USR STOCK OPTION AGREEMENT
THIS USR STOCK OPTION AGREEMENT (the "Agreement") is made and entered into
as of February 26, 1997 by and between 3Com Corporation, a California
corporation ("3Com"), and U.S. Robotics Corporation, a Delaware corporation
("USR").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, 3Com,
USR, and TR Acquisitions Corporation, a Delaware corporation and a wholly-owned
subsidiary of 3Com ("Sub"), are entering into an Agreement and Plan of Merger,
dated as of February 26, 1997 (the "Merger Agreement"), which provides, among
other things, upon the terms and subject to the conditions thereof, for the
merger of Sub with and into USR in accordance with the laws of the State of
Delaware (the "Merger"); and
B. As a condition and inducement to USR's willingness to enter into the
Merger Agreement, USR has requested that 3Com agree, and 3Com has agreed, to
grant to USR an option to acquire certain shares of 3Com's authorized but
unissued common stock, par value $.01 per share, together with any associated
rights under the Amended and Restated Rights Agreement dated as of December 21,
1994 between 3Com and The First National Bank of Boston ("3Com Common Stock"),
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce USR to enter into the Merger Agreement and in
consideration of the representations, warranties, covenants and agreements
contained herein and in the Merger Agreement, the parties hereto, intending to
be legally bound, hereby agree as follows. Capitalized terms used herein but
not defined herein shall have the meanings ascribed to them in the Merger
Agreement.
1. GRANT OF OPTION. 3Com hereby grants to USR an irrevocable option (the
"3Com Option") to purchase a number of shares of 3Com Common Stock equal to the
Option Number (as defined in Section 2(d)), on the terms and subject to the
conditions set forth below.
2. EXERCISE AND TERMINATION OF THE 3COM OPTION.
(a) EXERCISE. The 3Com Option may be exercised by USR, in whole or
in part, at any time or from time to time after the occurrence of an event which
causes the 3Com Initial Termination Fee (as defined in the Merger Agreement) to
become payable (a "Trigger Event") and prior to the termination of USR's right
to exercise the 3Com Option by the terms of this Agreement. 3Com shall notify
USR promptly in writing of the occurrence of any Trigger Event; however, such
notice shall not be a condition to the right of USR to exercise the 3Com Option.
Notwithstanding the foregoing, the 3Com Option may not be exercised if USR is in
material breach of any of its material representations, warranties, covenants or
agreements in this Agreement or the Merger Agreement.
(b) EXERCISE PROCEDURE. In the event that USR wishes to exercise the
3Com Option, USR shall deliver to 3Com written notice (an "Exercise Notice")
specifying the total number of shares of 3Com Common Stock that USR wishes to
purchase. To the extent permitted by law and the Amended and Restated Articles
of Incorporation of 3Com (the "3Com Charter") and provided that the conditions
set forth in Section 3 to 3Com's obligation to issue the shares of 3Com Common
Stock to USR hereunder have been satisfied or waived, USR shall, upon delivery
of the Exercise Notice and tender of the applicable aggregate Exercise Price,
immediately be deemed to be the holder of record of the shares of 3Com Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of 3Com shall then be closed or that certificates representing such shares of
3Com Common Stock shall not theretofore have been delivered to USR. Each
closing of a purchase of shares of 3Com Common Stock hereunder (a "Closing")
shall occur at a place, on a date, and at a time designated by USR in an
Exercise Notice delivered at least two (2) business days prior to the date of
such Closing.
(c) TERMINATION OF THE 3COM OPTION. USR's right to exercise the 3Com
Option shall terminate upon the earliest to occur of: (i) the Effective Time of
the Merger; (ii) the termination of the Merger Agreement other than under
circumstances which also constitute a Trigger Event under this Agreement; or
(iii) twelve (12) months following the receipt by USR of written notice from
3Com of the occurrence of a Trigger Event. Notwithstanding the foregoing, if
the 3Com Option cannot be exercised by reason of any applicable judgment,
decree, order, law or regulation, the 3Com Option shall remain exercisable and
shall not terminate until the earlier of (x) the date on which such impediment
shall become final and not subject to appeal and (y) 5:00 p.m., Pacific Standard
Time, on the tenth (10th) business day after such impediment shall have been
removed. The rights of USR set forth in Sections 7 and 10 shall not terminate
upon termination of USR's right to exercise the 3Com Option, but shall extend to
the time provided in such sections. Notwithstanding the termination of the 3Com
Option, USR shall be entitled to purchase the shares of 3Com Common Stock with
respect to which USR had exercised the 3Com Option prior to such termination.
(d) OPTION NUMBER. The Option Number shall initially be the number
of shares equal to nineteen and nine-tenths percent (19.9%) of the total number
of shares of 3Com Common Stock issued and outstanding as of the date of this
Agreement, and shall be adjusted hereafter to reflect changes in 3Com's
capitalization occurring after the date hereof in accordance with Section 11.
Notwithstanding any other provision of this Agreement, in no event shall the
Option Number exceed nineteen and nine-tenths percent (19.9%) of the total
number of shares of 3Com Common Stock issued and outstanding as of the date of
this Agreement, adjusted in accordance with Section 11.
