MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") is entered into this 27th day of
August 1999, by and between Netrix Corporation, a Delaware corporation with
offices at 00000 Xxxxxx Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000-0000 (hereinafter
"Company") and OpenROUTE, a Massachusetts corporation, with offices at Nine
Xxxxxxxxxx Xxxxx, Xxxxxxxxxxx, XX 00000 (hereinafter "OpenROUTE").
1. This MOU is intended to set forth the non-binding understanding of
the parties as to the terms and conditions under which OpenROUTE
will merge with and into Company in a stock for stock transaction
(the "Merger").
2. Upon the closing of the Merger (the "Closing"), all outstanding
shares of OpenROUTE common stock will be converted into shares of
Company common stock in the ratio of one share of Company common
stock for one share of OpenROUTE common stock. All employee options
to purchase OpenROUTE common stock that are granted and outstanding
at the Closing (less any options that have expired or will expire as
a result of a reorganization due to the Merger) will be converted,
on a one to one basis, into options to purchase shares of Company
common stock, on comparable terms and with a comparable vesting
schedule. It is the parties' mutual intent that all other options,
warrants or other rights or securities to purchase, exchange for or
convert into OpenROUTE stock that are outstanding at the Closing
(other than such options, warrants or other rights or securities
which would, under their terms, expire upon consummation of the
Merger) will be converted into substantially equivalent options,
warrants or rights or securities to purchase, exchange for or
convert into shares of Company stock.
3. The parties shall use their best efforts to meet all necessary
conditions in order for this transaction to be accounted for as a
pooling of interest, and a reorganization that is tax free under
Section 368 of the Internal Revenue Code of 1986, as amended, as to
Company common stock received by the stockholders of OpenROUTE;
provided however, the parties agree that the consummation of the
transaction on the terms set forth herein shall not be contingent
upon such accounting treatment.
4. OpenROUTE and Company each agree to provide the other with necessary
access to their books and records and other information to complete
their respective due diligence review and to provide reasonable
access to their properties, suppliers, customers and employees, as
may be requested by the other party, and to work in good faith to
complete the proposed Merger.
5. Subject to paragraph 16, this is a non-binding agreement which is
subject to the conditions set forth herein and in any definitive
agreements executed by the parties in connection with the Merger.
6. Upon execution and delivery of this MOU, the parties and their
respective counsel will commence negotiation of the terms of a
definitive Merger Agreement ("Merger Agreement"). The parties agree
to negotiate in good faith the Merger Agreement, which will contain
customary representations, warranties, covenants and conditions,
including without limitations termination or break up fees and
representations as to litigation or threatened claims, financial
statements, significant contingencies, regulatory approvals and
compliance with laws and regulations.
7. The Closing under the Merger Agreement will be held as soon as
practicable after all conditions to it have been satisfied or, if
appropriate, waived, and the Merger will become effective as soon as
practicable thereafter.
The conditions to the Closing will include, without limitation, the
following:
1. approval of the Merger Agreement and the transactions
contemplated thereby by the Board of Directors of each of
Company and OpenROUTE,
2. approval of the Merger by the stockholders of OpenROUTE,
3. approval of the Merger by the stockholders of Company,
4. all material approvals, consents and waivers of lenders,
lessors, governmental agencies (including approvals under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended) and other third parties on a basis appropriate to the
Merger,
5. receipt by each party of a written fairness opinion from its
financial advisor,
6. absence of any litigation relating to the Merger and any
injunction, order or decree prohibiting the consummation of
the Merger, and
7. continued operation of OpenROUTE's and Company's respective
businesses in the ordinary course until the Closing, without
material adverse change in their respective assets,
operations, contracts, financial condition or prospects,
except to such extent as may be specified in the Merger
Agreement, and
8. OpenROUTE and Company will cooperate in the preparation of and will
file with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, a joint proxy
statement/prospectus for use in connection with the meetings of the
stockholders of Company and OpenROUTE for the purpose of obtaining
their approval of the Merger. OpenROUTE and Company will cooperate
with each other in order to make, as soon as appropriate, all
governmental and regulatory filings appropriate for the consummation
of the Merger Agreement, including, without limitation, filing under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
9. Recognizing that the Company's investigation concerning OpenROUTE's
business and properties will be time-consuming and expensive,
OpenROUTE agrees that after the date hereof and until September 30,
1999 it will not (a) solicit or encourage any offer from any person
or entity other than Company relating to any acquisition of a
substantial equity interest in OpenROUTE or a material part of its
assets (other than in the ordinary course of OpenROUTE's business),
or (b) furnish any non-public information concerning OpenROUTE's
business or properties to, or negotiate with, any such person or
entity with a view to any such acquisition (an "Acquisition
Transaction"), unless prior to such action by OpenROUTE, Company has
terminated this MOU, consented to such action or refused to execute
the Merger Agreement. In the event that OpenROUTE breaches its
promise contained in the preceding sentence, Company may terminate
this MOU.
