, (i) that if the Merger is not consummated as a result of a
termination of this Agreement pursuant to Sections 6.1(a), 6.1(c),
6.1(d) (but solely as it relates to Sections 5.1(a), 5.2(c) (but solely
as it relates to a Special Breach (as defined below) with respect to
the certain covenants contained in clauses (a), (c) through (j) and (l)
of Section 4.6 (the "Section 4.6 Covenants")), 5.2(d) and 5.2(h)) or
6.1(f), then, without further action or consideration on the part of
any party or person, the license agreement in the form of Exhibit D
hereto shall become effective and (ii) that if the Merger is not
consummated as a result of a termination of this Agreement pursuant to
Section 6.1(d) (but solely as it relates to Sections 5.1(b), 5.1(c) or
5.1(e)), then, without further action on the part of any party or
person, the license agreement in the form of Exhibit D hereto shall
become effective upon the payment by the Buyer within 10 business days
after the giving of notice of termination of this Agreement pursuant to
Section 6.1(d) of Fifty Million Dollars ($50,000,000.00) to the Company
in immediately available funds. Notwithstanding the foregoing, if
within 180 days after the date hereof and prior to termination of this
Agreement pursuant to Section 6.1(d) (but solely as it relates to
Sections 5.2(a) or 5.2(c)), the Company has received, participated in
or encouraged inquiries, discussions or negotiations of the nature
described in Section 4.9 and the Board of Directors of the Company
shall have approved or recommended to the Company Stockholders that
they accept the terms of any Acquisition Proposal or shall have
resolved to take any of the foregoing actions, with a party with whom
they had discussions during such period, then, without further action
or consideration on the part of any party or person, the license
agreement in the form of Exhibit D hereto shall become effective. For
purposes of this Section 6.2, "Special Breach" shall mean (i) any
material breach of clauses (a), (d), (f), (g), (h), (i), (j) and (l) of
the
-44-
45
Section 4.6 Covenants; (ii) any material breach of clause (c) of the
Section 4.6 Covenants related solely to loans, advances, capital
contributions to, or investments in, any other person or entity and
(iii) any material breach of clause (e) of the Section 4.6 Covenants
related to the Modem Business.
ARTICLE VII
DEFINITIONS
The Section references for the defined terms used in this
Agreement are set forth on Schedule VII to this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and Announcements. No Party shall issue any
press release or public disclosure relating to the acquisition of the
Modem Business by the Buyer subject matter of this Agreement without
the prior written approval of the other Parties; provided, however,
that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party
shall advise the other Parties and provide them with a copy of the
proposed disclosure prior to making the disclosure).
8.2 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns; provided, however, the
provisions in Article I concerning issuance of the Merger Shares and
the provisions of Section 1.16 are intended for the benefit of the
Company Stockholders; (ii) the provisions of the last sentence of
Section 4.10 are intended for the benefit of the Company Affiliates;
(iii) the provisions of Section 4.12 are intended for the benefit of
the Indemnified Parties and the officers, directors and employees of
the Company and of the Buyer; (iv) the provisions of Section 4.13(a)
are intended for the benefit of the employees of the Company and the
Modem Subsidiaries; (v) the provisions of Section 4.13(b) are intended
for the benefit of the Modem Subsidiaries; and (vi) the provisions of
Sections 4.13(b), 4.14, 4.15 and 4.17 are intended for the benefit of
the Spin-off Company
8.3 Entire Agreement. This Agreement (including the
documents referred to in this Agreement) constitutes the entire
agreement among the Parties and supersedes any prior
-45-
46
understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
8.4 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named in this Agreement
and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other
Parties; provided that the Transitory Subsidiary may assign its rights,
interests and obligations hereunder to an Affiliate of the Buyer.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This
Agreement, once executed, may be delivered to either party through the
use of facsimile transmission. In this regard, any and all signatures
of the parties appearing on any facsimile copies of this Agreement
shall be deemed, unless otherwise proved, the lawful and valid
signature of the executing party.
8.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service,
in each case to the intended recipient as set forth below:
If to the Company: Copy to:
Penril DataComm Networks, Inc. Benesch, Friedlander, Xxxxxx &
0000 Xxxxxx Xxxxxxx Xxxxxxxxx Aronoff, P.L.L.
Xxxxxxxxxxxx, Xxxxxxxx 00000 0000 XX Xxxxxxx Xxxxxxxx
Xxxx.: Chairman 000 Xxxxxx Xxxxxx
Telecopier: (000) 000-0000 Xxxxxxxxx, Xxxx 00000-0000
Attn.: Xxx Xxxxxxxx, Esq.
Telecopier: (000) 000-0000
-46-
47
If to the Buyer: Copy to:
Bay Networks, Inc. Bay Networks, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxx 0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000 Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: President Attn.: Xxxxxxxxxx Xxxxxxx, Esq.
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
If to the Transitory Copy to:
Subsidiary:
Beta Acquisition Corporation Bay Networks, Inc.
c/o Bay Networks, Inc. 0000 Xxxxx Xxxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxxxx Xxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxx, Xxxxxxxxxx 00000 Attn.: Xxxxxxxxxx Xxxxxxx
Attn.: President Telecopier: (000) 000-0000
Telecopier: (000) 000-0000
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the party for whom it
is intended. 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 in this
Agreement set forth.
8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of
conflicts) of the State of Delaware.
8.9 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time;
provided, however, that any amendment effected subsequent to the
Requisite Stockholder Approval shall be subject to the restrictions
contained in the Delaware General Corporation Law. No amendment of any
provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. 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.
-47-
48
8.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares
that any term or provision hereof is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or
to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
8.11 Expenses. The Buyer and the Company shall each bear its own
costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated by
this Agreement. The fees and expenses of the Company shall be accrued
prior to the Closing Date and reflected on the Closing Balance Sheet.
The fees and expenses of the Transitory Subsidiary shall be borne by
the Buyer.
8.12 Specific Performance. Each of the Parties acknowledges and
agrees that one or more of the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other
Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter (subject to
the provisions of Section 8.13), in addition to any other remedy to
which it may be entitled, at law or in equity.
8.13 Submission to Jurisdiction. Each of the Parties (a) submits to
the jurisdiction of any state or federal court sitting in Delaware in
any action or proceeding arising out of or relating to this Agreement,
(b) agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court, and (c) agrees not to bring
any action or proceeding arising out of or relating to this Agreement
in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so
brought and waives
-48-
49
any bond, surety or other security that might be required of any other
Party with respect thereto. Any Party may make service on another Party
by sending or delivering a copy of the process to the Party to be
served at the address and in the manner provided for the giving of
notices in Section 8.7. Nothing in this Section 8.13, however, shall
affect the right of any Party to serve legal process in any other
manner permitted by law.
8.14 Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction shall be applied
against any Party. 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.
8.15 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated in this
Agreement by reference and made a part hereof.
8.16 Non-Survival of Representations, Warranties and Agreements. No
representations, warranties or agreements in this Agreement shall
survive the Closing, except for those contained in Article I and
Sections 4.10 (the last sentence only), 4.12, 4.13, 4.14, 4.15 and 4.17
and, to the extent relating to such specified provisions, those
contained in this Article VIII.
-49-
50
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
THE BUYER:
BAY NETWORKS, INC.
/s/
By:________________________________
Title:_____________________________
THE TRANSITORY SUBSIDIARY:
BETA ACQUISITION CORP.
/s/
By:________________________________
Title:_____________________________
THE COMPANY:
PENRIL DATACOMM NETWORKS, INC.
/s/
By:________________________________
Title:_____________________________
-50-