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(e) EXERCISE PRICE. The purchase price per share of 3Com Common
Stock pursuant to the 3Com Option (the "Exercise Price") shall be payable, at
USR's election, in cash (a "Cash Exercise") or in shares (a "Stock Exercise") of
USR common stock, $.01 par value per share ("USR Common Stock"). The Exercise
Price, (i) in the case of a Cash Exercise, shall be a cash amount equal to the
average of the last sale prices of 3Com Common Stock on the ten (10) trading
days immediately prior to the announcement of the Merger (the "Cash Exercise
Price"), and (ii) in the case of a Stock Exercise, shall be a number of shares
(or fraction of a share) of USR Common Stock with a value (based on the average
of the last sale prices of USR Common Stock on the ten (10) trading days
immediately prior to the applicable Closing) equal to the Cash Exercise Price
(the "Stock Exercise Price").
(f) CERTAIN LIMITATIONS. In the event USR would receive Net Proceeds
(as defined below) of more than one hundred million dollars ($100,000,000) in
connection with the sale or other disposition of the shares of 3Com Common Stock
acquired pursuant to the 3Com Option (other than a sale of such shares to 3Com
pursuant to Section 7), all Net Proceeds in excess of such amount shall be
remitted to 3Com promptly upon receipt. "Net Proceeds" shall mean the aggregate
proceeds of such sale or disposition in excess of the product of the Exercise
Price multiplied by the number of shares of 3Com Common Stock included in such
sale or disposition. Notwithstanding anything in this Agreement or in the
Merger Agreement to the contrary, the maximum aggregate amount payable by 3Com
to USR and its affiliates pursuant to Section 7 of this Agreement and the
provisions of Section 8.3(c) of the Merger Agreement shall not exceed the sum of
one hundred fifty million dollars ($150,000,000) plus expenses pursuant to
Section 8.3(c) of the Merger Agreement plus, in the case of payments pursuant to
Sections 7(a)(ii) and 7(b)(ii) of this Agreement, the aggregate Exercise Price
for the shares of 3Com Common Stock repurchased by 3Com from USR pursuant to
Section 7 of this Agreement, it being understood that the limitation contained
in this sentence shall not limit the amounts receivable by USR from persons
other than 3Com, including without limitation amounts receivable pursuant to a
tender offer or other sale.
3. CONDITIONS TO CLOSING. The obligation of 3Com to issue the shares of
3Com Common Stock to USR hereunder is subject to the conditions that (a) all
waiting periods, if any, under the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act
of 1975, as amended (the "HSR Act"), applicable to the issuance of the shares of
3Com Common Stock by 3Com and the acquisition of such shares by USR hereunder
(and, in the case of a Stock Exercise, the issuance of shares of USR Common
Stock by USR and the acquisition of such shares by 3Com) shall have expired or
have been terminated; (b) no preliminary or permanent injunction or other order
by any court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect; and (c) all consents, approvals, orders,
authorizations and permits of any federal, state, local or foreign governmental
authority, if any, required in connection with the issuance of the shares of
3Com Common Stock and the acquisition of such shares by USR hereunder (and, in
the case of a Stock Exercise, the issuance of shares of USR Common Stock and the
acquisition of such shares by 3Com) shall have been obtained.
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4. CLOSING. At any Closing:
(a) 3Com shall deliver to USR or its designee a single certificate in
definitive form representing the number of shares of 3Com Common Stock
designated by USR in its Exercise Notice, such certificate to be registered in
the name of USR and to bear the legend set forth in Section 12;
(b) USR shall deliver to 3Com the aggregate Exercise Price for the
shares of 3Com Common Stock so designated and being purchased by (i) wire
transfer of immediately available funds to the account or accounts specified in
writing by 3Com (in the case of a Cash Exercise), or (ii) subject to the
satisfaction of applicable conditions, delivery of a certificate or certificates
representing the number of shares of USR Common Stock being issued by USR in
consideration thereof (in the case of a Stock Exercise);
(c) 3Com shall pay all expenses, and any and all federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 4; and
(d) 3Com shall cause the shares of 3Com Common Stock being delivered
at the Closing to be approved for quotation on The Nasdaq National Market and
shall pay all expenses in connection with the application for approval of such
quotation.
