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 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, 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 canceled 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 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
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.
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).
(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.
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 canceled 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
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 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.
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 Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "Hart-Scott-Rodino
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 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,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 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,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
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.
(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:
(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. 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
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(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
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.
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
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
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.
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 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 Hart-Scott-Rodino
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 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. Brown & 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 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 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 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 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 Hart-Scott-Rodino 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 Hart-Scott-Rodino 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,(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 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 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
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.
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 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
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
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 Hart-Scott-Rodino 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
(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 &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.
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
(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 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
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, Coplan &
1300 Quince Orchard Boulevard Aronoff,P.L.L.
Gaithersburg, Maryland 20878 2300 BP America Building
Attn.: Chairman 200 Public Square
Telecopier: (301) 921-9149 Cleveland, Ohio 44114-2378
Attn.: Irv Berliner, Esq.
Telecopier: (216) 363-4588
If to the Buyer:
Copy to: Bay Networks, Inc. Bay Networks, Inc.
4401 Great America Parkway 4401 Great America Parkway
Santa Clara, California 95052 Santa Clara, California 95052
Attn.: President Attn.: Montgomery Kersten, Esq.
Telecopier: (408) 764-1799 Telecopier: (408) 764-1991
If to the Transitory:
Copy to: Beta Acquisition Corporation Bay Networks, Inc.
c/o Bay Networks, Inc. 4401 Great America Parkway
4401 Great America Parkway Santa Clara, California 95052
Santa Clara, California 95052 Attn.: Montgomery Kersten
Attn.: President Telecopier: (408)764-1991
Telecopier: (408) 764-1799
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.
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
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.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
THE BUYER: BAY NETWORKS,INC.
By:\s\Bruce I. Sachs
-----------------------------------------------------
Bruce I. Sachs
Executive Vice President
THE TRANSITORY SUBSIDIARY: BETA ACQUISITION CORP.
By :\s\Bruce I. Sachs
-----------------------------------------------------
Bruce I. Sachs
Executive Vice President
THE COMPANY: PENRIL DATACOMM
NETWORKS,INC.
By:\s\ Henry D. Epstein
-----------------------------------------------------
Chief Executive Officer and
Chairman of the Board of Directors