OpenROUTE shall advise Company orally and in writing of all the
terms and conditions of any inquiries or proposals relating to an
Acquisition Transaction and the identity of the party making any
such inquiry or proposal or on whose behalf such inquiry or proposal
is being made, within one day following OpenROUTE's receipt of any
such inquiry or proposal. The Merger Agreement will contain a
provision extending the undertaking in this paragraph 9, and will
provide for appropriate "fiduciary outs."
10. OpenROUTE and the Company shall each continue to conduct their
respective businesses in the ordinary course from and after the date
hereof through the earlier to occur of the termination of this MOU
or September 30, 1999.
11. Company and OpenROUTE will identify key management and technical
employees of OpenROUTE and will make arrangements to provide for
their continued employment with Company under employment agreements
and terms and conditions acceptable to Company and such employees.
12. Company shall appoint four designees of OpenROUTE to its Board of
Directors at Closing; provided that Company's Board of Directors at
Closing shall not exceed nine persons (including the four designees
of OpenROUTE).
13. Except as otherwise required by law, no public disclosure of the
terms of the transactions contemplated hereby shall be made by
either party hereto and then only with the prior written consent of
the other party, which will not be unreasonably withheld or delayed.
Each party shall furnish to the other party advance copies of any
releases which it proposes to make concerning the transaction. It is
the intent of the parties not to publicly announce the transactions
until this MOU is executed and delivered.
14. This MOU will continue in effect until the earlier of (i) such time
as a Merger Agreement is entered into between OpenROUTE and Company
or (ii) September 30, 1999.
15. This MOU and any discussions regarding this matter will be subject
to the Non-Disclosure Agreement ("NDA") executed by OpenROUTE and
Company.
16. It is not the intention of the parties that this MOU, or any actions
of the parties with respect hereto, be, or be deemed to constitute,
a legally binding obligation of the parties hereto, except that the
provisions in paragraphs, 9, 13, 14 and 15 above and this paragraph
16 shall be binding and enforceable obligations on the parties. Each
party agrees to negotiate in good faith to consummate the
transactions described herein. Any other legally binding obligation
with respect to this proposed Merger Agreement shall exist only upon
the execution and delivery of a definitive Merger Agreement and all
rights and obligations of the parties shall be governed by such
agreement. Accordingly, subject to the provisions of paragraph 9,
either party is free to abandon negotiations regarding the Merger at
any time for any reason or for no reason, by notice to the other in
writing, and the decision of either party to so abandon discussions
shall not be subject to legal challenge by the other.
IN WITNESS WHEREOF, the parties have executed this Agreement the 27
day of August, 1999.
Netrix Corporation OPENROUTE Networks, Inc.
By: /s/ Xxxxxx X. Francesco By:/s/ Xxxxx Xxxxxx
_________________________________ ______________________________
Name: /s/ Xxxxxx X. Francesco Name: /s/ Xxxxx Xxxxxx
_______________________________ ____________________________
Title: Chairman and Chief Executive Title: President & Chief
Officer Executive Officer