5. REPRESENTATIONS AND WARRANTIES OF 3COM. 3Com represents and warrants
to USR that:
(a) 3Com is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has all corporate
power and authority required to enter into this Agreement and to carry out its
obligations hereunder;
(b) the execution and delivery of this Agreement by 3Com and the
consummation by 3Com of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of 3Com and no other
corporate proceedings on the part of 3Com and no action of 3Com shareholders are
necessary to authorize this Agreement or any of the transactions contemplated
hereby; this Agreement has been duly and validly executed and delivered by 3Com,
and, assuming the due authorization, execution and delivery hereof by USR and
the receipt of all required governmental approvals, constitutes the valid and
binding obligation of 3Com, enforceable against 3Com in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except that the availability of equitable remedies,
including specific performance, may be subject to the discretion of any court
before which any proceeding therefor may be brought;
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(c) 3Com has taken all necessary corporate action to authorize and
reserve for issuance and to permit it to issue, upon exercise of the 3Com
Option, and at all times from the date hereof through the expiration of the 3Com
Option will have reserved, a number of authorized and unissued shares of 3Com
Common Stock not less than the Option Number, such amount being subject to
adjustment as provided in Section 11, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable;
(d) the shares of 3Com Common Stock issued to USR upon the exercise
of the 3Com Option will be, upon delivery thereof to USR, free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever;
(e) the execution and delivery of this Agreement by 3Com does not,
and, subject to compliance with applicable law, the consummation by 3Com of the
transactions contemplated hereby will not, violate, conflict with, or result in
a breach of any provision of, or constitute a default (with or without notice or
lapse of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination, cancellation,
or acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest or other encumbrance on assets
(any such violation, conflict, breach, default, termination, acceleration, right
of termination, cancellation or acceleration, loss, or creation, a "Violation")
of 3Com or any of its subsidiaries, pursuant to (i) any provision of the 3Com
Charter or the Bylaws of 3Com, (ii) any provision of any material loan or credit
agreement, note, mortgage, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license (a "Material
Contract") of 3Com or any of its subsidiaries or to which any of them is a party
or by which any of them or their properties or assets are bound, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to 3Com or any of its subsidiaries or any of their properties or assets;
(f) the execution and delivery of this Agreement by 3Com does not,
and (except for the expiration or early termination of the waiting period under
the HSR Act and except as contemplated by Sections 10(e), (f) and (j)) the
performance of this Agreement by 3Com and the consummation of the transactions
contemplated hereby will not, require any consent, approval, order,
authorization or permit of, filing with, or notification to any governmental or
regulatory authority;
(g) none of 3Com or any of its affiliates or anyone acting on its or
their behalf has issued, sold or offered any security of 3Com to any person
under circumstances that would cause the issuance and sale of shares of 3Com
Common Stock hereunder to be subject to the registration requirements of the
Securities Act as in effect on the date hereof, and, assuming the
representations and warranties of USR contained in Section 6(g) are true and
correct, the issuance, sale and delivery of the shares of 3Com Common Stock
hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date
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hereof, and 3Com shall not take any action which would cause the issuance, sale,
and delivery of shares of 3Com Common Stock hereunder not to be exempt from such
requirements; and
(h) any shares of USR Common Stock acquired by 3Com pursuant to this
Agreement will be acquired for 3Com's own account, for investment purposes only,
and will not be acquired by 3Com with a view to the public distribution thereof
in violation of any applicable provision of the Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF USR. USR represents and warrants to
3Com that:
(a) USR is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority required to enter into this Agreement and to carry out its obligations
hereunder;
(b) except as set forth in Section 6(c), the execution and delivery
of this Agreement by USR and the consummation by USR of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of USR, and no other corporate proceedings on the part of USR and no
action of its stockholders are necessary to authorize this Agreement or any of
the transactions contemplated hereby; this Agreement has been duly and validly
executed and delivered by USR and, assuming the due authorization, execution and
delivery hereof by 3Com and the receipt of all required governmental approvals,
constitutes the valid and binding obligation of USR, enforceable against USR in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies, including specific performance, may be subject to the discretion of
any court before which any proceeding may be brought;
(c) prior to any delivery of shares of USR Common Stock in
consideration of the purchase of shares of 3Com Common Stock pursuant hereto,
USR will have taken all necessary corporate action to authorize for issuance and
to permit it to issue such shares of USR Common Stock, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable;
(d) the shares of USR Common Stock (if any) issued to 3Com in
consideration of the purchase of shares of 3Com Common Stock pursuant hereto
will be, upon delivery thereof to 3Com, free and clear of all claims, liens,
charges, encumbrances and security interests of any nature whatsoever;
(e) the execution and delivery of this Agreement by USR does not, and
the consummation by USR of the transactions contemplated hereby will not,
violate, conflict with, or result in the breach of any provision of, or
constitute a
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default (with or without notice or a lapse of time, or both) under, or result in
any Violation by USR or any of its subsidiaries, pursuant to (i) any provision
of the Certificate of Incorporation or Bylaws of USR, (ii) any Material Contract
of USR or any of its subsidiaries or to which any of them is a party or by which
any of them or any of their properties or assets are bound, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to USR or its properties or assets, which Violation, in the case of each of
clauses (ii) or (iii), would have an USR Material Adverse Effect;
(f) the execution and delivery of this Agreement by USR does not, and
(except for the expiration or early termination of the waiting period under the
HSR Act and except as contemplated by Sections 10(e), (f) and (j)) the
performance of this Agreement by USR and the consummation of the transactions
contemplated hereby will not, require any consent, approval, order,
authorization or permit of, filing with, or notification to any governmental or
regulatory authority; and
(g) any shares of 3Com Common Stock acquired by USR upon exercise of
the 3Com Option will be acquired for USR's own account, for investment purposes
only and will not be, and the 3Com Option is not being, acquired by USR with a
view to the public distribution thereof, in violation of any applicable
provision of the Securities Act.
7. CERTAIN REPURCHASES.
(a) USR "PUT". Subject to the limitations set forth in Section 2(f),
upon written notice to 3Com by USR (the "Repurchase Notice"):
(i) at any time during which the 3Com Option is exercisable pursuant
to Section 2 (the "Repurchase Period"), 3Com and its successors in interest
shall repurchase from USR all or any portion of the 3Com Option, as
specified by USR, at the Option Repurchase Price set forth in Section
7(b)(i); and
(ii) at any time prior to the Expiration Date (as defined in Section
8), 3Com and its successors in interest shall repurchase from USR all or
any portion of the shares of 3Com Common Stock purchased by USR pursuant to
the 3Com Option, as specified by USR, at the Share Repurchase Price set
forth in Section 7(b)(ii).
(b) CERTAIN DEFINITIONS. For purposes of this Section 7, the
following definitions shall apply:
(i) OPTION REPURCHASE PRICE. "Option Repurchase Price" shall mean
(A) the difference between the Option Repurchase Market/Offer Price (as
defined below) for shares of 3Com Common Stock as of the date of the
applicable Repurchase Notice and the Exercise Price, multiplied by (B) the
number of shares of 3Com Common Stock purchasable pursuant to the 3Com
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Option or the portion thereof covered by the applicable Repurchase Notice,
but only if the Option Repurchase Market/Offer Price is greater than the
Exercise Price. "Option Repurchase Market/Offer Price" shall mean, as of
any date, the higher of (X) the highest price per share offered as of such
date pursuant to any tender or exchange offer or other offer with respect
to a business combination offer involving 3Com or any of its material
subsidiaries as the target party which was made prior to such date and not
terminated or withdrawn as of such date, and (Y) the Fair Market Value (as
defined in Section 7(b)(iii)) of 3Com Common Stock as of such date.
(ii) SHARE REPURCHASE PRICE. "Share Repurchase Price" shall mean the
product of (A) the sum of (I) the Exercise Price paid by USR per share of
3Com Common Stock acquired pursuant to the 3Com Option and (II) if the
Share Repurchase Market/Offer Price (as defined below) is greater than the
Exercise Price, the difference between the Share Repurchase Market/Offer
Price and the Exercise Price, and (B) the number of shares of 3Com Common
Stock to be repurchased pursuant to this Section 7. "Share Repurchase
Market/Offer Price" shall mean, as of any date, the higher of (X) the
highest price per share offered pursuant to a tender or exchange offer or
other business combination offer involving 3Com as the target party during
the Repurchase Period prior to the delivery by USR of a notice of
repurchase, and (Y) the Fair Market Value (as defined in Section 7(b)(iii))
of 3Com Common Stock as of such date.
(iii) FAIR MARKET VALUE. As used in this Agreement, "Fair Market
Value" shall mean, with respect to any security, the per share average of
the last sale prices on The Nasdaq National Market (or such other national
stock exchange or national market system as shall then be the primary
trading market for such security) for the ten (10) trading days immediately
preceding the applicable date.
(c) REDELIVERY OF SHARES OF USR COMMON STOCK. In 3Com's discretion
or if specified by USR in the Repurchase Notice, all or a portion of the Share
Repurchase Price shall be paid by 3Com in shares of USR Common Stock, by
redelivery to USR of the shares of USR Common Stock (and the certificate(s)
representing such shares) previously delivered by USR to 3Com pursuant to a
Stock Exercise. For purposes of this Section 7(c), each share of USR Common
Stock redelivered to USR shall be valued at the Fair Market Value thereof. If
fewer than all of the shares of 3Com Common Stock purchased by USR pursuant to a
Stock Exercise are to be repurchased by 3Com pursuant to Section 7(a)(ii), USR
shall issue to 3Com new certificates representing those shares of USR Common
Stock which are not due to be redelivered to USR pursuant to this Section 7(c)
to the extent that excess shares of USR Common Stock are included in the
certificates redelivered to USR by 3Com. All shares of USR Common Stock
redelivered to USR hereunder shall be free and clear of all claims, liens,
charges, encumbrances and security interests of any nature whatsoever.
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(d) PAYMENT AND REDELIVERY OF 3COM OPTIONS OR SHARES. In the event
that USR exercises its rights under this Section 7, 3Com shall, within ten (10)
business days thereafter, pay the required amount to USR in immediately
available funds and USR shall surrender to 3Com the 3Com Option or the
certificate or certificates evidencing the shares of 3Com Common Stock purchased
by USR pursuant hereto, and USR shall warrant that it has sole beneficial
ownership of the 3Com Option or such shares and that the 3Com Option or such
shares are then free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever.
(e) REPURCHASE PRICE REDUCED AT USR'S OPTION. In the event that
payment of the repurchase price specified in Section 7(a) would subject the
repurchase of the 3Com Option or the shares of 3Com Common Stock purchased by
USR pursuant to the 3Com Option to a vote of the stockholders of 3Com pursuant
to applicable law, regulations, or requirements of a national securities
exchange or national market system or the 3Com Charter, then USR may, at its
election, reduce the repurchase price or the number of shares covered by the USR
repurchase request to an amount which would permit such repurchase without the
necessity for such a vote.
(f) REPURCHASE AT THE ELECTION OF 3COM.
(i) Except to the extent that USR shall have previously exercised its
rights under Section 7(a), at the request of 3Com during the six-month
period immediately following the Repurchase Period, 3Com may repurchase
from USR, and USR shall sell to 3Com, all (but not less than all) the
shares of 3Com Common Stock acquired by USR pursuant hereto and with
respect to which USR has beneficial ownership at the time of such
repurchase, at a price equal to the sum of (A) the greater of (I) one
hundred ten percent (110%) of the Current Market Price (as defined in
Section 7(f)(iii)) or (II) the sum of (X) the Purchase Price in respect of
the shares so acquired plus (Y) USR's Pre-Tax Carrying Cost (as defined in
Section 7(f)(iii)), multiplied in either case by the number of shares so
acquired, and (B) the amount of the documented out-of-pocket expenses (to
the extent not previously reimbursed or compensated for pursuant hereto or
pursuant to the Merger Agreement) incurred by USR in connection with the
Merger Agreement and this Agreement and the transactions contemplated
thereby and hereby, including reasonable accounting, investment banking and
legal fees (the "Section 7(f) Repurchase Consideration"); provided, that
3Com's rights under this Section 7(f) shall be suspended (with any such
rights being extended accordingly) during any period when the exercise of
such rights would subject USR to liability or disgorgement of profits
pursuant to Section 16(b) of the Exchange Act.
(ii) If 3Com exercises its rights under this Section 7(f), 3Com shall,
within ten (10) business days pay the Section 7(f) Repurchase Consideration
in immediately available funds and USR shall surrender to 3Com certificates
evidencing the shares of 3Com Common Stock purchased hereunder with
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respect to which USR then has beneficial ownership, and USR shall warrant
that it has sole beneficial ownership of such shares and that all such
shares are then free and clear of all claims, liens, charges, encumbrances
and security interests of any nature whatsoever.
(iii) As used in Section 7(f)(i), (A) "Current Market Price" shall
mean the average of the last sale prices per share of 3Com Common Stock on
The Nasdaq National Market for the ten (10) trading days immediately
preceding the date of 3Com's request for repurchase pursuant to this
Section 7(f), and (B) "Pre-Tax Carrying Cost" shall mean an amount equal to
the interest on the aggregate purchase price paid by USR for the shares of
3Com Common Stock purchased pursuant to the 3Com Option from the date of
purchase to the date of repurchase at the rate of interest announced by
Citibank, N.A. as its prime or base lending or reference rate during such
period, less any dividends received on the shares so purchased, divided by
the number of shares so purchased.
8. VOTING OF SHARES. Following the date hereof and prior to the fifth
anniversary of the date hereof (the "Expiration Date"), (a) each party shall
vote any shares of capital stock of the other party acquired by such party
pursuant to this Agreement ("Restricted Shares"), including any shares of USR
Common Stock issued pursuant to a Stock Exercise, or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) by
such party, on each matter submitted to a vote of the stockholders of such other
party for and against such matter in the same proportion as all other shares of
the same class of capital stock of such other party are voted (whether by proxy
or otherwise) for and against such matter, and (b) each party shall execute
written consents with respect to the Restricted Shares in the same proportion as
written consents are executed by other holders of such class of capital stock.
Before acquiring any Restricted Shares hereunder, USR shall execute and deliver
a proxy to 3Com authorizing 3Com to vote and execute written consents with
respect to all Restricted Shares acquired by USR hereunder, and before acquiring
any Restricted Shares in payment therefor, 3Com shall execute and deliver a
proxy to USR authorizing USR to vote and execute written consents with respect
to all Restricted Shares acquired by 3Com hereunder, in each case in accordance
with the provisions of this Section 8.
9. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON TRANSFER. Prior to the Expiration Date, neither
party shall, directly or indirectly, by operation of law or otherwise, sell,
assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7, or (ii)
in accordance with Sections 9(b), 9(c) or 10.
(b) PERMITTED SALES. Following the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares beneficially
owned by it if such sale is made pursuant to a tender or exchange offer that has
been
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approved or recommended, or otherwise determined to be fair to and in the best
interests of the holders of common stock of the other party, by a majority of
the members of the Board of Directors of such other party.
(c) 3COM'S RIGHT OF FIRST REFUSAL. At any time after the first
occurrence of a Trigger Event and prior to the expiration of twenty-four (24)
months immediately following the first purchase of shares of 3Com Common Stock
pursuant to the 3Com Option, if USR shall desire to sell, assign, transfer or
otherwise dispose of all or any of the shares of 3Com Common Stock or other
securities acquired by it pursuant to the 3Com Option, it shall give 3Com
written notice of the proposed transaction (a "USR Offer Notice"), identifying
the proposed transferee, accompanied by a copy of a binding offer to purchase
such shares or other securities signed by such transferee and setting forth the
terms of the proposed transaction. A USR Offer Notice shall be deemed an offer
by USR to 3Com, which may be accepted within five (5) business days of the
receipt of such USR Offer Notice, on the same terms and conditions and at the
same price at which USR is proposing to transfer such shares or other securities
to such transferee. The purchase of any such shares or other securities by 3Com
shall be settled within five (5) business days of the date of the acceptance of
the offer and the purchase price shall be paid to USR in immediately available
funds. In the event of the failure or refusal of 3Com to purchase all the
shares or other securities covered by a USR Offer Notice, USR may sell all, but
not less than all, of such shares or other securities to the proposed transferee
at no less than the price specified and on terms no more favorable to the
transferee than those set forth in the USR Offer Notice; provided that the
provisions of this sentence shall not limit the rights USR may otherwise have in
the event 3Com has accepted the offer contained in the USR Offer Notice and
wrongfully refuses to purchase the shares or other securities subject thereto.
The requirements of this Section 9(c) shall not apply to (i) any disposition as
a result of which the proposed transferee would own beneficially not more than
three percent (3%) of the outstanding voting power of 3Com, (ii) any disposition
of 3Com Common Stock or other securities by a person to whom USR has assigned
its rights under the 3Com Option with the consent of 3Com, (iii) any sale by
means of a public offering registered under the Securities Act, or (iv) any
transfer to a wholly-owned subsidiary of USR which agrees in writing to be bound
by the terms hereof.
(d) USR'S RIGHT OF FIRST REFUSAL. At any time after the first
occurrence of a Trigger Event and prior to the expiration of twenty-four (24)
months immediately following the first transfer of shares of USR Common Stock
from USR to 3Com in connection with a Stock Exercise of the 3Com Option, if 3Com
shall desire to sell, assign, transfer or otherwise dispose of all or any of the
shares of USR Common Stock or other securities acquired by it pursuant to a
Stock Exercise of the 3Com Option by USR, it shall give USR written notice of
the proposed transaction (a "3Com Offer Notice"), identifying the proposed
transferee, accompanied by a copy of a binding offer to purchase such shares or
other securities signed by such transferee and setting forth the terms of the
proposed transaction. A 3Com Offer Notice shall be deemed an offer by 3Com to
USR, which may be accepted within five (5) business days of the receipt of such
3Com Offer Notice, on the same terms and conditions and
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at the same price at which 3Com is proposing to transfer such shares or other
securities to such transferee. The purchase of any such shares or other
securities by USR shall be settled within five (5) business days of the date of
the acceptance of the offer and the purchase price shall be paid to 3Com in
immediately available funds. In the event of the failure or refusal of USR to
purchase all the shares or other securities covered by a 3Com Offer Notice, 3Com
may sell all, but not less than all, of such shares or other securities to the
proposed transferee at no less than the price specified and on terms no more
favorable to the transferee than those set forth in the 3Com Offer Notice;
provided that the provisions of this sentence shall not limit the rights 3Com
may otherwise have in the event USR has accepted the offer contained in the 3Com
Offer Notice and wrongfully refuses to purchase the shares or other securities
subject thereto. The requirements of this Section 9(d) shall not apply to (i)
any disposition as a result of which the proposed transferee would own
beneficially not more than three percent (3%) of the outstanding voting power of
USR, (ii) any sale by means of a public offering registered under the Securities
Act, or (iii) any transfer to a wholly-owned subsidiary of 3Com which agrees in
writing to be bound by the terms hereof.
10. REGISTRATION RIGHTS.
(a) Following the termination of the Merger Agreement, either party
hereto that owns Restricted Shares (a "Holder") may by written notice (the
"Registration Notice") to the other party (the "Registrant") request the
Registrant to register under the Securities Act all or any part of the
Restricted Shares beneficially owned by such Holder (the "Registrable
Securities") pursuant to a bona fide firm commitment underwritten public
offering, in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any person (including any "group" as
used in Rule 13d-5 under the Exchange Act)) and its affiliates from purchasing
through such offering Restricted Shares representing more than three percent
(3%) of the outstanding shares of common stock of the Registrant on a fully
diluted basis (a "Permitted Offering").
(b) The Registration Notice shall include a certificate executed by
the Holder and its proposed managing underwriter, which underwriter shall be an
investment banking firm of nationally recognized standing (the "Manager"),
stating that (i) they have a good faith intention to commence promptly a
Permitted Offering, and (ii) the manager in good faith believes that, based on
the then-prevailing market conditions, it will be able to sell the Registrable
Securities to the public in a Permitted Offering within one hundred twenty (120)
days at a per share price equal to at least eighty percent (80%) of the then
Fair Market Value of such shares.
(c) The Registrant (and/or any person designated by the Registrant)
shall thereupon have the option exercisable by written notice delivered to the
Holder within five (5) business days after the receipt of the Registration
Notice, irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price equal to the product of
(i) the number of Registrable
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Securities to be so purchased by the Registrant and (ii) the then Fair Market
Value of such shares.
(d) Any purchase of Registrable Securities by the Registrant (or its
designee) under Section 10(c) shall take place at a closing to be held at the
principal executive offices of the Registrant or at the offices of its counsel
at any reasonable date and time designated by the Registrant and/or such
designee in such notice within twenty (20) business days after delivery of such
notice, and any payment for the shares to be so purchased shall be made by
delivery at the time of such closing in immediately available funds.
(e) If the Registrant does not elect to exercise its option pursuant
to Section 10(c) with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so sold;
provided, however, that (i) neither party shall be entitled to demand more than
an aggregate of two (2) effective registration statements hereunder, and (ii)
the Registrant will not be required to file any such registration statement
during any period of time (not to exceed forty (40) days after such request in
the case of clause (A) below or ninety (90) days after such request in the case
of clauses (B) and (C) below) when (A) the Registrant is in possession of
material non-public information which it reasonably believes would be
detrimental to be disclosed at such time and, in the opinion of counsel to the
Registrant, such information would be required to be disclosed if a registration
statement were filed at that time; (B) the Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) the Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other transaction involving the Registrant or any of
its material subsidiaries and that such transaction is material to the
Registrant and its subsidiaries taken as a whole. If consummation of the sale
of any Registrable Securities pursuant to a registration hereunder does not
occur within one hundred twenty (120) days after the effectiveness of the
initial registration statement, the provisions of this Section 10 shall again be
applicable to any proposed registration.
(f) The Registrant shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be qualified
for sale under the securities or Blue Sky laws of such jurisdictions as the
Holder may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 10 are subject
to the condition that the Holder shall provide the Registrant with such
information with respect to its Registrable Securities, the plans for the
distribution thereof, and such other information with respect to the Holder as,
in the reasonable judgment of
- 13 -
counsel for the Registrant, is necessary to enable the Registrant to include in
such registration statement all material facts required to be disclosed with
respect to a registration thereunder.
(h) A registration effected under this Section 10 shall be effected
at the Registrant's expense, except for underwriting discounts and commissions
and the fees and the expenses of counsel to the Holder, and the Registrant shall
provide to the underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from auditors) as is customary in connection
with underwritten public offerings as such underwriters may reasonably require.
(i) In connection with any registration effected under this Section
10, the parties agree (i) to indemnify each other and the underwriters in the
customary manner, (ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the Manager and the other
underwriters participating in such offering, and (iii) to take all further
actions which shall be reasonably necessary to effect such registration and sale
(including if the Manager deems it necessary, participating in road-show
presentations).
(j) The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Without limiting any restriction on 3Com contained in this
Agreement or in the Merger Agreement, in the event of any change in 3Com Common
Stock by reason of any stock dividend, stock split, merger (other than the
Merger), recapitalization, combination, exchange of shares or any similar
transaction, the type and number of shares or securities subject to the 3Com
Option, and the Exercise Price per share provided herein, shall be adjusted
appropriately and proper provision shall be made in the agreements governing
such transaction so that USR shall receive, upon exercise of the 3Com Option,
the number and class of securities or property that USR would have received in
respect of the shares of 3Com Common Stock issuable to USR if the 3Com Option
had been exercised immediately prior to such event or the record date therefor,
as applicable.
(b) In the event that 3Com shall enter into an agreement: (i) to
consolidate with or merge into any person, other than USR or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than USR or one of its
subsidiaries, to merge into 3Com and 3Com shall be the continuing or surviving
corporation, but, in connection with such merger, the then-outstanding shares of
3Com Common Stock shall be changed into or exchanged for stock or other
securities of 3Com or any other person or cash or any other property; or (iii)
to sell or otherwise transfer all or substantially all of its assets to any
person, other than USR or one of its subsidiaries,
- 14 -
then, and in each such case, the agreement governing such transaction shall make
proper provision so that upon the consummation of such transaction and upon the
subsequent exercise of the 3Com Option, USR shall be entitled to receive, for
each share of 3Com Common Stock with respect to which the 3Com Option has not
theretofore been exercised, an amount of consideration in the form of and equal
to the per share amount of consideration that would be received by the holder of
one share of 3Com Common Stock (and, in the event of an election or similar
arrangement with respect to the type of consideration to be received by the
holders of 3Com Common Stock, subject to the foregoing, proper provision shall
be made so that the holder of the 3Com Option would have the same election or
similar rights as would the holder of the number of shares of 3Com Common Stock
for which the 3Com Option is then exercisable).
12. RESTRICTIVE LEGENDS. Each certificate representing shares of 3Com
Common Stock issued to USR hereunder, and shares of USR Common Stock, if any,
delivered to 3Com pursuant to a Stock Exercise, shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR
BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE USR
STOCK OPTION AGREEMENT DATED AS OF FEBRUARY 26, 1997, A COPY OF WHICH MAY
BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act and state securities or Blue Sky laws in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if USR or 3Com, as the case may be, shall have delivered to the other party a
copy of a letter from the staff of the Securities and Exchange Commission, or an
opinion of counsel, in form and substance reasonably satisfactory to the other
party, to the effect that such legend is not required for purposes of the
Securities Act or such laws; (ii) the reference to the provisions of this
Agreement in the foregoing legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law. Certificates representing
shares sold in a registered public offering pursuant to Section 10 shall not be
required to bear the legend set forth in this Section 12.
13. BINDING EFFECT; NO ASSIGNMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and
- 15 -
their respective successors and permitted assigns. Except as expressly provided
for in this Agreement, neither this Agreement nor the rights or obligations of
either party hereto are assignable, except by operation of law, or with the
written consent of the other party, and any such attempted assignment in
violation of this Agreement shall be void and of no force or effect. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever. Any Restricted Shares sold by a
party in compliance with the provisions of Section 10 shall, upon consummation
of such sale, be free of the restrictions imposed with respect to such shares by
this Agreement, unless and until such party shall repurchase or otherwise become
the beneficial owner of such shares, and any transferee of such shares shall not
be entitled to the registration rights of such party.
14. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, whether at law or in equity, the other party shall be entitled to an
injunction to prevent or restrain any violation or threatened violation of the
provisions of this Agreement, and to enforce specifically the terms and
provisions hereof, in any court of the State of Delaware or of the United States
of America located in the State of Delaware. In the event that any action
should be brought in equity to enforce the provisions of this Agreement, neither
party will allege, and each party hereby waives the defense, that there is an
adequate remedy at law. Each party hereto irrevocably and unconditionally
consents and submits to the jurisdiction of the courts of the State of Delaware
and of the United States of America located in the State of Delaware for any
actions, suits or proceedings arising out of or relating to this Agreement and
the transactions contemplated hereby, and further agrees that service of any
process, summons, notice or document by U.S. registered or certified mail to
U.S. Robotics Corporation at 0000 Xxxxx XxXxxxxxx Xxxx., Xxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx Xxxxxxx, General Counsel, or to 3Com Corporation at 0000
Xxxxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxx Xxxxxxx,
General Counsel, shall be effective service of process for any action, suit or
proceeding brought against such party in any such court. Each party hereto
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit, or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the courts of the State of Delaware or of
the United States of America located in Wilmington, Delaware, and hereby further
irrevocable and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
15. VALIDITY.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
- 16 -
(b) In the event any court or other governmental or regulatory
authority holds any provisions of this Agreement to be null, void or
unenforceable, the parties hereto shall negotiate in good faith the execution
and delivery of an amendment to this Agreement in order, as nearly as possible,
to effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof.
(c) If for any reason any such court or other governmental or
regulatory authority determines that USR is not permitted to acquire, or 3Com is
not permitted to repurchase pursuant to Section 7, the full number of shares of
3Com Common Stock provided in this Agreement (as the same may be adjusted), it
is the express intention of 3Com to allow USR to acquire or to require 3Com to
repurchase such lesser number of shares as may be permissible without any other
amendment or modification hereof.
(d) Each party agrees that, should any court or other governmental or
regulatory authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action inconsistent
herewith, or not take any action required herein, the other party shall not be
entitled to specific performance of such provision or part hereof or to any
other remedy, including but not limited to money damages, for breach hereof or
of any other provision of this Agreement or part hereof as the result of such
holding or order.
16. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered personally, or (b) if sent by
overnight courier service (receipt confirmed in writing), or (c) if delivered by
facsimile transmission (with receipt confirmed), or (d) five days after being
mailed by registered or certified mail (return receipt requested) to the parties
in each case to the following addresses (or at such other address for a party as
shall be specified by like notice):
If to 3Com, to:
By Mail, Overnight Courier or Hand:
3Com Corporation
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxx, General Counsel
By Fax:
3Com Corporation
000-000-0000
Attention: Xxxx Xxxxxxx, General Counsel
with a copy to:
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Xxxx Xxxx Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Fax: 000-000-0000
Attention: J. Xxxxxx Xxxxxx & Xxx X. Xxxxxx
If to USR, to:
By Mail, Overnight Courier or Hand:
U.S. Robotics Corporation
0000 Xxxxx XxXxxxxxx Xxxx.
Xxxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxx, General Counsel
By Fax:
U.S. Robotics Corporation
000-000-0000
Attention: Xxxxxx Xxxxxxx, General Counsel
with a copy to:
Xxxxx Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Fax: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxx
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State and without regard to its choice
of law principles.
18. INTERPRETATION. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or interpretation
of the Agreement. When reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement, unless otherwise indicated.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense. The words "herein," "hereby," "hereof," "hereto,"
"hereunder" and words of similar import refer to this Agreement.
19. COUNTERPARTS; EFFECT. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
- 18 -
20. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. EXTENSION OF TIME PERIODS. The time periods for exercises of certain
rights hereunder shall be extended (but in no event by more than six (6)
months): (a) to the extent necessary to obtain all governmental approvals for
the exercise of such rights, and for the expiration of all statutory waiting
periods; and (b) to the extent necessary to avoid any liability or disgorgement
of profits under Section 16(b) of the Exchange Act by reason of such exercise.
23. FURTHER ASSURANCE. Each party agrees to execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
- 19 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
3COM CORPORATION
By:
--------------------------------
Name:
Title:
U.S. ROBOTICS CORPORATION
By:
--------------------------------
Name:
Title:
