<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ACCESS BEYOND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3661 52-1987873
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
MARK FIELDS
ACTING CHIEF FINANCIAL OFFICER
1300 QUINCE ORCHARD BLVD. 1300 QUINCE ORCHARD BLVD.
GAITHERSBURG, MD 20878 GAITHERSBURG, MD 20878
(301) 921-8600 (301) 921-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL INCLUDING AREA CODE, OF AGENT FOR SERVICE)
EXECUTIVE OFFICES)
</TABLE>
------------------------
Copy to:
STEPHEN I. BUDOW, ESQ.
MORRISON COHEN SINGER & WEINSTEIN, LLP
750 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 735-8600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
PROPOSED MAXIMUM
AGGREGATE AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value................... 23,106,433 $.01(3) $16,639 $5.04
Common Stock, $.01 par value................... 22,681,729 $7.14(4) $11,683,305 $3,535.35
Series A Preferred Stock, no par value......... 1,217,930 $20.73(5) $1,818,111 $551.01
Total................................ 47,006,092 -- $13,518,055 $4,091.40
===============================================================================================================
</TABLE>
(1) Represents the maximum number of shares of the Registrant's common stock and
Series A Preferred Stock issuable in the merger described herein.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended,
and based on one-third of the par value or stated value of the securities to
be canceled in the transaction.
(3) Represents the par value per share of common stock of Hayes Microcomputer
Products, Inc. to be canceled in the transaction.
(4) Represents the stated value per share of Series A Preferred Stock of Hayes
Microcomputer Products, Inc. to be canceled in the transaction.
(5) Represents the stated value per share of Series B Preferred Stock of Hayes
Microcomputer Products, Inc. to be canceled in the transaction.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
================================================================================
<PAGE> 2
ACCESS BEYOND, INC.
LETTERHEAD
November , 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Access Beyond, Inc. (the "Company" or "Access Beyond") on December , 1997, at
a.m./p.m., local time, at the offices of Access Beyond, 1300 Quince
Orchard Boulevard, Gaithersburg, Maryland.
At the Annual Meeting, you will be asked to consider and vote upon, among
other things, a proposal (the "Proposal") to approve and adopt the Agreement and
Plan of Reorganization dated as of July 29, 1997 (the "Merger Agreement"), among
Access Beyond, Hayes Microcomputer Products, Inc., a Georgia corporation
("Hayes"), and H & A Merger Sub, Inc., a wholly-owned subsidiary of Access
Beyond (the "Subsidiary").
Pursuant to the Merger Agreement, the Subsidiary will be merged (the
"Merger") with and into Hayes, and Hayes will become a wholly-owned subsidiary
of Access Beyond. As a result of the Merger and the transactions contemplated
thereby, (a) all holders of Hayes (i) common stock will have the right to
receive shares of Access Beyond common stock, (ii) Series A Preferred Stock will
have the right to receive shares of Access Beyond common stock and (iii) Series
B Preferred Stock will have the right to receive shares of Access Beyond Series
A Preferred Stock; (b) Access Beyond will amend its certificate of incorporation
to (i) change its name to Hayes Communications Inc., (ii) increase the number of
authorized shares of common stock and (iii) create the Series A Preferred Stock;
(c) the Board of Directors of Access Beyond will be increased to seven members,
five of whom will be designated by the Hayes shareholders; and (d) the
obligations of Hayes under the Hayes Option Plan will be assumed by the Company.
After giving effect to the Merger, the Hayes shareholders will own approximately
79% of the issued and outstanding securities of the Company. After giving effect
to the Merger and assuming that (x) all then vested and exercisable options and
warrants to purchase Hayes common stock are exercised and (y) none of the then
vested and exercisable options to purchase Access Beyond's common stock are
exercised, the Hayes shareholders will own approximately 80.15% of the issued
and outstanding securities of the Company.
You should read carefully the accompanying Notice of Annual Meeting of
Stockholders and the Proxy Statement/Prospectus for details of the merger and
additional related information.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER WILL PROVIDE SIGNIFICANT
VALUE TO ACCESS BEYOND AND ITS STOCKHOLDERS BY OFFERING OPPORTUNITIES FOR GROWTH
USING THE MANUFACTURING EXPERTISE, DISTRIBUTION CHANNELS AND TECHNOLOGY
AVAILABLE FROM HAYES AND HAS DETERMINED THAT THE MERGER IS, THEREFORE, IN THE
BEST INTERESTS OF ACCESS BEYOND AND ITS STOCKHOLDERS. YOUR BOARD OF DIRECTORS
HAS UNANIMOUSLY APPROVED THE PROPOSAL AND RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE PROPOSAL.
It is important that your shares be represented at the Annual Meeting
whether or not you attend. I urge you to sign, date and return the enclosed
proxy at your earliest convenience.
Sincerely,
RONALD HOWARD
President and Chairman of the Board
<PAGE> 3
ACCESS BEYOND, INC.
1300 QUINCE ORCHARD BOULEVARD
GAITHERSBURG, MARYLAND 20878
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER , 1997
------------------------
To the Stockholders of ACCESS BEYOND, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Access Beyond, Inc. (the "Company" or "Access Beyond") will be held
on December , 1997, at a.m./p.m., at the offices of Access Beyond at 1300
Quince Orchard Boulevard, Gaithersburg, Maryland.
The Annual Meeting will be held for the following purposes:
1. To consider and vote upon a proposal (the "Proposal") to (x)
approve and adopt the Agreement and Plan of Reorganization, dated July 29,
1997 (the "Merger Agreement"), among Access Beyond, Hayes Microcomputer
Products, Inc., a Georgia corporation ("Hayes"), and H & A Merger Sub,
Inc., a wholly-owned Georgia subsidiary of Access Beyond (the
"Subsidiary"), and the transactions contemplated thereby, (y) amend the
Company's Certificate of Incorporation as described below and (z) elect two
members of the Board of Directors of the Company. Pursuant to the Merger
Agreement, the Subsidiary will be merged with and into Hayes (the
"Merger"), and Hayes will become a wholly-owned subsidiary of Access
Beyond. In the Merger, (a) all holders of Hayes (i) common stock will have
the right to receive for each such share such number of shares of Access
Beyond common stock as is equal to the Conversion Ratio (as defined in the
Proxy Statement/Prospectus), (ii) Series A Preferred Stock will have the
right to receive for each such share such number of shares of Access Beyond
common stock as is equal to the Conversion Ratio multiplied by the number
of shares of Hayes common stock into which such shares of Hayes Series A
Preferred Stock is then convertible, and (iii) Series B Preferred Stock
will have the right to receive for each such share such number of shares of
Access Beyond Series A Preferred Stock as is equal to the Conversion Ratio
multiplied by the number of shares of Hayes common stock into which such
shares of Hayes Series B Preferred Stock is then convertible; (b) Access
Beyond will amend its certificate of incorporation to (i) change its name
to Hayes Communications Inc., (ii) increase the number of authorized shares
of common stock and (iii) create the Series A Preferred Stock; (c) the
Board of Directors of Access Beyond will be increased to seven members,
five of whom will be designated by the Hayes shareholders, and (d) the
obligations of Hayes under the Hayes Option Plan will be assumed by the
Company. After giving effect to the Merger, the Hayes shareholders will own
approximately 79% of the issued and outstanding equity securities of the
Company. After giving effect to the Merger and assuming that (x) all then
vested and exercisable options and warrants to purchase Hayes common stock
are exercised and (y) none of the then vested and exercisable options to
purchase Access Beyond's common stock are exercised, the Hayes shareholders
will own approximately 80.15% of the issued and outstanding securities of
the Company;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending July 31, 1998; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is attached to the Proxy
Statement/Prospectus as Exhibit A and is incorporated herein by reference.
The Proposal to approve the Merger and the transactions contemplated
thereby will be voted upon as a single proposal. Failure of the Proposal to be
approved by the stockholders will result in the termination of the Merger
Agreement, no right of the Hayes shareholders to receive Access Beyond
securities, no amendment of
<PAGE> 4
the Access Beyond certificate of incorporation, no change in the Access Beyond
Board of Directors and no assumption of the Hayes Option Plan.
The Board of Directors of Access Beyond has fixed , 1997 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting. The affirmative vote of the holders of a majority of
the outstanding shares of Access Beyond's common stock entitled to vote at the
Annual Meeting is necessary to approve and adopt the Proposal. Holders of Access
Beyond's common stock are not entitled to appraisal rights under Delaware law in
connection with the Merger.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF THE
PROXY IS MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
RONALD HOWARD,
President and Chairman of the Board
Dated: November , 1997
<PAGE> 5
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER , 1997
PRELIMINARY PROXY STATEMENT AND PROSPECTUS
ACCESS BEYOND, INC.
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of H & A Merger Sub, Inc., a Georgia corporation ("Subsidiary") and a
wholly-owned subsidiary of Access Beyond, Inc., a Delaware corporation (the
"Company" or "Access Beyond"), with Hayes Microcomputer Products, Inc., a
Georgia corporation (with its subsidiaries, "Hayes"), pursuant to an Agreement
and Plan of Reorganization (the "Merger Agreement") dated July 29, 1997 between
the Company, Hayes and the Subsidiary. As a result of the Merger, Hayes will
become a wholly-owned subsidiary of the Company, and the shareholders of Hayes
at the time the Merger becomes effective (the "Effective Time") will own
approximately 79% of the outstanding equity securities of the Company. After
giving effect to the Merger and assuming that (x) all then vested and
exercisable options and warrants to purchase Hayes common stock are exercised
and (y) none of the then vested and exercisable options to purchase Access
Beyond's common stock are exercised, the Hayes shareholders will own
approximately 80.15% of the issued and outstanding securities of the Company. At
the Effective Time, (a) each outstanding share of Hayes (i) common stock, $.01
par value per share ("Hayes Common Stock"), will be converted into a right to
receive such number of shares of the Company's common stock, $.01 par value per
share ("Common Stock") as is equal to the Conversion Ratio (as defined below),
(ii) Series A Preferred Stock, no par value ("Hayes Series A Preferred Stock"),
will be converted into the right to receive such number of shares of Common
Stock as is equal to the Conversion Ratio multiplied by the number of shares of
Hayes Common Stock into which such shares of Hayes Series A Preferred Stock is
then convertible, and (iii) Series B Preferred Stock, no par value ("Hayes
Series B Preferred Stock"), will be converted into the right to receive such
number of shares of the Company's Series A Preferred Stock (the "Series A
Preferred Stock") as is equal to the Conversion Ratio multiplied by the number
of shares of Hayes Common Stock into which such shares of Hayes Series B
Preferred Stock is then convertible; (b) the Company will amend its certificate
of incorporation to (i) change its name to Hayes Communications Inc., (ii)
increase the number of authorized shares of capital stock and (iii) create the
Series A Preferred Stock; (c) the Board of Directors of the Company will be
increased to seven members, five of whom will be designated by the Hayes
shareholder; and (d) the obligations of Hayes under the Hayes Option Plan will
be assumed by the Company.
The Conversion Ratio is equal to the percentage ownership immediately
following the closing of the Merger of the issued and outstanding shares of
Common Stock and Series A Preferred Stock (together, the "Securities") that the
holders of all classes of Hayes stock, in the aggregate, are entitled to receive
in the Merger (which the Company and Hayes have agreed is 79%), multiplied by a
ratio, the numerator of which is the number of shares of the Securities issued
and outstanding on a fully diluted basis (excluding stock options) prior to the
Effective Date, and the denominator of which is .21, all divided by the number
of shares of Hayes common and preferred stock issued and outstanding on a fully
diluted basis (excluding all outstanding options and warrants) prior to the
Effective Date. Based on the number of Hayes and Company shares outstanding as
of September 30, 1997, the Conversion Ratio would equal 4.62892 Company shares
for each Hayes share.
This Proxy Statement/Prospectus also relates to the ratification of the
appointment of Deloitte & Touche LLP as independent auditors of the Company for
the fiscal year ending July 31, 1998.
This Proxy Statement/Prospectus is being furnished to the Company's
stockholders in connection with the solicitation of proxies by its Board of
Directors (the "Company Board") for use at the Annual Meeting of Stockholders,
to be held on December , 1997 at local time at 1300 Quince Orchard
Blvd., Gaithersburg, Maryland (the "Annual Meeting"). This Proxy
Statement/Prospectus and the accompanying form of proxy are first being mailed
to stockholders on or about November , 1997. This Proxy Statement/Prospectus
also constitutes the prospectus of the Company with respect to up to (a)
45,788,162 shares of Common Stock to be issued in the Merger in exchange for
outstanding shares of Hayes Common Stock and Hayes Series A Preferred Stock and
(b) 1,217,930 shares of Series A Preferred Stock to be issued in the Merger in
exchange for outstanding shares of Hayes Series B Preferred Stock. The exact
number of shares of Common Stock and Series A Preferred Stock to be issued in
the Merger cannot be determined as of the date hereof due to the fact that any
shares of Hayes capital stock issued and outstanding immediately prior to the
Merger, which are held by Hayes shareholders who comply with all of the relevant
provisions of the Georgia Business Corporation Code (the "GBCC") for perfecting
shareholders' rights of appraisal will not be converted into or be exchangeable
for the right to receive the corresponding Securities, unless and until such
shareholders fail to perfect or effectively withdraw or lose their rights to
appraisal under such statute. See "THE MERGER -- Dissenters' Rights."
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 15 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS OCTOBER , 1997.
<PAGE> 6
No fractional shares of the Securities will be issued in connection with
the Merger. In lieu of any fractional shares, the record holder of any shares of
Hayes stock who would otherwise be entitled to receive a fraction of a share of
the Company, upon aggregation of all shares and fractional shares of the same
class or series owned by such holder, will receive from the Company promptly
after the Merger, cash equal to the per share market value of the Common Stock,
which market value shall be the closing sale price of the Common Stock on the
last trading day prior to the Closing Date (as defined below), as quoted on the
Nasdaq National Market multiplied by such fraction of a share of the Company to
which such holder would otherwise be entitled. The Closing Date means such
mutually agreeable date, no later than the fifth business day after all of the
conditions to the obligations of the parties to consummate the transactions
contemplated by the Merger have been satisfied or waived (where permissible).
The Common Stock is quoted on the National Association of Securities
Dealers Automated Quotations/ National Market System ("NASDAQ/NMS") under the
symbol "ACCB." The closing price per share reported on NASDAQ/NMS on October 3,
1997 was $7.875.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, such information or representations should not be relied upon as having
been authorized. The Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy any, securities, or the solicitation
of a proxy, in any jurisdiction or to any person to whom it would be unlawful to
make such offer or solicitation. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities made hereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of the Company or of Hayes, or in the information set
forth herein since the date of this Prospectus. The information contained herein
with respect to the Company and the Subsidiary has been supplied by the Company,
and the information with respect to Hayes and its subsidiaries has been supplied
by Hayes.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copies may be obtained at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the Regional Offices
of the Commission at Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such information may also be obtained by mail from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Commission's web
site can be accessed at http://www.sec.gov. Any such reports, proxy statements
and other information filed or to be filed by the Company may also be inspected
at the offices of the National Association of Securities Dealers, Inc., Market
Listing Section, 1735 K Street, N.W., Washington, D.C. 20006. The Common Stock
is traded on NASDAQ/NMS, and the Company's reports (and proxy and information
statements when filed) may be inspected at the offices of The Nasdaq Stock
Market, Inc., located at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-4 and amendments thereto (the "Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act"), of which this Proxy
Statement/Prospectus is a part. This Proxy Statement/Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. Statements made in this Proxy Statement/Prospectus as to
the contents of any contract, agreement or other document referred to herein are
not necessarily complete. In each instance, for a more complete description of
the matter involved, reference is made to such contract, agreement or other
document filed as an exhibit to the Registration Statement or annexed to this
Proxy Statement/Prospectus, and the Registration Statement shall be deemed
qualified in its entirety by such reference.
i
<PAGE> 7
TABLE OF CONTENTS
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AVAILABLE INFORMATION.................................................................. i
SUMMARY................................................................................ 1
The Company.......................................................................... 1
Hayes................................................................................ 2
The Annual Meeting................................................................... 3
The Merger and the Merger Agreement.................................................. 4
Interests of Certain Persons in the Merger........................................... 8
Risk Factors......................................................................... 9
Selected Historical Financial Data of the Company.................................... 10
Selected Historical Financial Data of Hayes.......................................... 11
Selected Pro Forma Financial Data.................................................... 12
RISK FACTORS........................................................................... 13
Absence of Profitable Operations; Liquidity.......................................... 13
Limited Trading History of the Common Stock; No Public Market for Series A Preferred
Stock............................................................................. 13
Limited Operating History............................................................ 14
Dependence on Key Management......................................................... 14
Risks Relating to Integration of the Businesses...................................... 14
Technological Changes................................................................ 14
Possible Loss of Technology.......................................................... 14
Competition.......................................................................... 15
Important Considerations Related to Forward-looking Statements....................... 15
Option Plans -- Shares Eligible for Future Sale and Dilution......................... 15
Other Issuances -- Shares Eligible for Future Sale and Dilution...................... 16
Product Protection and Intellectual Property......................................... 16
Certain Antitakeover Effects......................................................... 16
Dividends............................................................................ 17
Relationship with Penril............................................................. 17
Tax Treatment........................................................................ 18
International Sales.................................................................. 18
Product Returns, Price Protection and Warranty Claims................................ 18
Dependence on Suppliers.............................................................. 18
Sales Channel Risks.................................................................. 19
Conditions to the Merger............................................................. 19
Implementation of New Information System............................................. 19
Election of Directors and Other Stockholder Matters.................................. 20
THE ANNUAL MEETING..................................................................... 20
Date and Place; Record Date.......................................................... 20
Purpose of the Annual Meeting........................................................ 20
Stockholders Entitled to Vote; Requisite Approval.................................... 21
Proxies.............................................................................. 22
ITEM 1................................................................................. 22
THE MERGER............................................................................. 22
Background of the Merger............................................................. 22
The Company's Reasons for the Merger................................................. 23
Opinion of DLJ....................................................................... 23
Analysis of Access Beyond............................................................ 24
Analysis of Hayes.................................................................... 26
</TABLE>
ii
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Analysis of Combined Entity.......................................................... 27
Hayes' Reasons for the Merger........................................................ 29
Interests of Certain Persons in the Merger........................................... 29
Management and Operations of the Company............................................. 31
Accounting Treatment................................................................. 31
Regulatory Approvals................................................................. 31
Material Tax Consequences of the Merger.............................................. 31
Resale of Common Stock; Affiliates................................................... 34
NASDAQ/NMS Listing................................................................... 34
Dissenters' Rights................................................................... 34
THE MERGER AGREEMENT................................................................... 36
The Merger........................................................................... 36
Effective Time....................................................................... 36
Terms of the Merger.................................................................. 36
Surrender and Payment................................................................ 37
Representations and Warranties....................................................... 38
Conduct of Business by the Company and Hayes Pending the Merger...................... 38
Certain Covenants.................................................................... 39
Market Standoff Agreements........................................................... 40
Conditions........................................................................... 40
Termination; Effect of Termination................................................... 41
Amendment............................................................................ 43
MARKET PRICE INFORMATION, DIVIDENDS AND RELATED STOCKHOLDER MATTERS.................... 44
The Company.......................................................................... 44
Hayes................................................................................ 44
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............................ 45
Unaudited Pro Forma Condensed Combined Balance Sheet................................. 46
Unaudited Pro Forma Condensed Combined Statement of Operations....................... 47
Unaudited Pro Forma Condensed Combined Statement of Operations....................... 48
BUSINESS OF THE COMPANY................................................................ 49
General Development.................................................................. 49
Principal Products................................................................... 49
Discontinued Operations.............................................................. 50
Suppliers............................................................................ 50
Patents, Copyrights and Licenses..................................................... 51
Backlog.............................................................................. 51
Competition.......................................................................... 51
Research and Development............................................................. 52
Environmental Matters................................................................ 52
Sales and Marketing.................................................................. 52
Customer Support, Service and Warranty............................................... 52
International Operations............................................................. 52
Properties........................................................................... 52
Employees............................................................................ 53
Legal Proceedings.................................................................... 53
MANAGEMENT OF THE COMPANY.............................................................. 54
Executive Officers................................................................... 55
Management Post Merger............................................................... 55
</TABLE>
iii
<PAGE> 9
<TABLE>
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PAGE
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<S> <C>
Committees of the Company's Board.................................................... 58
Compensation of Directors............................................................ 58
Executive Compensation............................................................... 59
Employment and Consulting Agreements................................................. 59
Retirement and Savings Plan.......................................................... 60
Option Grants in Last Fiscal Year.................................................... 60
Option Exercises and Holdings........................................................ 61
The Amended and Restated 1996 Incentive Option Plan.................................. 61
The Amended and Restated 1996 Non-employee Directors' Stock Option Plan.............. 64
Compensation Committee Interlocks and Insider Participation.......................... 65
Compensation Committee Report on Executive Compensation.............................. 66
SECURITY OWNERSHIP OF THE COMPANY...................................................... 67
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................... 69
STOCK PERFORMANCE GRAPH................................................................ 69
ACCESS BEYOND'S
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................... 70
Liquidity and Capital Resources...................................................... 70
Results of Operations................................................................ 71
Fiscal 1997 Compared to Fiscal 1996.................................................. 72
Fiscal 1996 Compared to Fiscal 1995.................................................. 73
BUSINESS OF HAYES...................................................................... 75
General.............................................................................. 75
Principal Products................................................................... 77
Suppliers............................................................................ 78
Patents, Copyrights and Licenses..................................................... 78
Backlog.............................................................................. 78
Competition.......................................................................... 78
Sales................................................................................ 79
Marketing............................................................................ 80
Customer Support, Service and Warranty............................................... 81
Research and Development............................................................. 81
Environmental Matters................................................................ 81
Properties........................................................................... 81
Employees............................................................................ 81
Legal Proceedings.................................................................... 82
MANAGEMENT OF HAYES.................................................................... 83
Directors and Executive Officers..................................................... 83
Executive Compensation............................................................... 83
Option/SAR Grants in Last Fiscal Year................................................ 84
Aggregated Option Exercised in Last Fiscal Year and Fiscal Year End Option Values.... 84
Employment Agreements................................................................ 84
SECURITY OWNERSHIP OF HAYES............................................................ 86
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................... 87
</TABLE>
iv
<PAGE> 10
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<S> <C>
HAYES' MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 88
General Business Developments........................................................ 88
Liquidity and Capital Resources...................................................... 88
Results of Operations................................................................ 89
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY............................................ 92
Authorized Capital Stock............................................................. 92
Common Stock......................................................................... 92
Preferred Stock...................................................................... 92
Series A Preferred Stock............................................................. 93
Antitakeover Provisions.............................................................. 93
DESCRIPTION OF THE CAPITAL STOCK OF HAYES.............................................. 96
Authorized Capital Stock............................................................. 96
Hayes Common Stock................................................................... 96
Preferred Stock...................................................................... 96
Hayes Series A Preferred Stock....................................................... 96
Hayes Series B Preferred Stock....................................................... 97
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE COMPANY AND HAYES.......................... 97
Business Combinations................................................................ 97
Amendments to Charters............................................................... 98
Amendments to By-laws................................................................ 98
Redemption of Capital Stock.......................................................... 99
Stockholder Action................................................................... 99
Special Stockholder Meetings......................................................... 99
Number and Election of Directors..................................................... 99
Antitakeover Provisions.............................................................. 100
Indemnification of Directors and Officers............................................ 101
LEGAL MATTERS.......................................................................... 102
EXPERTS................................................................................ 102
ITEM 2................................................................................. 102
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING JULY 31, 1998................................................... 102
OTHER MATTERS.......................................................................... 102
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................................. F-1
ACCESS BEYOND FINANCIAL STATEMENTS..................................................... F-2
HAYES FINANCIAL STATEMENTS............................................................. F-20
INDEPENDENT AUDITOR'S REPORT ON SCHEDULE............................................... S-1
FINANCIAL STATEMENT SCHEDULE........................................................... S-2
EXHIBITS
A. Agreement and Plan of Reorganization.............................................
B. Opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
the Company's Financial Advisors................................................
C. Amended and Restated Certificate of Incorporation................................
</TABLE>
v
<PAGE> 11
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus and is qualified by the more detailed
information set forth elsewhere in this Proxy Statement/ Prospectus which should
be read in its entirety. Unless otherwise indicated, (i) all references to the
operations of the Company in this Proxy Statement/Prospectus shall include the
operations of the Remote Access Business (as hereinafter defined) of Penril
DataComm Networks, Inc. ("Penril") prior to November 18, 1996; and (ii) all
references to Hayes capital stock, options and warrants assumes the application
of the Conversion Ratio. Capitalized terms used but not defined in this Summary
have the respective meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus. Portions of this Proxy Statement/Prospectus contain
certain "forward looking" statements which involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed in
the forward looking statements. Factors that might cause such a difference
include, but are not limited to, market acceptance of the Company's products and
services, other factors discussed in this Proxy Statement/Prospectus, including
factors discussed in "RISK FACTORS," as well as factors discussed in other
filings made with the Securities and Exchange Commission. Although the Company
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could prove inaccurate,
and therefore, there can be no assurance that the forward looking statements
included herein will prove to be accurate.
THE COMPANY
The Company is in the business of developing and marketing products which
enable local, remote or mobile users to access network resources (the "Remote
Access Business"). The Company was incorporated on July 23, 1996 and was
spun-off from Penril on November 18, 1996 pursuant to the distribution (the
"Distribution") to the Penril stockholders on such date of shares of Common
Stock in connection with the merger of Penril with a wholly-owned subsidiary of
Bay Networks, Inc. (the "Penril/Bay Merger"). The Company retains the historical
financial information of Penril through November 18, 1996.
The Company's product line consists of the product family called Access
Beyond, serving the remote access market and products which serve the LAN and
Host Access product markets.
The Company's Access Beyond product family is targeted at the remote access
market, providing a scalable modular platform combining advanced modem, ISDN
BRI/PRI, remote access, internet working and terminal connectivity capabilities
within a single family of products. The Access Beyond products currently use
three chassis configurations supporting from one to eight interface modules for
end users to choose from, based on current needs and anticipated future growth.
Interface modules are then selected based upon WAN and LAN technology and port
density requirements. The result is a fully integrated solution that effectively
solves the end user's specific remote access needs.
The Access Beyond advanced remote access software delivers complete IP, IPX
and Appletalk routing, remote node and remote control capabilities including
NACS/NASI, all combined with full support for PPP, SLIP, CSLIP, LAT, Telnet, and
a wealth of security and management capabilities. In addition to full support
for SNMP, it provides an advanced, easy to use Windows based management and
configuration utility.
The Company recently introduced a new class of remote access solutions that
integrates both T1 and PRI-ISDN directly within Microsoft Windows NT servers.
This new technology, dubbed "Hawk", supports either digital or analog (modem or
ISDN) remote access transmission and can be easily plugged into any Microsoft
Windows NT or Novell Netware Connect and Border Manager configured server.
Servers can be configured to simultaneously support existing network
applications as well as remote access, with the Dynamic Access Switching
available in the Hawk solution. This substantially reduces network traffic by
connecting users directly into the server hosting the network applications.
The LAN and Host Access Products currently sold by the Company include
statistical multiplexers and host access servers (VCX) and Ethernet terminal
servers (CSX), Ethernet local and remote bridge routers (BRX), and a line of
CSU/DSU wide area products. Each of the LAN and Host Access Products provides
the Company with an existing revenue stream as well as an installed base.
<PAGE> 12
The VCX product line of multiplexers ranges from 4-port remote site
multiplexers to enterprise solutions providing up to 304 ports or 36 trunk lines
and multipurpose communication servers that combine both WAN and LAN
capabilities. These products can function as a data PBX, X.25 PAD, statistical
multiplexer, terminal server or any combination of these. Although the market
for these products is in decline, the Company continues to serve the installed
base and fulfill customer applications.
The CSX Ethernet communications server family provides local and dialup
access to Ethernet LANs. Available as either 8-port or 16-port stand alone units
or as a modular chassis based solution, the CSX server provides terminal and
dialup access for TCP/IP networks.
The mailing address of the Company's principal executive offices is
currently 1300 Quince Orchard Boulevard, Gaithersburg, Maryland 20878, and the
phone number is (301) 921-8600
HAYES
Hayes is in the business of designing, manufacturing, marketing and
supporting computer communications products for business, government, small
office, professional, and individual consumers worldwide through the sales of
modem, network and broadband products. Hayes was incorporated on January 3, 1978
to develop and market modems designed for the microcomputer marketplace.
While a substantial portion of the Hayes business is focused on its core
modem business, Hayes has broadened its products to include integrated network
communication products. In addition, Hayes has launched a substantial effort in
the broadband market offering products for the asymmetric digital subscriber
line ("ADSL") and the cable market.
For nearly two decades, Hayes has been a leader in providing value-based
modems. The Hayes standard AT command set has become the de facto industry
standard for personal computer modems and, along with the patented escape
sequence, created the market requirement for "Hayes compatibility."
Hayes' first product was released in April 1977 which was a modem for the
early S-100 type computers. Hayes developed the Micromodem II for the Apple II
before Apple had a disk drive. Hayes introduced the Smartmodem in June 1981. In
August 1981, IBM introduced the first IBM PC that legitimized the personal
computer industry. Personal computer ("PC") sales began to skyrocket and Hayes
was the leading manufacturer of modems to serve this market.
In the 1987 to 1988 time period, the "low price" modem competition began to
consolidate into recognizable brands from the multitude of market players. By
1989, Hayes realized the significance of the emergence of what was internally
referred to as clone modems (claiming Hayes compatibility) as had been observed
with clone PCs (IBM compatible) slightly earlier. In August 1989, Hayes
purchased Practical Peripherals, Inc. to establish a presence in the clone modem
market.
In the early 1990s, the consumer, small office/home office ("SOHO") market
experienced rapid expansion. In response, Hayes introduced the ACCURA product
line in 1993. This product line provided a different feature set and lower price
point than Hayes Ultra and Optima product lines. Competitors in this market
segment pursued an extremely aggressive price strategy to gain market share by
initiating rapid price erosion for this market.
Due to market price pressures Hayes reduced its ACCURA pricing in March
1994 to competitive levels. As a result, the ACCURA volumes increased
dramatically. In responding to the ACCURA volume increase, Hayes experienced a
number of operational and manufacturing problems. Due to excess inventory of old
designs, Hayes could not benefit from new lower cost product designs.
Additionally, there was an inadequate internal infrastructure and process in
place to support subcontractor start-up necessary to support increased demand
and significant air freight expense was required due to resultant delays in
subcontractor production. Inventory increased and severe margin compression
occurred.
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<PAGE> 13
The resulting strain on Hayes' cash position and operating losses combined
with insufficient capitalization precipitated Hayes' filing a petition for
relief under Chapter 11 of the United States Bankruptcy Code on November 15,
1994.
On April 16, 1996, Hayes consummated a court approved reorganization plan
(the "Plan"), under which all prepetition creditors were paid in full plus
interest, except where other agreements were made. Funding of the Plan was
provided through three major sources. First, pursuant to the Agreement and Plan
of Merger dated April 12, 1996 (the "Agreement") entered into by and between
Rinzai Limited ("ACMA"), Kaifa Technology (H.K.) Limited, Rolling Profit
Holdings, Ltd., Lao Hotel (H.K.), Limited, Saliendra Pte. Ltd., and S.P. Quek
Investments Pte. Ltd. (the "Investors"), certain subsidiaries were created by
the Investors which collectively contributed $35.0 million to fund the Plan and
merge with Hayes. The Investors received Hayes Series A Preferred Stock
representing a 49% voting interest in Hayes. Second, Hayes entered into an
agreement with the CIT Group/Credit Finance, Inc. to borrow up to an aggregate
of $64.5 million through three separate debt instruments collateralized by
Hayes' intellectual property, certain equipment, and accounts receivable and
inventory balances. Third, pursuant to the Plan, Hayes sold certain parcels of
real property.
During 1996, Dennis Hayes assembled a new management team comprised of
individuals from the communications industry to proceed with the turn around
begun during the Chapter 11 proceeding and to execute Hayes' business plan.
On April 24, 1997, Hayes acquired Cardinal Technologies, Inc. ("Cardinal"),
which Hayes believes added a highly visible brand to Hayes' brand portfolio and
strengthened Hayes' position in the North American retail market. In connection
therewith, Hayes received a $5.5 million investment from Vulcan Ventures, Inc.
("Vulcan Ventures"), one of the Paul Allen Group of Companies. The investment
involved the issuance of 263,113 shares of Hayes Series B Preferred Stock which
will be converted into 1,217,930 shares of Series A Preferred Stock upon the
Effective Time.
In July 1997, Hayes entered into a letter of intent with a prospective
investor (the "Investor Letter of Intent") to purchase 1,350,743 shares of
Series C Preferred Stock from Hayes for a purchase price of $30.0 million. If
such purchase is consummated, these shares will be converted into 6,252,454
shares of Common Stock upon the Effective Time and the Hayes shareholders,
including such investor, will own 80.997%, instead of 79%, of the issued and
outstanding securities of the Company. The prospective investor subsequently
proposed to purchase additional shares of Hayes Common Stock from certain Hayes
shareholders for an aggregate purchase price of $10.0 million. Negotiations with
this prospective investor are continuing, and Hayes is also pursuing discussions
with other potential sources of capital funding. There can be no assurance that
any of such possible investments will be consummated.
The mailing address of Hayes' principal executive offices is currently 5854
Peachtree Corners East, Norcross, Georgia 30092, and the telephone number is
(770) 840-9200.
THE ANNUAL MEETING
Date and Place. The Annual Meeting will be held on December , 1997 at
a.m./p.m. local time at 1300 Quince Orchard Blvd., Gaithersburg, Maryland.
See "THE ANNUAL MEETING -- Date and Place; Record Date."
Purpose. The purpose of the Annual Meeting is to consider and vote upon
(i) the proposal (the "Proposal") to approve the Merger Agreement and the
transactions contemplated thereby and (ii) the ratification of the appointment
of Deloitte & Touche LLP as independent auditors of Access Beyond for the fiscal
year ending July 31, 1998. The transactions contemplated by the Merger Agreement
include, without limitation, (a) the conversion of each outstanding share of (i)
Hayes Common Stock, $.01 par value per share, into a right to receive such
number of shares of Common Stock as is equal to the Conversion Ratio, (ii) Hayes
Series A Preferred Stock into the right to receive such number of shares of
Common Stock as is equal to the Conversion Ratio multiplied by the number of
shares of Hayes Common Stock into which such shares of Hayes Series A Preferred
Stock is then convertible, and (iii) Hayes Series B Preferred Stock into the
right to receive such number of shares of Series A Preferred Stock as is equal
to the Conversion Ratio
3
<PAGE> 14
multiplied by the number of shares of Hayes Common Stock into which such shares
of Hayes Series B Preferred Stock is then convertible; (b) the amendment of the
Company's Certificate of Incorporation to (i) change its name to Hayes
Communications Inc., (ii) increase the number of authorized shares of capital
stock of the Company and (iii) create the Series A Preferred Stock; (c) expand
the Board of Directors of the Company to seven members, five of whom will be
designated by the Hayes shareholders; and (d) assumption by the Company of the
obligations of Hayes under the Hayes Option Plan.
Stockholders Entitled to Vote; Requisite Approval. Holders of record of
shares of Common Stock at the close of business on , 1997 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were 12,495,291 shares of Common Stock outstanding,
each of which will be entitled to one vote on each matter to be acted upon at
the Annual Meeting. The affirmative vote of holders of a majority of the
outstanding shares of Common Stock is required for approval of the Proposal.
Approval by the Company Board. The Company Board unanimously approved the
Merger Agreement and the transactions contemplated thereby and recommends that
stockholders vote "FOR" approval and adoption of the Merger Agreement and the
transactions contemplated thereby. See "THE ANNUAL MEETING -- Purpose of the
Annual Meeting."
THE MERGER AND THE MERGER AGREEMENT
General. At the Effective Time, (a) the separate existence of the
Subsidiary will cease and the Subsidiary will be merged with and into Hayes, and
Hayes will be the surviving corporation, (b) Hayes will become a wholly-owned
subsidiary of the Company, (c) the certificate of incorporation and by-laws of
Hayes will remain the certificate of incorporation and by-laws of Hayes as the
surviving corporation, (d) each share of the Subsidiary's common stock
outstanding prior to the Effective Time will be converted into one outstanding
share of Hayes Common Stock, (e) the directors of Hayes serving subsequent to
the Effective Time will be the directors of Hayes as the surviving corporation,
and (f) each share of Hayes capital stock and each Hayes option and warrant
outstanding immediately prior to the Effective Time will be converted into
shares, options and warrants, respectively, of the Company. Assuming that none
of the Hayes Shareholders perfect rights of appraisal, (i) the 4,991,750 shares
of Hayes Common Stock outstanding on the date hereof will be converted into the
right to receive 23,106,433 shares of Common Stock, (ii) the 4,900,000 shares of
Hayes Series A Preferred Stock outstanding on the date hereof will be converted
into the right to receive 22,681,729 shares of Common Stock and (iii) the
263,113 shares of Hayes Series B Preferred Stock outstanding on the date hereof
will be converted into the right to receive 1,217,930 shares of Series A
Preferred Stock. As a result of the Merger, the shareholders of Hayes at the
Effective Time will own approximately 79% of the outstanding capital stock of
the Company immediately after the Effective Time. After giving effect to the
Merger and assuming that (x) all then vested and exercisable options and
warrants to purchase Hayes Common Stock are exercised and (y) none of the then
vested and exercisable options to purchase the Company's Common Stock are
exercised, the Hayes shareholders will own approximately 80.15% of the issued
and outstanding securities of the Company. A copy of the Merger Agreement is
attached hereto as Exhibit A. See "THE MERGER AGREEMENT."
The Company's Reasons for the Merger. The Company Board determined that
the Merger is fair to and in the best interests of the Company and its
stockholders, and unanimously approved the Merger Agreement and the transactions
contemplated thereby. During fiscal 1997 the emergence of new competitors and
several consolidations in the Company's industry contributed to concern over
whether the Company had sufficient resources to compete effectively. The
Company's management believes that Hayes' world wide brand name, global
distribution system and low cost manufacturing capabilities will enable the
Company's remote access products to be brought to market sooner, on a broader
basis and with lowered product costs. The Company's management also believes
that the Merger will produce significant consolidation and cost-cutting
opportunities. The Company Board believes that the Merger will provide
significant value to its stockholders and offers opportunities for growth using
the manufacturing expertise, distribution channels and technology available from
Hayes. The Company Board considered a number of potential benefits in reaching
its decision, including
4
<PAGE> 15
(a) the ability to have its products manufactured cost effectively, (b) the
ability to have its products quickly distributed through distribution channels
significantly greater than those of the Company, (c) obtaining the experience
and expertise of engineers and design specialists to help advance the Company's
business and technology, (d) the financial condition, results of operations and
prospects of the Company in the absence of a business combination or similar
transaction and (e) the terms and conditions of the Merger Agreement, which the
Company Board concluded to be advisable and fair to the Company and its
stockholders in light of the nature of the transaction with Hayes and which led
the Company Board to conclude that, in its opinion, there is a high likelihood
of the Merger being consummated. See "THE MERGER -- Background of the Merger"
and "THE MERGER -- The Company's Reasons for the Merger."
Opinion of Financial Advisor to the Company Board. Donaldson, Lufkin &
Jenrette Securities Corporation, ("DLJ") which was engaged by the Company Board
to serve as its financial advisor, delivered its opinion to the Company Board on
August 26, 1997, stating that, as of such date, the Conversion Ratio was fair to
the Company and its stockholders from a financial point of view. The full text
of the written opinion of DLJ which sets forth the assumptions made, procedures
followed, matters considered and limits of the review, updated as of the date
hereof, is attached hereto as Exhibit B. Holders of the Company's Securities are
urged to read the opinion in its entirety. See "THE MERGER -- Opinion of DLJ."
Hayes Shareholders Meeting. Pursuant to a shareholders' agreement by and
among Hayes and Common, Series A Preferred and Series B Preferred shareholders
of Hayes (the "Hayes Shareholders") dated April 16, 1996, as amended on April
23, 1997, Hayes and the Hayes Shareholders have agreed that a 70% affirmative
vote shall be required for a transaction such as the Merger. In connection with
the Merger Agreement, holders of 69.5% of Hayes capital stock have already
agreed to vote in favor of the Merger. Hayes will hold an annual shareholders'
meeting (the "Hayes Annual Meeting") to consider and vote upon a proposal to
approve the Merger and adopt the Merger Agreement and the transactions
contemplated thereby. The proposal will include the conversion of all
outstanding shares of (a) Hayes Common Stock into a right to receive such number
of shares of Company Common Stock as is equal to the Conversion Ratio, (b) Hayes
Series A Preferred Stock into the right to receive such number of shares of
Company Common Stock as is equal to the Conversion Ratio multiplied by the
number of shares of Hayes Common Stock into which such shares of Hayes Series A
Preferred Stock is then convertible and (c) Hayes Series B Preferred Stock into
the right to receive such number of shares of Series A Preferred Stock as is
equal to the Conversion Ratio multiplied by the number of shares of Hayes Common
Stock into which such shares of Hayes Series B Preferred Stock is then
convertible.
Holders of record of Hayes Common Stock and Hayes Series A Preferred Stock
as of , 1997 (the "Hayes Record Date"), are entitled to notice of
and to vote at the Hayes Annual Meeting. The Hayes Board of Directors (the
"Hayes Board") has unanimously approved the Merger and the Merger Agreement and
the transactions contemplated thereby and has recommended that the Hayes
Shareholders who have not already approved the Merger and the Merger Agreement,
vote for approval and adoption of the Merger Agreement and the transactions
contemplated thereby.
Holders of Hayes capital stock who dissent from the Merger are entitled to
the rights and remedies of dissenting shareholders set forth in Article 13 of
the GBCC subject to compliance with the procedures set forth therein. See "THE
MERGER -- Dissenters' Rights."
Hayes' Reasons for the Merger. The Hayes Board determined that the Merger
is fair to and in the best interests of Hayes and its shareholders, and
unanimously approved the Merger Agreement and the transactions contemplated
thereby. The Hayes Board believes that the Merger will provide significant value
to its shareholders and offer opportunities for growth using the expertise and
technology available from the Company. In reaching its decision to approve the
Merger Agreement and the transactions contemplated thereby, the Hayes Board
considered several factors including (a) the consideration to be received by the
Hayes Shareholders, (b) the potential for the Hayes Shareholders to hold shares
of a public company, and, therefore, obtain the possibility of a more active
trading market than a private company, (c) the terms and conditions of the
Merger Agreement, which the Hayes Board concluded to be advisable and fair to
Hayes, and the likelihood of the Merger being consummated, (d) the information
relating to the financial condition,
5
<PAGE> 16
results of operations and prospects of Hayes in the absence of a business
combination or similar transaction, and (e) the tax-free nature of the exchange
of Hayes capital stock for the Company's capital stock. Hayes management also
believes that the combination of the two companies will reduce costs by
eliminating redundant expenses, and realizing certain economies of scale. The
Merger will eliminate the existing vendor-buyer relationship between the two
companies, which Hayes management expects to immediately improve margins for
remote access products. The integration and elimination of overlapping
activities is expected to improve overall operating results in the remote access
product line. Hayes management also expects the consolidation of R&D resources
to reduce product development cycles and improve time-to-market for new remote
access products. Hayes management also believes that the market for remote
access products is beginning to experience significant acceptance which Hayes
management believes indicates potential rapid growth opportunity in the general
business application of the technology. Hayes management expects the combined
companies to take advantage of Hayes' distribution channels, thereby avoiding
direct competition with established remote access equipment vendors who
principally serve large users such as internet service providers, enabling the
combined companies to realize significant revenue growth opportunities in the
global marketplace for remote access products.
Conditions to the Merger. The respective remaining obligations of the
Company and Hayes to consummate the Merger are subject to the satisfaction or
waiver (where permissible) of certain conditions, including, but not limited to,
approval of the Merger Agreement and the transactions contemplated thereby by
the holders of the requisite number of shares of Common Stock and Hayes capital
stock; receipt by the Company of a fairness opinion dated as of the Effective
Time; expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); the absence of any stop order suspending the effectiveness of the
Registration Statement of which this Proxy Statement/Prospectus is a part; the
approval for listing of the shares of Common Stock issued in the Merger on
NASDAQ/NMS; obtaining consents or waivers from other parties to material
contracts and leases; and the absence of any order, ruling or decree that would
prohibit or render illegal the transactions contemplated by the Merger
Agreement. See "THE MERGER AGREEMENT -- Conditions."
Amendment or Waiver. Any term of the Merger Agreement may be amended or
waived in writing by the parties thereto at any time before or after approval of
the Hayes Shareholders or the Company's stockholders.
Termination; Effect of Termination. The Merger Agreement may be
terminated, and the Merger abandoned prior to the Effective Time, whether before
or after approval of the Merger by the stockholders of the Company and/or the
shareholders of Hayes (a) by mutual written consent of the Company and Hayes;
(b) by either the Company or Hayes if the Merger is not consummated by 5:00 p.m.
(Eastern Time) on December 31, 1997; (c) by either the Company or Hayes if any
of the Hayes Shareholders repudiate the voting agreements entered into by them
(the form of which is attached to the Merger Agreement as Exhibit D-1) pursuant
to which the holders of 69.5% of Hayes capital stock agreed, among other things,
to vote in favor of the Merger (the "Voting Agreements"); (d) by either the
Company or Hayes if the Merger is not approved by their respective stockholders
and shareholders; and (e) under certain other circumstances, including
performance by the Company Board or the Hayes Board of their fiduciary
obligations. Upon termination of the Merger Agreement under certain
circumstances, the non-terminating party will be required to pay the terminating
party certain costs, expenses and a break-up fee which will be considered non-
refundable liquidated damages. See "THE MERGER AGREEMENT -- Termination; Effect
of Termination."
Regulatory Approvals.
Antitrust. The Merger is subject to the requirements of the HSR Act and
the rules and regulations thereunder, which provide that certain transactions
may not be consummated until required information and material have been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and certain waiting
periods have expired or been terminated. The Company and Hayes filed the
required information and material with the Antitrust Division and the FTC on
, 1997. The statutory waiting period under the HSR Act expired on
, 1997. See "THE MERGER -- Regulatory Approvals."
6
<PAGE> 17
State Securities Laws. Prior to the Effective Time, the Company shall use
reasonable, diligent efforts to obtain all regulatory approvals needed to ensure
that the securities issued in the Merger will be registered or qualified under
the securities laws, or exempt therefrom, in every jurisdiction of the United
States in which any holder of the Hayes capital stock has an address of record
on the Record Date. Hayes shall use reasonable, diligent efforts to assist the
Company to comply with the securities and Blue Sky laws of all applicable
jurisdictions in connection with the Merger.
Management and Operations of the Company after the Merger. After the
Effective Time, the Company Board will consist of seven persons, five of whom
will be designated by Hayes Shareholders. In addition, Dennis Hayes, the founder
and Chairman of Hayes, will become Chairman of the Company; Ronald Howard,
Chairman and Chief Executive Officer of the Company will become Vice-Chairman
and Executive Vice President of Business Development of the Company; and P.K.
Chan, President and Chief Operating Officer of Hayes will become President and
Chief Operating Officer of the Company.
Comparison of Rights Under Applicable Law. The rights of shareholders of
Hayes are currently governed by Georgia law, the Hayes certificate of
incorporation and the Hayes by-laws. Holders of Hayes capital stock immediately
prior to the Effective Time will become stockholders of the Company, a Delaware
corporation, and their rights as stockholders of the Company will be governed by
applicable Delaware law, the Company's amended and restated certificate of
incorporation (the "Certificate of Incorporation") and the Company's by-laws
(the "By-laws") from and after the Effective Time. See "COMPARISON OF RIGHTS OF
STOCKHOLDERS OF THE COMPANY AND HAYES."
Appraisal Rights. Holders of Common Stock will not be entitled to
appraisal rights under Delaware law in connection with the Merger. See "THE
MERGER -- Dissenters Rights."
Holders of Hayes capital stock who have complied with all requirements for
perfecting shareholders' rights of appraisal, as set forth in Section 14-2-310
et seq. of the GBCC, shall be entitled to their rights under the GBCC with
respect to such shares (the "Dissenting Shares") and not to any portion of the
Common Stock or Series A Preferred Stock receivable by the Hayes Shareholders by
reason of the Merger. See "THE MERGER -- Appraisal Rights" and "COMPARISON OF
STOCKHOLDERS' RIGHTS -- Appraisal Rights."
Accounting Treatment. The Merger will be treated as a reverse acquisition
of the Company by Hayes. In a reverse acquisition, the accounting acquiror
receives less than 100 percent of the post combination shares since it is not
the legal issuer. The Hayes Shareholders will receive approximately 79% of the
post combination shares of the Company and will be the accounting acquiror. The
cost of the acquisition of the Company will be based on the fair value of the
Company's outstanding shares and certain acquisition costs and allocated to the
issuer's net assets following the guidance of APB 16 Accounting For Business
Combinations. As a result of the reverse acquisition of the Company by Hayes,
the historical financial statements of the surviving corporation for periods
prior to the Merger will be those of Hayes rather than the Company. See
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
Material Tax Consequences of the Merger. The Merger is intended to qualify
as a "tax-free reorganization" within the meaning of Sections 368(a)(1) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
However, cash received by Hayes Shareholders in lieu of fractional shares, and
cash received by any Hayes stockholder who may exercise any dissenters rights,
may give rise to taxable income. See "THE MERGER -- Material Tax Consequences of
the Merger." Each stockholder of the Company and each shareholder of Hayes is
urged to consult his or her tax advisor to determine the specific tax
consequences of the Merger to such holder.
Effective Time of the Merger. Subject to the terms and conditions of the
Merger Agreement, the Certificate of Merger of the Subsidiary with and into
Hayes will be filed with the Secretary of State of the State of Georgia on the
Closing Date. The date and time that the Certificate of Merger is filed with the
Georgia Secretary of State and the Merger becomes effective is the Effective
Time.
Exchange of Stock Certificates. As of the Effective Time, all shares of
Hayes capital stock outstanding immediately prior thereto will, by virtue of the
Merger and without further action, cease to exist, and all such
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<PAGE> 18
shares will be converted into the right to receive from the Company a certain
number of shares of Common Stock and/or Series A Preferred Stock. Unless
surrendered to the Company for exchange at the Closing, as soon as practicable
after the Effective Time, each holder of shares of Hayes capital stock will
surrender (a) the certificates for such shares (the "Hayes Certificates") to the
Company for cancellation or (b) an affidavit of lost (or nonissued) certificate
and indemnity with respect to the same. Promptly following the Effective Time
and receipt of the Hayes Certificates, the Company will cause its transfer agent
to issue to each such surrendering holder, certificate(s) for the number of such
shares of Common Stock and/or Series A Preferred Stock to which such holder is
entitled, and the Company will distribute cash payable for any fractional
shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In considering the recommendation of the Company Board with
respect to the Merger Agreement, stockholders of the Company should be aware
that certain members of the Company Board and management have interests in the
Merger that are in addition to or different from the interests of stockholders
generally. Certain directors and executive officers of Hayes will also receive
benefits that differ from or are in addition to the benefits received by all
other shareholders. In addition, in connection with the Merger, the Company has
agreed to treat Hayes options and warrants and Company options in the manner
described below.
Affiliate Agreements. All affiliates, as such term is defined in Rule 145
promulgated under the Securities Act, of Hayes have executed an Affiliate
Agreement whereby each such affiliate has covenanted and agreed not to offer,
sell or otherwise dispose of any of the shares of Common Stock and/or Series A
Preferred Stock issued to such affiliate in the Merger in violation of the
Securities Act and Rule 145 promulgated thereunder, and will make no disposition
of such shares of the Company's Securities for 90 days after the Effective Time,
except for Mr. Hayes who has agreed to sell no more than $3.0 million of the
Company's Securities for an additional 180-day period thereafter.
Bonus Compensation. Upon closing of the Merger, Mr. Hayes and Chiang Lam,
each of whom is a director of Hayes, will be entitled to receive cash bonuses of
$450,000 and $275,000, respectively. Upon closing of the Merger, pursuant to the
terms of an existing employment agreement between Mr. Howard and the Company,
which will terminate at the Effective Time of the Merger, Mr. Howard will be
entitled to receive a cash payment equal to $437,500. Mr. Howard has advised the
Company that in lieu of receiving such cash payment, he will accept shares of
Common Stock having a value equal to such amount. In addition, Mr. Howard owns
options to purchase 300,000 shares of Common Stock under the Company's Amended
and Restated 1996 Long Term Incentive Plan (the "Incentive Plan"), which options
will be repriced to market as of the Effective Time if they expire unexercised.
See "MANAGEMENT -- Employment and Consulting Agreements."
Shareholders Agreement. Each of the Hayes Shareholders and Mr. Howard have
entered into a shareholders' agreement (the "Shareholders' Agreement"),
effective as of the Effective Time, in respect of the voting of their respective
shares of the Company's Securities for the election of directors. Such
Shareholders' Agreement provides that the shares owned by such persons will be
voted to elect Messrs. Hayes and Howard and five persons designated by certain
of the Hayes Shareholders.
Employment Agreements. At the Effective Time, Messrs. Hayes and Howard
will enter into employment agreements with the Company (the "Hayes Employment
Agreement," and the "Howard Employment Agreement," respectively), the terms of
which shall be for three (3) years from January 1, 1998, unless earlier
terminated. Pursuant to the Hayes Employment Agreement, Mr. Hayes will be
entitled to receive a base salary of $400,000 per year, bonuses of up to
$800,000 per year as determined by the Company Board or Compensation Committee
and options each year to purchase 200,000 shares of Common Stock. Pursuant to
the Howard Employment Agreement, Mr. Howard will be entitled to receive a base
salary of $330,000 per year, a bonus of up to approximately $141,000 per year as
determined by the Company Board or Compensation Committee and stock options each
year to purchase 150,000 shares of Common Stock. See "THE MERGER -- Interests of
Certain Persons in the Merger."
8
<PAGE> 19
Hayes Options and Warrants. All outstanding options and warrants to
purchase shares of Hayes will be assumed by the Company, with appropriate
adjustment to the number of shares covered and the exercise price to give effect
to the Conversion Ratio. Based upon the number of options and warrants to
purchase shares of Hayes issued on the date hereof, as of the Effective Time the
Company will assume warrants for 1,851,560 shares of Common Stock and options
for 5,690,074 shares of Common Stock. Options and warrants to purchase 5,878,703
shares of Hayes Common Stock are held by current officers and directors of
Hayes.
Company Options. Options to purchase shares of Common Stock will become
fully vested and will terminate as a result of the Merger. Insofar as the Merger
will constitute a "change in control," an option holder will generally have the
right, commencing at least five days prior to the "change in control" and
subject to any other limitation on the exercise of the option in effect on the
date of exercise, to immediately exercise any options in full to the extent not
previously exercised, without regard to any vesting limitations. To the extent
that options are not exercised by persons who continue in the employ of the
Company following the Effective Time, the Company will grant replacement
options, repriced to market value at the time of expiration or cancellation,
with credit for vesting purposes of the time that the terminated options were
outstanding. Each non-employee director (or his nominee) holds options to
purchase 25,000 shares, Mr. Howard holds options for 300,000 shares and Mr.
James Gallagher, Vice President Sales of the Company, holds options for 75,000
shares.
RISK FACTORS
For a discussion of certain risk factors that should be considered
carefully by the Company's stockholders in determining whether to vote in favor
of the Merger and by the Hayes Shareholders in determining whether to exchange
their Hayes capital stock for the Company's capital stock or to perfect their
statutory appraisal rights, see "RISK FACTORS" beginning on page 15.
9
<PAGE> 20
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
The table below sets forth selected consolidated historical financial data
of the Company. The selected financial data for the Company for the year ended
July 31, 1997 has been obtained from audited financial statements of the
Company. The selected financial data for the Company for the fiscal years ended
July 31, 1996, 1995, 1994, and 1993 have been derived from the audited
consolidated financial statements of Penril, the former parent company of Access
Beyond. All of the data derived from the audited financial statements should be
read in conjunction with "Access Beyond's Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere herein and
the consolidated financial statements and the notes thereto included herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
-------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1).......................... $44,108 $61,838 $52,611 $39,435 $18,000
Net income (loss)
Continuing operations(2)............... 1,027 2,345 (4,614) (20,668) (13,890)
Discontinued operations................ (896) (828) (1,661) 404 --
Loss on disposal of discontinued
operations............................. -- -- (1,400) (640) (3,735)
Earnings (loss) per share
Continuing operations.................. 0.15 0.30 (0.61) (2.14) (1.16)
Discontinued operations................ (0.13) (0.11) (0.22) 0.04 --
Loss on disposal....................... -- -- (0.19) (0.07) (0.31)
Cash dividends per share................. -- 0.02 -- -- --
BALANCE SHEET DATA:
Total assets(3).......................... $49,178 $51,061 $44,388 $33,780 $13,906
Working capital.......................... 11,727 13,502 12,158 16,798 3,631
Long-term debt........................... 10,217 8,890 5,681 905 743
Stockholders' equity..................... 27,501 28,580 21,723 18,215 7,311
Book value per common share.............. 3.96 3.66 2.87 1.89 .61
</TABLE>
- ---------------
(1) Included in net revenues are the following net revenues relating to Penril's
modem business which was acquired by Bay Networks, Inc. ("Bay") immediately
prior to the Penril/Bay Merger, including $4.5 million paid in the fourth
quarter of fiscal 1996 to Penril for a license agreement with Bay:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net revenues...................... $21,768 $22,828 $18,974 $19,519 $4,228
</TABLE>
(2) Net income from continuing operations for fiscal 1996 included a charge of
$9.7 million for restructuring costs and $500,000 for costs incurred through
July 31, 1996 related to the Penril/Bay Merger.
(3) Included in total assets are the following net assets related to two
discontinued operations (Technipower, Inc., a subsidiary the assets of which
were sold by Penril on October 11, 1996, and Electro-Metrics, Inc. ("EMI"),
a subsidiary the assets of which were sold on June 30, 1997):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net assets........................ $7,299 $6,830 $5,145 $7,337 $0
</TABLE>
10
<PAGE> 21
SELECTED HISTORICAL FINANCIAL DATA OF HAYES
The following selected consolidated historical financial data of Hayes has
been derived from its audited consolidated historical financial statements
except for the six months ended June 30, 1996 and 1997 and should be read in
conjunction therewith and the notes thereto included herein. All of the data
derived from the audited and unaudited financial statements should be read in
conjunction with "Hayes' Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein and the
consolidated financial statements and the notes thereto included herein. The
unaudited amounts have been derived from the financial records, include only
normal recurring adjustments and are not indicative of a full year.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED JUNE 30,
-------------------------------------------- DECEMBER 31, DECEMBER 31, --------------------
1992 1993 1994 1995(1) 1995(2) 1996(1)(3) 1996(1)(3) 1997
-------- -------- -------- -------- ------------ ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............... $171,453 $206,191 $246,277 $269,155 $ 70,111 $257,452 $145,585 $ 94,897
Net income (loss)(3)....... 3,883 887 (28,066) (14,383) (4,637) (13,154) 5,227 (7,835)
Earnings (loss) per
share.................... $ .68 $ .16 $ (4.98) $ (2.56) $ (.82) $ (2.52) $ .70 $ (1.57)
BALANCE SHEET DATA:
Total assets............... $ 93,409 $103,939 $124,964 $100,964 $ 91,696 $ 69,215 $ 88,284 $100,921
Working capital............ 29,687 30,314 15,840 25,994 25,270 3,654 26,372 (5,771)
Long-term debt............. 9,108 10,307 28,685 -- 11,134 20,854 23,116 42,447
Stockholders' equity....... 43,039 44,125 15,897 1,683 (3,012) 5,741 26,814 (2,420)
</TABLE>
- ---------------
(1) On November 15, 1994, Hayes filed petition for relief under Chapter 11 of
the United States Bankruptcy Code. On March 8, 1996, Hayes' Chapter 11 Plan
was confirmed by the U.S. Bankruptcy Court and became effective on April 16,
1996.
(2) Effective October 1, 1995, Hayes changed its year end from September 30 to
December 31.
(3) Included in net income (loss) are the following reorganization costs related
to the Chapter 11 filing:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1996
------------------ ----------------- ----------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
$5,026 $ 4,301 $ 5,378 $ 5,378
</TABLE>
The net loss for the year ended December 31, 1996 and six months ended June
30, 1996 also includes a gain on the sale of land of $8.2 million. The net loss
for the year ended December 31, 1996 also includes a plant closure and inventory
writedown costs associated with such plant closure of $6.0 million.
11
<PAGE> 22
SELECTED PRO FORMA FINANCIAL DATA
The unaudited pro forma condensed combined statement of operations data
gives effect to the Merger as if it had occurred at the beginning of the
earliest period presented. The unaudited pro forma condensed combined balance
sheet data gives effect to the Merger as if it had occurred on June 30, 1997.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................ 278,682 101,389
Net loss.................................... (41,956) (16,544)
Loss per share.............................. (.72) (.28)
BALANCE SHEET DATA:
Total assets................................ 123,813
Working capital............................. (2,391)
Long-term debt.............................. 42,903
Stockholders' equity........................ 12,877
</TABLE>
See "Unaudited Pro Forma Condensed Combined Financial Statements"
12
<PAGE> 23
RISK FACTORS
Hayes' Shareholders should be aware that ownership of the Common Stock and
Series A Preferred Stock of the Company involves certain risks, including those
described below, which could adversely affect the value of their holdings of
Common Stock or Series A Preferred Stock. The Company does not make, nor has it
authorized any other person to make, any representation about the future market
value of the Common Stock or Series A Preferred Stock. In addition to the other
information contained in this Proxy Statement/Prospectus, the following factors
should be considered carefully in evaluating an investment in the Securities
offered hereby. The following factors should also be considered carefully by the
stockholders of the Company in determining whether to vote in favor of the
Merger.
ABSENCE OF PROFITABLE OPERATIONS; LIQUIDITY
The Company, and the Remote Access Business as conducted by Penril, have
not been profitable for the past three fiscal years. Penril posted a net loss
from continuing operations of $4.6 million for fiscal 1995, and $20.7 million
for fiscal 1996 and the Company posted a net loss of $13.9 million for fiscal
1997. Such losses have been due, in part, to decreased revenues caused by a
declining market for certain Penril products that began in fiscal 1995,
non-recurring restructuring costs in connection with operations that were
discontinued due to decline in market demand, costs related to the Penril/Bay
Merger, which occurred during fiscal 1996, costs associated with development of
the Remote Access Business and the spinning off of the Company from Penril
during the year ended July 31, 1997. In addition, during fiscal 1997, the
Company's revenues including, in particular, its revenues from the "Access
Beyond" product family, have been insufficient for the Company to be profitable.
There can be no assurance that the Company will achieve profitability, or that
the Company will be able to increase sales of its products to an amount which
will generate adequate cash for operational and capital needs.
Hayes has not been profitable for the past three fiscal years. On November
15, 1994, Hayes filed a petition for relief under Chapter 11 of the United
States Bankruptcy Code due to its inability to pay its debts on a current basis.
Although Hayes consummated a court approved Reorganization Plan on April 16,
1996, it has accumulated losses of approximately $26.5 million since such date.
The Company and Hayes have financed their loss from operations in the past
three years (or shorter period with respect to the Company) primarily though
private sales of equity securities, borrowings under credit facilities and sale
of assets, including assets from discontinued operations. On a combined basis
the Company and Hayes had a working capital deficit of approximately $38 million
at June 30, 1997.
At the Effective Time, only a limited amount of cash will be available for
working capital from credit facilities of the combined companies. Both the
Company and Hayes are relying on anticipated cash from private placements
totaling $40.0 million prior to the Effective Time to provide working capital
following the Merger. In the event that neither the Company's proposed $10.0
million private placement, nor Hayes' proposed $30.0 million private placement
is consummated, cash provided by future operations and available borrowings
under the Company's and Hayes' credit facilities or lines of credit will be
insufficient to meet the Company's working capital requirements. There can be no
assurance that any of such private placements will be consummated prior to or
subsequent to the Effective Time.
LIMITED TRADING HISTORY OF THE COMMON STOCK; NO PUBLIC MARKET FOR SERIES A
PREFERRED STOCK
The Common Stock has a limited history as a publicly traded security. The
price for the Common Stock is determined in the market place and may be
influenced by many factors, including the operating performance of the Company,
the depth and liquidity of the market for the Common Stock, investor perception
of the Company and general economic and market conditions. There is no trading
market for the Series A Preferred Stock, and the Company does not intend to list
it on any national exchange or NASDAQ/NMS. There can be no assurance that an
orderly market for the Common Stock will be sustained, and the prices at which
the Common Stock is traded may fluctuate significantly.
13
<PAGE> 24
LIMITED OPERATING HISTORY
The Company began operations on November 18, 1996 for the purpose of
receiving certain lines of business which were to be spun off from Penril. The
Company, as a separate entity, has a limited operating history. The Remote
Access Business, as conducted by Penril prior to the distribution of the Common
Stock to Penril shareholders in November 1996, had an operating history
consisting of the development and sale of local area network ("LAN") and host
access products (the "LAN and Host Access Products") and the development of a
new product family called "Access Beyond." See "-- Relationship with Penril" and
"BUSINESS OF THE COMPANY -- Principal Products."
DEPENDENCE ON KEY MANAGEMENT
If the Company is to be successful, its success will be due in large part
to the performance of Messrs. Hayes, Howard and Chan, and, to a lesser extent,
other key management personnel. Although the Company will have employment
agreements with Messrs. Hayes, Howard and Chan which provides for their
continued employment, no assurance can be given that the Company will be able to
retain their services or the services of any other key management personnel. The
loss of the services of one or more of the Company's senior management following
the Merger could have a material adverse effect upon the Company's business,
operating results and financial condition. See "MANAGEMENT OF HAYES -- Executive
Compensation" and "MANAGEMENT OF HAYES -- Employment Agreements."
RISKS RELATING TO INTEGRATION OF THE BUSINESSES
There can be no assurance that the economics which the Company and Hayes
expect to realize as a result of the combination of the businesses will be
achieved, or that the personnel from the two companies will be successfully
integrated.
TECHNOLOGICAL CHANGES
The market for networking and modem products is subject to rapid
technological change, evolving industry standards and frequent new product
introductions and, therefore, requires a high level of expenditures for research
and development. The Company may be required to incur significant expenditures
to develop new integrated product offerings. There can be no assurance that
customer demand for products integrating network connectivity and remote access
technologies will grow at the rate expected by the Company, that the Company
will be successful in developing, manufacturing and marketing new products or
product enhancements that respond to these customer demands or to evolving
industry standards and technological change, that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction, manufacture and marketing of these products (especially in light
of the increasing design and manufacturing complexities associated with the
integration of technologies), or that its new products and product enhancements
will adequately meet the requirements of the marketplace and achieve market
acceptance. The Company's business, operating results and financial condition
may be materially and adversely affected if the Company encounters delays in
developing or introducing new products or product enhancements or if such
product enhancements do not gain market acceptance. In order to maintain a
competitive position, the Company must also continue to enhance its existing
products and there is no assurance that it will be able to do so. The Company
will be required to continue to make significant investment in research and
development to refine Hayes' products and its products and to continue to
develop additional products. A major portion of future revenues is expected to
come from new products and services. The Company cannot determine the ultimate
effect that new products will have on its revenues or earnings.
POSSIBLE LOSS OF TECHNOLOGY
The Company acquired technology and intellectual property rights relating
to certain open remote dial access cards used in its Hawk products principally
in consideration of the issuance of 503,704 shares of Common Stock. If the
Company fails to register the resale of such shares under the Securities Act by
14
<PAGE> 25
December 31, 1997 or fails to use its best efforts to maintain the effectiveness
of the Registration Statement then such technology and rights could be lost
which loss could have a material adverse effect on the Company.
COMPETITION
The networking industry is highly competitive and competition is expected
to intensify. There are numerous companies competing in various segments of the
network management and remote access markets. Competitors include Ascend
Communications, Shiva Corporation, Cisco Systems, Inc., 3Com Corporation
("3Com"), Microcom, Inc. ("Microcom") and Bay Networks, Inc., among others. Many
of the Company's competitors have greater name recognition, more extensive
engineering, manufacturing and marketing capabilities and greater financial,
technological and personnel resources than those available to the Company. In
addition, certain companies in the networking industry have expanded their
product lines or technologies in recent years as a result of acquisitions. There
can be no assurance that the Company will be able to compete successfully in the
future with existing or new competitors.
Hayes' business products compete with the business products of 3Com, AT&T,
Microcom, Multitech, Telebit and others. 3Com is one of Hayes' most significant
competitors in the retail modem market. Other competitors of Hayes in the retail
modem market include GVC, Boca Research, Inc. ("Boca"), Zoom Telephonics, Inc.,
Diamond Multimedia Systems, Inc. and others.
There are many other companies engaged in the research, development and
commercialization of products similar to the Hayes modem, network and broadband
products. Some of the Company's competitors and potential competitors possess
significantly greater capital, marketing, technical and other competitive
resources than Hayes or the Company following the Merger. As a result, they may
be able to adapt more quickly to new or emerging technologies and changes in
customer requirements, to devote greater resources to the promotion and sale of
their products, or to devote greater resources to the development of new
products than can the Company.
Hayes' products are subject to significant price competition, and
management expects that it will face increasing pricing pressures from
competitors. Accordingly, there can be no assurance that following the Merger
the Company will be able to provide products that compare favorably with the
products of the Company's competitors or that competitive pressures will not
require the Company to reduce its prices. Any material reduction in the price of
the Company's products would negatively affect net margins as a percentage of
net revenues and would require the Company to increase sales to maintain or
increase net income.
IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS
With the exception of historical information, the matters discussed in this
document may include forward-looking statements that involve risks and
uncertainties. The Company wishes to caution readers that a number of important
factors, including those identified in this section as well as factors discussed
elsewhere in this filing and in other filings with the Commission, could affect
the Company's actual results and cause actual results to differ materially from
those in the forward-looking statements.
OPTION PLANS -- SHARES ELIGIBLE FOR FUTURE SALE AND DILUTION
In March 1997, the stockholders of the Company, at an Annual Meeting,
approved and ratified two stock option plans of the Company -- the Incentive
Plan and the Amended and Restated 1996 Non-employee Directors' Stock Option Plan
(the "Directors' Plan"). The Company is authorized to issue options to purchase
up to an aggregate of 2,000,000 shares of Common Stock under the Incentive Plan
and options to purchase an aggregate of 250,000 shares of Common Stock under the
Directors' Plan. As of September 30, 1997, the Company had issued options to
purchase an aggregate of 1,469,000 shares under the Incentive Plan and options
to purchase an aggregate of 100,000 shares under the Directors' Plan. As a
result of the Merger, all outstanding options will become fully vested. Holders
of Common Stock could experience dilution in earnings per share in the event
that a large number of options are exercised. Furthermore, the Company expects
to register the resale of the shares of Common Stock issuable upon the exercise
of options granted under the Incentive Plan and the Directors' Plan, which
registration would allow such shares to be freely tradeable in the
15
<PAGE> 26
public market immediately following exercise of such options, subject to certain
volume limitations for options exercised by directors and executive officers of
the Company.
In addition, at the Effective Time, each outstanding option to purchase
Hayes Common Stock (the "Hayes Options") granted under the Hayes Stock Option
Plan, adopted on June 4, 1996, as amended effective October 22, 1996 (the "Hayes
Option Plan"), and each warrant to purchase Hayes capital stock (collectively
the "Hayes Warrants") will be assumed by the Company in accordance with the
terms of such option or warrant, and converted into rights to purchase shares of
the Company's Securities. Hayes Options and Hayes Warrants for 5,690,074 shares
and 1,851,560 shares of Common Stock, respectively, will be assumed by the
Company. At the Effective Time, Hayes Options to purchase 1,597,664 shares of
Company Common Stock and Hayes Warrants to purchase 1,851,560 shares of Company
Common Stock will be exercisable. Holders of Common Stock could experience
dilution in earnings per share in the event that a large number of Hayes Options
or Hayes Warrants are exercised. The Company expects to register the resale of
the shares of Common Stock issuable upon the exercise of the Hayes Options and
the Hayes Warrants, which registration would allow such shares to be freely
tradeable in the public market immediately following exercise of such Hayes
Options and Hayes Warrants, subject to certain volume and other limitations for
Hayes Options and Hayes Warrants, by directors and executive officers of the
Company following the Merger. See "THE MERGER -- Interests of Certain Persons in
the Merger."
OTHER ISSUANCES -- SHARES ELIGIBLE FOR FUTURE SALE AND DILUTION
The Company may use shares of its Common Stock to acquire assets,
technology, license rights and/or other companies to develop and expand its
product lines. Future issuances of Common Stock in connection with such
acquisitions could, individually or in the aggregate, adversely affect the
market price of the Common Stock.
PRODUCT PROTECTION AND INTELLECTUAL PROPERTY
The Company, like many other companies in the network access industry,
anticipates that it will rely upon rights granted through licenses from third
parties for a substantial amount of proprietary information used to develop its
products; however, some companies may decide not to grant such licenses and may
seek to protect their proprietary rights in such technological information.
Accordingly, there can be no assurance that the Company will be able to continue
obtaining additional rights to utilize proprietary technological information
necessary to develop its products. Because of the existence of a large number of
patents in the networking field and the rapid rate of issuance of new patents,
it is not economically practical to determine in advance whether a product or
any of its components infringe patent rights of others. In the event of any
infringement, the Company believes that, based upon industry practice, necessary
licenses or rights under such patents may be obtained on terms that should not
have a material adverse effect on the Company's consolidated financial position
or results of operations. However, there can be no assurance in this regard.
Hayes relies on a combination of patent, trade secret, copyright and
trademark laws, nondisclosure and other contractual provisions and technical
measures to protect its proprietary and intellectual property rights in its
products. Hayes receives from time to time, and may receive in the future,
communications from third parties asserting intellectual property rights
relating to its products and technologies. There can be no assurance that these
protections will be adequate to protect Hayes' proprietary rights or that
following the Merger, the Company's competitors will not independently develop
products that are substantially equivalent or superior to the Company's
products. There can be no assurance that third parties will not assert
infringement claims against the Company following the Merger. The loss of
proprietary technology or a successful claim against the Company could have a
material adverse effect on the Company's financial condition or results of
operations.
CERTAIN ANTI-TAKEOVER EFFECTS
The Company's Certificate of Incorporation includes certain provisions that
are intended to prevent or delay the acquisition of the Company by means of a
tender offer, proxy contest or otherwise. Specifically, the
16
<PAGE> 27
Certificate of Incorporation provides for a classified board of directors,
classified into three classes with terms of three years each. In addition, the
Certificate of Incorporation authorizes the Company Board to issue preferred
stock without further stockholder approval, which could have dividend,
redemption, liquidation, conversion, voting or other rights that could adversely
affect the voting power or other rights of the holders of Common Stock. Finally,
the Company is subject to Section 203 of the Delaware General Corporation Law
(the "DGCL") which limits transactions between a publicly held company and
"interested stockholders" (generally those stockholders who, together with their
affiliates and associates, own 15% or more of a company's outstanding capital
stock). Any one of, or a combination of, the above anti-takeover provisions
could discourage a third party from attempting to acquire control of the
Company. See "DESCRIPTION OF CAPITAL STOCK OF THE COMPANY." The Incentive Plan
and the Directors' Plan provide for acceleration of stock options upon a change
in control of the Company, which may have the effect of making an acquisition of
control of the Company more expensive. See "MANAGEMENT OF THE COMPANY -- The
Amended and Restated 1996 Incentive Option Plan" and "The Amended and Restated
1996 Non-employee Directors Stock Option Plan." These plans may also inhibit a
change in control of the Company. In addition, certain Company officers have
severance compensation agreements with the Company that provide for substantial
cash payments and acceleration of other benefits in the event of specified
corporate changes related to the Company, including a change in control of the
Company. See "MANAGEMENT OF THE COMPANY -- Employment and Consulting
Agreements."
DIVIDENDS
The Company does not anticipate paying dividends on either its Common Stock
or Series A Preferred Stock in the foreseeable future. Holders of Series A
Preferred Stock are entitled to receive, as and when declared by the Company
Board, cumulative compounding dividends at the rate of 10% per annum of the
original issue price per share of the Series A Preferred Stock. No dividends may
be paid on the Common Stock unless all accrued and unpaid dividends on the
Series A Preferred Stock are paid.
RELATIONSHIP WITH PENRIL
The Company has a limited operating history as an independent public
company. The operations of the Company historically have relied on Penril for
certain necessary administrative services. As of November 18, 1996, Penril and
the Company entered into several agreements for purposes of governing certain of
the ongoing relationships between the two companies following the Penril/Bay
Merger, including indemnification obligations. Pursuant to the Indemnification
Agreement entered into between Penril and the Company (the "Indemnification
Agreement") in connection with Penril's transfer (the "Transfer") to the Company
of substantially all of its assets and liabilities, other than those assets and
liabilities related to Penril's modem business (the "Modem Business"), the
Company agreed to indemnify Penril against all expenses and liabilities
resulting from (i) the operation of the Company from and after the Penril/Bay
Merger, (ii) Penril's operations prior to the Transfer other than those based
upon, arising out of or in connection with (a) the Modem Business, (b) the
Penril/Bay Merger and transactions relating to the Penril/Bay Merger or (c) the
tax consequences of the Distribution, (iii) the termination of employment of
employees (other than those employees identified as remaining with Penril after
the Transfer) by Penril or (iv) information furnished by Penril or the Company
relating to the Company contained in the registration statement filed by Bay in
connection with the Penril/Bay Merger proxy statement/prospectus. Included
within the potential liabilities against which the Company will indemnify Penril
are those referred to in "BUSINESS OF THE COMPANY -- Legal Proceedings."
Although the Company is not aware of any pending or threatened material
liability for which the Company may become obligated to make payments in
connection with its obligation to indemnify Penril, there can be no assurance
that such indemnification obligations could not arise or that such
indemnification obligations would not be material to the Company. These
agreements were negotiated while the Company was owned by Penril and,
consequently, are not the result of arm's-length negotiations between
independent parties. Nevertheless, the Company believes that the agreements are
fair to the parties and contain terms which are generally comparable to those
which would result from arm's-length negotiations, although there can be no
assurance thereof.
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TAX TREATMENT
The Merger is intended to qualify as a "reorganization" within the meaning
of Sections 368(a)(1) and 368(a)(2)(E) of the Code and so, in general, be
tax-free to the exchanging Hayes Shareholders (except to the extent that such
shareholders receive cash in lieu of fractional shares or in satisfaction of
dissenters' rights). However, no ruling has been or will be requested from the
Internal Revenue Service as to such issue. Qualification of the Merger as a
"reorganization" is subject to the satisfaction of a number of conditions and
the accuracy of a number of assumptions. See, "THE MERGER -- Material Tax
Consequences of the Merger." Accordingly, there is a risk that the Merger may
not qualify as a "reorganization", with the result that Hayes Shareholders could
become subject to income tax liability by reason of their exchange of Hayes
capital stock for the Company capital stock pursuant to the Merger.
INTERNATIONAL SALES
In fiscal 1996, international sales of Hayes' products accounted for
approximately 25% of net sales. These sales were primarily to customers in
Europe and the Asia Pacific region. The Company anticipates that, following the
Merger, international sales will continue to account for a significant portion
of the Company's net sales in the foreseeable future. As a result, the Company's
operating results will be subject to risks inherent in international sales,
including tariffs or other barriers, difficulties in staffing and managing
international operations, fluctuations in foreign currency exchange rates,
compliance with international regulations, approval and market requirements, and
volatility of international economic conditions. One or more of these factors
may have a material adverse effect on the Company's future international sales
and, consequently, on the Company's operating results.
PRODUCT RETURNS, PRICE PROTECTION AND WARRANTY CLAIMS
Like other manufacturers of computer products, Hayes is exposed to the risk
of product returns from wholesale distributors, resellers and retailers, either
through contractual stock rotation privileges or as a result of Hayes' interest
in assisting customers in balancing inventories. Although Hayes attempts to
monitor and manage the volume of sales to wholesale distributors and retailers,
large shipments in anticipation of sales by wholesale distributors and retailers
could lead to substantial overstocking by Hayes' wholesale distributors and lead
to higher than normal returns. Moreover, the risk of product returns may
increase if demand for Hayes product declines. When Hayes reduces its prices,
Hayes credits its wholesale distributors and retailers for the difference
between the purchase price of products remaining in their inventory and Hayes'
reduced price for such products on terms negotiated with Hayes, the result of
which could have a material adverse effect on Hayes' operating results.
Hayes' standard two-year warranty permits customers to return any product
for repair or replacement if the product does not perform as warranted. In the
U.S. and Canada only, Hayes also offers its customers the option of an
additional three-year warranty upon completion of a registration card within 90
days of purchase. Some of the Practical Peripheral modems previously sold have a
lifetime warranty. Hayes to date has not encountered material warranty claims or
liabilities. Hayes has established and the Company following the Merger will
establish reserves for product returns, price protection and warranty claims
which management believes are adequate. There can be no assurance that product
returns, price protection and warranty claims will not have a material adverse
effect on future operating results of the Company.
DEPENDENCE ON SUPPLIERS
Material and components for the Company's products are purchased from
outside suppliers. While most components are available from several suppliers, a
few are provided from sole-source vendors. The Company believes that in most
cases alternative sources of supply could be obtained within a reasonable time
period; however, an interruption in the supply of such components could have a
temporary adverse effect on the Company's operations. The major components of
Hayes' products include silicon chips, printed circuit boards, microprocessors,
chipsets and other integrated circuits. Most of the components used in Hayes'
modem products are available from multiple sources. However, certain components
used in Hayes' products are
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custom manufactured and currently obtained from single sources. In addition,
although readily interchangeable items are available from several suppliers,
many of the components that are incorporated in Hayes' products, such as
integrated circuits and discrete components, are in limited supply and are
allocated throughout the industry. Like others in the computer industry, Hayes
has, from time to time, experienced difficulty in obtaining certain components.
While Hayes has entered into supply arrangements with certain suppliers,
including Lucent Technologies, Inc. and Rockwell International Corporation
("Rockwell") regarding a supply of chips and chipsets, there can be no assurance
following the Merger that these suppliers will continue to meet the Company's
requirements. There can be no assurance that severe shortages of components will
not occur in the future which could increase the cost or delay the shipment of
products and have a material adverse effect on the Company's operating results.
SALES CHANNEL RISKS
Hayes sells its products primarily through national, regional and
international wholesale distributors, national corporate resellers, computer
superstores and mail order. Sales to wholesale distributors accounted for a
significant share of Hayes net sales in fiscal 1996. The personal computer
distribution industry has been characterized by rapid change, including
consolidations and financial difficulties of wholesale distributors and the
emergence of alternative distribution channels. Hayes is dependent upon the
continued viability and financial stability of its wholesale distributors. The
loss or ineffectiveness of any of Hayes' largest wholesale distributors or a
number of its smaller wholesale distributors could have a material adverse
effect on the Company's operating results following the Merger. In addition, an
increasing number of vendors are competing for access to wholesale distributors
which could adversely affect the Company's ability to maintain Hayes' existing
relationships with its wholesale distributors or could negatively impact sales
to such distributors.
Hayes is dependent on the continued viability and financial stability of
its national resellers. The loss or ineffectiveness of any of Hayes' largest
national resellers or a number of its smaller national resellers could have a
material adverse effect on the Company's operating results following the Merger.
Due to increased competition for limited shelf space, retailers are
increasingly in a better position to negotiate favorable terms of sale,
including price discounts and product return policies. There can be no assurance
that Hayes will be able to sustain or increase its sales to retailers, which
could have a material adverse effect on the Company's operating results
following the Merger.
The OEM modem market has grown to approximately 50% of the overall modem
market. Hayes has not participated substantially in the OEM modem market for the
last two years and Hayes can give no assurances that it will be able to
successfully penetrate this market.
CONDITIONS TO THE MERGER
The obligations of the Company and Hayes to effect the Merger are subject
to a number of conditions including the receipt by each party of all consents,
assignments, waivers, authorizations or other certificates of third parties for
the continuation in full force and effect of any and all material contracts and
leases. Hayes has not received a consent from its lender CIT Group/Credit
Finance, Inc. ("CIT") for the continuation in full force and effect of Hayes'
credit facility with CIT following the Merger. If CIT does not consent to the
continuation of its credit facility following the Merger, each of Hayes and the
Company may determine to not effect the Merger. If the Merger is consummated
without CIT's consent to continue its credit facility with the Company, it will
be necessary for the Company to pursue additional equity or debt financing to
meet its cash requirements. See "HAYES' MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital
Resources."
IMPLEMENTATION OF NEW INFORMATION SYSTEM
Hayes is currently involved in the replacement of its information systems
with software from Oracle Corporation which will be completed after the
Effective Time of the Merger. The implementation of a new information system
could cause disruption to work efficiency. There can be no assurance that the
project will
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be completed within the budgeted time schedule or costs. To the extent that the
project is not completed timely or within the budgeted costs, the Company's
business and financial condition could be adversely affected.
ELECTION OF DIRECTORS AND OTHER STOCKHOLDER MATTERS
As a result of the Shareholders' Agreement among each of the Hayes
Shareholders and Mr. Howard, certain shareholders who will own substantially
more than 50% of the Common Stock will control the election of a majority of the
directors, such agreement to remain effective for so long as certain
stockholders own at least ten (10%) percent of the outstanding shares of the
Company. Such persons will also be able to control the taking of action which
requires approval by stockholders, since they will own more than a majority of
the outstanding shares of the Company.
THE ANNUAL MEETING
DATE AND PLACE; RECORD DATE
This Proxy Statement/Prospectus is provided to the stockholders of Common
Stock in connection with the solicitation of proxies by the Company Board for
use at the Annual Meeting to be held on December , 1997 at a.m./p.m.
local time at 1300 Quince Orchard Blvd., Gaithersburg, Maryland, and at any
adjournments or postponements thereof.
Representatives of Deloitte & Touche LLP, the Company's independent
auditors, are expected to be present at the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to stockholders on or about November , 1997.
PURPOSE OF THE ANNUAL MEETING
To consider and vote upon (i) the Proposal to (x) approve and adopt the
Merger Agreement, among Access Beyond, Hayes, and the Subsidiary, and the
transactions contemplated thereby, (y) amend the Company's Certificate of
Incorporation as described below and (z) elect two members of the Board of
Directors of the Company and (ii) the ratification of the appointment of
Deloitte & Touche LLP as independent auditors of the Company for the fiscal year
ending July 31, 1998. Pursuant to the Merger Agreement, the Subsidiary will be
merged with and into Hayes, and Hayes will become a wholly-owned subsidiary of
Access Beyond. In the Merger, (a) all holders of Hayes (i) common stock will
have the right to receive for each such share such number of shares of Common
Stock as is equal to the Conversion Ratio, (ii) Series A Preferred Stock will
have the right to receive for each such share such number shares of Common Stock
as is equal to the Conversion Ratio multiplied by the number of shares of Hayes
common stock into which such shares of Hayes Series A Preferred Stock is then
convertible, and (iii) Series B Preferred Stock will have the right to receive
for each such share such number of shares of Series A Preferred Stock as is
equal to the Conversion Ratio multiplied by the number of shares of Hayes common
stock into which such shares of Hayes Series B Preferred Stock is then
convertible; (b) the Company will amend its certificate of incorporation to (i)
change its name to Hayes Communications Inc., (ii) increase the number of
authorized shares of common stock, and (iii) create the Series A Preferred
Stock; (c) the Board of Directors of the Company will be increased to seven
members, five of whom will be designated by the Hayes Shareholders; and (d) the
Company will assume the obligations of Hayes under the Hayes Option Plan. After
giving effect to the Merger, the Hayes Shareholders will own approximately 79%
of the issued and outstanding equity securities of the Company. After giving
effect to the Merger and assuming that (x) all then vested and exercisable Hayes
Options and Hayes Warrants are exercised and (y) none of the then vested and
exercisable options to purchase the Company's Common Stock are exercised, the
Hayes Shareholders will own approximately 80.15% of the issued and outstanding
securities of the Company. A copy of the Merger
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Agreement is attached hereto as Exhibit A. A copy of the Company's Amended and
Restated Certificate of Incorporation is attached hereto as Exhibit C.
The Conversion Ratio is equal to the percentage ownership immediately
following the closing of the Merger of the Securities that the holders of all
classes of Hayes capital stock, in the aggregate, are entitled to receive in the
Merger (which the Company and Hayes have agreed is 79%), multiplied by a ratio,
the numerator of which is the number of shares of the Securities issued and
outstanding on a fully diluted basis (excluding stock options) prior to the
Effective Date, and the denominator of which is .21, all divided by the number
of shares of Hayes capital stock issued and outstanding on a fully diluted basis
(excluding all outstanding options and warrants) prior to the Effective Date.
THE COMPANY BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY. SEE "THE MERGER -- THE COMPANY'S REASONS FOR THE MERGER."
STOCKHOLDERS ENTITLED TO VOTE; REQUISITE APPROVAL
The Company Board has fixed the close of business on , 1997 as
the record date (the "Record Date") for the determination of holders of the
Common Stock entitled to notice of and to vote at the Annual Meeting. A form of
proxy is being provided to the holders of Common Stock with this Proxy
Statement/Prospectus. For information with respect to the execution and the
revocation of proxies, see
"-- Proxies." On the Record Date, there were 12,495,291 shares of Common Stock
(held by approximately holders of record) issued and outstanding. The
Common Stock is the only class of voting stock of the Company currently issued
and outstanding. Each holder of Common Stock on the Record Date is entitled to
cast one vote per share at the Annual Meeting, exercisable in person or by
properly executed proxy. The presence of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting, in
person or by properly executed proxy, is necessary to constitute a quorum.
Approval and adoption of the Merger Agreement and the transactions
contemplated thereby, all of the amendments to the Certificate of Incorporation
and the election of directors will be voted on by the Company's stockholders as
a single proposal. Therefore, failure to obtain the requisite stockholder
approval will result in the abandonment of the Merger, no change to the
Certificate of Incorporation and no vote for the directors. The Company or Hayes
may be entitled to a breakup fee in certain circumstances. See "The Merger
Agreement -- Termination; Effect of Termination."
As of the Record Date, directors and executive officers of the Company and
their affiliates as a group held shares representing 23.0% of the votes entitled
to be cast by holders of the Company's capital stock at the Annual Meeting. At
the Annual Meeting, abstentions will be considered shares present for purposes
of determining whether a quorum is present and, therefore, will have the same
legal effect as a vote against the proposal. Broker non-votes will be considered
as shares not entitled to vote and will, therefore, not be considered in the
tabulation of votes.
Under Delaware law, the affirmative vote of a majority of the votes cast at
the Annual Meeting by the holders of Common Stock entitled to vote thereon is
required to amend the Company's Certificate of Incorporation as provided in the
Merger Agreement. In addition, the ratification of the appointment of Deloitte &
Touche LLP as independent auditors of the Company for the fiscal year ending
July 31, 1998 requires the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy at the Annual Meeting.
Because of the number of shares of Common Stock to be issued in the Merger,
NASDAQ/NMS requires the Company to obtain stockholder approval of the Merger.
Under the rules and regulations of NASDAQ/NMS, the affirmative vote of a
majority of the votes cast at the Annual Meeting by the holders of Common Stock
entitled to vote thereon is required to approve and adopt the Merger Agreement.
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PROXIES
All shares represented by properly executed proxies will, unless such
proxies have previously been revoked, be voted at the Annual Meeting in
accordance with the directions on the proxies. A proxy may be revoked at any
time prior to final tabulation of the votes at the Meeting. Stockholders may
revoke proxies by written notice to the Secretary of the Company, by delivery of
a proxy bearing a later date, or by personally appearing at the Annual Meeting
and casting a contrary vote. If no direction is indicated, the shares
represented by properly executed proxies will be voted in favor of the Merger
and in favor of the ratification of the appointment of the independent auditors.
The persons named in the proxies will have discretionary authority to vote all
proxies with respect to additional matters that are properly presented for
action at the Annual Meeting.
The proxy solicitation is made by and on behalf of the Company Board.
Solicitation of proxies for use at the Annual Meeting may be made in person or
by mail, telephone or telegram, by officers and regular employees of the
Company. Such persons will receive no additional compensation for any
solicitation activities. Copies of solicitation materials will be furnished to
banks, brokerage houses, fiduciaries and custodians holding in their names
shares of Common Stock beneficially owned by others to forward to such
beneficial owners. The Company may reimburse persons representing beneficial
owners of Common Stock for their costs of forwarding solicitation materials to
such beneficial owners. The Company and Hayes will share equally all fees and
expenses, other than attorneys' fees, incurred in connection with the printing
and filing of this Proxy Statement/Prospectus, and the Company will bear the
entire cost of its financial advisor, DLJ, the solicitation of proxies,
including the mailing of this Proxy Statement/Prospectus, the proxy card and any
additional information furnished to stockholders.
ITEM 1
THE MERGER
BACKGROUND OF THE MERGER
Penril and Hayes have had a long working relationship. Since October 1994,
Penril and Hayes have entered into a series of agreements, including a
Manufacturing and Purchase Agreement pursuant to which Penril developed and
manufactured certain products for Hayes known as the CXS/VCP products as well as
a Technology Development Agreement and Technology License Agreement.
In October 1996, Penril entered into agreements with Hayes, which were
assigned by Penril to Access Beyond, for the sale by Penril to Hayes on an OEM
basis of the Company's remote access products and for the manufacture by Hayes
of such products upon achievement by Hayes of certain milestones. The OEM
Agreement further provided that the Company would be permitted to purchase from
Hayes or Hayes' suppliers various parts and components for use in the Company's
products, at the same cost as paid by Hayes, to the extent allowed by the
suppliers.
This business relationship and resulting mutual familiarity with the
product line, manufacturing capability, engineering skills and distribution
channels created the opportunity for the two companies to explore whether
advantages could be realized by merging their businesses in lieu of Hayes
reselling the Company's products lines. In addition, the Company was concerned
about the length of time that it was encountering in increasing its distribution
of products through its channels as well as by various operating expenses being
higher than desired in light of the revenue level.
Mr. Hayes approached Mr. Howard to discuss the possibility of merging the
two companies, together with a third company, during the months of January and
February 1997. These conversations were preliminary and inconclusive. Over the
next several months Hayes considered the possibility of merging alone with the
third company. After Hayes determined not to pursue a merger with the third
company, Hayes engaged in negotiations with another potential merger candidate,
which occurred during April, May and June, 1997. These discussions were
terminated in mid-June.
In late June 1997, each company reviewed the business plans and financial
statements of the other with their respective financial advisors and held
general conversations regarding merger possibilities. During July 2 and 3, 1997
Messrs. Hayes and Howard met, together with their companies' respective legal
and financial
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advisors and reached conceptual agreement on merger terms. Each party made a
commitment to seek approval of their respective Boards of Directors to the
proposed transaction. Over the next few weeks, after consultation with each
company's Board, key management and their legal, financial and accounting
advisors, the final terms of the Merger Agreement were negotiated, resulting in
a definitive agreement being executed on July 29, 1997. During the following
thirty days, each company performed a comprehensive due diligence review of the
other, which each determined to be satisfactory, and the Company received a
fairness opinion from its financial advisor, DLJ, stating that as of such date
the Merger was fair to the Company and its stockholders from a financial point
of view with respect to the Conversion Ratio.
THE COMPANY'S REASONS FOR THE MERGER
The Company Board has determined that the Merger is fair to, and in the
best interests of, the Company and its stockholders, and has unanimously
approved the Merger and unanimously recommends that Company stockholders vote
FOR the Proposal.
During fiscal 1997 the emergence of new competitors and several
consolidations in the Company's industry contributed to concern over whether the
Company had sufficient resources to compete effectively. The Company's
management believes that Hayes' world wide brand name, global distribution
system and low cost manufacturing capabilities will enable the Company's remote
access products to be brought to market sooner, on a broader basis and with
lowered product costs. The Company's management also believes that the Merger
will produce significant consolidation and cost-cutting opportunities. The
Company Board believes that the Merger will provide significant value to its
stockholders and offers opportunities for growth using the manufacturing
expertise, distribution channels and technology available from Hayes. The
Company Board considered a number of potential benefits in reaching its
decision, including (a) the ability to have its products manufactured cost
effectively, (b) the ability to have its products quickly distributed through
distribution channels significantly greater than those of the Company, (c)
obtaining the experience and expertise of engineers and design specialists to
help advance the Company's business and technology, (d) the financial condition,
results of operations and prospects of the Company in the absence of a business
combination or similar transaction and (e) the terms and conditions of the
Merger Agreement, which the Company Board concluded to be advisable and fair to
the Company and its stockholders in light of the nature of the transaction with
Hayes and which led the Company Board to conclude that, in its opinion, there is
a high likelihood of the Merger being consummated.
The Company Board also considered the risks relating to the Merger,
including (i) the risk that the benefits sought in the Merger would not be fully
achieved, (ii) the risk that the Merger would not be consummated, and (iii)
other risks described under "RISK FACTORS."
The decision of the Company Board was conditioned upon, among other things,
the Company receiving an opinion from its financial advisor, DLJ, as to the
fairness of the Merger to the Company and its stockholders from a financial
point of view of the Conversion Ratio, which opinion was received on August 26,
1997.
OPINION OF DLJ
In its role as financial adviser to the Company Board, DLJ was asked to
render an opinion to the Company Board as to the fairness, from a financial
point of view, of the Conversion Ratio to the holders of Access Beyond Common
Stock, pursuant to the terms of the Agreement. On August 26, 1997, DLJ delivered
to the Company Board its written opinion (the "DLJ Opinion") to the effect that,
as of the date of such opinion and based upon and subject to the assumptions,
limitations and qualifications set forth in such opinion, the Conversion Ratio
was fair to the holders of Access Beyond Common Stock from a financial point of
view.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX B. ACCESS BEYOND'S
STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION CAREFULLY IN ITS ENTIRETY FOR
INFORMATION WITH RESPECT TO THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER
MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DLJ IN CONNECTION WITH SUCH
OPINION. THE SUMMARY OF THE DLJ OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
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The Company Board selected DLJ as its financial advisor based on DLJ's
qualifications, expertise and reputation. In addition, DLJ, as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
The DLJ Opinion was prepared for the Company Board and is directed only to
the fairness of the Conversion Ratio to holders of Access Beyond Common Stock
from a financial point of view. The DLJ Opinion does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
Access Beyond Annual Meeting nor does it constitute an opinion as to the price
at which the Common Stock will actually trade at any time. The Merger was
negotiated at arm's length by Access Beyond and Hayes. The Company Board
requested that DLJ not solicit, and DLJ did not solicit, the interest of any
other party.
In arriving at its opinion, DLJ reviewed the Merger Agreement, the terms of
the Series A Preferred Stock and the Investor Letter of Intent. DLJ also
reviewed financial and other information that was publicly available or
furnished to it by or on behalf of Access Beyond and Hayes, including
information provided during discussions with their respective managements.
Included in the information provided during discussions with the respective
managements were certain financial projections for the Company for the period
beginning August 1, 1997 and ending July 31, 1998 prepared by the management of
the Company and certain financial projections for Hayes for the period beginning
August 1, 1997 and ending December 31, 2001, prepared by the management of
Hayes. In addition, DLJ reviewed certain historical financial information with
respect to Access Beyond and Hayes; compared certain historical financial and
securities data of Access Beyond with selected companies whose securities are
traded in public markets; reviewed the historical stock prices and trading
volumes of Access Beyond's Common Stock; reviewed prices and premiums paid in
certain other business combinations and conducted such other financial studies,
analyses and investigations as DLJ deemed appropriate for purposes of rendering
its opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, and that was provided to it by Access
Beyond and Hayes or their respective representatives, or that was otherwise
reviewed by it. With respect to the financial projections (including projections
as to Access Beyond's liquidity) supplied to DLJ, it assumed that they had been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of Access Beyond and Hayes as to the future
operating and financial performance of Access Beyond and Hayes, respectively.
DLJ has not assumed any responsibility for making any independent evaluation of
Access Beyond's assets or liabilities or for making an independent verification
of any of the information reviewed by DLJ. DLJ has relied as to various legal
matters on advice of counsel to Access Beyond and the Access Beyond board of
directors and has assumed that the tax consequences of the transaction are as
set forth in this Proxy Statement/Prospectus.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. It should be understood that, although
subsequent developments may affect its opinions, DLJ has not updated, reviewed
or reaffirmed, and has no obligation to update, review or reaffirm, the DLJ
Opinion.
The following is a summary of the presentation made by DLJ to the Access
Beyond board of directors at its August 26, 1997 board meeting with respect to
the material analyses underlying the DLJ Opinion.
ANALYSIS OF ACCESS BEYOND
Liquidity Analysis. Based upon the Company's draft year-end financial
statements, for the quarter ended July 31, 1997, Access Beyond had an operating
loss of $4.1 million, and, as of July 31, 1997, Access Beyond had approximately
$578,000 of cash and limited borrowing capacity. Access Beyond's management
advised DLJ that it was pursuing capital sources including the repayment of
certain notes receivable and attempting to obtain a credit facility; however,
Access Beyond's management informed DLJ that it was uncertain as to the timing
and likelihood of the receipt of any such funds. Management's liquidity
assessment indicated that under the then current circumstances and as projected
by management for fiscal year 1998, Access Beyond would require an additional
$2.9 million of liquidity for the periods through July 1998.
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In addition, management intended to lower operating costs by significantly
reducing nonmanufacturing personnel and reducing certain other operating
expenses. Under the revised liquidity assessment reflecting such reductions,
Access Beyond's cash balance was projected to decrease to $52,000 by December
31, 1997.
Analysis of Certain Other Publicly Traded Companies. DLJ compared selected
historical share prices, earnings, and operating and financial ratios for Access
Beyond to the corresponding data and ratios of certain other companies whose
securities are publicly traded, which companies were selected for comparison
because as a group they possess business, operating and financial
characteristics that are generally representative of companies in the industry
in which Access Beyond operates. The selected companies were divided into the
following two categories: small-capitalization comparable companies, which
consisted of Shiva Corp. (the "Small-Cap Public Comparable"), and
large-capitalization comparable companies, which consisted of Ascend
Communications, Bay Networks, Cisco Systems and 3Com Corp. (the "Large-Cap
Public Comparables"). Such data and ratios included Enterprise Value (defined as
the product of the stock price and total shares outstanding plus Net Debt (debt
and preferred stock (less cash and cash equivalents)) as a multiple of gross
revenue and earnings before interest, taxes, depreciation and amortization
("EBITDA") for the latest reported twelve months ("LTM"). Additional ratios
examined included the ratios of current stock prices to projected calendar year
1998 net income (determined on the basis of estimates provided by selected
investment banking firms). This analysis indicated that the multiples of
Enterprise Value to LTM revenues and LTM EBITDA for the Small-Cap Public
Comparable were 1.4x and 21.4x, respectively. The multiples of equity value to
projected calendar year 1998 net income for the Small-Cap Public Comparable was
determined to be not meaningful. The analysis indicated that the multiples of
Enterprise Value to LTM revenues and LTM EBITDA for the Large-Cap Public
Comparables ranged from 3.3x to 8.6x and 15.2x to 25.1x, respectively, resulting
in an average multiple of 5.6x and 21.7x, respectively. The multiples of equity
value to projected calendar year 1998 net income for the Large-Cap Public
Comparables ranged from 19.2x to 33.4x, resulting in an average multiple of
26.2x. DLJ then derived a valuation range for Access Beyond by concentrating on
Enterprise Value as a multiple of revenues and net income multiples, which DLJ
concluded to be the most relevant bases for valuing publicly traded remote
access and network equipment companies, and by comparing Access Beyond's
businesses and performance to the Small-Cap Public Comparable and Large-Cap
Public Comparables. DLJ determined that the relevant range of Enterprise Value
to LTM revenues was 1.5x to 2.5x, principally reflecting Access Beyond's small
market capitalization. DLJ then calculated the imputed valuation ranges for
Access Beyond by applying these multiples to Access Beyond's reported LTM
revenues from continuing operations, which yielded a range of equity values for
Access Beyond of $1.56 to $2.56 per share. DLJ determined that the relevant
range of projected calendar year 1998 net income multiples was 24.0x to 28.0x.
DLJ then calculated the imputed valuation ranges for Access Beyond by applying
these multiples to the projected calendar year 1998 net income provided by
Access Beyond management, which yielded a range of equity values for Access
Beyond of $4.65 to $5.43 per share.
Gandalf Transaction Analysis. DLJ also analyzed the acquisition of the
remote access business of Gandalf Technologies, Inc. ("Gandalf") by Mitel
Corporation announced August 8, 1997 (the "Gandalf Transaction"). Gandalf was a
small-capitalization developer of remote access products in financial distress
and ultimately sold its remote access product business for $14.9 million. DLJ
believes the Gandalf Transaction to be a closely analogous situation to that of
Access Beyond, given Access Beyond's liquidity constraints and small
market-capitalization. The multiple of purchase price to LTM revenues for the
Gandalf Transaction was 0.4x. DLJ calculated the imputed valuation for Access
Beyond by applying the multiple of purchase price to LTM revenues for the
Gandalf Transaction to Access Beyond's LTM revenues from continuing operations,
which yielded an equity value of $0.44 per share.
Comparative Transaction Analysis. DLJ reviewed publicly available
information for selected transactions completed involving the combination of
remote access device manufacturers. The comparative transactions reviewed (the
"Comparative Transactions") included 6 transactions that were proposed or
completed. The Comparative Transactions included the following acquisitions:
Gandalf Technologies product business by Mitel Corp., Microcom, Inc. by Compaq
Computers, Crosscom Corp. by OlicomAS, Telebit Corp. by Cisco Systems, Network
Express, Inc. by Cabletron Systems, Inc. and Xylogics, Inc. by Bay Networks,
Inc. The Comparative Transactions selected are not intended to represent a
complete list of remote-access manufacturer transactions that have occurred;
rather, they include only transactions involving
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combinations of companies with operating size or financial performance
characteristics believed to be comparable to Access Beyond's characteristics.
DLJ reviewed the consideration paid in such transactions in terms of the offer
price per share multiplied by total common shares outstanding ("Equity Purchase
Price") and Equity Purchase Price plus total debt less cash and cash equivalents
("Target Enterprise Price"), in each case, as a multiple of LTM gross revenue
and LTM EBITDA. For the Comparative Transactions, the ratios of Target
Enterprise Price to LTM revenues and LTM EBITDA ranged from 0.9x to 5.1x and
9.8x to 31.0x, respectively, resulting in an average multiple of 2.6x and 18.8x,
respectively. DLJ concluded that multiples of LTM revenues provided the most
relevant measure for evaluating the Comparative Transactions and that the
appropriate range of LTM revenue multiples was 2.2 to 3.1x. DLJ then calculated
the imputed valuation ranges for Access Beyond by applying its LTM revenues from
continuing operations to the relevant multiple ranges. This analysis yielded a
range of Enterprise Values for Access Beyond of $27.5 million to $38.8 million,
which results in an equity value range of $2.25 to $3.15 per share.
ANALYSIS OF HAYES
Analysis of Certain Publicly Traded Companies. DLJ compared selected
historical share prices, earnings, and operating and financial ratios for Hayes
to the corresponding data and ratios of certain companies whose securities are
publicly traded, which companies were selected for comparison because as a group
they possess business, operating and financial characteristics that are
generally representative of companies in the industry in which Hayes operates.
The selected companies were divided into the following three categories: modem
manufacturers, which included Boca Research, Global Village Communications and
Zoom Telephonics (the "Modem Public Comparables"); remote access/network
equipment manufacturers, which included Ascend Communications, Bay Networks,
Cisco Systems, 3Com Corp. and Shiva Corp. (the "Remote Access Public
Comparables"); and xDSL modem manufacturers, which included Amati
Communications, Aware, Pairgain Technologies and Westell Technologies (the "xDSL
Public Comparables"). Such data and ratios included Enterprise Value as a
multiple of LTM gross revenue and LTM EBITDA. Additional ratios examined
included the ratios of current stock prices to projected calendar year 1998 net
income (determined on the basis of estimates provided by selected investment
banking firms). This analysis indicated that the multiple of Enterprise Value to
LTM revenues for Modem Public Comparables ranged from 0.5x to 0.6x, resulting in
average multiple of 0.6x. The multiple of Enterprise Value to LTM EBITDA for
Modem Public Comparables was not meaningful due to losses throughout the
industry over the LTM. The multiple of equity value to projected calendar year
1998 net income for Modem Public Comparables ranged from 19.2x to 22.9x,
resulting in a average multiple of 21.0x. The analysis indicated that the
multiples of Enterprise Value to LTM revenues and LTM EBITDA for Remote Access
Public Comparables ranged from 1.4x to 8.6x and 15.2x to 25.1x, respectively,
resulting in an average multiple of 4.8x and 21.7x, respectively. The multiple
of equity value to projected calendar year 1998 net income for Remote Access
Public Comparables ranged from 19.2x to 33.4x, resulting in an average multiple
of 26.2x. The analysis indicated that the multiple of Enterprise Value to LTM
revenues for xDSL Public Comparables ranged from 6.2x to 30.4x, resulting in an
average of 17.3x. The multiple of LTM EBITDA for xDSL Public Comparables was
20.4x, since only one company had positive EBITDA. The multiple of equity value
to projected calendar year 1998 net income for xDSL Public Comparables ranged
from 32.1x to 84.2x, resulting in an average multiple of 58.1x. DLJ derived a
valuation range for Hayes by concentrating on Enterprise Value as a multiple of
revenues and net income multiples, and by comparing Hayes' businesses and
performance to the Modem Public Comparables, Remote Access Public Comparables
and the xDSL Public Comparables. DLJ concluded that the appropriate range of
ratios of Enterprise Value to LTM revenues was 1.2x to 1.8x, a premium to the
Modem Public Comparables due to Hayes' xDSL technology and shift in business
focus to the remote access business. DLJ then calculated the imputed valuation
ranges for Hayes by applying these multiples to Hayes' reported LTM revenues,
which yielded a range of equity values for Hayes of $214.4 million to $338.5
million. DLJ concluded that the appropriate range of projected calendar year
1998 net income multiples was 21.0x to 29.0x. DLJ then calculated the imputed
valuation ranges for Hayes by applying these multiples to the projected calendar
year 1998 net income provided by Hayes management, which yielded a range of
equity values for Hayes of $187.1 million to $258.4 million.
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Transaction Analysis. DLJ reviewed publicly available information for
selected transactions completed involving the combination of modem
manufacturers. The comparative transactions reviewed (the "Hayes Comparative
Transactions") included 3 transactions that were proposed or completed. The
Hayes Comparative Transactions included the following acquisitions: U.S.
Robotics by 3Com Corp., Penril DataComm Networks, by Bay Networks and Megahertz
Holding Corp. by U.S. Robotics. The Hayes Comparative Transactions selected are
not intended to represent a complete list of modem manufacturer transactions
that have occurred; rather, they include only transactions involving
combinations of companies with operating size or financial performance
characteristics believed to be comparable to Hayes' characteristics. DLJ
reviewed the consideration paid in such transactions in terms of Target
Enterprise Price as a multiple of LTM gross revenue and LTM EBITDA. For the
Hayes Comparative Transactions, the ratios of Target Enterprise Price to LTM
revenues and LTM EBITDA ranged from 2.5x to 2.6x and 14.0x to 19.8x,
respectively, resulting in an average multiple of 2.6x and 16.9x, respectively.
DLJ concluded that the multiples of LTM revenues provided the most relevant
measure for evaluating the Hayes Comparative Transactions and that the
appropriate range of LTM revenue multiples was 2.0 to 2.6x. DLJ then calculated
the imputed valuation ranges for Hayes by applying its LTM revenues to the
relevant multiple ranges. This analysis yielded a range of Enterprise Values for
Hayes of $413.5 million to $537.6 million, which results in an equity value
range of $379.8 million to $503.9 million after subtracting $33.3 million of net
debt.
New Investment Analysis. Prior to delivering the DLJ Opinion, DLJ reviewed
a draft of the Investor Letter of Intent for the $30.0 million new money
investment in Hayes (the "Investment"). DLJ did not participate in negotiating
the Investment and has not reviewed the Investment since delivering the DLJ
Opinion. For the purposes of the opinion, DLJ has assumed that either (i) the
contemplated equity purchase will be completed on the terms set forth in the
Investor Letter of Intent or (ii) alternative sources of sufficient liquidity
will be available to Hayes, on a timely basis, that would not materially affect
the Conversion Ratio in a manner adverse to the Company as compared with the
Conversion Ratio that is anticipated to result from the contemplated equity
purchase pursuant to the Investor Letter of Intent.
Discounted Cash Flow Analysis. DLJ also performed a discounted cash flow
analysis of Hayes using a discount rate approach. Using the information set
forth in the Hayes forecast, DLJ calculated the estimated "Free Cash Flow" based
on projected unleveraged operating income adjusted for: (i) taxes; (ii) certain
projected non-cash items (e.g., depreciation and amortization); (iii) projected
changes in non-cash working capital; and (iv) projected capital expenditures.
Using the discount rate approach, DLJ analyzed Hayes' forecast and
discounted the stream of free cash flows from 1998 to fiscal year 2001 provided
in such projections back to December 31, 1997 using discount rates ranging from
15% to 30%. To estimate the residual value of Access Beyond at the end of the
forecast period, DLJ applied terminal multiples of 8.0x to 16.0x to the
projected year 2001 EBITDA and discounted such value back to December 31, 1997
using discount rates ranging from 15% to 30%. DLJ then summed the present value
of the free cash flows and the present value of the residual value to derive a
range of implied enterprise values for Hayes of $150.4 million to $477.6
million. The range of implied enterprise values of Hayes was then adjusted for
debt (net of cash and cash equivalents of $5.0 million) by deducting $11.3
million from implied Enterprise Value to yield an implied equity value of Hayes
of $139.1 million to $466.3 million.
ANALYSIS OF COMBINED ENTITY
Contribution Analysis. DLJ reviewed the relative contribution of Access
Beyond and Hayes to certain operating and financial statistics for both the LTM
and projected for 1998. Over the LTM, Access Beyond contributed the following to
the pro forma combined entity: 5.7% of revenues, 11.3% of gross profit, 78.3% of
shareholders' equity excluding the Investment, 24.9% of shareholders' equity
including the Investment and 0.0% of the debt outstanding. For calendar year
1998, based on projections provided by management of each company, Access
Beyond's contribution to the pro forma combined entity is expected to be the
following: 8.6% of revenues, 13.7% of gross profit, 20.5% of operating income
and 21.4% of net income.
Accretion Analysis. DLJ reviewed the projected pro forma combined income
statement of Access Beyond and Hayes, including projected synergies. All
projections, including synergies, were provided by
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managements of Hayes and Access Beyond. Access Beyond's projected stand-alone
earnings per share ("EPS") for calendar year 1998 was $0.32. The projected pro
forma EPS of the combined entity, including the Investment, for calendar year
1998 was $0.38, which represents a premium of 17.9% to Access Beyond's projected
stand-alone EPS.
Analysis of Certain Publicly Traded Companies. DLJ compared LTM revenues
and projected 1998 net income, both with and without certain possible synergies
identified by Access Beyond and Hayes managements, for the pro forma combined
entity to the corresponding data and ratios of the Hayes Public Comparables
because as a group they possess business, operating and financial
characteristics that are generally representative of companies in the industry
in which the pro forma combined entity will operate. DLJ concluded that the
appropriate multiple range of Enterprise Value to LTM revenues was 1.2x to 1.8x,
given Hayes' xDSL technology and shift in business focus to the remote access
business solidified by the combination with Access Beyond. DLJ then calculated
the imputed valuation ranges for Access Beyond by applying these multiples to
the combined reported LTM revenues, which yielded a range of equity values for
the combined company of $230.1 million to $361.7 million. The implied value of
the equity to be received by Access Beyond shareholders in the Merger was $3.87
to $6.08 per share. DLJ concluded that the relevant range of projected calendar
year 1998 net income multiples was 21.0x to 29.0x. DLJ then calculated the
imputed valuation ranges for the combined company by applying these multiples to
the projected pro forma combined calendar year 1998 net income without synergies
but including the Investment, which yielded a range of equity values for the
combined company of $238.1 million to $328.7 million. The implied value of the
equity to be received by Access Beyond shareholders in the Merger was $3.62 to
$5.00 per share. DLJ then calculated the imputed valuation ranges for the
combined company by applying these multiples to the projected pro forma combined
calendar year 1998 net income with synergies and including the Investment, which
yielded a range of equity values for the combined company of $339.5 million to
$468.8 million. The implied value of the equity to be received by Access Beyond
shareholders in the Merger was $5.16 to $7.13 per share.
The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ, but describes, in summary form, the principal
elements of the presentation made by DLJ to the Access Beyond board of directors
on August 26, 1997. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Each of the analyses conducted by DLJ was carried out in the order
to provide a different perspective on the transaction and to add to the total
mix of information available. DLJ did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to fairness from a financial point of view. Accordingly,
notwithstanding the separate factors summarized above, DLJ believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses and
factors, could create an inadequate view of the evaluation process underlying
its opinion. In performing the analyses, DLJ made numerous assumptions with
respect to industry performance, business and economic conditions and other
markets. The analyses performed by DLJ are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses.
Pursuant to the terms of an engagement letter dated June 6, 1997, Access
Beyond has agreed to pay DLJ a retainer of $50,000, a fee of $350,000 upon the
delivery of the DLJ Opinion and an additional fee to be paid upon consummation
of the Merger equal to $1.0 million less the amounts paid with respect to the
retainer and fairness opinion fees. Access Beyond has also agreed to reimburse
DLJ promptly for all out-of-pocket expenses (including the reasonable fees and
out-of-pocket expenses of counsel) incurred by DLJ in connection with its
engagement, and to indemnify DLJ and certain related persons against certain
liabilities in connection with its engagement, including liabilities under the
federal securities law.
In the ordinary course of business, DLJ actively trades public securities,
which may include Access Beyond securities, for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
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HAYES' REASONS FOR THE MERGER
The Hayes Board has determined that the Merger is fair to and in the best
interests of Hayes and its shareholders, and unanimously approved the Merger
Agreement and the transactions contemplated thereby. The Hayes Board believes
that the Merger will provide value to its shareholders and offer opportunities
for growth using the expertise and technology available from the Company. In
reaching its decision to approve the Merger Agreement and the transactions
contemplated thereby, the Hayes Board considered several factors including (a)
the consideration to be received by the Hayes Shareholders, (b) the potential
for the Hayes Shareholders to hold shares of a public company, and, therefore,
obtain the possibility of a more active trading market of its investment than
that of a private company, (c) the terms and conditions of the Merger Agreement,
which the Hayes Board concluded to be advisable and fair to Hayes, and the
likelihood of the Merger being consummated, (d) the information relating to the
financial condition, results of operations and prospects of Hayes in the absence
of a business combination or similar transaction, and (e) the tax-free nature of
the exchange of Hayes' capital stock for the Company's capital stock. The Hayes
Board also considered the risks relating to the Merger including the risk that
the anticipated synergies would not be achieved and the risks associated
generally with the products of Hayes and the Company. The Hayes Board further
considered Hayes' and the Company's lack of profitable operations in the past
three years and the liquidity and capital resources of the combined companies
following the Merger. Hayes management also believes that the combination of the
two companies will reduce costs by eliminating redundant expenses, and realizing
certain economies of scale. The Merger will eliminate the existing vendor-buyer
relationship between the two companies, which Hayes management expects to
immediately improve margins for remote access products. The integration and
elimination of overlapping activities is expected to improve overall operating
results in the remote access product line. Hayes management also expects the
consolidation of R&D resources to reduce product development cycles and improve
time-to-market for new remote access products. Hayes management also believes
that the market for remote access products is beginning to experience
significant acceptance which Hayes management believes indicates potential rapid
growth opportunities in the general business application of the technology.
Hayes management expects the combined companies to take advantage of Hayes
distribution channels, thereby avoiding direct competition with established
remote access equipment vendors who principally serve large users such as
internet service providers, enabling the combined companies to realize
significant revenue growth opportunities in the global marketplace for remote
access products.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In considering the recommendation of the Company Board with
respect to the Merger Agreement, stockholders of the Company should be aware
that certain members of the Company Board and management have interests in the
Merger that are in addition to or different from the interests of stockholders
generally. Certain directors and executive officers of Hayes will also receive
benefits that differ from or are in addition to the benefits received by all
other Hayes Shareholders. In addition, in connection with the Merger, the
Company has agreed to treat Hayes stock options and warrants and Access Beyond
stock options in the manner described below.
Affiliate Agreements. All affiliates, as such term is defined in Rule 145
promulgated under the Securities Act, of Hayes have executed an Affiliate's
Agreement whereby each such affiliate has covenanted and agreed not to offer,
sell or otherwise dispose of any of the shares of Common Stock and/or Series A
Preferred Stock issued to such affiliate in the Merger in violation of the
Securities Act and Rule 145 promulgated thereunder, and will make no disposition
of such shares of the Company's Securities for 90 days after the Effective Date,
except for Dennis Hayes who has agreed to sell no more than $3.0 million of the
Company's Securities for an additional 180-day period thereafter.
Bonus Compensation; Options. Upon Closing of the Merger Messrs. Hayes and
Lam, each of whom is a director of Hayes, will be entitled to receive cash
bonuses of $450,000 and $275,000, respectively. Upon closing of the Merger,
pursuant to the terms of the present Employment Agreement between Mr. Howard and
the Company, Mr. Howard will be entitled to receive a cash payment equal to
$437,500. Mr. Howard has advised the Company that in lieu of receiving such cash
payment he will accept shares of Common Stock having a value equal to such
amount. In addition, Mr. Howard owns options to purchase 300,000 shares of
Common Stock under the Incentive Plan, which options will be repriced to market
as of the Effective Time if
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they expire unexercised. See "MANAGEMENT OF THE COMPANY -- Employment and
Consulting Agreements."
Employment Agreements. As of the Effective Time, the Company will enter
into the following employment agreements:
Dennis Hayes -- Pursuant to the terms of the Hayes Employment Agreement,
Mr. Hayes will be the Chairman of the Company. His annual base salary will be
$400,000 per year, with annual increases on each anniversary date of the
Effective Time directly proportional to any increase (but not decrease) in the
cost of living as reflected by the Consumer Price Index for Urban Wage Earners
and Clerical Workers -- All Items ("CPI") published by the Bureau of Labor
Statistics. Mr. Hayes will also be eligible for a personal incentive cash bonus
up to $500,000 per year based on attaining personal goals approved by the
Company Board in respect of his duties on behalf of the Company and a corporate
incentive bonus in the maximum amount of $300,000 per year upon the Company
attaining goals established by the Company Board. In addition, Mr. Hayes will
receive on January 1 of each year during the term of the Hayes Employment
Agreement ten-year stock options to purchase 200,000 shares of Common Stock with
an exercise price of fair market value on the date of award. Twenty-five percent
(25%) of the options will vest on the date of award, and an additional 25% will
vest on December 31 of such year and each ensuing year. If Mr. Hayes voluntarily
resigns his employment (except in the case of a breach of the Hayes Employment
Agreement by the Company, or in the event of a "change in control" as such term
is defined in the Hayes Employment Agreement) or is discharged for "Cause" as
such term is defined in the Hayes Employment Agreement, then no further vesting
will occur and all unvested options will terminate immediately upon termination
of employment. Mr. Hayes must exercise any vested options after such termination
of employment within the earlier to occur of five years after the date of
termination or the expiration of the 10-year term of the options. Mr. Hayes will
also receive certain short-term and long-term disability benefits under the
Company's respective disability plans and a car and driver on a full-time basis.
The Company will also pay the premiums on the life insurance policy of Mr.
Hayes. Mr. Hayes will receive a severance payment in an amount equal to
three-twelfths (3/12) of his base salary in the event of Mr. Hayes' death during
the term of the Hayes Employment Agreement. Mr. Hayes has agreed not to compete
with the Company and not to solicit the Company's employees during the term of
his employment and for 18 months thereafter.
Ronald Howard -- Pursuant to the terms of the Howard Employment Agreement,
Mr. Howard will be the Vice Chairman of the Company and Executive Vice
President -- Business Development. His annual base salary will be $330,000 per
year, with annual increases to be reviewed by the Company Board. Mr. Howard will
also be eligible for a cash bonus in an amount calculated by dividing his base
salary by 70% and subtracting his base salary from the resulting amount (the
"Bonus Amount"). Such Bonus Amount shall consist of two parts: (a) a personal
incentive bonus in the maximum amount of 30% of the Bonus Amount, based on
attaining personal goals established by the Compensation Committee in respect of
Mr. Howard's duties on behalf of the Company and (b) a corporate incentive bonus
in the maximum amount of 70% of the Bonus Amount, based on the Company's
attaining such goals, objectives and benchmarks as shall be set by the Company
Board. In addition, Mr. Howard will receive on January 1 of each year during the
term, ten-year stock options to purchase 150,000 shares of Common Stock with an
exercise price of fair market value on the date of award. Twenty-five percent
(25%) of the options will vest on the date of award, and an additional 25% will
vest on December 31 of such year and each ensuing year. If Mr. Howard
voluntarily resigns his employment (except in the case of a breach of the Howard
Employment Agreement by the Company, or in the event of a "change in control" as
such term is defined in the Howard Employment Agreement) or is discharged for
"Cause" as such term is defined in the Howard Employment Agreement, then no
further vesting will occur and all unvested options will terminate immediately
upon termination of employment. Mr. Howard must exercise any vested options
after such termination of employment within the earlier to occur of five years
after the date of termination or the expiration of the 10-year term of the
options. The Company will also continue to pay the premiums on the life
insurance policy that has been maintained by the Company on Mr. Howard's life
prior to the Effective Time. Mr. Howard has agreed not to compete with the
Company, and not to solicit the Company's customers and employees during the
term of his employment and for 18 months thereafter.
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Shareholders Agreement. Each of the Hayes Shareholders and Mr. Howard have
entered into a Shareholders' Agreement, effective as of the Effective Time, in
respect of the voting of their respective shares of the Company's Securities for
the election of directors. Such Shareholders' Agreement provides that the shares
owned by such persons will be voted to elect Messrs. Hayes and Howard and five
persons designated by certain of the Hayes Shareholders.
Indemnification. All rights to indemnification existing in favor of the
current directors and officers of the Company and Hayes for acts and omissions
occurring prior to the Effective Time, as provided in their respective
certificates of incorporation and/or bylaws (as in effect as of the date of the
Merger Agreement) and as provided in the indemnification agreements between the
Company or Hayes and said directors and officers, shall survive the Merger and
shall be maintained by the Company and Hayes, as the surviving corporation in
the Merger, for a period of not less than six years from the Effective Time.
MANAGEMENT AND OPERATIONS OF THE COMPANY
The Company Board following the Merger shall consist of Dennis Hayes (the
Chairman of the Hayes Board), Ronald Howard (the Chairman of the Company Board),
Barbara Perrier Dreyer (presently a Company director), and four directors
designated by the Hayes Shareholders. Except for Mr. Howard, who will continue
in office, the above directors will take office effective as of the Closing,
except for Dennis Hayes and one designee of the Hayes Shareholders who take
office as of the day after the Closing. Hayes will be the surviving corporation
in the Merger and, following the Merger, will be, and will be operated as, a
wholly-owned subsidiary of the Company.
ACCOUNTING TREATMENT
The Merger will be treated as a reverse acquisition of the Company by
Hayes. In a reverse acquisition the accounting acquiror receives less than 100
percent of the post combination shares since it is not the legal issuer. The
Hayes Shareholders will receive approximately 79% of the post combination shares
of the Company and will be the accounting acquiror. The cost of the acquisition
of the Company will be based on the fair value of the Company's outstanding
shares and certain acquisition costs and allocated to the issuer's net assets
following the guidance of APB 16 Accounting For Business Combinations. As a
result of the reverse acquisition of the Company by Hayes, the historical
financial statements of the surviving corporation for periods prior to the
Merger will be those of Hayes rather than the Company. See "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS."
REGULATORY APPROVALS
Antitrust. The Merger is subject to the requirements of the HSR Act and
the rules and regulations thereunder, which provide that certain transactions
may not be consummated until required information and material have been
furnished to the Antitrust Division and the FTC and certain waiting periods have
expired or been terminated. The Company and Hayes filed the required information
and material with the Antitrust Division and the FTC on , 1997. The
statutory waiting period under the HSR Act expired on , 1997.
State Securities Laws. Prior to the Effective Time, the Company shall use
reasonable, diligent efforts to obtain all regulatory approvals need to ensure
the Securities issued in the Merger will be registered or qualified under the
securities law, or exempt from the same, of every jurisdiction of the United
States in which any holder of the Hayes capital stock has an address of record
on the Record Date. Hayes shall use reasonable, diligent efforts to assist the
Company to comply with the securities and Blue Sky laws of all applicable
jurisdictions in connection with the Merger.
MATERIAL TAX CONSEQUENCES OF THE MERGER
The following discussion of the material federal income tax consequences of
the Merger is based on the current provisions of the Code applicable Treasury
Regulations, judicial authority and administrative rulings and practice. This
discussion, however, does not address all aspects of federal income taxation
that may be
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relevant to a particular Hayes Shareholder in light of his personal investment
circumstances and to certain types of shareholders subject to special treatment
under the federal income tax laws (for example, insurance companies, tax exempt
organizations, financial institutions or broker-dealers, persons who acquired
their Hayes stock pursuant to the exercise of employee stock options or
otherwise as compensation, or persons who are not citizens or residents of the
United States or who are foreign corporations, foreign partnerships or foreign
estates or trusts) and does not discuss any aspects of state, local or foreign
taxation. Further, this discussion assumes that all Hayes Shareholders will hold
their shares of Hayes capital stock as capital assets as of the date of the
Merger.
There can be no assurance that the Internal Revenue Service (the "IRS")
will not take a contrary view to those expressed herein. Moreover, legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conclusions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to Hayes Shareholders.
In connection with the filing of the Registration Statement, Womble Carlyle
Sandridge & Rice, PLLC delivered a tax opinion ("Tax Opinion") to Hayes and
Access Beyond. The following discussion summarizes the material income tax
consequences to the shareholders of Hayes, and is qualified in its entirety by
reference to such opinion which is an exhibit to the Registration Statement. In
connection with the Tax Opinion, Womble Carlyle Sandridge & Rice, PLLC has
relied on such factual assumptions as are customary in similar tax opinions and
certain representations made by the Company and Hayes in the Merger Agreement,
and by the Company, Hayes and certain Hayes Shareholders to Womble Carlyle
Sandridge & Rice, PLLC. The accuracy of the Tax Opinion is dependent upon the
correctness of the factual assumptions and representations upon which the Tax
Opinion is premised. No ruling from the IRS concerning the tax consequences of
the merger has been (or will be) requested by the Company or Hayes, and the Tax
Opinion will not be binding upon the IRS or the courts.
EACH HAYES SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISER AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OF THE MERGER, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX LAWS, AND OF CHANGES IN
APPLICABLE TAX LAWS.
Qualification of the Merger as a Tax-free Reorganization. Although the
matter is not free from doubt and is subject to the accuracy of the assumptions
and representations set forth in the following paragraph, the Merger should be a
tax-free reorganization within the meaning of Section 368(a)(1) of the Code by
reason of the application of Section 368(a)(2)(E) of the Code with respect to,
and to the extent of, the exchange of Hayes Common Stock, Series A Preferred
Stock and Series B Preferred Stock for shares of the Company stock. See "Federal
Income Tax Consequences to Hayes Shareholders" below.
The conclusion of the previous paragraph is based on certain assumptions,
including the following: (i) the Merger will be consummated in accordance with
the Merger Agreement; (ii) the representations made by the Company, Subsidiary
and Hayes in the Merger Agreement are accurate; (iii) the representations made
to Womble Carlyle Sandridge & Rice, PLLC by the Company, Hayes and certain Hayes
Shareholders are accurate; (iv) the Company presently has no plan or intention
to liquidate Hayes, to merge Hayes with or into another corporation, to sell or
otherwise dispose of the capital stock of Hayes, to cause Hayes to issue
additional shares of its stock that would result in the Company's loss of
"control" of Hayes within the meaning of Section 368(c) of the Code or to cause
Hayes to sell or dispose of any of its assets except for dispositions made in
the ordinary course of business or which would not cause the Merger to fail to
satisfy the "continuity of the business enterprise" requirements as a result of
a failure by Hayes to continue its historic business or use a significant
portion of its historic business assets in a business; (v) Hayes has no declared
but unpaid dividends; (vi) the Company has no plan or intention to reacquire any
of its stock issued in the Merger; (vii) at the consummation of the Merger, the
fair market value of Hayes' assets will exceed the sum of its liabilities, plus
the amount of liabilities, if any, to which the assets are subject; (viii) the
Company will be in control of Subsidiary within the meaning of Section 368(c) of
the Code on the date of the Merger; (ix) following the consummation of the
Merger, Hayes will continue to hold "substantially all" (within the meaning of
Section 368(a)(2)(E)(i) of the Code) of its properties and the properties of
Subsidiary owned immediately
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prior to the Merger; (x) there will be no plan or intention by the historic
Hayes Shareholders to sell, exchange or otherwise dispose of a number of shares
of Common Stock received in the Merger that would reduce the Hayes Shareholders'
aggregate ownership of the Company's stock to a number of shares having a value,
as of the date of the Merger, less than the number of shares as are necessary to
satisfy the "continuity of interest" requirement for transactions qualifying as
reorganizations under Section 368(a)(1) of the Code; (xi) none of the
compensation to be received by any Hayes Shareholder is actually separate
consideration for, or allocable to, any of his or her shares of Hayes capital
stock, and the compensation to be paid to any Hayes Shareholder will be for
services actually rendered and commensurate with amounts paid to third parties
bargaining at arm's length for similar services; and (xii) following the
consummation of the Merger, the Company will not take any actions that would
cause the Merger to fail to qualify as a reorganization within the meaning of
Sections 368(a)(1) and 368(a)(2)(E) of the Code.
Federal Income Tax Consequences to Hayes Shareholders. If the Merger
constitutes a tax-free reorganization under Sections 368(a)(1) and 368(a)(2)(E)
of the Code, the historic shareholders of Hayes will not recognize gain or loss
upon the receipt of the Company stock in exchange for their Hayes shares, but
each Hayes Shareholder will be required to recognize a taxable gain (but not a
taxable loss) for federal income tax purposes with respect to such
reorganization in an amount equal to the lesser of (i) the amount of the excess,
if any, of the sum of the fair market value of the Company stock and the cash,
if any, received over the adjusted tax basis of the Hayes shares exchanged by
such shareholder, or (ii) the amount of cash and the fair market value of any
property other than the Company stock received by such Hayes Shareholder in
connection with the Merger. Such gain will be taxed as a capital gain unless the
payment of money (and other property, if any) to such shareholder is deemed to
have the effect of a dividend, in which case it will be taxed as a dividend to
the extent of such Hayes Shareholder's ratable share of the corporation's
accumulated earnings and profits. For purposes of this Section, the historic
shareholders of Hayes shall be those shareholders owning Hayes capital stock as
of July 29, 1997. Whether the money or other property received is taxed as a
dividend will depend on each Hayes Shareholder's particular facts and
circumstances and will be determined under the principles of the United States
Supreme Court's decision of Commissioner v. Clark, 489 U.S. 726 (1989) and
Section 302 of the Code, by assuming that such Hayes Shareholder receives only
shares of the Company stock in exchange for such shareholder's shares of Hayes
Common Stock and immediately thereafter exchanged a portion of the Company stock
having a fair market value equal to the amount of money received in redemption
of such shares.
If the Merger constitutes a reorganization under Section 368(a)(1) and
368(a)(2)(E) of the Code, the Company stock received by each Hayes Shareholder
will have a tax basis equal to the Hayes shares exchanged therefor decreased by
the amount of cash received and increased by the amount of gain recognized
(including gain characterized as dividend income) by such shareholder.
A Hayes Shareholder who exercises the right to dissent in connection with
the Merger and receives only cash in exchange for such shareholder's Hayes
shares will be treated as having received such cash as a distribution in
redemption of such Hayes Shareholder's Hayes shares and will recognize gain or
loss equal to the difference between the amount of cash received and the
adjusted basis of such Hayes Shareholder's Hayes shares, unless such payment,
under each such Hayes Shareholder's particular facts and circumstances (such as
constructive stock ownership), is deemed to have the effect of a dividend
distribution and not a redemption treated as an exchange under the principles of
Section 302 of the Code.
If the Merger were not to constitute a reorganization under Section
368(a)(1) of the Code, each Hayes Shareholder would recognize a taxable gain or
loss equal to the difference between (i) the fair market value of the Company
stock and cash received pursuant to the Merger and (ii) his basis in his Hayes
stock surrendered in the Merger. The basis in Company stock received in such a
case would be equal to the fair market value of such stock on the date of the
Merger.
Capital gains or capital losses, as the case may be, recognized by a Hayes
Shareholder as a result of the Merger will be long-term capital gains or losses
if the Hayes Shareholder has held the Hayes shares deemed sold or exchanged, in
whole or in part, in connection with the Merger for more than eighteen months as
of the date of the Merger.
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Federal Income Tax Consequences to the Corporate Parties to the Merger
Agreement. No material gain or loss for federal income tax purposes will be
recognized by the Company, Subsidiary or Hayes in the transactions constituting
the Merger.
RESALE OF COMMON STOCK; AFFILIATES
All shares of Common Stock received by holders of Hayes Common Stock and
Hayes Series A Preferred Stock, and all shares of Series A Preferred Stock
received by holders of Hayes Series B Preferred Stock in the Merger will be
freely transferable, except that Common Stock received by persons who are deemed
to be "affiliates" (as such term is defined under the Securities Act) of the
Company or Hayes prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 under the Securities Act with
respect to affiliates of Hayes, or Rule 144 under the Securities Act with
respect to persons who are or become affiliates of the Company. Persons who may
be deemed to be affiliates of the Company or Hayes generally include individuals
or entities that control, are controlled by or are under common control with the
Company or Hayes, as the case may be, and may include certain officers and
directors of such party as well as principal stockholders of such party.
Concurrently with the execution of the Merger Agreement, Hayes delivered to
the Company a letter identifying all persons who are, in Hayes' reasonable
judgment, affiliates, and caused each of its affiliates to deliver to the
Company written agreements (the "Hayes Affiliate Agreements") providing, among
other things, that such persons will not offer to sell, sell or otherwise
dispose of any of the Company's stock issued to such person in the Merger in
violation of the Securities Act and Rule 145 promulgated thereunder, as they may
be amended from time to time. In addition, each shareholder of Hayes has agreed
to make no disposition of the Company's stock for 90 days after the Effective
Time, and Dennis Hayes has agreed that for 180 days after such 90 day period, he
will not dispose of more than $3.0 million of Common Stock.
NASDAQ/NMS LISTING
The Company has agreed to cause its Common Stock issued in the Merger to be
authorized for listing on NASDAQ/NMS, upon official notice of issuance. Such
authorization for listing is a condition to the obligations of Hayes under the
Merger Agreement to consummate the Merger.
DISSENTERS' RIGHTS
In accordance with the applicable provisions of the GBCC, the shareholders
of Hayes are entitled to dissent from the Merger and to receive an appraised
value of such shares in cash. Pursuant to the provisions of Article 13 of the
GBCC, if the Merger is consummated, any Hayes Shareholder who (i) gives Hayes,
prior to the vote at the meeting with respect to the approval of the Merger
Agreement, written notice of such holder's intent to demand payment for such
holder's shares and (ii) does not vote in favor thereof, shall be entitled to
receive, upon compliance with the statutory requirements summarized below, the
fair value of such holder's shares as of the Effective Date.
The written objection requirement referred to above will not be satisfied
under the GBCC by merely voting against approval of the Merger Agreement by
proxy or in person at the Hayes Annual Meeting to approve the Merger. In
addition to not voting in favor of the Merger Agreement, a shareholder wishing
to preserve the right to dissent and seek appraisal must give a separate written
notice of such holder's intent to demand payment for such holder's shares if the
Merger is effected, as hereinabove provided.
If the Merger is authorized at the Hayes Annual Meeting, Hayes must deliver
a written dissenters' notice (the "Dissenters' Notice") to all of its
shareholders who satisfied the foregoing requirements. The Dissenters' Notice
must be sent within 10 days after the Effective Date and must (i) state where
the demand for payment must be sent and where and when certificates for the
shares must be deposited, (ii) set a date by which Hayes must receive the demand
for payment (which date may not be fewer than 30 nor more than 60 days after the
Dissenters' Notice is delivered), and (iii) be accompanied by a copy of Article
13 of the GBCC.
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A record shareholder who receives the Dissenters' Notice must demand
payment and deposit such holder's certificates in accordance with the
Dissenters' Notice. Such shareholder will retain all other rights of a
shareholder until those rights are canceled or modified by the consummation of
the Merger. A record shareholder who does not demand payment or deposit such
holder's share certificates where required, each by the date set in the
Dissenters' Notice, is not entitled to payment for such holder's shares under
Article 13 of the GBCC.
Except as described below, Hayes as the surviving corporation following the
Merger with the Subsidiary must, within 10 days of the later of the Effective
Date or receipt of a payment demand, offer to pay to each dissenting shareholder
who complied with the payment demand and deposit requirements described above
the amount the Company estimates to be the fair value of such holder's shares,
plus accrued interest from the Effective Date. Such offer of payment must be
accompanied by (i) certain recent financial statements of Hayes, (ii) Hayes'
estimate of the fair value of the shares, (iii) an explanation of how the
interest was calculated, (iv) a statement of the dissenter's right to demand
payment under Section 14-2-1327 of the GBCC, and (v) a copy of Article 13 of the
GBCC. If the shareholder accepts the Company's offer, payment must be made
within 60 days after the later of the making of the offer or the Effective Date.
If the Merger is not effected within 60 days after the date set forth
demanding payment and depositing share certificates, Hayes must return the
deposited certificates. If, after such return and release, the Merger is
effected, the Company must send a new Dissenters' Notice and repeat the payment
demand procedure described above.
Section 14-2-1327 of the GBCC provides that a dissenting shareholder may
notify the Company in writing of such holder's own estimate of the fair value of
such holder's shares and the interest due, and may demand payment of such
holder's estimate, if (i) such holder believes that the amount offered by the
Company is less than the fair value of such holder's shares or that the interest
due has been calculated incorrectly, or (ii) Hayes, having failed to effect the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting shareholder waives such holder's right
to demand payment under Section 14-2-1327 unless such holder notifies the
Company of such holder's demand in writing within 30 days after the Company
makes or offers payment for such holder's shares. If the Company does not offer
payment within 10 days of the later of the Effective Date or receipt of a
payment demand, then (i) the shareholder may demand the financial statements and
other information required to accompany the Company's payment offer, and the
Company must provide such information within 10 days after receipt of the
written demand, and (ii) the shareholder may notify the Company of such holder's
own estimate of the fair value of such holder's shares and the amount of
interest due, and may demand payment of that estimate.
If a demand for payment under Section 14-2-1327 remains unsettled, Hayes
must commence a nonjury equity valuation proceeding in the Superior Court of
Gwinnett County, Georgia, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If Hayes does not commence the proceeding within those 60 days, it is
required to pay each dissenting shareholder whose demand remains unsettled the
amount demanded. The Company is required to make all dissenting shareholders
whose demands remain unsettled parties to the proceeding and to serve a copy of
the petition upon each dissenting shareholder. The court may appoint appraisers
to receive evidence and to recommend a decision on fair value. Each dissenting
shareholder made a party to the proceeding is entitled to judgment for the fair
value of such holder's shares plus interest on the date of judgment.
Any dissenting shareholder who perfects such holder's right to be paid the
value of such shareholder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes. See
"-- Material Federal Income Tax Consequences of the Merger."
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached hereto as Exhibit A. The summary is
qualified in its entirety by reference to the Merger Agreement. The Company's
stockholders and the Hayes Shareholders are urged to read the Merger Agreement
in its entirety for a more complete description of the Merger.
THE MERGER
The Merger Agreement provides that, subject to the approval of the Merger
by both the stockholders of the Company and the shareholders of Hayes and the
satisfaction of the other conditions to the Merger, the Subsidiary will be
merged with and into Hayes, the separate existence of the Subsidiary will cease,
and Hayes will be the surviving corporation of the Merger and a wholly-owned
subsidiary of the Company.
At the Effective Time, by virtue of the Merger and without any action on
the part of the Company, Hayes, the Subsidiary or the stockholders or
shareholders, each share of Hayes Common Stock, Hayes Series A Preferred Stock
and Series B Preferred Stock then outstanding and each share of the Subsidiary
shall be converted pursuant to the terms of the Merger Agreement, as described
below. See "-- Terms of the Merger."
The certificate of incorporation and by-laws of Hayes, as in effect
immediately prior to the Effective Time will be the certificate of incorporation
and by-laws of Hayes following the Merger. Thereafter both the certificate of
incorporation and by-laws of Hayes may be amended in accordance with their terms
and as provided by law. The name of the surviving corporation of the Merger
will, by virtue of the Merger, remain Hayes Microcomputer Products, Inc. The
name of the Company, however, will be changed to Hayes Communications Inc.
EFFECTIVE TIME
Subject to the terms and conditions of the Merger Agreement, the
Certificate of Merger of the Subsidiary with and into Hayes will be filed with
the Secretary of State of the State of Georgia on the Closing Date. The date and
time that the Certificate of Merger is filed with the Georgia Secretary of State
and the Merger becomes effective is the Effective Time.
TERMS OF THE MERGER
General. At the Effective Time, Hayes will become a wholly-owned
subsidiary of the Company and (a) the Hayes Shareholders (excluding holders of
options and warrants) will own approximately 79% of the total outstanding equity
of the Company (excluding options), subject to adjustment, as described below,
if Hayes or the Company issues additional equity securities prior to the
Effective Time; (b) the Company will amend its Certificate of Incorporation to
(i) change its name to Hayes Communications Inc, (ii) increase the number of
authorized shares of capital stock and (iii) create the Series A Preferred
Stock; (c) the Board of Directors of the Company will be increased to seven
members, five of whom will be designated by the Hayes Shareholders; and (d) the
Company will assume Hayes' obligations under the Hayes Option Plan. After giving
effect to the Merger and assuming that (x) all then vested and exercisable Hayes
Options and Hayes Warrants are exercised and (y) none of the then vested and
exercisable options to purchase Access Beyond's Common Stock are exercised, the
Hayes Shareholders will own approximately 80.15% of the issued and outstanding
securities of the Company.
Assuming that none of the Hayes Shareholders perfect rights of appraisal,
(i) the 4,991,750 shares of Hayes Common Stock outstanding on the date hereof
will be converted into the right to receive 23,106,433 shares of Common Stock,
(ii) the 4,900,000 shares of Hayes Series A Preferred Stock outstanding on the
date hereof will be converted into the right to receive 22,681,729 shares of
Common Stock and (iii) the 263,113
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shares of Hayes Series B Preferred Stock outstanding on the date hereof will be
converted into the right to receive 1,217,930 shares of Series A Preferred
Stock.
The Merger Agreement provides that, subject to the approval of the other
party, each of the Company and Hayes may obtain up to an additional $35.0
million of equity capital with proportionate dilution resulting to the
stockholders of the Company and the shareholders of Hayes. Hayes has entered
into the Investor Letter of Intent setting forth the terms of a proposed $30.0
million investment in Hayes in exchange for 1,350,743 shares of Hayes Series C
Preferred Stock (these shares will be converted into 6,252,454 shares of Common
Stock upon the Effective Time). The Company and Hayes have agreed that if such
transaction is consummated, then upon the closing thereof and the Closing of the
Merger, the respective percentages of ownership of the Company, without giving
effect to shares issuable upon exercise of options or warrants, would be
approximately as follows: Hayes Shareholders (other than the prospective
investor) - 71.488%, the Company's stockholders - 19.003%, and the prospective
investor - 9.509%. The Company is currently negotiating a $10.0 million private
placement. Negotiations with this prospective investor are continuing, and Hayes
is also pursuing discussions with other potential sources of capital funding.
There can be no assurance that any of such possible investments will be
consummated.
Treatment of Hayes Options and Warrants. At the Effective Time, each Hayes
Option to purchase Hayes Common Stock granted under the Hayes Option Plan, and
each Hayes Warrant shall be assumed by the Company in accordance with the terms
of such option or warrant, and converted into rights with respect to that number
of shares of Common Stock, determined by multiplying the number of shares of
Hayes stock underlying the Hayes Option or Hayes Warrant at the Effective Time
by the Conversion Ratio, and the exercise price per share for each such option
or warrant will equal the exercise price of the Hayes Option or Hayes Warrant
immediately prior to the Effective Time divided by the Conversion Ratio (rounded
up to the nearest whole cent). If such calculation results in an assumed option
or warrant exercisable for a fraction of a share, then the number of shares of
Common Stock underlying such option or warrant will be rounded down to the
nearest whole number with no cash being payable for such fractional share. As of
the date hereof, 1,851,560 shares of Hayes Common Stock are subject to the Hayes
Warrants and 5,690,074 shares are subject to the Hayes Options.
Treatment of the Company's Options. Under the Company's stock option
plans, the transactions contemplated by the Merger Agreement will constitute a
change in control resulting in acceleration of unvested options and termination
of all options on the 90th day after the Effective Time. The Merger Agreement
provides that as to any employee who continues in the employ of the Company
after the Effective Time and whose option is terminated without exercise as a
result of the Merger, replacement options will be issued for the same number of
shares giving credit to the time attained under the terminated options, at an
exercise price equal to the "fair market value" (as defined in the stock option
plans) on the date of grant.
Fractional Shares. No fractional shares of the Securities will be issued
in connection with the Merger. In lieu of any fractional shares, the record
holder of any shares of Hayes stock who would otherwise be entitled to receive a
fraction of a share of the Company, upon aggregation of all shares and
fractional shares of the same class or series owned by such holder, will receive
from the Company promptly after the Merger, cash equal to the per share market
value of the Common Stock, which market value shall be the closing sale price of
the Common Stock on the last trading day prior to the Closing Date, as quoted on
the NASDAQ/NMS multiplied by such fraction of a share of the Company to which
such holder would otherwise be entitled.
SURRENDER AND PAYMENT
As of the Effective Time, all shares of Hayes stock that are outstanding
immediately prior thereto, other than Dissenting Shares will, by virtue of the
Merger and without further action, cease to exist, and all such shares will be
converted into the right to receive shares of Common Stock and/or Series A
Preferred Stock. See "THE ANNUAL MEETING -- Purpose of the Annual Meeting." At
and after the Effective Time, each certificate representing outstanding shares
of Hayes capital stock, other than Dissenting Shares, will represent the right
to receive the number of shares of Common Stock or Series A Preferred Stock into
which such
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shares of Hayes capital stock have been converted, and such shares of Access
Beyond stock will be registered in the name of the holder of such certificate.
Unless surrendered to the Company for exchange at the Closing, as soon as
practicable after the Effective Time, each holder of shares of Hayes common
stock, other than Dissenting Shares, will surrender (a) the Hayes Certificates
to the Company for cancellation or (b) an affidavit of lost (or nonissued)
certificate and indemnity with respect to the same, in form reasonably
satisfactory to the Company. Promptly following the Effective Time and receipt
of the Hayes Certificates, the Company will cause its transfer agent to issue to
each such surrendering holder, certificate(s) for the number of Securities to
which such holder is entitled, and the Company will distribute any cash payable
in lieu of fractional shares. After the Effective Time, there will be no further
registration of transfers of the shares of Hayes stock on the stock transfer
books of Hayes.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of,
among other things: (a) the due organization, valid existence and good standing
of the Company, Hayes and their respective subsidiaries and the corporate power
to operate their respective businesses; (b) the capitalization of the Company
and Hayes; (c) the authorization, execution, delivery and enforceability of the
Merger Agreement, Affiliate Agreements, Voting Agreements and Market Standoff
Agreements; (d) the accurate presentation of financial conditions in financial
statements prepared in accordance with GAAP; (e) that neither the execution and
delivery of the Merger Agreement, nor the consummation of the transactions
contemplated thereby by the Company and Hayes are in violation of their
respective certificates of incorporation, bylaws, material contracts, or any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation; (f) litigation against the Company and Hayes; (g) taxes, tax returns
and audits of the Company and Hayes; (h) the title to and ownership of assets of
the Company and Hayes; (i) the absence of any undisclosed liabilities or any
material change in the operation of the Company and Hayes; (j) material
contracts, agreements and commitments of the Company and Hayes; (k) ownership,
license of or possession of otherwise legally enforceable rights of the Company
and Hayes and their respective subsidiaries to certain intellectual property,
and the absence of any intellectual property litigation or breach of any license
or infringement upon any patent; (l) legal compliance by the Company and Hayes
and their respective subsidiaries; (m) intercompany agreements and arrangements
and affiliate transactions among the Company or any of its subsidiaries and its
affiliates and among Hayes or any of its subsidiaries and its affiliates; (n)
employees of the Company, Hayes and their respective subsidiaries; (o) insurance
maintained by the Company, Hayes and their respective subsidiaries; (p)
environmental matters relating to the Company, Hayes and their respective
subsidiaries; (q) government contracts of the Company, Hayes and their
respective subsidiaries; (r) the development by the Company of certain of its
remote access products, including their having passed quality testing and their
being ready for manufacture in volume, (s) absence of brokers fees in connection
with the origin, negotiation and execution of the Merger Agreement, except for
the obligation of the Company to DLJ, (t) absence of untrue statements of and
omissions of material facts by the Company and Hayes in the Registration
Statement of which this Proxy Statement/Prospectus is a part, and in the Merger
Agreement; and (u) failure to meet the definition of a "United States real
property holding corporation" by the Company and Hayes.
CONDUCT OF BUSINESS BY THE COMPANY AND HAYES PENDING THE MERGER
During the period from the date of the Merger Agreement until the Effective
Time, unless earlier terminated, each of the Company and Hayes has covenanted to
and agreed that, except as provided in the Merger Agreement, it will not,
without the prior written consent of an officer of the other party, such consent
not to be unreasonably withheld or delayed: (a) enter into any transaction not
in the ordinary course of business or enter into any transaction or make any
commitment involving a capital expenditure in excess of $100,000 with respect to
the Company, $10,000 with respect to the Subsidiary and $5.0 million with
respect to Hayes; (b) borrow any money or encumber or permit to be encumbered
any of its assets except in the ordinary course of its business consistent with
past practice and to an extent that is not material to such party or its
business; provided that the Company may establish a credit facility with any
institutional lender prior to the
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Effective Time in the approximate amount of $3.0 million and may grant security
interests in all or substantially all of its assets in connection therewith,
provided that the Company shall not agree to any prepayment fees or penalties in
connection therewith in excess of $100,000 without Hayes' prior consent; (c)
dispose of any of its material assets except in the ordinary course of business
consistent with past practice; (d) with respect to the Company, the Company will
not enter into any material agreement except in the ordinary course of business
consistent with past practice without the consent of Hayes, which will not be
unreasonably withheld; (e) fail to maintain its equipment and other assets that
are material to the operation of its business in good working condition and
repair according to the standards it has maintained to the date of the Merger
Agreement, subject only to wear and tear; (f) except as contemplated by the
Merger Agreement and for severance and "stay put" bonuses, pay any bonus,
royalty, increased salary (except for annual increases in the ordinary course of
business consistent with past practice) or special remuneration to any officer,
employee or consultant (except pursuant to existing arrangements previously
disclosed in writing to the other party or in connection with the transactions
contemplated thereby) or enter into any new employment or consulting agreement
with any such person, or enter into any new agreement or employee plan, as the
case may be; (g) change accounting methods, unless required by generally
accepted accounting principles; (h) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock, or, as necessary to
redeem any or all of the issued and outstanding shares of Hayes Series B
Preferred Stock, redeem or otherwise acquire any of its capital stock; (i) amend
or terminate any material agreements to which the Company is a party, except
those amended or terminated in the ordinary course of business consistent with
past practice; (j) lend any amount to any person or entity, other than advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practice; (k) guarantee or act as surety for any
obligation, except for the endorsement of checks and other negotiable
instruments in the ordinary course of business consistent with past practice;
(l) waive or release any material right or claim, except in the ordinary course
of business consistent with past practice; (m) split or combine the outstanding
shares of its capital stock of any class or enter into any recapitalization
affecting the number of outstanding shares of its capital stock of any class or
affecting any other of its securities; (n) except for the Merger, consolidate or
reorganize with, or acquire the business, stock or assets of any entity,
provided that Hayes may enter into any merger or acquisition with any party in
which the amount of the transaction does not exceed $10.0 million, provided that
no such transaction will be entered into by Hayes in which the percentage of
shares of the Company issuable to or retained by either the stockholders of the
Company or the shareholders of Hayes, as the case may be, immediately after the
Effective Time would be affected, without the consent of the Company; and no
such transaction will be entered into by either the Company or Hayes after the
filing of this Registration Statement until the earlier of the Effective Time or
termination of the Merger Agreement; (o) amend its certificate of incorporation
or by-laws, except as contemplated by, and in accordance with, the Merger
Agreement; (p) agree to any audit assessment by any tax authority or file any
federal or state income or franchise tax return unless copies of such returns
have been delivered to the Company or Hayes, as the case may be, for its review
prior to filing; (q) license any of the Company's or Hayes' intellectual
property, as the case may be, except in the ordinary course of business
consistent with past practice; (r) terminate the employment of any officer,
director or key employee of the Company or Hayes, as the case may be; (s) agree
to do any of the things described in (a) through (r) above; or (t) file a
registration statement with the Commission, other than a Form S-8 in respect of
the Company's 1996 Long Term Incentive Plan and 1996 Non-employee Directors'
Stock Option Plan, or become subject to the Exchange Act by directly or
indirectly merging with or acquiring an entity which is a reporting company.
CERTAIN COVENANTS
Pursuant to the terms of the Merger Agreement, the Company and Hayes have
each agreed, among other things, (a) to allow the other party to hold meetings
and discussions with its material customers and suppliers to determine any
business issues that may exist concerning the customer's or supplier's
relationship with the other party; (b) to notify the other party in writing of
(i) any event that would render untrue or inaccurate any representation or
warranty of such party contained in the Merger Agreement; (ii) any material
action, suit or proceeding by or before any court, board or governmental agency
initiated, against or threatened against such party or any subsidiary; (iii) any
material deterioration in the relationship with any material customer, supplier
39
<PAGE> 50
or key employee of the party of which the party becomes aware; (c) to conduct
their respective businesses as described in "-- Conduct of Business by the
Company and Hayes Pending the Merger;" (d) to use reasonable, diligent efforts
to file, as soon as practicable after the date of the Merger Agreement, all
notices, reports and other documents required to be filed with any government
body or agency with respect to the Merger, and to promptly file any
notification, reports, forms or other information required under the HSR Act;
(e) not to, directly or indirectly, solicit, initiate, encourage or induce the
making, submission or announcement of any offer or proposal, other than to the
Company or Hayes, contemplating or relating to any Acquisition Transaction (as
defined below) or take any action that could reasonable be expected to lead to
an Acquisition Transaction proposal; (f) furnish any nonpublic information
regarding the Company or Hayes to, or engage in any discussions with, any person
or entity with respect to any Acquisition Transaction proposal; and (g) enter
into any letter of intent or similar document or any agreement relating to any
Acquisition Transaction. Acquisition Transaction means any transaction or series
of related transactions involving (a) any merger, consolidation, share exchange,
business combination, issuance of securities, acquisition of securities, tender
offer, exchange offer or other similar transaction in which (i) either the
Company or Hayes is a constituent corporation, (ii) a person or group (as
defined in the Exchange Act and the rules promulgated thereunder) of persons
directly or indirectly acquires either the Company or Hayes or more than 50% of
the business of the Company or Hayes or, directly or indirectly acquires
beneficial or record ownership of securities representing more than 50% of the
outstanding securities of any class of voting securities of the Company or
Hayes, or (iii) in which the Company or Hayes issues securities representing
more than 50% of the outstanding securities of any class of their voting
securities; or (b) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business) or disposition of more than 50% of the assets of the Company or Hayes.
With respect to unsolicited bona fide written Acquisition Transaction proposals,
each of Hayes and the Company may furnish non-public information with respect to
itself, engage in negotiations and take other action in furtherance thereof if
advised by its financial advisor that such Acquisition Transaction proposal
could reasonable be expected to result in a transaction that is more favorable
from a financial point of view to such party's stockholders and upon advice by
outside counsel that such action is required for the Company Board or the Hayes
Board to comply with its fiduciary obligations.
In addition, the Company and Hayes have agreed to make diligent efforts to
obtain equity capital for the Company or Hayes prior to or after the Merger in
the aggregate amount of approximately $35.0 million, and Hayes has agreed to (a)
prepare a proposed detailed business plan for the combination of the Company and
Hayes; (b) furnish the Company with the name and address of each Hayes
dissenting shareholder, if any, and the number of shares of Hayes stock owned by
such dissenting shareholders; and (c)(i) use its reasonable efforts to cause
certain convertible notes (the "Convertible Notes") (with approximately $11.1
million outstanding at September 30, 1997) to be converted to Hayes Common Stock
or amended to terminate the conversion feature and to adjust the repayment
provisions following the Closing such that repayment may only be made upon
determination by the Company Board that the Company's cash flow is sufficient to
make such repayment and (ii) to terminate an antidilution warrant (the
"Antidilution Warrant").
MARKET STANDOFF AGREEMENTS
Each of the shareholders of Hayes has executed a Market Standoff Agreement
pursuant to which each such shareholder has agreed not to offer, sell or
otherwise dispose of any of the shares of Common Stock and/or Series A Preferred
Stock issued to such shareholder in the Merger for a period of 90 days after the
Effective Time. In addition, Dennis Hayes has agreed not to offer, sell or
otherwise dispose of more than $3.0 million of Common Stock issued to him in the
Merger for a period of 180 days after such 90 day period.
CONDITIONS
Conditions to Obligations of Both the Company and Hayes. The respective
obligations of the Company and Hayes to effect the Merger are subject to certain
conditions, including: (a) approval of the Merger Agreement and the transactions
contemplated thereby by the stockholders of the Company and the shareholders of
Hayes, including the election by the Company's stockholders of a new Company
Board, as
40
<PAGE> 51
described in "THE MERGER -- Management and Operations of the Company"; (b) there
shall be no order, decree, or ruling by any court or governmental agency, or
threat thereof, and no fact or circumstance shall exist, that would render
illegal the transactions provided for in the Merger Agreement; (c) receipt of
such permits or authorizations, at or prior to the Closing, from any regulatory
authority having jurisdiction over the Company and/or Hayes, as may be required
to consummate the Merger, including but not limited to satisfaction of all
requirements under state and federal securities laws; (d) the Registration
Statement shall become effective under the Securities Act and shall not be
subject to any stop order or proceedings seeking a stop order and the
Prospectus/Proxy Statement shall, on the Closing Date, not be subject to any
proceedings commenced or threatened by the Commission; (e) all applicable
waiting periods under the HSR Act shall have expired or early termination shall
have been granted by both the FTC and the U.S. Department of Justice; (f) the
Company, Ronald Howard and Dennis Hayes shall have executed and delivered to the
Company employment agreements; and (g) the authorization for listing of the
shares of Common Stock to be issued in the Merger on NASDAQ/NMS, subject to
notice of issuance.
Conditions to Obligations of Hayes. The obligation of Hayes to effect the
Merger is subject to additional conditions, including: (a) the satisfactory
completion of due diligence by Hayes and receipt by the Company of a fairness
opinion from DLJ that the Merger is fair to the Company and its stockholders
from a financial point of view of the Conversion Ratio, which conditions have
been satisfied; (b) receipt of an officer's certificate of the Company that the
representations and warranties of the Company are true and complete in all
material respects as of the Closing; (c) receipt of all written consents,
assignments, waivers, authorizations or other certificates of third parties to
provide for the continuation in full force and effect of any and all material
contracts and leases of the Company; (d) delivery by the Company to its transfer
agent of the certificates representing the shares of Common Stock and Series A
Preferred Stock to be issued in the Merger, and receipt by Hayes from the
Company and the Subsidiary of an officer's certificate as to tax matters; (e)
certification from the Company that no litigation or proceeding is pending which
will prevent the consummation of any transactions provided for in the Merger
Agreement; (f) receipt by Hayes of an opinion of Morrison Cohen Singer &
Weinstein, LLP, counsel to the Company; (g) approval by the Company's
stockholders and acceptance for filing by the Secretary of State of Delaware of
the Company's amended and restated certificate of incorporation; and (h) the
resignation of the current officers and directors of the Company (other than
Ronald Howard) effective as of the Effective Time.
Conditions to Obligations of the Company. The obligation of the Company to
effect the Merger is subject to additional conditions, including: (a) the
satisfactory completion of due diligence by the Company and receipt by the
Company of a fairness opinion from DLJ that the Merger is fair to the Company
and its stockholders from a financial point of view of the Conversion Ratio,
which conditions have been satisfied; (b) receipt of an officer's certificate of
Hayes that the representations and warranties of Hayes are true and complete in
all material respects as of the Closing; (c) receipt of all written consents,
assignments, waivers, authorizations or other certificates of third parties to
provide for the continuation in full force and effect of any and all material
contracts and leases of Hayes; (d) receipt by the Company from Hayes of an
officer's certificate as to tax matters; (e) certification from Hayes that no
litigation or proceeding is pending which will prevent the consummation of any
transactions provided for in the Merger Agreement; (f) receipt by the Company of
an opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to Hayes; (g)
conversion or amendment of the Convertible Notes and termination of the
Antidilution Warrant; (h) execution of the Voting Agreement, the Hayes Affiliate
Agreements and the Market Stand-Off Agreements; and (i) receipt by the Company
of a fairness opinion, updated as of the Closing, from DLJ that the Merger is
fair to the Company and its stockholders from a financial point of view of the
Conversion Ratio.
TERMINATION; EFFECT OF TERMINATION
The Merger Agreement may be terminated prior to the Effective Time, whether
before or after approval of the Merger by the stockholders or shareholders of
either or both of the parties, (a) by mutual written consent of the Company and
Hayes; (b) by either the Company or Hayes if the Merger shall not have been
consummated by 5:00 p.m. (Eastern Time) on December 31, 1997 (unless the failure
to consummate the
41
<PAGE> 52
Merger is attributable to a failure on the part of the party seeking to
terminate the Merger Agreement to perform any material obligation required to be
performed by such party at or prior to the Effective Time); (c) by either the
Company or Hayes if a court of competent jurisdiction or other governmental body
or agency shall have issued a final and nonappealable order, decree or ruling,
or shall have taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger; (d) by either the
Company or Hayes if (i) any of the applicable Hayes Shareholders repudiate the
Voting Agreements or (ii) the Hayes Annual Meeting shall have been held and the
Merger Agreement and the Merger shall not have been adopted and approved at such
meeting by the vote required by law or (iii) the required Hayes Shareholder
Meeting to vote on the Merger Agreement is not held within ten (10) business
days after the Registration Statement is declared effective by the Commission;
provided, however, that (i) the Company shall not be permitted to terminate the
Merger Agreement if the failure of the Hayes Shareholders to adopt and approve
the Merger Agreement and the Merger at the Hayes Annual Meeting is attributable
to a failure on the part of the Company to perform any material obligation
required to have been performed by the Company under this Agreement, and (ii)
Hayes shall not be permitted to terminate this Agreement if the failure of the
Hayes Shareholders to adopt and approve this Agreement and the Merger at the
Hayes Annual Meeting is attributable to a failure on the part of Hayes to
perform any material obligation required to have been performed by Hayes under
this Agreement; (e) by either the Company or Hayes if (i) the Annual Meeting
shall have been held and (ii) the Merger Agreement and the Merger shall not have
been adopted and approved at such meeting by the vote required by law; provided,
however, that (i) Hayes shall not be permitted to terminate the Merger Agreement
if the failure of the Company's stockholders to adopt and approve the Merger
Agreement and the Merger at the Annual Meeting is attributable to a failure on
the part of Hayes to perform any material obligation required to have been
performed by Hayes under the Merger Agreement, and (ii) the Company shall not be
permitted to terminate the Merger Agreement if the failure of the Company's
stockholders to adopt and approve the Merger Agreement and the Merger at the
Annual Meeting is attributable to a failure on the part of the Company to
perform any material obligation required to have been performed by the Company
under the Merger Agreement; (f) by the Company (at any time prior to the
adoption and approval of the Merger Agreement and the Merger by the Hayes
Shareholders by the vote required by law) if a "Triggering Event" with respect
to Hayes as the "Triggering Party" shall have occurred. A "Triggering Event"
shall have occurred if (i) the Company Board or the Hayes Board (the "Triggering
Party") fails to recommend, or shall for any reason have withdrawn or shall have
amended or modified in a manner adverse to the other party its unanimous
recommendation in favor of, the Merger or approval or adoption of this
Agreement; or (ii) the Triggering Party fails to hold a stockholders meeting as
promptly as practicable and in any event within 60 days after the Form S-4
Registration Statement is declared effective; (g) by Hayes (at any time prior to
the adoption and approval of the Merger Agreement and the Merger by the
Company's stockholders by the vote required by law) if a Triggering Event with
respect to the Company as the Triggering Party shall have occurred; (h) by the
Company if any of Hayes' representations and warranties contained in the Merger
Agreement shall be or shall have become materially inaccurate, or if any of
Hayes' material covenants contained in the Merger Agreement shall have been
breached in any material respect; provided, however, that if an inaccuracy in
Hayes' representations and warranties or a breach of covenant by Hayes is
curable by Hayes and Hayes is continuing to exercise reasonable efforts to cure
such inaccuracy or breach, then the Company may not terminate the Merger
Agreement on account of such inaccuracy or breach; or (i) by Hayes if any of the
Company's representations and warranties contained in the Merger Agreement shall
be or shall have become materially inaccurate, or if any of the Company's
material covenants contained in the Merger Agreement shall have been breached in
any material respect; provided, however, that if any inaccuracy in the Company's
representations and warranties or a breach of a covenant by the Company is
curable by the Company and the Company is continuing to exercise reasonable
efforts to cure such inaccuracy or breach, then Hayes may not terminate the
Merger Agreement on account of such inaccuracy or breach.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall be of no further force or effect; provided, however, that (a)
Sections 9.2, 9.3, 10 and 11 of the Merger Agreement shall survive the
termination thereof and shall remain in full force and effect, and (b) the
termination of the Merger Agreement shall not relieve any party, from any
liability for any breach thereof.
42
<PAGE> 53
Expenses. Each party will bear its respective expenses and fees of its own
accountants, attorneys, investment bankers and other professionals incurred with
respect to this Agreement and the transactions contemplated hereby, whether or
not the Merger is consummated; provided, however, that Hayes and the Company
shall share equally all fees and expenses, other than attorneys' fees, incurred
in connection with the printing and filing of the Registration Statement and the
Prospectus/Proxy Statement and any amendments or supplements thereto.
Break-up Fee. If the Merger Agreement is terminated by Hayes or the
Company upon the occurrence of a Triggering Event and the stockholders of the
Company or the shareholders of Hayes fail to approve the Merger, then the
non-terminating party shall pay the terminating party as non-refundable
liquidated damages, the total out-of-pocket expenses of the Terminating Party
incurred in connection with the negotiation and performance of the Merger
Agreement, plus $200,000, provided, however, that such payment shall not exceed
$500,000. In addition, if either the Company or Hayes publicly announces the
entering into of an agreement relating to an Acquisition Transaction within six
months after the date of termination then the nonrefundable liquidated damages
described above shall increase to $2.0 million. In addition, if the Merger
Agreement is terminated due to the occurrence of circumstances described in
clause (d) of the first paragraph of "-- Termination; Effect of Termination," or
is terminated by Hayes as a result of the amount of cash payable for Dissenting
Shares causing the Merger to fail to qualify as a tax-free reorganization, then
Hayes shall pay to the Company a termination fee of $2.0 million as
non-refundable liquidated damages.
AMENDMENT
Any term of the Merger Agreement may be amended or waived in writing by the
parties thereto at any time before or after approval of the Hayes Shareholders
or the Company's stockholders.
43
<PAGE> 54
MARKET PRICE INFORMATION, DIVIDENDS AND RELATED STOCKHOLDER MATTERS
THE COMPANY
The Common Stock is traded on NASDAQ/NMS under the symbol "ACCB." The stock
prices listed below represent the high and low closing sale prices of the Common
Stock, as reported by NASDAQ/NMS, for each fiscal quarter since the Common Stock
began trading on NASDAQ/NMS on November 18, 1996. There is no public market for
the Series A Preferred Stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR 1997
Second quarter ended January 31, 1997 (from November 18, 1996)............... $8 7/8 $6
Third quarter ended April 30, 1997........................................... $7 1/8 $3
Fourth quarter ended July 31, 1997........................................... $6 1/8 $3 1/4
First quarter (through October 3, 1997)...................................... $7 7/8 $4 5/8
</TABLE>
On October 3, 1997, the last reported sale price of the Common Stock on
NASDAQ/NMS was $7.875 per share and there were approximately 803 holders of
record of Common Stock, who management believes hold such shares of Common Stock
for more than 1,800 beneficial owners.
On July 28, 1997, the last trading day prior to the public announcement of
the Merger, the high and low sale prices of the Common Stock on NASDAQ/NMS were
$4 9/16 and $4, respectively.
On , the last trading day prior to the mailing of this Proxy
Statement to the Company's stockholders, the high and low sale prices of the
Common Stock on NASDAQ/NMS were $ and $ , respectively.
The Company has not paid any dividends on its Common Stock or Series A
Preferred Stock and does not anticipate paying any such dividends on its Common
Stock in the foreseeable future. Holders of Series A Preferred Stock are
entitled to receive, as and when declared by the Company Board, cumulative
compounding dividends at the rate of ten percent (10%) per annum of the original
issue price per share of the Series A Preferred Stock. Such dividends are to be
paid in cash upon redemption, or in additional shares of Common Stock upon
conversion of the Series A Preferred Stock. No dividends may be paid on the
Common Stock unless all accrued and unpaid dividends on the Series A Stock are
paid.
HAYES
Hayes is a privately-held company and its securities are not listed for
quotation on NASDAQ/NMS or a stock exchange. On November 15, 1994, Hayes filed a
petition for relief under Chapter 11 of the U.S. Bankruptcy Code due to its
inability to pay its debts on a current basis. From November 15, 1994 to April
16, 1996, there were no sales of Hayes securities other than the redemption of
529,141.81 shares (after a 3.07835 for one reverse split) of Hayes Common Stock
owned by Melita E. Hayes pursuant to the court approved Plan and the redemption
of stock under the Hayes Profit Sharing, Savings and Stock Plan. In addition,
and in connection with the Plan, on April 16, 1996, Hayes issued 4,900,000
shares of Hayes Series A Preferred Stock for $35.0 million or $7.14 per share to
fund the Plan. On April 11, 1997, Hayes issued 263,113 shares of Hayes Series B
Preferred Stock to Vulcan Ventures for $5.5 million or $20.90 per share, without
giving effect to the Conversion Ratio. The following is a summary of prices paid
in private transactions involving Hayes' capital stock during the past two
years, without giving effect to the Conversion Ratio:
<TABLE>
<CAPTION>
PRICE
TRANSACTION DATE DESCRIPTION OF SECURITY TRANSACTION VALUE PER SHARE
- ------------------- ------------------------- ----------------- ---------
<S> <C> <C> <C>
April 16, 1996 Common Stock $11,000,000 $ 20.79
April 16, 1996 Series A Preferred Stock $35,000,000 $ 7.14
September 12, 1996 Common Stock $ 1,741,805 $ 22.90
December 6, 1996 Common Stock $ 737,383 $ 22.90
April 11, 1997 Series B Preferred Stock $ 5,500,000 $ 20.90
</TABLE>
44
<PAGE> 55
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements have been
derived from the historical consolidated financial statements of the Company and
Hayes and give effect to (i) the Merger as a reverse acquisition and a purchase
for accounting purposes, and (ii) costs associated with the consummation of the
Merger. The unaudited pro forma condensed combined balance sheet gives effect to
the combination as if it had occurred on June 30, 1997 using the Company's year
ended July 31, 1997 financial statements. The unaudited pro forma condensed
combined statements of operations give effect to the combination as if it had
occurred at the beginning of the earliest period presented. The pro forma
adjustments are based on preliminary estimates, available information and
certain assumptions that management deems appropriate. The pro forma financial
data does not purport to represent what the combined Company's financial
position or results of operations would actually have been if such transactions
in fact had occurred on those dates or to project the combined Company's
financial position or results of operations for any future period. The unaudited
pro forma condensed combined financial statements should be read in conjunction
with the Company's and Hayes' consolidated financial statements and the notes
thereto included elsewhere herein.
45
<PAGE> 56
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
HAYES YEAR ENDED YEAR ENDED ACQUISITION
JUNE 30, 1997 JULY 31, 1997 ADJUSTMENTS PRO FORMA
---------------- ------------- --------------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents....................... $ 3,301 $ 578 $ 3,879
Accounts receivable............................. 38,371 3,050 41,421
Receivables from related parties................ 3,883 3,883
Inventories..................................... 34,891 5,678 749(1) 41,318
Prepaids and other(6)........................... 4,601 167 4,768
Total Current Assets................... 85,047 9,473 749 95,269
Property and equipment.......................... 9,185 3,484 12,669
Intangibles and other........................... 6,689 949 7,638
Acquired technology............................. 4,010(2) 4,010
Acquired in process research and development.... 46,398(3) (46,398)(3)
Excess of cost over identifiable assets
acquired...................................... 4,227(8) 4,227
Total Assets........................... 100,921 13,906 55,384 (46,398) 123,813
LIABILITIES:
Current debt.................................... 31,501 31,501
Accounts payable and accrued liabilities........ 50,126 5,842 1,000(7) 56,968
Amounts due related parties..................... 8,265 8,265
Income taxes.................................... 926 926
Total current liabilities.............. 90,818 5,842 1,000 97,660
Long-term debt, less current.................... 5,491 456 5,947
Other long-term liabilities..................... 1,577 297 1,874
Total Liabilities...................... 97,886 6,595 1,000 105,481
Redeemable preferred stock, series B............ 5,455 5,455
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock.................................... 50 125 (50)(4) 458(4) 583
Preferred stock, series A....................... 35,000 (35,000)(4) 1,218(4) 1,218
Additional paid in capital...................... 46,431 (46,431)(5) 94,944(4) 94,944
Accumulated deficit............................. (38,147) (39,206) 39,206(5) (46,398)(3) (84,545)
Other adjustments............................... 677 (39) 39(5) 677
Total stockholders' equity (deficit)... (2,420) 7,311 (42,336) 50,222 12,877
Total liabilities and stockholders'
equity............................... 100,921 13,906 (41,236) 50,222 123,813
</TABLE>
- ---------------
(1) Adjustment to reflect fair value of the Company's inventory less estimated
selling costs.
(2) Adjustment to capitalize the acquired product line technology using the
income forecast method.
(3) Adjustment to capitalize and expense the acquired in process research and
development based on an appraisal of the product line technology that has
not yet reached technological feasibility using the income forecast method.
(4) Adjustment to reflect the exchange of Hayes common and preferred stock for
common and preferred stock of the Company.
(5) Adjustment to reflect the elimination of additional paid in capital,
accumulated deficit and other equity adjustments account balances of the
Company.
(6) Consistent with the Company's historical financial statements, the purchase
allocation does not include the $980,000 note receivable from Technipower,
Inc. and the $1,950,000 note receivable from Electro-Metrics, Inc. Repayment
of these notes cannot be assured beyond a reasonable doubt.
(7) Adjustment to record the Company's estimate of costs associated with the
consummation of the Merger.
(8) The fair value of stock issued was based on the outstanding shares at the
average market price of $4.94 five days before and after the announcement
date of July 29, 1997. The unaudited and estimated fair value of assets
acquired and liabilities assumed is summarized as follows:
<TABLE>
<S> <C>
Fair value of stock issued........................................... $ 61,695
Other acquisition costs.............................................. 1,000
Fair value of liabilities assumed.................................... 6,595
Fair value of tangible and identifiable assets acquired.............. (14,655)
Acquired product technology line..................................... (4,010)
Acquired in process research and development......................... (46,398)
--------
Excess of cost over identifiable assets acquired..................... $ 4,227
=========
</TABLE>
46
<PAGE> 57
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY
HAYES SIX MONTHS
SIX MONTHS ENDED ENDED JULY PRO FORMA
JUNE 30, 1997 31, 1997 ADJUSTMENTS PRO FORMA
---------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues from continuing
operations............................. $ 94,897 $ 6,492 $ 101,389
Cost of Revenues......................... 70,965 4,093 75,058
Gross profit............................. 23,932 2,399 26,331
Selling, general and administrative...... 26,374 5,566 31,940
Research and development................. 5,981 2,671 8,652
Amortization............................. 775(1) 775
Restructuring charges.................... 238 238
Write-down of assets..................... 864 864
Operating loss from continuing
operations............................. (8,423) (6,940) 775 (16,138)
Interest (expense) income, net........... (2,375) 108 (2,267)
Other income............................. 1,710 213 1,923
Loss before tax expense.................. (9,088) (6,619) 775 (16,482)
Income tax expense....................... (62) (62)
Loss before unusual items, reorganization
expenses, discontinued operations, and
non-recurring gains.................... (9,150) (6,619) 775 (16,544)
Loss per common share.................... (0.28)
Shares used in per share calculation..... 58,283,453
</TABLE>
- ---------------
(1) Adjustment to recognize amortization of acquired product technology over its
estimated life of three to thirty-six months and to recognize amortization
of excess of cost over identifiable assets acquired over seven years.
47
<PAGE> 58
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
HAYES THE COMPANY
YEAR ENDED YEAR ENDED PENRIL THE COMPANY PRO FORMA
DECEMBER 31, 1996 JANUARY 31, 1997 ADJUSTMENTS AS ADJUSTED ADJUSTMENTS PRO FORMA
----------------- ---------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues from
continuing
operations.......... $ 257,452 $ 33,596 $ (12,366)(1) $ 21,230 $ 278,682
Cost of Revenues...... 195,918 20,416 (8,683)(1) 11,733 207,651
Gross profit.......... 61,534 13,180 (3,683) 9,497 71,031
Selling, general and
administrative...... 61,727 17,239 (2,147)(2) 15,092 76,819
Research and
development......... 9,640 7,358 (1,400)(3) 5,958 15,598
Amortization.......... 367 367 2,882(4) 3,249
Restructuring
charges............. 3,600 9,718 9,718 13,318
Merger related
expenses............ 4,576 4,576 4,576
Operating loss from
continuing
operations.......... (13,433) (26,078) (136) (26,214) (2,882) (42,529)
Interest expense,
net................. (5,056) (150) (150) (5,206)
Other income.......... 2,279 3,885 3,885 6,164
Loss before tax
expense............. (16,210) (22,343) (136) (22,479) (2,882) (41,571)
Income tax expense.... (385) (385)
Loss before unusual
items,
reorganization
expenses,
discontinued
operations, and non-
recurring gains..... (16,595) (22,343) (136) (22,479) (2,882) (41,956)
Loss per common share... (0.72)
Shares used in per
share calculation... 58,283,453
</TABLE>
- ---------------
(1) Adjustments to exclude the modem business revenues and associated costs of
sales; the adjustments to Penril are only for those items that can be
directly attributed to the modem business sold to Bay.
(2) Adjustment to eliminate rent expense related to the modem business product
development and engineering, to exclude marketing and advertising expenses
related to the modem business and related depreciation, amortization and
other operating expense.
(3) Adjustment to eliminate modem business related engineering labor.
(4) Adjustment to recognize amortization of acquired product technology over its
estimated life of three to thirty-six months and to recognize amortization
of excess of cost over identifiable assets acquired over seven years.
48
<PAGE> 59
BUSINESS OF THE COMPANY
GENERAL DEVELOPMENTS
The Company is in the business of developing and marketing products which
enable local, remote or mobile users to access network resources (the "Remote
Access Business"). The Company was incorporated on July 23, 1996 and, as
described more fully in Note 1 to the Company's Consolidated Financial
Statements, was spun-off from Penril on November 18, 1996 pursuant to the
distribution (the "Distribution") to the Penril stockholders on such date of
shares of the Company's Common Stock. The Company retains the historical
financial information of Penril through November 18, 1996 when Penril was merged
into Bay Networks, Inc. For accounting purposes, the disposition of Penril's
modem business, as a result of the merger agreement with Bay Networks, Inc. has
been accounted for as a reduction of paid in capital. The Company's product
lines consists of the product line called Access Beyond, serving the remote
access market, and products which serve the LAN and Host Access Products.
Restructuring: In the fourth quarter of fiscal 1996, Penril took actions
to strategically restructure its business to reduce costs and improve
competitiveness for the long term. As a result of this plan, Penril recorded a
charge of approximately $9.7 million in the fourth quarter of fiscal 1996. The
restructuring included a plan to focus the Company's business operations on the
remote access server and remote connectivity markets and away from the data
transmission markets. See Note 2 to the Consolidated Financial Statements.
Reduction in Work Force: In August 1997, the Company completed a reduction
in work force and other cost-saving measures which will result in an annual
savings of approximately $2.0 million and is expected to improve the Company's
competitiveness. The cost of such reduction in work force was immaterial.
Acquisitions: On May 2, 1997, the Company and Paradyne Corporation, a
Delaware corporation ("Paradyne"), entered into the Hawk Technology Transfer
Agreement pursuant to which Paradyne (i) transferred to the Company technology
relating to certain open remote dial access cards (in the form of a
comprehensive set of specifications, technical information, hardware and
software) (the "Hawk Technology"), (ii) sold to the Company certain inventory,
tools and equipment used in the application of the Hawk Technology to develop
and manufacture products, ("Hawk Products") which include the Hawk Technology,
(iii) licensed to the Company certain intellectual property in connection with
the Hawk Technology, and (iv) agreed to provide the Company with technical,
engineering, manufacturing and marketing support, for an aggregate purchase
price of 503,704 shares of the Common Stock (the "Paradyne Shares"), and
$425,000 in cash. The Company and Paradyne also entered into a Stock Purchase
Agreement, dated as of May 2, 1997 (the "Purchase Agreement"), pursuant to which
the Company sold and issued the Paradyne Shares to Paradyne. The Company is
required to register the Paradyne Shares for Paradyne under the Securities Act
and use its best efforts to maintain the effectiveness of the Registration
Statement. See Note 7 to the Company's Consolidated Financial Statements.
PRINCIPAL PRODUCTS
Access Beyond Product Line
The Company's Access Beyond product family is targeted at the remote access
market, providing a scalable modular platform combining advanced modem, ISDN
BRI/PRI, remote access, internet working and terminal connectivity capabilities
within a single family of products. The Access Beyond products currently use
three chassis configurations supporting from one to eight interface modules for
end users to choose from, based on current needs and anticipated future growth.
Interface modules are then selected based upon WAN and LAN technology and port
density requirements. The result is a fully integrated solution that effectively
solves the end user's specific remote access needs.
The Access Beyond advanced remote access software delivers complete IP, IPX
and Appletalk routing, remote node and remote control capabilities including
NACS/NASI, all combined with full support for PPP, SLIP, CSLIP, LAT, Telnet, and
a wealth of security and management capabilities. In addition to full support
for SNMP, it provides an advanced, easy to use Windows(R) based management and
configuration utility.
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The Company recently introduced a new class of remote access solutions that
integrates both T1 and PRI-ISDN directly within Microsoft Windows NT(R) servers.
This new technology, dubbed "Hawk", supports either digital or analog (modem or
ISDN) remote access transmission and can be easily plugged into any Microsoft
Windows NT(R) or Novell Netware Connect(R) and Border Manager configured server.
Servers can be configured to simultaneously support existing network
applications as well as remote access, with the Dynamic Access Switching
available in the Hawk solution. This substantially reduces network traffic by
connecting users directly into the server hosting the network applications.
LAN and Host Access Products
The LAN and Host Access Products currently sold by the Company include
statistical multiplexers and host access servers (VCX), and Ethernet terminal
servers (CSX). Each of the LAN and Host Access Products provides the Company
with an existing revenue stream as well as an installed base.
The VCX product line of multiplexers ranges from 4-port remote site
multiplexers to enterprise solutions providing up to 304 ports or 36 trunk lines
and multipurpose communication servers that combine both WAN and LAN
capabilities. These products can function as a data PBX, X.25 PAD, statistical
multiplexer, terminal server or any combination of these. Although the market
for these products is in decline, the Company continues to serve the installed
base and fulfill customer applications.
The CSX Ethernet communications server family provides local and dialup
access to Ethernet LANs. Available as either 8-port or 16-port stand alone units
or as a modular chassis based solution, the CSX server provides terminal and
dialup access for TCP/IP networks.
DISCONTINUED OPERATIONS
In fiscal 1995, the board of directors of Penril decided to sell
Technipower, Inc. ("TPI"), a subsidiary manufacturing uninterruptible power
supplies and power regulating equipment. In October 1996, the Company completed
the sale of TPI business for $1.6 million in cash and a $2.8 million note. As of
July 31, 1997, a balance of $980,000 remained unpaid on the note which was due
July 31, 1997. The Company reserved the unpaid balance of this note with a
charge of $980,000 to loss on disposal of discontinued operations.
In fiscal 1996, the board of directors of Penril decided to sell EMI, a
subsidiary manufacturing test equipment and systems for analysis of
electromagnetic interference and communications security including applications
in satellite communications. In June 1997, the Company completed the sale of the
EMI business to EMI Holding Corp. (the "Borrower"), for $2.0 million in cash,
$1.5 million in subordinated term notes, and $500,000 in warrants. The
subordinated term notes include a $1.0 million note with payments of principal
and interest to be made in seven (7) quarterly installments of $50,000 each,
beginning on June 30, 1997, and one final installment together with accrued
interest being due on June 30, 1999. Interest on the $1.0 million note is at 3%
above the highest interest rate being charged to the Borrower by the Borrower's
principal bank lender ("Bank Rate"). The remaining subordinated term note of
$500,000 accrues interest at 2% above the Bank Rate, accruing from June 30, 1997
and payable in monthly installments beginning on July 1, 1999. The principal
shall be paid in one (1) installment on June 30, 2002. The warrants are
exercisable on June 30, 2002, wherein the Borrower issues to the Company shares
of preferred stock of the Borrower equal to 19.678% of the shares of the
Borrower outstanding immediately after the exercise of these warrants. In
accordance with the Securities and Exchange Commissions Staff Accounting
Bulletin No. 81, "Gain Recognition on the Sale of a Business or Operating Assets
to a Highly Leveraged Entity," a provision was charged to Loss from Disposal of
Discontinued Operations for the outstanding balance of the subordinated term
notes and warrants at July 31, 1997 of $1,950,000. The Company fully expects to
collect these notes and warrants, however the repayments will be recorded as
income when received due to the highly leveraged structure of the Borrower.
SUPPLIERS
Material and components for the Company's products are purchased from
outside suppliers. While most components are available from several suppliers, a
few are provided from sole-source vendors. The Company
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believes that in most cases alternative sources of supply could be obtained
within a reasonable time period; however, an interruption in the supply of such
components could have a temporary adverse effect on the Company's operations. In
March 1997, the Company entered into an agreement (the "Hibbing Agreement") with
Hibbing Electronics Corporation ("Hibbing") pursuant to which Hibbing
manufactures and sells printed circuit card products to the Company. The Hibbing
Agreement expires August 31, 1998 at which time Hibbing shall have the option to
purchase for nominal consideration all of the equipment covered under the
agreement and the Company will assign all right, title, and interest in the
covered leases and equipment to Hibbing in exchange for Hibbing's agreement to
pay and perform the Company's obligations under those leases.
PATENTS, COPYRIGHTS AND LICENSES
The Company owns, or is licensed or otherwise possesses legally enforceable
rights to use, several patents, patent applications, trademarks, trade names,
service marks, copyrights, schematics, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information or
material essential and necessary to the business of the Company. The Company may
desire in the future to obtain additional licenses related to its products and
believes, based on industry practice, that any necessary licenses could be
obtained. The costs of such licenses may vary significantly depending on the
nature of the technology involved.
The United States trademarks, trade names and service marks owned by Access
Beyond include ACCESS BEYOND.
The Company may license much of its technology including integrated access
software; CSU/DSU technology; frame relay assembler disassembler technology;
PC/TCP SNMP technology; terminal emulation software; remote access software;
router card technology and software; network management software; and basic
frame relay software for LAN interconnect products.
On June 16, 1996, Penril and Bay entered into a Development and License
Agreement on behalf of Access Beyond whereby Bay licensed to Penril on behalf of
Access Beyond certain intellectual property, software, and technical know-how
related to certain 24-port Digital Modem Cards. The agreement contemplates that
Bay will develop a 24-port Digital Modem Card for Access Beyond, train Access
Beyond's personnel in the underlying technology, and provide technical
assistance where necessary to permit Access Beyond to market this digital
technology.
BACKLOG
A significant portion of data communications revenues are based on customer
purchase orders with immediate shipment requirements. Backlog, which tends not
to be significant in data communications products, is a result of the occasional
customer order with future scheduled shipment requirements or misalignment of
demand and production of a particular product. Because data communications
revenues constitute such a significant portion of the revenues of the Company,
it is the opinion of the Company's management that the dollar amount of backlog
at any given time is not indicative of the actual level of revenues which will
ultimately be realized during future periods. Consequently, the Company's
management believes that the amount of backlog is not a material consideration
in understanding the Company's business operations.
COMPETITION
The Company encounters substantial competition in the marketing of its
products and many of its competitors have greater financial, marketing and
technical resources. Important competitive factors in the markets for the
Company's products are established customer base, product performance and
features, service and support as well as price. The Company believes that it
competes favorably with respect to these factors. There can be no assurance that
the Company's products will compete successfully with competitive products that
may be offered in the future or that aggressive pricing will not negatively
impact the profitability of the Company.
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RESEARCH AND DEVELOPMENT
Under its own sponsorship, the Company is continuously engaged in the
development of new products as well as the development and enhancement of its
existing products. The Company expensed approximately $6.2 million (34% of
consolidated revenues) for product development and engineering during fiscal
1997 compared to $7.4 million (19% of consolidated revenues) in fiscal 1996 and
$7.4 million (14% of consolidated revenues) in fiscal 1995.
ENVIRONMENTAL MATTERS
The Company's compliance with federal, state and local environmental laws
had no material effect upon the Company's capital expenditures, earnings or
competitive position.
SALES AND MARKETING
The Company's distribution channel is composed of value-added resellers
("VARs"), original equipment manufacturers ("OEMs") and distributors in more
than 40 countries. Sales to end-user customers account for less than 10% of the
Company's revenues. This multi-channel strategy allows the Company to meet
specific customer needs while giving coverage to the worldwide markets.
Value Added Resellers. VARs integrate the Company's products with products
of other vendors, into networking systems that are sold directly to end-users.
VARs also sell the Company's products as stand-alone units. Sales to VARs are
made at discounts based on purchase volumes and other incentive programs.
Original Equipment Manufacturers. The Company also customizes its product
for sale through OEMs. This customization may range from simple private labeling
of existing products to complete customization of software and/or hardware to
fit the product lines of the OEM.
Distributors. The Company also sells its products to distributors who
generally resell to VARs and other dealers. Distributors generally provide a
minimal level of systems integration. The Company offers sales and marketing
programs to assist distributors in promoting, selling and supporting the
Company's products.
Many of the Company's VARs and distributors carry products which are
complementary to, or compete with, those of the Company, and may choose to give
higher priority to products of other suppliers or competitors of the Company.
CUSTOMER SUPPORT, SERVICE AND WARRANTY
The Company services, repairs and provides technical support for its
products. A large portion of these support activities, provided through a 24
hour United States support center, are related to software and hardware
configuration. The Company sells products with end-user warranty periods of up
to sixty months. Following the expiration of the warranty period, if any, the
Company offers services on a time and materials basis, or under maintenance
contracts.
INTERNATIONAL OPERATIONS
The Company has a subsidiary (Access Beyond, Ltd.) located in the United
Kingdom. Financial information about foreign and domestic operations and export
sales is more fully described in Note 10 of the Company's Consolidated Financial
Statements.
PROPERTIES
The Company's executive offices are located in Gaithersburg, Maryland in
facilities which had previously been leased to Penril. The lease between the
Company and Real Estate Income Partners III was assigned to the Company by
Penril as part of the spin-off, is for 54,874 square feet and expires on
September 30, 1999. The Company has an option to extend the term of the lease
for a period of 119 months and may exercise the option by giving written notice
to the landlord prior to the end of the initial term of the lease. Approximately
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50% of the premises is subleased to Hibbing, which pays the Company an amount
equal to 50% of the rent and other charges payable by the Company.
The Company leases a research and development facility in Carlstadt, New
Jersey. The lease is for approximately 44,403 square feet and expires in
September 2001. As more fully described in Note 5 to the Company's Consolidated
Financial Statements, the Company has sublet to other parties a substantial
portion of such premises.
In addition to the facilities mentioned above, the Company and its
subsidiaries lease manufacturing, warehouse and office facilities in
Basingstoke, England. The lease is for approximately 6,800 square feet and
expires in December 2001.
The Company believes its properties are adequate for its needs for the
foreseeable future.
EMPLOYEES
The Company employed approximately 120 full time employees as of July 31,
1997. The Company believes that its future success will depend largely on its
ability to retain certain key personnel and to recruit and retain additional
highly skilled employees who are in great demand. The Company has an employment
contract with Ronald A. Howard, President and CEO, but does not have employment
contracts with its other employees. The Company has employee retention
arrangements with two employees. The Company has experienced no work stoppages
and believes that its employee relations are satisfactory. See "MANAGEMENT OF
THE COMPANY -- Employment and Consulting Agreements."
LEGAL PROCEEDINGS
The Company initiated a lawsuit in December 1994 against Network Systems
Corporation ("NSC") for breach of contract, fraudulent inducement and
defamation. The suit is seeking specific performance, compensatory damages of
$2.0 million and punitive damages of $5.0 million. The litigation arises out of
a contract in which the Company agreed to develop certain computer hardware and
software to NSC's specifications. NSC subsequently brought a counterclaim
alleging negligent misrepresentation, fraud and breach of contract by the
Company. NSC is seeking recision of the contract, restitution of monies paid by
NSC to the Company, compensatory damages of $5.0 million and punitive damages in
an unspecified amount. As of September 23, 1997, the Company was in settlement
discussions with NSC.
The Company is involved in other routine litigation. Management believes
none of the litigation will have a material adverse effect on the Company's
financial position or results of operations.
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MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Certificate of Incorporation and the By-laws, the Company
Board is divided into three classes with each director serving a three year term
(after the initial term). The following table sets forth certain information as
to persons who currently serve as directors and executive officers of the
Company.
DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS WITH THE
COMPANY OTHER THAN DIRECTOR PRINCIPAL OCCUPATION INFORMATION
- ------------------------------------- ------------------------------------------------------
<S> <C>
Class I -- Term Expiring at 1997 Annual Meeting
Barbara Perrier Dreyer, 42........... Ms. Perrier Dreyer has served as a Vice President and
Chief Financial Officer of Communication Systems
Technology, Inc., a developer of software and hardware
communications and control equipment, since March
1996, and became a Senior Vice President in October
1997. In July 1997, Ms. Perrier Dreyer was appointed a
member of the Board of Directors of the International
Teleconferencing Association. Ms. Perrier Dreyer was
President and founder of VideoGrafects, Inc., a
multimedia communications company specializing in the
production of video and computer based material, from
its founding in August 1992 until the Company was sold
to French Bray in March 1996. Prior to founding
VideoGrafects, Inc., Ms. Perrier Dreyer was a special
(investing) partner with New Enterprise Associates, a
venture capital firm.
Paul Schaller, 49.................... Mr. Schaller has served as President of Schaller
Associates, a management consulting firm, since March,
1996. From September 1995 to March 1996, Mr. Schaller
was Vice President of Business Development with the
LAN Switching Division of FORE Systems, Inc., a
provider of ATM switching solutions. From August 1993
to August 1995, Mr. Schaller was the Vice President of
Marketing at Alantec, Inc., a provider of routing
switches for the internet working market. Mr. Schaller
was Vice President of Sales and Marketing at Harmonic
Lightwaves, Inc., a fiber optic equipment provider
from 1992 to 1993. From 1982 to 1991 Mr. Schaller was
Vice President of Sales and Marketing and General
Manager of the Digital Division of Vitalink
Corporation, a provider of remote internet working
equipment.
Class II -- Term Expiring at 1998 Annual Meeting
John Howard, 44...................... Mr. Howard has served as Senior Managing Director of
Bear, Stearns & Co., Inc. since March 1997. Mr. Howard
was the Chief Executive Officer of Gryphon Capital
Partners Corporation, an investment firm, from July
1996 to March 1997. He served as Co-Chief Executive
Officer of Vestar Capital Partners, a leveraged buyout
firm, from 1990 to 1996. Mr. Howard is also a director
of Celestial Seasonings, Inc., a manufacturer of
herbal teas. Mr. Howard is the brother of Ronald A.
Howard, the Chairman of the Board, President and Chief
Executive Officer of the Company.
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE AND POSITIONS WITH THE
COMPANY OTHER THAN DIRECTOR PRINCIPAL OCCUPATION INFORMATION
- ------------------------------------- ------------------------------------------------------
<S> <C>
Arthur Samberg, 56................... Mr. Samberg has served as President of Dawson-Samberg
Capital Management, Inc., a registered investment
advisor, since 1985. Mr. Samberg is a General Partner
and senior portfolio manager of Pequot Partners Fund,
L.P., Pequot International Fund Inc. and Pequot
Endowment Fund, L.P.
Class III -- Term Expiring at 1999 Annual Meeting
Ronald Howard, 41.................... Mr. Howard has served as Chairman of the Board,
Chairman of the Board, President and President and Chief Executive Officer of the Company
Chief Executive Officer since November 1996. Mr. Howard served as President of
the Datability Networks Division of Penril from
November 1994 to November 1996, and as Co-President of
that division from May 1993 until November 1994. He
had held the position of Executive Vice President of
Penril from May 1993 until November 1996. Mr. Howard
was President of Datability Inc. from its founding in
1977 until it was acquired by Penril in May 1993. Mr.
Howard is the brother of John Howard, a director of
the Company.
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)
James Gallagher, 52.................. Mr. Gallagher has served as Vice President of Sales of
Vice President -- Sales the Company since November 1996. He was Vice
President -- Sales of the Datability Networks Division
of Penril from November 1994 until November 1996. From
May 1993, when Penril acquired Datability, Inc, until
November 1994, Mr. Gallagher was Vice President, North
and South American Sales of the Datability Networks
Division. At Datability, Inc, he was Vice President of
Sales from April 1990 until May 1993.
</TABLE>
MANAGEMENT POST MERGER
As part of the Proposal, as of the Closing, the size of the Company Board
will be increased to seven, all of the directors of the Company, other than Mr.
Howard, will resign, Mr. Howard will fill the vacancies thereby created in
Classes II and III and the stockholders will elect two persons to Class I, the
term of which expires at the 1997 Annual Meeting. All of such persons will take
office effective as of the Closing Date, except that Messrs. Hayes and Lam will
take office effective as of the day after the Closing Date. The following table
sets forth certain information as to persons who will serve as directors and
executive officers of the Company after the Merger. The directors of Class I
will hold office until the Annual Meeting of stockholders in 2000, the directors
of Class II will hold office until the Annual Meeting of stockholders in 1998
and the directors of Class III will hold office until the Annual Meeting of
stockholders in 1999. Thereafter, stockholders will elect the directors of each
Class at the appropriate succeeding Annual Meeting of stockholders.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ------------------------------------- ------------------------------------------------------
<S> <C>
Class I -- Term Expiring at 2000 Annual Meeting
Chiang Lam, 43....................... Mr. Lam has served as a director of Hayes since April
1996. Mr. Lam is a financial investment advisor
serving various venture capital interests. Mr. Lam
served on the Board of Directors of Paradigm
Technology from June 1994 to August 1996.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ------------------------------------- ------------------------------------------------------
<S> <C>
P. K. Chan, 56....................... Mr. Chan has served as President and Chief Operating
President and Chief Operating Officer Officer of Hayes since October 1997 and served as Vice
President of Operations from October 1994 to October
1997. Prior to joining Hayes in October 1994, Mr. Chan
served as Managing Director of Achiever Group, a
subsidiary of Achiever Industrial Limited from 1991 to
1994. Prior to joining Achiever Industrial Limited, he
held various positions with Ampex and Meadville Group,
most recently serving as Managing Director of
Manufacturing.
, ........................
Class II -- Term Expiring at 1998 Annual Meeting
, ........................
, ........................
Class III -- Term Expiring at 1999 Annual Meeting
Dennis Hayes, 47..................... Mr. Hayes founded Hayes in 1977 at the age of 27 and
Chairman has served as Chairman and a director of Hayes since
its inception. Mr. Hayes worked on the first four-bit
microprocessor technology while employed at Financial
Data Services. After concluding his studies at Georgia
Tech, Mr. Hayes worked for National Data Corporation
where he developed microcomputer based systems to
interconnect networks and maintain communications
systems on large mainframe computers. Mr. Hayes is
active in both community and industry associations
including the Public Policy Committee of the Computing
Technology Industry Association, the Association of On
Line Professionals, Georgia High Tech Alliance,
Governor's Advisory Council on Science and Technology
and Georgia Center for Advanced Telecommunications
Technology. Mr. Hayes is also the Georgia
Representative to the Federal Lab Consortium and is
one of the four initial inductees into the Technology
Hall of Fame of Georgia.
Ronald Howard, 41.................... Mr. Howard has served as Chairman of the Board,
Vice Chairman and Executive Vice President and Chief Executive Officer of the Company
President of Business Development since November 1996. Mr. Howard served as President of
the Datability Networks Division of Penril from
November 1994 to November 1996, and as Co-President of
that division from May 1993 until November 1994. He
had held the position of Executive Vice President of
Penril from May 1993 until November, 1996. Mr. Howard
was President of Datability Inc. from its founding in
1977 until it was acquired by Penril in May 1993.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ------------------------------------- ------------------------------------------------------
<S> <C>
Barbara Perrier Dreyer, 42........... Ms. Perrier Dreyer has served as a Vice President and
Director Chief Financial Officer of Communication Systems
Technology, Inc., a developer of software and hardware
communications and control equipment, since March
1996, and became a Senior Vice President in October
1997. In July 1997, Ms. Perrier Dreyer was appointed a
member of the Board of Directors of the International
Teleconferencing Association. Ms. Perrier Dreyer was
President and founder of VideoGrafects, Inc., a
multimedia communications company specializing in the
production of video and computer based material, from
its founding in August 1992 until the Company was sold
to French Bray in March 1996. Prior to founding
VideoGrafects, Inc., Ms. Perrier Dreyer was a special
(investing) partner with New Enterprise Associates, a
venture capital firm.
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)
Alan Clark, 44....................... Dr. Clark joined Hayes in March 1993 and has served as
Vice President and Chief Technical Vice President and Chief Technical Officer since March
Officer 1996. Prior to joining Hayes, Dr. Clark served as
Director, Research and Strategy for Dowty
Communications in the United Kingdom. Prior to this
position, Dr. Clark held a Marketing Director position
and an Engineering Director position for the Dowty
Advanced Development Centre from 1989 to 1993. Prior
to joining Dowty, Dr. Clark served British Telecom in
various positions.
James Jones, 40...................... Mr. Jones joined Hayes in January 1996 as Vice
Vice President and Chief Financial President and Chief Financial Officer and Treasurer.
Officer He previously served in various positions with Genicom
Corporation for nine years, most recently as Vice
President -- Finance. Prior to Genicom, Mr. Jones
served as a manager with Coopers and Lybrand L.L.P.
C. Bruce Meyer, 48................... Mr. Meyer has served as Vice President of Human
Vice President of Human Resources Resources since August 1997. He joined Hayes in August
1996 as Director of Human Resources. Prior to joining
Hayes, Mr. Meyer served at Genicom Corporation since
1983, most recently as Vice President of Human
Resources and Corporate Communications.
Keith Mintzer, 43.................... Mr. Mintzer joined Hayes in January 1997 as Vice
Vice President of Worldwide Sales President of Worldwide Sales. Prior to joining Hayes,
Mr. Mintzer served in a number of senior executive
positions with GBC Technologies for 10 years. Prior to
joining GBC Technologies, Mr. Mintzer held various
sales and channel management positions at the Sperry
Corporation and Reynolds & Reynolds.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ------------------------------------- ------------------------------------------------------
<S> <C>
Marshall Toplansky, 46............... Mr. Toplansky joined Hayes in August 1996 as Vice
Vice President of Marketing President of Marketing. Prior to joining Hayes, Mr.
Toplansky was Chief Executive Officer of Core
Strategies, a high technology consulting firm. Prior
to Core Strategies, Mr. Toplansky served as Vice
President of Marketing for U.S. Robotics, Inc.
Charles Riehm, 58.................... Mr. Riehm joined Hayes in October 1996 as Director of
Vice President of Engineering Development. In April 1997, he was promoted to Vice
President of Engineering. Mr. Riehm served as Vice
President of Operations of SPE Microsystems, Inc. from
1994 to 1996. Prior to SPE Microsystems, Inc., he
served as Director of Communications Products of
Silicom Systems, Inc.
</TABLE>
COMMITTEES OF THE COMPANY'S BOARD
The Company Board has established an Audit Committee (the "Audit
Committee") and a Compensation Committee (the "Compensation Committee").
The general functions of the Audit Committee include selecting the
independent auditors (or recommending such action to the Company Board),
evaluating the performance of the independent auditors and their fees for
services, reviewing the scope of the annual audit with the independent auditors
and the results of the audit with management and the independent auditors,
consulting with management, internal auditors and the independent auditors as to
the systems of internal accounting controls, and reviewing the nonaudit services
performed by the independent auditors and considering the effect, if any, on
their independence. The members of the Audit Committee are to be outside
directors and are selected by the full Company Board. The current members of the
Audit Committee are Barbara Perrier Dreyer and John Howard.
The Compensation Committee is authorized and directed to (i) review and
approve the compensation and benefits of the Company's executive officers, (ii)
review and approve the annual salary plans, (iii) review management organization
and development, (iv) review and advise management regarding the benefits,
including bonuses, and other terms and conditions of employment of other
employees, (v) administer the Incentive Plan and the granting of options under
that plan, the Directors' Plan and any other plans that may be established, (vi)
review and recommend for the approval of the Company Board the compensation of
directors, and (vii) determine the compensation and benefits of the Chief
Executive Officer and review and approve, or modify if appropriate, the
recommendations of the Chief Executive Officer with respect to compensation and
benefits of other executive officers. The members of the Compensation Committee
are to be outside directors and are selected by the full Company Board. The
current members of the Compensation Committee are Paul Schaller and Arthur
Samberg.
COMPENSATION OF DIRECTORS
Members of the Company Board who are also employees of the Company do not
receive any additional compensation for service on the Company Board or any
committees of the Company Board. Members of the Company Board who are not
employees receive an annual retainer of $5,000 plus a stipend of $1,000 for each
Company Board meeting attended. Non-employee directors receive additional
stipends for service on committees of the Company Board of $1,000 per committee
meeting not held on the same day as a Company Board meeting.
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EXECUTIVE COMPENSATION
The following table provides information with respect to the annual
compensation for services in all capacities to Penril or the Company for fiscal
years ended July 31, 1997, 1996 and 1995 of (i) the Company's chief executive
officer and (ii) the other three most highly compensated executive officers of
the Company (the "Named Executive Officers") who were employed by the Company at
the end of fiscal 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION(1) ---------------------------------
------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY STOCK OPTIONS COMPENSATION(2)
- -------------------------------------------- ---- --------- ------------- ---------------
<S> <C> <C> <C> <C>
Ronald Howard............................... 1997 $218,982 300,000(3) $ 568,269
Chairman of the Board, 1996 $221,877 250,000(4) $ 784
President and Chief 1995 $200,000 30,000(4) $ 5,458
Executive Officer
James Gallagher............................. 1997 $236,204 75,000(3) $ 200
Vice President -- Sales 1996 $188,293 20,000(4) $ 300
1995 $167,786 10,000(4) $ 250
Mark Silverman(5)........................... 1997 $155,993 60,000(3) $ 200
Vice President -- Research 1996 $109,577 15,000(4) $ 300
and Development 1995 $105,674 5,000(4) $ 250
John Clary(6)............................... 1997 $155,993 225,000(3) $ --
Senior Vice President and Chief 1996 -- -- --
Operating Officer 1995 -- -- --
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation set forth in the table does not include medical, group life
insurance or other benefits which are available to all salaried employees of
the Company, and certain perquisites and other benefits, securities or
property which do not exceed the lesser of $50,000 or 10% of the Named
Executive Officer's salary and bonus shown in the table.
(2) Includes for fiscal 1997, $562,500 paid to Mr. Howard upon the closing of
the Penril/Bay Merger in a change of control payment and $5,569 paid for
one-half of the life insurance premium purchased on behalf of Mr. Howard,
pursuant to the Mr. Howard's employment agreement with the Company. Includes
for fiscal 1997 and 1996, $200 and $300 respectively paid for benefits to
Mr. Howard, Mr. Gallagher and Mr. Silverman pursuant to the 401(k) plan.
Includes for fiscal 1996 $274 for Mr. Howard, under the Penril Split Dollar
Life Insurance Program and $210 for Mr. Howard paid to the Exec-u-Care
Medical Insurance Trust.
(3) Represents options granted under Access Beyond's 1996 Long-Term Incentive
Stock Option Plan. The options are exercisable at the price of $6.625 per
share, the fair market value on the date of grant, except for 100,000
options granted to Mr. Clary which are exercisable at $4.00 per share, the
exercise price on the date of grant.
(4) Represents options granted under Penril's 1980 Long-Term Incentive Stock
Option Plan. The options were exercisable at prices varying from $2.31 to
$8.00 per share, the fair market value on the date of grant. All options
were exercised prior to the spin-off of the Company in November 1996.
(5) Mr. Silverman's employment with the Company terminated after the end of
fiscal 1997.
(6) Mr. Clary joined Penril on August 5, 1996 as Vice President of Strategic
Planning at an annual salary of $150,000. Mr. Clary's employment with the
Company terminated after the end of fiscal 1997.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Employment Agreement dated November 18, 1996 between Ronald Howard and
the Company provides for Mr. Howard serving as Chairman of the Board, President
and Chief Executive Officer. Such employment agreement further provides for,
among other things, a two year term of employment, an annual
59
<PAGE> 70
salary of $175,000, an opportunity for bonus compensation in an amount at least
equal to his annual salary pursuant to a plan to be established by the Company
Board, and benefits consistent with those normally provided by the Company to
its executive employees as well as a $5.0 million term life insurance policy.
Pursuant to such employment agreement, Mr. Howard was granted options to
purchase 300,000 shares of Common Stock and is entitled to receive, upon a
change of control of the Company, which includes transactions such as the
Merger, a payment equal to two and one-half times his annual compensation. Upon
the Effective Time, the November 18, 1996 Employment Agreement will terminate.
Henry Epstein is a consultant to the Company under the terms of a November
18, 1996 consulting agreement (the "Epstein Agreement") between the Company and
Ideonics, a financial and technology consulting firm owned by Mr. Epstein. The
Epstein Agreement provides, among other things, for a four year consulting term
with an annual consulting fee of $137,500. In addition, pursuant to the Epstein
Agreement, the Company provides Ideonics with office space, secretarial
assistance and health care benefits for Mr. Epstein. Mr. Epstein was the
Chairman of the Board of both Penril and the Company until the Penril/Bay Merger
and the Distribution, respectively.
As of the Effective Time, the Company will enter into employment agreements
with Messrs. Hayes and Howard. See "MERGER -- Interests of Certain Persons in
the Merger."
RETIREMENT AND SAVINGS PLAN
Access Beyond's Retirement and Savings Plan ("401(k) Plan") is a defined
contribution plan that includes a "cash or deferred" option for participants, as
described in Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"). Employees of Access Beyond who have completed 90 days of
eligibility service ("Participants") are eligible to participate in the 401(k)
Plan. The 401(k) Plan permits, but does not require Access Beyond to make
matching contributions. In addition, Access Beyond may make discretionary
contributions to the 401(k) Plan which will be allocated to each Participant
based on the ratio of such Participant's eligible compensation to the total of
all Participants' eligible compensation. Amounts contributed by Access Beyond
vest as to 30% after 1 year of eligible service, 60% after 2 years of eligible
service and 100% after 3 years of eligible service. Participants may elect to
direct the investment of their contributions in accordance with the provisions
of the 401(k) Plan. As a part of the Transfer, a retirement and savings plan of
Penril ("Penril Plan") was transferred to the Company and active participation
in the Penril Plan is limited to eligible employees of the Company.
The following table sets forth certain information with respect to options
granted during the year ended July 31, 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERMS($)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ----------------------------- ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald Howard................ 300,000 20.4% 6.625 12/5/06 $1,249,928 $3,167,563
James Gallagher.............. 75,000 5.1% 6.625 12/5/06 312,482 791,891
Mark Silverman............... 60,000 4.1% 6.625 12/5/06 249,986 633,513
John Clary................... 125,000 8.5% 6.625 12/5/06 520,803 1,319,818
100,000 6.8% 4.00 6/4/07 251,558 637,497
</TABLE>
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<PAGE> 71
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning each exercise
of stock options, during the fiscal year ended July 31, 1997 by the Named
Executive Officers and unexercised stock options held by the Named Executive
Officers as of the end of such fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED PER SHARE IN-THE-MONEY
SHARES OPTIONS/SARS AT EXERCISE PRICE OF OPTIONS/SARS AT
ACQUIRED ON VALUE FISCAL YEAR-END UNEXERCISED FISCAL YEAR-END
EXERCISE REALIZED EXERCISABLE/ OPTIONS AT FISCAL EXERCISABLE/
NAME (#)(1) ($)(2) UNEXERCISABLE(3) YEAR-END UNEXERCISABLE(4)
- ---------------------------- ----------- ---------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald Howard............... 370,000 $1,697,125 --/300,000 $6.625 --/--
James Gallagher............. 75,000 611,695 --/ 75,000 $6.625 --/--
Mark Silverman.............. 40,000 286,481 --/ 60,000 $6.625 --/--
John Clary.................. none none --/225,000 $4.00-6.625 --/$125,000
</TABLE>
- ---------------
(1) Reflects shares of Penril's common stock acquired prior to the Spin-off
transaction pursuant to the exercise of options under Penril's 1986
Long-Term Incentive Stock Option Plan.
(2) Reflects the difference between the exercise price of the options exercised
under Penril's 1986 Long-Term Incentive Stock Option Plan, and the market
price of Penril's common stock on the date of exercise.
(3) Reflects only stock options granted under the Company's 1996 Long-Term
Incentive Plan; the Company does not grant SARs.
(4) Based on the fiscal year-end per share closing price of $5.25 (as reported
on the NASDAQ/NMS on July 31, 1997), 100,000 options held by Mr. Clary were
in-the-money.
THE AMENDED AND RESTATED 1996 INCENTIVE OPTION PLAN
The Company Board unanimously adopted and approved the Company's 1996
Incentive Long-Term Option Plan on November 18, 1996, and unanimously adopted
the plan, as amended and restated, on February 4, 1997 (the "Incentive Plan").
The Incentive Plan was approved by the stockholders of the Company at a Special
Meeting on March 6, 1997. On December 5, 1996, the Compensation Committee
granted 1,080,000 options to officers and key employees of the Company at an
exercise price of $6.625, on February 4, 1997, an additional 75,000 options were
granted at an exercise price of $6.75 and on June 4, 1997, an additional 314,000
options were granted at an exercise price of $4.00, which was the fair market
value of shares of Common Stock on each such day, determined in accordance with
the provisions of the Incentive Plan. All of such options vest at the rate of
30% after one (1) year, 60% after two (2) years and 100% after three (3) years,
subject to acceleration in certain circumstances. The grant of options prior to
March 6, 1997 was conditioned upon the approval of the Incentive Plan by the
stockholders of the Company, which was obtained at the Special Meeting of
Stockholders on March 6, 1997.
The purpose of the Incentive Plan is to encourage ownership of Common Stock
of the Company by officers, key employees, consultants, advisors and other
service providers ("Eligible Persons"), to encourage their continued employment
with the Company and providing of services to the Company and to provide them
with additional incentives to promote the success of the Company.
The Incentive Plan authorizes the grant to Eligible Persons of options
("Options") consisting of "incentive stock options," as that term is defined
under the provisions of Section 422 of the Code and non-qualified stock options.
There are 2,000,000 shares of Common Stock available for granting of Options
under the Incentive Plan. The Compensation Committee administers the Incentive
Plan and has sole discretion to determine those Eligible Persons to whom Options
will be granted, the number of Options granted, the provisions applicable to
each Option and the time periods during which Options may be exercisable;
provided, however, that no person may receive Options to acquire more than
500,000 shares of Common Stock during
61
<PAGE> 72
any given year. The Compensation Committee has complete authority to interpret
all provisions of the Incentive Plan, to prescribe, amend, and rescind rules and
regulations for its administration, and to make all other determinations
necessary or advisable for the administration of the Incentive Plan.
Options may be granted to such Eligible Persons as the Compensation
Committee, in its discretion, shall determine. In determining the Eligible
Persons to whom Options shall be granted and the number of shares of Common
Stock to be issued or subject to purchase or issuance under such Options, the
Compensation Committee shall take into account the recommendations of the
Company's management as to the duties of the Eligible Persons, their present and
potential contributions to the success of the Company and its subsidiaries, and
such other factors as the Compensation Committee shall deem relevant in
connection with accomplishing the purposes of the Incentive Plan. No Option
shall be granted to any member of the Compensation Committee so long as his or
her membership on the Compensation Committee continues or to any member of the
Company Board who is not also an officer, employee or consultant of the Company
or any subsidiary.
As a condition to the grant of an Option under the Incentive Plan, an
optionee must enter into two agreements with the Company: (1) an Assignment of
Inventions and Non-Disclosure Agreement ("Confidentiality Agreement") and (2) a
Non-interference Agreement ("Non-Interference Agreement").
The Compensation Committee may grant incentive stock options, non-qualified
stock options, or a combination of the two. The exercise price of each incentive
stock option may not be less than the fair market value of the Common Stock on
the date of grant. Under the Incentive Plan, fair market value is generally the
closing price of the Common Stock on NASDAQ/NMS on the last business day prior
to the date on which the value is to be determined. Unless the Compensation
Committee determines otherwise, the option price per share of any non-qualified
stock option will be the fair market value of the shares of Common Stock on the
last business day immediately preceding the date on which the option is granted.
The exercise price of each incentive stock option granted to any stockholder
possessing more than 10% of the combined voting power of all classes of capital
stock of the Company, or, if applicable, a parent or subsidiary of the Company,
on the date of grant must not be less then 110% of the fair market value on that
date. In addition, no Eligible Person may be granted an incentive stock option
to the extent the aggregate fair market value, as of the date of grant, of the
stock with respect to which incentive stock options are first exercisable by
such Eligible Person during any calendar year exceeds $100,000.
No Option shall be exercisable more than ten (10) years from the date it
was granted. Options granted as incentive stock options shall not be exercisable
more than five (5) years from the date of grant. Options shall be subject to
earlier termination as provided for in the Incentive Plan.
Unless the committee determines otherwise, Options may be exercised as to
30% of the shares subject to an Option at any time after the first anniversary
of the date of grant, as to 60% of the shares subject to an Option at any time
after the second anniversary of the date of grant and as to all shares subject
to an Option at any time after the third anniversary of the date of grant.
Options granted under the Incentive Plan are non-transferable except (a) by
will or the laws of descent and distribution or (b) pursuant to a qualified
domestic relations order as defined in the Code or in the Employee Retirement
Income Security Act of 1974, as amended.
Pursuant to the Incentive Plan, Options are terminated upon the termination
of the Eligible Person's employment or other relationship with the Company, for
(i) cause, (ii) voluntarily without the written consent of the Company or (iii)
upon a breach or threatened breach of the Confidentiality Agreement or Non-
Interference Agreement (entered into by the Eligible Persons upon the grant of
the Option). Upon any other termination of the employment or such other
relationship with the optionee (other than in (i)-(iii) above), the vested
portion of the Option is exercisable within three months after the date of such
termination (but not beyond the term of the Option). If an optionee dies while
in the employ of the Company or while providing consulting or other services to
the Company or dies within three months after the termination of employment or
such other relationship with the Company (other than a termination in (i)-(iii)
above), then the vested portion of the Option may be exercised by a legatee or
legatees or by his or her personal representative, at any time within one year
after his or her death (but not beyond the term of the Option). If the
employment or other relationship of an optionee terminates upon disability (as
defined in Section 221(e)(3) of the Code)
62
<PAGE> 73
such person may exercise the vested portion of the Option for one year after the
date of termination of employment (but not beyond the term of the Option).
An optionee entitled to exercise an Option shall do so by delivery of a
written notice to that effect specifying the number of shares of Common Stock
with respect to which the Option is being exercised. The notice shall be
accompanied by payment in full of the purchase price of any shares of Common
Stock to be purchased, which payment may be made in cash or, upon authorization
by the Compensation Committee, in shares of Common Stock.
Options granted under the Incentive Plan are subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend or other similar event affecting the Common
Stock.
In the case of a "change in control" of the Company, which includes
transactions such as the Merger, each Option granted under the Incentive Plan
will terminate 90 days after the occurrence of such "change in control" and an
officer, employee or consultant will generally have the right, commencing at
least five days prior to the "change in control" and subject to any other
limitation on the exercise of the Option (but without regard to any vesting
limitations) in effect on the date of exercise, to immediately exercise any
Option in full to the extent not previously exercised. Under the Company's stock
option plans, the transactions contemplated by the Merger Agreement will
constitute a change in control resulting in acceleration of unvested options and
termination of all Options on the 90th day after the Effective Time. The Merger
Agreement provides that as to any employee who continues in the employ of the
Company after the Effective Time and whose Option is terminated without exercise
as a result of the Merger, replacement Options will be issued for the same
number of shares giving credit to the time attained under the terminated
Options, at an exercise price equal to the "fair market value" (as defined in
the Incentive Plan) on the date of grant.
The Incentive Plan will terminate ten (10) years after adoption and Options
will not be granted under the Incentive Plan after that date although the terms
of any Option may be amended in accordance with the Incentive Plan at any date
prior to the end of the term of such Option. Any Options outstanding at the time
of termination of the Incentive Plan will continue in full force and effect
according to the terms and conditions of the Option and the Incentive Plan.
The Incentive Plan may be amended by the Company Board, provided that
stockholder approval will be necessary to the extent required under Section 422
of the Code or Rule 16b-3 of the General Rules and Regulations of the Exchange
Act, and provided further that no amendment may impair any rights of any holder
of an Option previously granted under the Incentive Plan without the holder's
consent.
Some of the Options granted under the Incentive Plan are intended to
qualify as incentive stock options for federal income tax purposes as described
in Section 422 of the Code. Generally, an optionee recognizes no taxable income
upon either the grant or exercise of an incentive stock option, although the
difference between the exercise price and the fair market value of the stock on
the date of exercise is an item of tax preference in computing the optionee's
alternative minimum tax liability, if any. If certain holding period
requirements are met, gain or loss on a subsequent sale of the stock by the
optionee is taxed at capital gain rates. Generally, long-term capital gains
rates will apply to the optionee's full gain at the time of the sale of the
stock, provided that: (i) no disposition of the stock is made within two (2)
years from the date of grant of the Option nor within one (1) year after the
acquisition of such stock, and (ii) the Option is exercised within three months
of the optionee's termination of employment (one year in the event of
disability).
A sale, exchange, gift or other transfer of legal title of stock acquired
pursuant to an incentive stock option within two (2) years from the date of
grant or within one (1) year after acquisition of the stock pursuant to exercise
of the option constitutes a disqualifying disposition. A disqualifying
disposition involving a sale or exchange produces taxable income to the
optionee, and an income tax deduction to the Company, in an amount equal to the
lesser of (i) the fair market value of the stock on the date of exercise minus
the option price or (ii) the amount realized on disposition minus the option
price. Otherwise, generally, neither issuance nor exercise of an incentive stock
option nor the disposition of the underlying stock produces a deduction for the
Company. A disqualifying disposition as a result of a gift produces taxable
income to the optionee in an amount equal to the difference between the option
price and the fair market value of the stock on the date of exercise
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<PAGE> 74
Some of the Options granted under the Incentive Plan may also be considered
to be so-called non-qualified stock options for federal income tax purposes. An
optionee recognizes no taxable income upon the grant of such stock options.
Generally, Section 83 of the Code requires that, upon exercise of an option, the
optionee recognizes ordinary income in an amount equal to the difference between
the option exercise price and the fair market value of the shares on the date of
exercise; and such amount, subject to certain limitations, is deductible as an
expense by the Company for federal income tax purposes. The ordinary income
resulting from the exercise of such options is subject to applicable withholding
taxes. Generally, any profit or loss on the subsequent disposition of such
shares is short-term or long-term capital gain or loss, depending upon the
holding period for the shares.
THE AMENDED AND RESTATED 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Company Board unanimously adopted and approved the Company's 1996
Non-employee Directors' Stock Option Plan on November 18, 1996, and unanimously
adopted the plan, as amended and restated, on February 4, 1997 (the "Directors'
Plan"). The Directors' Plan was approved by the stockholders of the Company at a
Special Meeting on March 6, 1997. In accordance with the provisions of the
Directors' Plan, each non-employee director, or his or her designee(s), was
granted 25,000 options ("Options") under the Directors' Plan on November 18,
1996, at the exercise price of $7.7375, which was the fair market value of
shares of Common Stock on such day, based on the average of the closing price of
the Common Stock for the 10 day period of November 19, 1996 to December 3, 1996,
in accordance with the provisions of the Directors' Plan. All of such Options
vest at the rate of 30% after one (1) year, 60% after two (2) years and 100%
after three (3) years, subject to acceleration in certain circumstances. The
grant of these Options was conditioned upon the approval of the Directors' Plan
by the stockholders of the Company, which was obtained at the Annual Meeting of
stockholders on March 6, 1997.
The Directors' Plan is intended to encourage non-employee directors of the
Company ("Eligible Directors") to acquire or increase their ownership of Common
Stock on reasonable terms, and to foster a strong incentive to put forth maximum
effort for the continued success and growth of the Company. The Directors' Plan
provides for the granting of non-qualified stock options to purchase 250,000
shares of Common Stock to current and future Eligible Directors.
The Directors' Plan is administered by the Committee. The principal terms
of the Option grants are fixed in the Directors' Plan. Therefore, the Committee
will have no discretion to select which Eligible Directors receive Options, the
number of shares of Common Stock included in any grant, or the exercise price of
options.
Immediately prior to the Distribution, each of the then identified Eligible
Directors, or his or her designee(s), was granted an Option to purchase 25,000
shares of Common Stock. Each Eligible Director who subsequently joins the
Company Board will be granted on the first business day following the first day
of his or her term, an Option to purchase 25,000 shares of Common Stock. On the
fifth business day after the Company's Annual Report on Form 10-K is filed with
the Commission for each fiscal year that the Directors' Plan is in effect, each
person who is an Eligible Director on such date will receive an additional
Option to purchase 5,000 shares of Common Stock. If the number of shares
available for grant under the Directors' Plan on a scheduled date of grant is
insufficient to make all the grants, then Each Eligible Director will receive an
Option to purchase a pro rata number of the available shares.
250,000 shares of Common Stock (subject to adjustment) have been reserved
for issuance by the Company under the Directors' Plan. Any shares of Common
Stock subject to an option which, for any reason, terminates unexercised or
expires, shall be available again for issuance under the Directors' Plan.
The Option price per share is the fair market value of the shares of Common
Stock on the date of grant. Under the Directors' Plan, fair market value is
generally the closing price of the Common Stock on NASDAQ/NMS on the last
business day prior to the date on which the value is to be determined; provided,
however, that with respect to the Options granted immediately prior to November
18, 1996, fair market value means the average of the daily closing price of the
Common Stock for the first ten (10) consecutive trading days that Common Stock
is traded on NASDAQ/NMS other than on an "as issued" or "when issued" basis,
calculated to the nearest cent, as determined by the Company.
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<PAGE> 75
Options granted under the Directors' Plan are exercisable for a term of ten
(10) years from the date of grant, subject to earlier termination, and may be
exercised as follows: (a) any Option granted as of the effective date of the
Director's Plan or as the first day of an Eligible Director's initial term on
the Company Board may be exercised as to 30% of the shares subject to such
option at any time after the first anniversary of the date of grant, as to 60%
of the shares subject to such option at any time after the second anniversary of
the date of grant, and as to all shares subject to such option at any time after
the third anniversary of the date of grant and (b) any other Options may be
exercised at any time after the third anniversary of the date of grant.
Options granted under the Directors' Plan are non-transferable other than
by will or pursuant to the laws of descent and distribution or pursuant to a
qualified domestic relations order.
In the event that an Eligible Director ceases to be a member of the Company
Board (other than by reason of death or disability), an option may be exercised
by the director (to the extent the director was entitled to do so at the time he
ceased to be a member of the Company Board) at any time within seven months
after he ceases to be a member of the Company Board, but not beyond the term of
the option. If the Eligible Director dies or becomes disabled while he is a
member of the Company Board or within seven months thereafter, an option may be
exercised (to the extent the director was entitled to do so as of the date of
his death or the termination of his directorship by reason of his disability) by
a legatee of the director under his will, or by him or his personal
representative or distributees, as the case may be, at any time within 12 months
after his death or disability, but not beyond the term of the Option.
An Eligible Director entitled to exercise an Option shall do so by delivery
of a written notice to that effect specifying the number of shares of Common
Stock with respect to which the Option is being exercised. The notice shall be
accompanied by payment in full of the purchase price of any shares of Common
Stock to be purchased, which payment may be made in cash or, upon authorization
by the Committee, in shares of Common Stock of the Company that such Eligible
Director has held for more than six (6) months.
In accordance with Rule 16b-3(d)(3) promulgated under the Exchange Act,
Eligible Directors are not permitted to dispose of the shares of Common Stock
underlying an option granted pursuant to the Directors' Plan during the six
month period commencing from the date of the acquisition of such option.
Options granted under the Directors' Plan are subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend or other similar event affecting the Common
Stock.
Upon a "change of control" of the Company, which includes transactions such
as the Merger, each option granted under the Directors' Plan will terminate on
the later of (i) 90 days after the occurrence of such "change of control" and
(ii) seven months following the date of grant of each Option, and an Option
holder will have the right, commencing at least five days prior to the "change
of control" and subject to any other limitation on the exercise of the option
(except without regard to any vesting limitations) in effect on the date of
exercise, to immediately exercise any options in full, to the extent they have
not previously been exercised.
The Directors' Plan will terminate on November 18, 2006 and options may not
be granted under the Directors' Plan after that date, although the terms of any
Option may be amended in accordance with the Directors' Plan at any date prior
to the end of the term of such option. Any options outstanding at the time of
termination of the Directors' Plan will continue in full force and effect
according to the terms and conditions of the option and the Directors' Plan.
The Directors' Plan may be amended by the Company Board, provided that
stockholder approval will be necessary to the extent required under Rule 16b-3
of the General Rules and Regulations of the Exchange Act, and no amendment may
impair any of the rights of any holder of an option previously granted under the
Directors' Plan without the holder's consent.
The tax treatment of Options granted under the Directors' Plan will be the
same as the tax treatment for non-qualified Options discussed under the
Incentive Plan above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Paul Schaller and Arthur Samberg.
Neither Mr. Schaller nor Mr. Samberg is or was an officer or employee of the
Company.
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<PAGE> 76
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee is responsible for determining and administering
the Company's compensation policies for the remuneration of the Company's
officers. The Compensation Committee annually evaluates individual and corporate
performance from both a short-term and long-term perspective.
Philosophy
The Company's executive compensation program seeks to encourage the
achievement of business objectives and superior corporate performance by the
Company's executives. The program enables the Company to reward and retain
highly qualified executives and to foster a performance-oriented environment
wherein management's long-term focus is on maximizing stockholder value through
equity-based incentives. The program calls for consideration of the nature of
each executive's work and responsibilities, unusual accomplishments or
achievements on the Company's behalf, years of service, the executive's total
compensation and the Company's financial condition generally.
Components of Executive Compensation
Historically, the Company's executive employees have received cash-based
and equity-based compensation.
Cash-Based Compensation. Base salary represents the primary cash component
of an executive employee's compensation, and is determined by evaluating the
responsibilities associated with an employee's position at the Company and the
employee's overall level of experience. In addition, the Compensation Committee,
in its discretion, may award bonuses. The Compensation Committee and the Board
believe that the Company's management and employees are best motivated through
stock option awards and cash incentives.
Equity-Based Compensation. Equity-based compensation principally has been
in the form of stock options. The Compensation Committee and the Board believe
that stock options represent an important component of a well-balanced
compensation program. Because stock option awards provide value only in the
event of share price appreciation, stock options enhance management's focus on
maximizing long-term stockholder value and thus provide a direct relationship
between an executive's compensation and the stockholders' interests. No specific
formula is used to determine stock option awards for an employee. Rather,
individual award levels are based upon the subjective evaluation of each
employee's overall past and expected future contributions to the success of the
Company.
Compensation of the Chief Executive Officer
The philosophy, factors and criteria of the Compensation Committee
generally applicable to the Company's officers are also applicable to the Chief
Executive Officer. The Chief Executive Officer's salary for 1997 was based on
his existing employment agreement with the Company. The Chief Executive Officer
did not receive a bonus in 1997. The stock option to purchase 300,000 shares of
Common Stock granted to the Chief Executive Officer in November 1996 was in
recognition of his anticipated significant contributions to the Company.
Paul Schaller
Arthur Samberg
66
<PAGE> 77
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth the projected beneficial ownership of Common
Stock as of September 19, 1997, by each director and Named Executive Officer of
the Company and all directors and Named Executive Officers of the Company as a
group, as well as by any person known by the Company to own beneficially more
than 5% of the Common Stock of the Company, based upon such person's reported
ownership of Common Stock in filings made with the Commission pursuant to
Sections 13(d) and 13(g) of the Exchange Act as of September 19, 1997 and
projected as of the Effective Time. The information in this table was based in
part on information supplied by the named individuals.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE PERCENTAGE
COMMON STOCK OWNERSHIP AS OF OWNERSHIP AS OF
BENEFICIALLY OWNED AS OF SEPTEMBER 19, THE EFFECTIVE
NAME AND ADDRESS OF BENEFICIAL OWNER SEPTEMBER 19, 1997 1997 (1) TIME (11)
- ------------------------------------ ------------------------- --------------- ---------------
<S> <C> <C> <C>
Ronald Howard....................... 1,225,603(2) 9.4% 2.1%
John Howard......................... 25,000(3) * *
Barbara Perrier Dreyer.............. 45,000(3)(4) * *
Arthur Samberg...................... 1,950,000(3)(5)(6) 15.0% 3.3%
Paul Schaller....................... 25,000(3) * *
James Gallagher..................... 75,000(7) * *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (6 PERSONS)............ 3,345,603(8) 25.9% 5.6%
Richard Chilton, Jr. 399 Park Avenue
New York, New York 10022.......... 672,800(9) 5.2% 1.1%
Pequot Partners Fund, L.P. and
Pequot International Fund, Inc.
354 Pequot Avenue Southport,
Connecticut 06490................. 1,510,600(5) 11.6% 2.5%
Cramer Partners, L.P. 100 Wall
Street, 8th Floor New York, New
York 10004........................ 2,960,000(10) 22.7% 5.0%
</TABLE>
- ---------------
(*) Less than 1%
(1) Includes, in certain instances, shares held in the name of an executive
officer's or director's spouse or minor children, the reporting of which is
required by applicable rules of the Commission, but as to which shares the
executive officer or director may have disclaimed beneficial ownership.
Beneficial ownership includes 475,000 shares issuable upon exercise of
options granted under the Incentive or Director's Plan, within 60 days from
the date hereof, assuming that the Merger is consummated.
(2) Includes 300,000 shares of Common Stock issuable upon the exercise of an
option within 60 days from the date hereof, assuming that the Merger is
consummated.
(3) Includes 25,000 shares of Common Stock issuable upon the exercise of an
option within 60 days from the date hereof, assuming that the Merger is
consummated.
(4) Mrs. Perrier Dreyer and her husband, John Dreyer, have shared voting and
dispositive power with respect to these shares.
(5) Includes 787,100 shares of Common Stock owned by Pequot Partners Fund,
L.P., a Delaware limited partnership whose general partner and investment
manager is Pequot General Partners, LLC, a Connecticut limited liability
company ("General Partners") and 698,500 shares of Common Stock owned by
Pequot International Fund, Inc., a British Virgin Islands corporation,
whose investment manager is DS International Partners, L.P., a Delaware
limited partnership ("International Partners"). (Pequot Partners Fund, L.P.
and Pequot International Fund, Inc. are together referred to as the
"Funds"). Mr. Samberg is a General Partner and senior portfolio manager of
each of the Funds. General Partners and International Partners (together,
the "Partners") are the beneficial owners, as such term is used in Rule
13d-3 of the Exchange Act of the shares of Common Stock owned by the
67
<PAGE> 78
Fund for which they act as investment manager, respectively. The Partners
may be deemed to constitute a group as such term is used in Section
13(d)(3) of the Exchange Act. Each of the Partners disclaims beneficial
ownership of the Common Stock beneficially owned by the other Partners.
(6) Includes 86,500 shares of Common Stock owned by Dawson-Samberg Capital
Management, Inc., of which Mr. Samberg is President, and 352,900 shares of
Common Stock owned by Pequot Endowment Fund, L.P., a Delaware limited
partnership ("Endowment Fund") whose general partner and investment manager
is Pequot Endowment Partners, L.P., a Delaware limited partnership. Mr.
Samberg is a General Partner and senior portfolio manager of Endowment
Fund.
(7) Includes 75,000 shares of Common Stock issuable upon the exercise of an
option within 60 days from the date hereof, assuming that the Merger is
consummated.
(8) Includes 475,000 shares of Common Stock issuable upon the exercise of
options within 60 days from the date hereof, assuming that the Merger is
consummated.
(9) According to the Amendment No. 1 to the Schedule 13D, dated March 21, 1997,
includes shares of Common Stock held by Chilton Investment Partners, L.P.
("Chilton Partners"), a Delaware limited partnership, Chilton Opportunity
Trust, L.P. ("Chilton Trust"), a Delaware limited partnership, or managed
accounts over which Mr. Chilton has investment discretion. Mr. Chilton is
the general partner of Chilton Investments, L.P. ("Chilton Investments"), a
Delaware limited partnership, and Olympic Equity Partners, L.P., a Delaware
limited partnership ("Olympic"). Chilton Investments is the general partner
of Chilton Partners. Olympic is the general partner of Chilton Trust,
serves as the investment advisor to Chilton International (BVI) Ltd., a
British Virgin Islands corporation, and advises several managed accounts.
(10) James J. Cramer, President of J.J. Cramer & Co., and Karen Cramer, Vice
President of J.J. Cramer & Co., have shared voting and dispositive power
with respect to these shares.
(11) Assumes consummation of the Merger, the issuance of additional shares of
Common Stock based upon the Conversion Ratio and no change in beneficial
ownership from September 19, 1997. Does not include additional shares of
Common Stock issuable to Mr. Ronald Howard in lieu of a $437,500 cash bonus
payable upon a change in control.
68
<PAGE> 79
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon the Effective Time, Messrs. Hayes and Howard will have employment
agreements with the Company, the terms of which are described in
"MANAGEMENT -- Interests of Certain Persons in the Merger" above.
STOCK PERFORMANCE GRAPH
The following graph compares the monthly percentage change in cumulative
stockholder return on the Common Stock since November 18, 1996, the date on
which the Common Stock began trading on NASDAQ/NMS with (i) the cumulative total
return on the NASDAQ/NMS Stock Market Index, and (ii) Hambrecht and Quist
Technology Index selected by the Company (see below). The figures presented
below assume a reinvestment of all dividends paid on the applicable dividend
payment date and that $100 was invested in the Company's Common Stock, and in
the stock of the companies comprising each of the indices, and such stock was
held through July 31, 1997.
LOGO
The Hambrecht and Quist Technology Index is based upon stock prices of
approximately 275 electronic manufacturing and service companies, including
computer hardware, computer software, semiconductor, communications and
information services companies.
69
<PAGE> 80
ACCESS BEYOND'S
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In the fourth quarter of fiscal 1996, Penril took actions to strategically
restructure the business to focus on the remote access connectivity products, to
reduce costs and improve competitiveness for the long-term. This restructuring
plan included the elimination of the VCP and BRX product lines and the
introduction of the new remote access product line. As described more fully in
Note 2 to the Company's Consolidated Financial Statements, Penril recorded a
restructuring charge in the fourth quarter of fiscal 1996 of $9.7 million. As of
July 31, 1997, the Company had completed all phases of the restructuring plan
and does not anticipate any additional cost associated with this plan.
In the first quarter of fiscal 1997, prior to the spin-off of the Company,
Penril received approximately $6.1 million from the exercise of employee and
director stock options. The cash generated from these exercises was used for the
expenditures related to the merger and spin-off of the Company. These
expenditures included legal and accounting fees of approximately $700,000,
investment banker fees of $1.6 million, and change of control payments to
certain officers of Penril of $1.8 million. Also in the first quarter of fiscal
1997, prior to the spin-off of the Company, Penril received the following; $3.5
million in cash from Standard Micro Systems Corp. for settlement of the law suit
with Penril, and $1.6 million in cash and $2.8 million in notes from the sale of
its TPI subsidiary. As of July 31, 1997, a balance of $980,000 on the TPI note
was past due. The Company reserved the unpaid balance of this note with a charge
in the fourth quarter of fiscal 1997 of $980,000 to loss on disposal of
discontinued operations.
On November 18, 1996, as a result of the merger between Penril and Bay,
certain assets and liabilities related to the modem business were transferred to
Bay. The assets included $2.5 million in accounts receivables, $2.7 million in
inventory, $1.7 million in deferred tax assets, and $761,000 in other assets.
The liabilities included a $4 million line of credit, $1.5 million in accounts
payables, and $887,000 in other liabilities. All cash and rights to future cash
from the sale of TPI were spun-off to the Company pursuant to the merger
agreement with Bay. In addition, the Company received $1.5 million in cash from
Bay pursuant to the Transitional Services Agreement between Penril and the
Company.
In March 1997, the Company entered into an agreement with Hibbing in which
Hibbing will manufacture and sell printed circuit card products to the Company.
Under the agreement, Hibbing has the right to use the lower level of the
Company's Gaithersburg, Maryland, facility as well as certain equipment needed
for the manufacturing process. Hibbing will pay the Company 50% of the monthly
rent and utilities associated with that facility, and will pay the current
installment amounts on the equipment that the Company leases. This agreement
expires August 31, 1998 at which time Hibbing shall have the option to purchase
all of the equipment covered under the agreement and the Company will assign all
right, title and interest in the covered leases and equipment to Hibbing in
exchange for Hibbing's agreement to pay and perform the Company's obligations
under those leases.
In May 1997, the Company and Paradyne Corporation, a Delaware corporation
("Paradyne"), entered into the 2290 Remote Access Gateway ("Hawk") Technology
Transfer Agreement (the "Technology Agreement") pursuant to which Paradyne (i)
transferred to the Company technology relating to certain open remote dial
access cards (in the form of a comprehensive set of specifications, technical
information, hardware and software)(the "Hawk Technology"), (ii) sold to the
Company certain inventory, tools and equipment used in the application of the
Hawk Technology to develop and manufacture products, ("Hawk Products") which
include the Hawk Technology, (iii) licensed to the Company certain intellectual
property in connection with the Hawk Technology, and (iv) agreed to provide the
Company with technical, engineering, manufacturing and marketing support, for an
aggregate purchase price of 503,704 shares of the Common Stock (the "Paradyne
Shares"), and $425,000 in cash. The Company and Paradyne also entered into a
Stock Purchase Agreement, dated as of May 2, 1997 (the "Purchase Agreement"),
pursuant to which the Company sold and
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<PAGE> 81
issued the Paradyne Shares to Paradyne. Pursuant to the Purchase Agreement, the
Company is required to register the Paradyne Shares for resale by Paradyne under
the Securities Act.
On June 30, 1997, the Company sold the assets of its EMI subsidiary to a
company principally owned by the former president of EMI and received $2.0
million in cash, $1.5 million in subordinated term notes, and $500,000 in
warrants (repayment terms of the notes and warrants are more fully described in
Note 3 to the Company's Consolidated Financial Statements). In accordance with
the Securities and Exchange Commissions' Staff Accounting Bulletin No. 81, "Gain
Recognition on the Sale of a Business or Operating Assets to a Highly Leveraged
Entity", a provision was charged to Loss from Disposal of Discontinued
Operations for the outstanding balance of the subordinated term notes and
warrants at July 31, 1997 of 2.0 million. The Company fully expects to collect
these notes and warrants, however the repayments will be recorded as income when
received due to the highly leveraged structure of the buyer. The purchase price
was determined by arms-length negotiation.
The cash received from the sources described above was used to fund the
Company's loss from continuing operations for fiscal 1997 of $13.9 million.
Contributing to the Company's cash flow in fiscal 1997 was the reduction of
accounts receivable of $1.4 million (after adjusting for the transfer of
accounts receivable to Bay). This reduction was the result of lower sales
volumes in fiscal 1997 compared to fiscal 1996.
The Company's inventories and accounts payables declined by $600,000 and
$1.1 million respectively (after adjusting for the transfer of inventory and
accounts payable to Bay), as a result of the lower level of business and the
outsourcing of its board level manufacturing to Hibbing Electronics, Inc.
In August 1997, the Company completed a reduction in force of 19 employees
which, in combination with reductions in other expenses, is expected to result
in an annual savings of approximately $2.0 million.
In September 1997, the Company obtained a commitment for a secured working
capital facility of $3.0 million with borrowings based on qualified accounts
receivable and inventory.
The ability of the Company to generate adequate cash for operational and
capital needs is dependent on the success of the Company to increase sales of
its new Access Beyond products including the AB2400/4400 and the "Hawk," coupled
with the collection of cash from notes received in the sale of its TPI and EMI
subsidiaries. In addition it may seek to raise cash from other sources including
sales of securities or other assets of the Company.
RESULTS OF OPERATIONS
The Company was incorporated on July 23, 1996, and filed a Form S-1
Registration Statement with the Securities and Exchange Commission which became
effective October 17, 1996. On November 18, 1996 Penril distributed a dividend
to its stockholders of record of one share of common stock of Access Beyond for
each share of Penril common stock held. Penril transferred all of the assets and
liabilities of Penril's remote access business to Access Beyond before becoming
a wholly owned subsidiary of Bay on November 18, 1996. As the successor company
to Penril, the Company retains the historical financial information of Penril
through November 18, 1996, when Penril was merged into Bay. For accounting
purposes, the disposition of the modem business, as a result of the merger
agreement with Bay, has been accounted for as a reduction of paid in capital.
For purposes of this discussion, revenue and expenses that could be specifically
identified with the modem business ("Modem Products") are shown separately from
the Company's Access Beyond and LAN/Host Access Products (the "Company's
Products"). Certain expenses that could not be specifically identified with the
modem business were included with the Company's business, consequently the
expenses reported for the Company's business in fiscal 1996 and 1995 are in
excess of those that would have been incurred had the Company been a stand alone
entity at that time. The results of operations from the discontinued operations
of the EMI and TPI subsidiaries are not included in this discussion. Dollar
amounts are reported in thousands.
71
<PAGE> 82
FISCAL 1997 COMPARED TO FISCAL 1996
<TABLE>
<CAPTION>
JULY JULY
31, 31,
1997 1996 CHANGE
------- ------- --------
<S> <C> <C> <C>
Revenues:
The Company's Products............................. $13,772 $19,916 $ (6,144)
Modem Products..................................... 4,228 19,519 (15,291)
------- ------- --------
$18,000 $39,435 $(21,435)
======= ======= ========
</TABLE>
Revenues from the Company's Products declined in fiscal 1997 as a result of
the delay in launching the new Access Beyond products including the AB2400/4400
models. These models were released in the fourth quarter of fiscal 1997. In
addition, there was a continued decline in the market demand for the Company's
CSX terminal servers and VCX multiplexers which represent older technology. The
Company believes that the new Access Beyond products are competitively priced
and will generate revenues over the next fiscal year to offset the decline in
revenues from the older LAN and Host Access products. Revenues from Modem
Products declined because of the sale of the modem product business to Bay in
November 1996.
Exports represented 21% of the Company's total revenues in fiscal 1997 and
32% of the Company's revenues in fiscal 1996. Revenues from the Company's
foreign subsidiary, which is primarily a sales and marketing operation in
England, represented 20% of the Company's total revenues in fiscal 1997 and 19%
of the Company's total revenues in fiscal 1996. The Company does not believe it
has any significant exposure to exchange rate risk.
In the three years ended July 31, 1997, 1996, and 1995, foreign operations
have generated net losses after eliminations of $164,000, $401,000, and $49,000
respectively, while domestic operations generated net losses of $13.7 million,
$20.3 million and $5.1 million respectively. The Company's foreign operation
consists of a sales and distribution facility. The net losses from the Company's
foreign operation is due to greater price competitiveness, which has caused a
decline in gross profit margins. The net losses from the Company's domestic
operations in fiscal 1996 included a restructuring charge of $9.7 million and
merger related expenses of $500,000. The net losses from the Company's domestic
operations in fiscal 1997 and 1996 were due to lower sales volumes and higher
absorption of manufacturing variances and other fixed charges related to the
Company's domestic manufacturing operation. The Company's domestic manufacturing
operation performs all manufacturing for the Company and consequently must
absorb all of the unfavorable manufacturing variances resulting from the lower
sales volumes.
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1997 1996 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Gross Profit Margin:
The Company's Products................................. 36% 37% (1)%
Modem Products......................................... 23% 49% (26)%
</TABLE>
Gross profit margins for the Company's Products declined slightly in fiscal
1997 because of manufacturing inefficiencies due to lower sales volumes and
because of delays in launching the new Access Beyond product line. Gross profit
margins for Modem Products declined sharply as a result of the sale of the modem
business to Bay and the efforts prior to the closing to reduce inventory of
Modem Products with discounted pricing.
<TABLE>
<CAPTION>
JULY JULY
31, 31,
1997 1996 CHANGE
------- ------- -------
<S> <C> <C> <C>
Selling, general and administrative expenses:
The Company's Products.............................. $12,253 $16,417 $(4,164)
Modem Products...................................... 634 2,694 (2,060)
------- ------- -------
$12,887 $19,111 $(6,224)
======= ======= =======
</TABLE>
72
<PAGE> 83
Selling, general and administrative expenses for the Company's Products
declined as a result of the restructuring plan implemented in fiscal 1997.
Expenses related to the Modem Products declined as a result of the sale of the
modem business to Bay.
<TABLE>
<CAPTION>
JULY JULY
31, 31,
1997 1996 CHANGE
------ ------ -------
<S> <C> <C> <C>
Product development expenses:
The Company's Products................................ $5,644 $5,624 $ 20
Modem Products........................................ 520 1,765 (1,245)
------ ------ -------
$6,164 $7,389 $(1,225)
====== ====== =======
</TABLE>
Product development expenses increased slightly in fiscal 1997 due to the
continued development of the new Access Beyond product line including the
AB2400/4400 and the "Hawk" products which were launched in the fourth quarter of
fiscal 1997. Modem Product development expenses declined due to the sale of the
modem business to Bay in November 1996.
<TABLE>
<CAPTION>
JULY JULY
31, 31,
1997 1996 CHANGE
------ ------ -------
<S> <C> <C> <C>
Other Operating expenses:
Merger related expenses............................... $4,077 $ -- $ 4,077
Write-down of assets.................................. 864 -- 864
Provision for restructuring........................... 238 9,718 (9,480)
Other Income(expenses):
Interest income....................................... 380 -- 380
Interest expense...................................... 200 698 (498)
Other: Settlement of Lawsuit............................ 3,547 -- 3,547
</TABLE>
Pursuant to the merger of Penril and Bay in the first quarter of fiscal
1997, Penril incurred merger related expenses of $4.2 million. In the fourth
quarter of fiscal 1997, the Company determined that as a result of the
introduction of its new AB2400/4400 products, an additional reserve for
inventory obsolescence of $864,000 needed to be recorded. Also in the fourth
quarter, the Company recorded a charge to restructuring of $238,000 for
additional inventory that was disposed of as part of the original restructuring
plan. Interest income was generated from the shortterm investments that the
Company made in fiscal 1997 with its excess cash. Interest expense resulted from
the Company's capital equipment leases. The decline in interest expense resulted
from the elimination of the line of credit as part of the merger and spin-off
transaction with Bay in fiscal 1997.
In 1993 the Company had initiated a lawsuit against Standard Microsystems
Corp. ("SMC") for breach of contract including failure to transfer technology,
unfair competition and false representations. In September 1996, the Company and
SMC agreed to drop the charges of false representation and settle the
contractual dispute. In October 1996, the Company received from SMC, in
settlement of the litigation, $3.5 million cash, net of legal payments.
FISCAL 1996 COMPARED TO FISCAL 1995
<TABLE>
<CAPTION>
JULY JULY
31, 31,
1996 1995 CHANGE
------- ------- --------
<S> <C> <C> <C>
Revenues:
The Company's Products............................. $19,916 $33,637 $(13,721)
Modem Products..................................... 19,519 18,974 545
------- ------- --------
$39,435 $52,611 $(13,176)
======= ======= ========
</TABLE>
The decrease in revenues for the Company's Products was primarily
attributable to the continued decline in market demand for terminal servers and
multiplexers which resulted in lower volumes and more competitive pricing.
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<PAGE> 84
In the fourth quarter of fiscal 1996, Penril and Bay entered into a License
Agreement whereby Bay acquired a license to certain intellectual property rights
related to Penril's modem technology, and Penril was paid $4.5 million. Revenues
for Modem Products without this license agreement would have been $15.0 million
in fiscal 1996 compared with $19.0 million in fiscal 1995. The decrease in
revenue from the sale of Modem Products was due to slower than expected sales of
Penril's V.34 modems, and a decline in sales of older Modem Products.
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1995 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Gross Profit Margin:
The Company's Products.................................. 37% 46% (9)%
Modem Products.......................................... 49% 41% 8%
</TABLE>
The decrease in the gross profit margins for the Company's Products was due
to reductions in product pricing in order to remain competitive in the market
place, and increases in manufacturing inefficiencies due to lower sales volumes.
As noted above, Penril entered into a License Agreement with Bay in the fourth
quarter of fiscal 1996 for $4.5 million. Gross profit margins without this
License Agreement would have been 34% in fiscal 1996 compared to 41% in fiscal
1995. The decrease in gross profit margins for Modem Products was due to higher
costs of materials in the V.34 modem product line as well as pricing competition
and lower manufacturing efficiencies related to the lower sales volume.
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1995 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Selling, general and administrative expenses:
The Company's Products................................ $ 16,417 $ 16,479 $(62)
Modem Products........................................ 2,694 2,286 408
------- ------- ----
$ 19,111 $ 18,765 $346
======= ======= ====
</TABLE>
Selling, general and administrative expenses decreased for the Company's
Products primarily from lower commissions paid due to lower sales volume. There
was also a reduction in personnel costs as a result of eliminating several
administrative positions in Penril's Gaithersburg, Maryland facilities during
fiscal 1995. This reduction was partially offset by a charge of $500,000 during
the fourth quarter of fiscal 1996, for costs incurred related to the Penril/Bay
Merger. All expenses which could not be specifically identified with the modem
products were included with the Company's Products. Consequently the expenses
for the Company's Products are in excess of those that would have been incurred
had the Company been a stand alone company.
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1995 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Product development expenses:
The Company's Products.................................. $ 5,624 $ 5,520 $ 104
Modem Products.......................................... 1,765 1,918 (153)
------- ------- ----
$ 7,389 $ 7,438 $ (49)
======= ======= ====
</TABLE>
Product development expenses for the Company's Products increased because
of an increase in personnel costs related to development of the new Access
Beyond product line. Modem Product development expenses decreased because of
reductions in personnel costs as a result of Penril's cost reduction efforts in
fiscal 1995. All expenses which could not be specifically identified with the
Modem Products were included with the Company's Products. Consequently the
expenses for the Company's Products are in excess of those that would have been
incurred had the Company been a stand alone company.
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1995 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Interest expense.......................................... $698 $ 1,228 $(530)
</TABLE>
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<PAGE> 85
During fiscal 1996, Penril sold Penril Stock in private placements which
generated approximately $14.7 million in cash. A portion of the proceeds was
used to repay all of Penril's term debt during fiscal 1996, which resulted in
decreased interest expense.
BUSINESS OF HAYES
GENERAL
Hayes was incorporated in January 1978 as a Georgia corporation. Hayes
engages in the design, manufacturing, marketing and support of computer
communication products for business, government, small office, professional and
individual consumers worldwide through the sale of modem, network and broadband
products.
While historically Hayes' business has focused on its core modem business,
Hayes has recently broadened its products to include integrated network
communication products (access systems). In addition, Hayes has pursued
penetrating the broadband market by offering products for the asymmetric digital
subscriber ("ADSL") line and the cable market.
For nearly two decades, Hayes has been the leader in providing value-based
modems. The Hayes standard AT command set has become the de facto industry
standard for personal computer modems and, along with the patented escape
sequence, created the market requirement for "Hayes compatibility."
Hayes was founded by Mr. Hayes in 1977 to develop and market modems
designed for the microcomputer marketplace. Hayes' first product was released in
April 1977 which was a modem for the early S-100 type computers. Hayes developed
the Micromodem II for the Apple II before Apple had a disk drive. Hayes
introduced the Smartmodem in June 1981. In August 1981, IBM introduced the first
IBM PC that legitimized the personal computer industry. Personal computer ("PC")
sales began to skyrocket and Hayes was the leading manufacturer of modems to
serve this market. Fueled by the growth in the PC market and the introductions
of 1200 and 2400 bits per second modems, Hayes' sales grew from $4.8 million in
1981 to $120.1 million in 1985. Hayes was included twice in Inc. Magazine's list
of Fastest Growing Privately Owned Companies.
In the 1987 to 1988 time frame, the "low price" modem competition began to
consolidate into recognizable brands from the multitude of market players. By
1989, Hayes realized the significance of the emergence of what was internally
referred to as clone modems (claiming Hayes compatibility) as had been observed
with clone PCS (IBM compatible) slightly earlier. Practical Peripherals, Inc.
had established itself as a true brand in the clone modem segment. In August
1989 Hayes purchased Practical Peripherals, Inc. to establish a presence in the
clone modem segment.
In the early 1990s, the consumer, small office/home office ("SOHO") market
segment experienced rapid expansion. In response, Hayes introduced the ACCURA
product line in 1993. This product line provided a different feature set and a
lower price point than Hayes Ultra and Optima product lines. Competitors in this
market segment pursued an extremely aggressive price strategy to gain market
share by initiating rapid price erosion for this market.
Due to market price pressures Hayes reduced its ACCURA pricing in March
1994 to competitive levels. As a result, the ACCURA volumes increased
dramatically. In responding to the ACCURA volume increase, Hayes experienced a
number of operational and manufacturing problems. Due to excess inventory of old
designs, Hayes could not benefit from new lower cost product designs.
Additionally, there was an inadequate internal infrastructure and process in
place to support subcontractor start-up necessary to support increased demand
and significant air freight expense was required due to resultant delays in
subcontractor production. Inventory increased and margins compression occurred.
The resulting strain on Hayes' cash position and operating losses combined with
insufficient capitalization precipitated Hayes' filing a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code on November 15, 1994.
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<PAGE> 86
On April 16, 1996, Hayes consummated a court approved Reorganization Plan.
Under the terms of the Plan, all prepetition creditors were paid in full plus
interest, except where other agreements were made. Funding of the Plan was
provided through three major sources. First, pursuant to the Agreement and Plan
of Merger dated April 12, 1996 entered into by and between ACMA, Kaifa
Technology (H.K.) Limited, Rolling Profit Holdings, Ltd., Lao Hotel (H.K.),
Limited, Saliendra Pte Ltd., and S.P. Quek Investments Pte. Ltd. (collectively,
the "Investors"), certain subsidiaries were created by the investors which
collectively contributed $35.0 million to fund the Plan and merge with Hayes.
The Investors received preferred stock representing a 49% voting interest in
Hayes. Second, Hayes entered into an agreement with the CIT Group/Credit
Finance, Inc. to borrow up to an aggregate of $64.5 million through three
separate debt instruments collateralized by Hayes' intellectual property,
certain equipment, and accounts receivable and inventory balances. Third,
pursuant to the Plan, Hayes sold certain parcels of real property.
During 1996, Mr. Hayes assembled a new management team comprised of
individuals from the communications industry including a new chief financial
officer, vice president of sales, marketing, development and human resources.
On April 24, 1997, Hayes acquired Cardinal which Hayes management believes
added a highly visible brand to Hayes' brand portfolio and strengthened Hayes'
position in the North American retail market. Cardinal's 1996 revenues were
approximately $64.0 million. In connection with the Cardinal acquisition, in
April 1997 Hayes received a $5.5 million investment from Vulcan Ventures, Inc.,
one of the Paul Allen Group of Companies. The investment involved the issuance
of 263,113 shares of Series B Preferred Stock of Hayes, which will be
convertible into 1,217,930 shares of Series A Preferred Stock at the Effective
Time.
In July 1997, Hayes entered into the Investor Letter of Intent whereby a
prospective investor proposed to purchase 1,350,743 shares of Series C Preferred
Stock from Hayes (which, if such purchase is consummated, would be convertible
into 6,252,454 shares of Common Stock at the Effective Time) for a purchase
price of $30.0 million. The prospective investor subsequently proposed to
purchase additional shares of Hayes Common Stock from certain Hayes Shareholders
for an aggregate purchase price of $10.0 million. Negotiations with this
prospective investor are continuing, and Hayes is also pursuing discussions with
other potential sources of capital funding. There can be no assurance that any
of such possible investments will be consummated.
PRINCIPAL PRODUCTS
Hayes has invested in technologies that expand its products to meet
changing market demands. Hayes' business is structured around three core product
categories; modems, broadband products and access systems.
Modems
Analog and ISDN modems represent the core of Hayes' business, and accounted
for approximately 96% of all revenues of Hayes for the first six months of 1997.
Hayes is widely recognized as being the company that commercialized the PC modem
in the early 1980's. The Hayes Standard AT Command Set has become the de facto
industry standard for PC modems and along with the patented escape sequence
created the market requirement for "Hayes compatibility."
Hayes markets its modem products under the Hayes ACCURA(TM), Hayes
OPTIMA(TM), Practical Peripherals(TM), and Cardinal(TM) brands. The modem
products are sold through the distribution, value added reseller and mass
merchant channels.
Due to demand for increased speed in delivery of information, modem speeds
have historically changed every 12 to 24 months. In 1997, Hayes introduced a
series of new products that transmit information at 56Kbs. Hayes anticipates
that the market will transition over the next 12 months to the 56Kbs speed from
the current 33.6Kbs standard. At present, the industry has not adopted a 56Kbs
standard, although such a standard is expected to be established in 1998. Hayes
currently sells products utilizing the two primary 56Kbs technologies offered in
the market.
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Broadband Products
Recognizing the market's need for more information at faster speeds, Hayes
has launched significant activities to deliver its customers products at speeds
of multiples of those offered by current analog and ISDN products. Hayes'
efforts are focused on the ADSL and cable markets.
ADSL
On June 6, 1997 Hayes announced that it had been selected by Alcatel
Telecom ("Alcatel") to jointly develop, manufacture and market products and
equipment implementing ADSL technology. These end-to-end ADSL solutions will
enable consumers, telecommuters and small business users to achieve affordable,
convenient, bandwidth-efficient, high-speed access to the Internet and other
interactive services, such as corporate intranets.
ADSL technology, which utilizes the existing telephone copper-wiring
infrastructure serving virtually all homes and businesses, allows customers to
interact with data networks, the Internet and associated services at speeds more
than 100 times faster than current 56Kbps modems. In recent months, Alcatel has
signed contracts with Ameritech, Bell South, Pacific Bell, Southwestern Bell,
Singapore Telecom, Telia (Sweden) and others to provide its 1000 ADSL system.
Hayes is pursuing other opportunities utilizing ADSL technologies to
develop a strong market position in the emerging ADSL market.
Cable
Management believes that the consumer's demand for higher speed
communications will result in significant demand for cable modems. In 1996 Hayes
launched a development and marketing effort with an Israeli cable modem company.
In the fourth quarter of 1996 Hayes introduced its cable modem products to the
industry and began a number of successful cable modem trials. Hayes' products
have been well received and Hayes received its first major cable modem order in
April 1997 with an estimated value of $2.0 million. Hayes began shipping cable
modems in the second half of 1997, under its ULTRA(TM) brand.
On September 18, 1997 Hayes and Cisco Systems, Inc. ("Cisco") signed a
Collaboration Agreement whereby Hayes and Cisco agreed to promote Multimedia
Cable Network System ("MCNS") compliant cable modems and head end systems. The
Collaboration Agreement contemplates joint development and marketing of such
products.
On September 18, 1997 Cisco announced that Samsung Electronics Corp., Ltd.
and Thomson Consumer Electronics had joined Cisco and Hayes in promoting MCNS
compliant cable modems.
Access Systems
The communications industry has seen tremendous growth in the area of
network connectivity. As the number of telecommuters, traveling employees and
branch offices grow, the demand for fast, low cost connectivity has grown.
Connectivity is enabled through client modems, modem pools and integrated remote
access devices. Hayes is seeking to leverage its experience and technology
strengths in communications to provide a portfolio of products that meet the
market's needs.
In the fourth quarter of 1996, Hayes entered into a comprehensive
technology collaboration agreement with the Company through which Hayes
introduced a family of remote access servers including its Century 2000 series,
Century 9200 series and Century 9400 series products. These products support the
connectivity needs of the small business or branch office. They are
fully-integrated remote access servers providing advanced management software
which enables easy configuration and network monitoring. These products use a
modular design for flexibility and ease of upgrade.
In April 1997 Hayes announced a technology agreement with Microcom. Hayes
and Microcom agreed to develop end-to-end communication solutions drawing from
the technology in Microcom's ISP Porte Chassis and Hayes' client and server
remote access products. According to terms of the agreement, the two companies
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will explore product development, product branding and co-marketing
opportunities worldwide. The agreement is expected to enable Hayes to quickly
broaden its product offerings for modem pools.
SUPPLIERS
Hayes depends upon certain suppliers for its sole source for certain
components, including Rockwell and Lucent Technologies, Inc. for certain modem
chips used in most of Hayes' product. In addition, Hayes acquires a significant
portion of its network products from two domestic suppliers.
PATENTS, COPYRIGHTS AND LICENSES
Hayes' patent estate strategy is based upon three fundamental goals: (i) to
protect Hayes' technology and to enhance its commercial deployment, (ii) to
obtain cross licenses of the technology of others to optimize a royalty-free
access to new technology, and (iii) to generate income. This strategy has
resulted in a significant patent estate consisting of more than 115 owned and
licensed patents, including internationally recognized patents, in the area of
data communications.
Hayes is committed to a licensing program which defends the value of its
intellectual property and offers licenses to responsible third parties. As a
result of Hayes' aggressive patent estate development program, many of Hayes'
competitors formed the Modem Patent Defense Group. This group attempted to
refute the validity of the Hayes' patents, specifically the Heatherington '302
patent, U.S. patent #4549302 ("Heatherington Patent"), and to avoid payment of
royalty fees by filing suits against Hayes. To date, Hayes has successfully
defended its patent estate, resulting in additional manufacturers signing
license agreements to use Hayes' patents.
The Heatherington Patent has been Hayes' most valuable patent to date. This
patent enables the modem to be switched between data transmission mode and
command mode for configuring the modem. The patent was issued in 1985 and is
valid until February 14, 2001. The Heatherington Patent is licensed to virtually
every major modem manufacturer in the United States and is recognized around the
world as an industry standard for computer communications. The validity of the
patent was upheld by the U.S. Federal Court and since the fall of 1994 has been
fully protected in the European Community.
Another significant patent is the AutoSync patent, U.S. patent #4700358.
This patent is a sophisticated asynchronous to synchronous converter which
allows serial communication through the asynchronous serial port. Industry
interest has been expressed in implementing and licensing this technology.
Currently there are approximately 12 companies licensing this patent from Hayes.
Hayes has other valuable license rights that were obtained through
cross-license agreements with key industry players, including AT&T, 3Com, Intel,
Compaq, IBM, Racal Datacom and Microcom.
Hayes has current and pending patents with potential commercial value in
the area of data compression, multi-channel communication and various other
technologies related to data communications.
BACKLOG
Hayes forecasts demand and builds products in order to fill expected
demand. Customers generally expect delivery within one to two weeks and Hayes'
backlog of firm orders generally represents orders expected to be filled not
later than two months following the date of the order. Management believes that
current backlog may not necessarily be indicative of future revenues.
COMPETITION
The data communications industry is very competitive. Product life cycles
are short with rapid improvements required in terms of product performance,
features and cost. Hayes competes in a number of different markets within the
overall data communications market.
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Modem Business Market
Hayes faces competition primarily from established companies such as 3Com,
Microcom, Multitech, Racal Datacom, Motorola and Telebit. The primary basis of
competition is brand recognition, performance, features, quality, reliability,
price, service and support.
Modem Consumer Markets
The retail modem market is expected to continue its consolidation. The
primary basis of competition is brand recognition and price. 3Com is the most
significant competitor in this market with several smaller competitors competing
at the very low price points. A sample of these smaller competitors include
Golden Video Corporation ("GVC"), Boca Research, Inc., Zoom, and Diamond
Multimedia, Inc. The battle for retail shelf space is and will continue to be
fierce and brand recognition is and will continue be a major benefit to Hayes
and to the Company.
OEM Modem Market
Hayes intends to make significant efforts to reenter the OEM modem market.
The key competitors in this market are CIS Technology, Inc., GVC, 3Com and
others.
Access Systems
The access systems market is characterized by a large number of
participants, none of which have a dominant market position. The market is
experiencing high growth and high margins in comparison to modems. Companies
such as 3Com, Shiva, Asend, and General Datacom compete in this market.
Management believes that in addition to leveraging its strong brand name,
its products can be priced competitively which will enable Hayes to grow its
share of this market.
Broadband
ADSL is an emerging market with no competitor having dominant market
position. Many of the network product and modem companies are likely to
introduce products into this market. In addition, major telecommunications
companies such as Alcatel are expected to have significant presence in the ADSL
market as it matures.
The cable market is also an emerging market. Cable equipment companies such
as Scientific Atlanta and General Instruments are expected to capture a share of
this market. In addition, management believes that modem companies such as 3Com
will offer products in this market. Management expects competition to intensify
as cable modem products gain acceptance.
International
Hayes' products are sold internationally in more than 45 countries. Some of
the U.S. based competitors are present in Hayes' international market but
competition is also present from smaller local modem suppliers.
SALES
Americas Region
North America
Hayes sells its products directly to high-volume computer superstores, mail
order resellers, and mass merchants as well as through the two-tiered PC
distribution channel that includes distributors, large national corporate
resellers and aggregators through its own sales force. In the two-tiered
distribution model, the distributors and national corporate resellers provide an
inventory, logistics, and credit function to smaller resellers such as computer
chains, company-owned locations and value-added resellers.
The sales strategy for Hayes branded products is to retain a channel "push"
sales organization (reseller, marketing and telephone) ensuring channel support
and appropriate field inventory levels. The sales organization is structured to
focus both on the Hayes, Practical Peripherals and Cardinal brands and each
respective product categories and product lines.
Hayes' sales force consists of the Field Sales Group and the National
Account Group. The Field Sales Group maintains relationships with the corporate
headquarters of Hayes' channel partners as well as the
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individual reseller locations that sell to end users. The Field Sales Group
ensures that resellers maintain adequate inventory of Hayes' products and that
Hayes maximizes the mind set of the resellers sales personnel to sell Hayes
products.
The National Account Group calls on large corporate customers and directly
markets Hayes' products to these large sophisticated end users. This group is
responsible for creating and maintaining demand in Fortune 1000 companies for
Hayes' technologies. Hayes also maintains a sales office in Washington D.C. to
market to the Federal Government and maintains dedicated resources within its
National Account Group to stimulate sales to state and local governments.
Latin America
Hayes has recently launched an initiative in Brazil to serve Brazil and the
Latin American region. Business is presently conducted directly with large end
users and through distributors for other customers.
Asia Pacific Region
Hayes' sales strategy in the Asia Pacific region is similar to its sales
strategy in North America. Hayes operates sales, marketing and service
subsidiaries in China, Hong Kong and Australia. Relationships are developed with
key distributors in each of the major Asia Pacific region countries.
Europe Region
Hayes' European sales, marketing and service efforts are headquartered in
the United Kingdom at its Fleet offices. Offices are also maintained in France
and Denmark. Strategic partners are identified in major markets to distribute
Hayes' products.
MARKETING
Hayes' marketing activities focus on developing brand recognition in key
market segments and geographic markets, as the underlying basis for cost
effective promotion of its products.
Public Relations
Hayes has focused its public relations activities on establishing strong
relationships with trade publications, reviewers and columnists. Hayes' products
have been consistently recognized for performance, quality, service and support
(i.e. Government Computer News, Computer Shopper, PCC Week, Mobile Office, PC
Magazine, Computerworld). Hayes has pursued a proactive posture in public
affairs, taking a prominent role in standard setting committees (ITU, ANSI) and
public policy organizations (AOP, GHTA and CompTIA).
Advertising, Packaging and Documentation
Over the years, Hayes has developed an in-house expertise to create
advertising that has consistently scored well in advertising readership studies
(i.e. Starch & Harvey Studies in PC Week, PC Magazine, Info World). Hayes has
been recognized by winning coveted awards from the Society for Technical
Communication Publications competition for the quality of its documentation and
packaging, which is also developed by Hayes in-house.
Channel and Infrastructure Activities
Hayes has established an effective channel marketing program which allows
the sales force to consistently execute on tactical promotions through the
entire channel spectrum. Hayes was most recently successful in developing new
mail order and mass merchant distribution channels. Hayes also has had success
through its infrastructure program in seeding its new products with influential
user groups of early adopters. In addition, customers can purchase Hayes
products over the worldwide web via ordering and fulfillment programs recently
implemented by Hayes.
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CUSTOMER SUPPORT, SERVICE AND WARRANTY
Hayes strives to provide users of its products with the highest quality
technical support and customer service, dedicating more than 90 professionals
processing more than 60,000 incoming calls a month. Hayes constantly surveys its
user base with regard to customer satisfaction and it believes it consistently
outperforms its competitors in the area of support and service.
Hayes offers a standard two-year warranty which permits customers to return
any product for repair or replacement if the product does not perform as
warranted. In the U.S. and Canada only, Hayes also offers its customers the
option of an additional three-year warranty upon completion of a registration
card within 90 days of purchase. Some of the Practical Peripheral modems
previously sold have a lifetime warranty. Hayes to date has not encountered
material warranty claims or liabilities.
RESEARCH AND DEVELOPMENT
Hayes focuses its research and development ("R&D") efforts on hardware and
firmware system design, integration and testing for standalone and board level
data, fax, and voice modems, modem pools, remote access servers and broadband
technologies for high speed communications. Additional R&D activities include
access systems and software products, object oriented programming, and digital
signal processing technologies. Specialized knowledge and skills in the areas of
electromagnetic compatibility ("EMC"), agency approvals, communications
standards and product integration are applied to ensure timely product delivery.
The Company utilizes computer aided design systems for three dimensional
mechanical design and is upgrading its computer aided engineering tools to
improve the engineering process and strengthen applications specific integrated
circuit design capabilities.
Product development cycles typically range from three to 12 months. Project
duration of fifteen to eighteen months are common for new access systems and new
technology platforms. Engineering strategies employed to reduce product costs
and time to market include focused application of resources, simulation,
standardization, on-going product and process value engineering, simplification,
automation and reduction of the number of development cycles. Hayes expensed
approximately $4.5 million and $6.0 million for product development and
engineering for the six months ending June 30, 1996 and 1997, respectively,
$16.2 million, $10.7 million and $9.6 million for the twelve months ending
September 30, 1994 and 1995, respectively, and December 31, 1996, respectively.
ENVIRONMENTAL MATTERS
Hayes' compliance with federal, state and local environmental laws has had
no material effect upon Hayes' capital expenditures, earnings or competitive
position.
PROPERTIES
Hayes' executive offices are located in Norcross, Georgia in leased
facilities. Hayes' also has manufacturing and distribution facilities at the
same location. The manufacturing facility has five surface mount lines and
occupies approximately 50,000 square feet. The leases between Hayes and Essex
Capital are for 172,342 square feet and cover both the executive offices and
Hayes' manufacturing and distribution facilities. The leases expire between
December 31, 1999 and September 30, 2000.
In addition to the above lease, Hayes leases sales and marketing facilities
in China, Hong Kong, Australia, United Kingdom, France and Denmark.
Hayes believes its properties are adequate for its needs for the
foreseeable future.
EMPLOYEES
Hayes employed approximately 634 employees and 125 temporary employees as
of October 1, 1997. Hayes' management believes that its future success will
depend largely on its ability to retain certain key personnel and to recruit and
retain additional highly skilled employees. Hayes has experienced no work
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stoppages and believes that its employee relations are satisfactory. The Company
will have a new employment agreement with Dennis Hayes as of the Effective Time
(see "THE MERGER -- Interests of Certain Persons in the Merger") and employment
agreements with other executives will be assumed by the Company (see MANAGEMENT
OF HAYES -- Employment Agreements").
LEGAL PROCEEDINGS
Although Hayes is involved in several legal proceedings, Hayes believes
that it has meritorious defenses, will vigorously defend these cases, and
believes no such proceeding would have a materially adverse effect on Hayes'
properties, business or prospects. Accordingly, Hayes believes that there are no
material legal proceedings to which Hayes is a party or of which any of its
properties are subject; nor are there material legal proceeding known to Hayes
to be contemplated by any governmental authority; nor are there material legal
proceedings known to Hayes, pending or contemplated, in which any director,
officer or affiliate or any principal security holder of Hayes, or any associate
of any of the foregoing, is a party or has any interest adverse to Hayes.
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MANAGEMENT OF HAYES
DIRECTORS AND EXECUTIVE OFFICERS
Following the Merger Messrs. Hayes, Lam and Chan will become directors of
the Company. The executive officers of Hayes immediately prior to the Merger
will become the executive officers of the Company. Joseph Formichelli resigned
as President and Chief Executive Officer of Hayes effective October 1, 1997. Mr.
Chan became President and Chief Operating Officer effective October 1, 1997. See
"MANAGEMENT OF THE COMPANY -- Post-Merger Management."
EXECUTIVE COMPENSATION
The following tables provide information with respect to the annual
compensation for services in all capacities to Hayes for the fiscal year ended
December 31, 1996 of (i) Hayes' chief executive officer and (ii) the other four
most highly compensated executive officers of Hayes who were employed by Hayes
at the end of fiscal 1996 and who will be executive officers of Hayes following
the Merger (the "Hayes Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION(1) AWARDS OF
SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)(2) COMPENSATION ($)
- --------------------------------------- ---- ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Dennis Hayes........................... 1996 1,000,000 250,000 -- 202,094(3)
Chairman
Joseph Formichelli..................... 1996 206,667 92,500 180,000 100,113(5)
President and Chief Executive
Officer (4)
James Jones............................ 1996 161,064 29,016 150,000 37,396(6)
Vice President and Chief Financial
Officer
P. K. Chan............................. 1996 198,024 13,792 150,000 1,275(7)
Vice President of Operations
Alan Clark............................. 1996 157,996 66,636 150,000 425(7)
Vice President and Chief Technical
Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation set forth in the table does not include medical, group life
insurance or other benefits which are available to all salaried employees of
Hayes, and certain perquisites and other benefits, securities or property
which do not exceed the lesser of $50,000 or 10% of the person's salary and
bonus shown in the table.
(2) Does not give effect to the Conversion Ratio.
(3) Includes $192,307 for payout of accrued vacation and $6,690, $1,754 and
$1,200 for payment of life insurance premiums, automobile use and club dues,
respectively.
(4) Effective October 1, 1997, Mr. Formichelli resigned as President and Chief
Executive Officer of Hayes.
(5) Payments for relocation expenses of $99,345 and life insurance premium of
$768.
(6) Includes payments for relocation expenses of $37,143 and life insurance
premiums of $253.
(7) Represents life insurance premiums.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to the option grants
in fiscal 1996 for the Hayes Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
PERCENT OF PRICE APPRECIATION
NUMBER OF TOTAL FOR
SECURITIES OPTIONS GRANTED OPTION TERM
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION ------------------
NAME OPTIONS GRANTED(1) IN FISCAL YEAR $ PER SHARE DATE 5% 10%
- ------------------------ ------------------ --------------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Dennis Hayes............ -- -- -- -- -- --
Joseph Formichelli...... 80,000 6.7% $.714 6/4/06 $35,922 $ 91,034
100,000 8.4% 1.00 10/23/06 62,889 159,374
James Jones............. 50,000 4.2% .714 6/4/06 22,451 56,897
100,000 8.4% 1.00 10/23/06 62,889 159,374
P. K. Chan.............. 50,000 4.2% .714 6/4/06 22,451 56,897
100,000 8.4% 1.00 10/23/06 62,889 159,374
Alan Clark.............. 50,000 4.2% .714 6/4/06 22,451 56,897
100,000 8.4% 1.00 10/23/06 62,889 159,374
</TABLE>
- ---------------
(1) Does not give effect to the Conversion Ratio.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information with respect to the aggregated
option exercises in the fiscal 1996 and option year end values for the Hayes
Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE (2) EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------- ----------------------------- -------------------------
<S> <C> <C>
Dennis Hayes.................................. --/-- --/--
Joseph Formichelli............................ (1)/150,000 (1)/$40,880
James Jones................................... (1)/150,000 (1)/$29,300
P. K. Chan.................................... (1)/150,000 (1)/$29,300
Alan Clark.................................... (1)/150,000 (1)/$29,300
</TABLE>
- ---------------
(1) All options were unexercisable at December 31, 1996.
(2) Does not give effect to the Conversion Ratio.
EMPLOYMENT AGREEMENTS
Mr. Chan is employed pursuant to an Executive Employment Agreement dated
October 7, 1996 and amended on October , 1997. The term of the agreement is
two (2) years from the date of the Agreement as amended. Mr. Chan's annual base
salary is $198,000 and he is entitled to receive additional incentive
compensation of up to $69,300 based upon criteria to be determined by Hayes. He
is generally eligible for participation in the employee benefits programs,
including stock option plans. In the event of a termination for "Cause" (as
defined in the Agreement), a voluntary termination by Mr. Chan, or the
expiration of the term, Mr. Chan will receive no right to compensation or other
benefits. If Mr. Chan's employment is terminated by the Board of Directors for
any reason other than "Cause" within the term of the Agreement, Mr. Chan is
entitled to receive a severance in the form of salary continuation for twelve
(12) months following the effective date of the termination. In the event of a
termination or qualifying resignation relating to a "Change of Control" (as
defined in the Agreement), then Mr. Chan is entitled to receive a severance in
the form of salary continuation for twelve (12) months following the effective
date of the termination. Finally, the Agreement includes an invention assignment
and protective covenants of two (2) years in duration.
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Mr. Jones is employed pursuant to an Executive Employment Agreement dated
October , 1997. The term of the agreement is two (2) years from the date of
the Agreement. Mr. Jones's annual base salary is $181,000 and he is entitled to
receive additional incentive compensation of up to $54,300 upon criteria to be
determined by Hayes. He is generally eligible for participation in the employee
benefits programs, including stock option plans. In the event of a termination
for "Cause" (as defined in the agreement), a voluntary termination by Mr. Jones,
or the expiration of the term, Mr. Jones will receive no right to compensation
or other benefits. If Mr. Jones's employment is terminated by the Board of
Directors for any reason other than "Cause" within the term of the Agreement,
Mr. Jones is entitled to receive a severance in the form of salary continuation
until the later in time of the remainder of the term of the Agreement or twelve
(12) months following the effective date of the termination. Finally, the
Agreement includes an invention assignment and protective covenants of two (2)
years in duration.
Mr. Clark is employed pursuant to an Executive Employment Agreement dated
October , 1997 and a letter of agreement dated February 5, 1996, Mr. Clark's
base salary is $160,000. He is entitled to an executive incentive of up to
$40,000 based on Hayes' performance relative to its business plan. Mr. Clark is
generally eligible for participation in the employment benefit programs
including stock option plans. If Mr. Clark's employment with Hayes is terminated
without "Cause," he is entitled to six (6) months of his base salary as in
effect on the date of termination and shall be payable monthly in the same
manner as salary prior to the date of termination for a six (6) month period,
provided that Hayes' obligation to pay such severance will be reduced on a
dollar-for-dollar basis by the amount of any compensation received by Mr. Clark
from employment by any other party during the six (6) months severance period.
Pursuant to the Hayes Option Plan, and after giving effect to the
Conversion Ratio, 8,332,020 shares of authorized, unissued Hayes Common Stock
are currently reserved for issuance upon exercise of stock options granted and
to be granted pursuant to the Hayes Option Plan. These options are classified as
"executive," "management" and "performance" under the Hayes Option Plan. There
are 1,573,826 shares reserved for executive options, 2,129,294 shares reserved
for management options and 4,628,900 shares reserved for performance options.
There have been 1,296,092 executive options issued, 1,269,475 management options
issued and 3,124,507 performance options issued. No further options will be
issued pursuant to the Hayes Option Plan following the Merger.
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SECURITY OWNERSHIP OF HAYES
The following table sets forth the beneficial ownership of capital stock in
Hayes as of September 30, 1997 and as of the Effective Time, by each Director
and Hayes Named Executive Officer, as well as by any person known to own
beneficially more than 5% of the capital stock of Hayes.
<TABLE>
<CAPTION>
OF HAYES OF THE COMPANY
AS OF SEPTEMBER 30, 1997 AS OF THE EFFECTIVE TIME(10)
---------------------------- -----------------------------
NUMBER OF NUMBER OF SHARES
SHARES OF STOCK OF COMMON STOCK
BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNERSHIP OWNED OWNERSHIP
- --------------------------------------------- --------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Dennis Hayes................................. 4,991,750(2) 49.1% 23,106,312 38.8%
Mina Hayes................................... 200,000(3) 1.9% 925,780 1.6%
Chiang Lam................................... 200,000(4) 1.9% 925,780 1.6%
Rinzai Limited
17 Jurong Port Road
Singapore 619092........................... 3,062,500(5) 30.2% 14,176,006 23.8%
S.P. Quek.................................... 3,062,500(6) 30.2% 14,176,006 23.8%
K.S. Chou.................................... -- -- -- --
Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Mills
Industrial Building
31-39 Wo Tong Jsui Street
Kwai Chury, New Territories
Hong Kong.................................. 816,667(7) 8.0% 3,780,270 6.4%
M.C. Tam..................................... 816,667(8) 8.0% 3,780,270 6.4%
Joseph Formichelli........................... 20,000(9) * 92,578 *
James Jones.................................. 50,000(9) * 231,445 *
Alan Clark................................... 50,000(9) * 231,445 *
P. K. Chan................................... 50,000(9) * 231,445 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS
A GROUP (14 PERSONS)....................... 9,530,317 88.1% 44,114,884 70.1%
</TABLE>
- ---------------
* Less than 1%.
(1) On a fully-diluted basis including options exercisable within 60 days and
without giving effect to the Conversion Ratio.
(2) Consists of Hayes Common Stock. Includes 4,400,000 shares owned by Chestnut
Capital, LP of which Mr. Hayes is the General Partner. Includes 48,529
shares held by a Hayes employee benefit plan of which Mr. Hayes serves as
trustee. Mr. Hayes disclaims beneficial ownership of warrants held by Ms.
Hayes.
(3) Consists of warrants to purchase Hayes Common Stock. Ms. Hayes disclaims
beneficial ownership of shares held by Mr. Hayes and Chestnut Capital, LP.
(4) Consists of warrants to purchase Hayes Common Stock.
(5) Consists of Hayes Series A Preferred Stock which has voting rights
equivalent to those of Hayes Common Stock. Includes Series A Preferred
Stock held by S.P. Quek Investments Pte. Ltd., which is an affiliate of Mr.
S.P. Quek, Chairman of Rinzai Limited.
(6) Consists of Hayes Series A Preferred Stock held by Rinzai Limited of which
Mr. Quek serves as Chairman and Hayes Series A Preferred Stock held by S.P.
Quek Investments Pte. Ltd.
(7) Consists of Hayes Series A Preferred Stock which has voting rights
equivalent to those of the Hayes Common Stock.
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<PAGE> 97
(8) Consists of Hayes Series A Preferred Stock, held by Kaifa Technology (H.K.)
Limited, of which Mr. Tam serves as President.
(9) Consists of options to purchase Hayes Common Stock.
(10) After giving effect to the Conversion Ratio.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Vulcan Ventures is a shareholder of Hayes, currently owning 263,113 shares
of Hayes Series B Preferred Stock (without giving effect to the Conversion
Ratio). Vulcan Ventures was the majority shareholder of Cardinal, a company that
Hayes acquired in April, 1997. With respect to certain obligations of Cardinal,
Vulcan Ventures had certain guarantee obligations. As a part of the transaction
to acquire Cardinal, Hayes entered into a guarantee agreement in favor of Vulcan
Ventures relating to Vulcan Venture's guarantee of Cardinal obligations. Vulcan
Ventures and Hayes have also entered into a Strategic Relationship Agreement
pursuant to which Hayes and Vulcan Ventures have agreed to develop mutually
beneficial business opportunities.
Dennis Hayes has an employment agreement with Hayes. Hayes has loaned funds
to Dennis Hayes of approximately $244,214 at September 30, 1997. Dennis Hayes
sits on the Boards of Directors of three companies in which Hayes has an
ownership interest: Scaleable Software Solutions, Inc., BVRP Software S.A., and
Xylon Semiconductors, Inc.
Kaifa Technology, Ltd. ("Kaifa") is a shareholder of Hayes, currently
owning 816,667 shares of Hayes Series A Preferred Stock (without giving effect
to the Conversion Ratio). Kaifa and Hayes have entered into a Subcontract
Manufacturing Agreement, pursuant to which Kaifa performs certain manufacturing
work for Hayes in its factory in Hong Kong.
Rolling Profits, Ltd. is a shareholder of Hayes, currently owning 408,333
shares of Hayes Series A Preferred Stock (without giving effect to the
Conversion Ratio). Wong's Electronics Limited ("Wong's") is an affiliate of
Rolling Profit, Ltd. Wong's and Hayes have entered into a Subcontract
Manufacturing Agreement, pursuant to which Wong's performs certain manufacturing
work for Hayes in its factory in China.
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<PAGE> 98
HAYES' MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL BUSINESS DEVELOPMENTS
Hayes is comprised of three business units: the Modem Products business,
the Network Products business and the recently formed Broadband Products
business. The Modem Products business designs, manufactures and markets analog
and ISDN modem products. The Modem Products business distributes its products
under the Optima, Accura, Practical Peripherals, and Cardinal brands. The
Network Products business designs and markets modem pool and remote access
server products. These products are distributed under the Century brand. The
Broadband Products business designs and markets ADSL and cable modem products
and was formed in June 1997. The Broadband Products business markets its
products under the Ultra brand.
On October 1, 1995, Hayes changed its year end from September 30 to
December 31. In the following discussion, fiscal 1996 is the calendar year and
is compared to Hayes' fiscal year ending September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
General. Hayes' primary capital requirements are for working capital,
acquisitions and other capital expenditures. Hayes has historically met its
capital requirements through a combination of equity transactions, cash flow
from operations, bank lines of credit and credit terms from suppliers.
Cash Flows. Cash and cash equivalents decreased by approximately $2.9
million to $2.8 million at June 30, 1997 as compared to $5.7 million at December
31, 1996. Cash and cash equivalent increased by $500,000 at December 31, 1996
from $5.2 million at September 30, 1995. Cash and cash equivalents decreased by
$3.1 million at September 30, 1995, as compared to September 30, 1994. The
increase in cash in fiscal 1996 resulted from implementation of the Plan and
reduction in restricted cash. The decrease in fiscal 1995 resulted primarily
from the increase in restricted cash as a result of Hayes' debtor-in-possession
financing with General Electric Capital Corporation ("GECC"). The increase in
cash and cash equivalents in fiscal 1994 resulted from extending vendor payments
prior to Hayes' Chapter 11 filing.
Cash used in operations was $16.6 million and $50.8 million in the first
six months of 1997 and the first six months of 1996, respectively. Cash used in
operations was $41.0 million in fiscal 1996 due to the implementation of the
Plan, which included payments of approximately $44.6 million to pre-petition
claimants, and a net loss of $13.2 million. Cash generated by operations was
approximately $1.5 million in fiscal 1995 and resulted from a net loss of
approximately $14.4 million which was more than offset by non-cash depreciation
and amortization and reduced working capital investment. Cash used in operations
was $7.7 million in 1994 due to a net loss of approximately $28.1 million
reduced by non cash depreciation and amortization and reduced working capital
investment.
Cash from investment activities was approximately $250,000 in the first six
months of 1997 due to sale of stock in a French software company partially
offset by the net impact of capital expenditures and changes in other long term
assets and $15.9 million in the first six months of 1996 due to the sale of
certain parcels of real estate. Cash from investment activities in fiscal 1996
was due to the sale of real estate, investments and equipment and a reduction in
restricted cash partially offset by capital expenditures. Cash used in
investment activities was $1.5 million and $8.1 million in fiscal 1995 and 1994,
respectively. The primary uses of these funds were capital investments and an
increase in restricted cash.
Cash provided from financing activities was approximately $13.8 million and
$34.4 million in the first six months of 1997 and in the first six months of
fiscal 1996, respectively. In March 1997, Hayes exercised its right to request
additional loans from certain shareholders to meet short-term capital needs.
Hayes issued short-term promissory notes totaling $4.0 million. Such notes are
convertible into Hayes Series A Preferred Stock. On April 23, 1997, Hayes
completed an agreement with Vulcan Ventures, Inc. to issue 263,113 shares of
Hayes Series B Preferred Stock (without giving effect to the Conversion Ratio)
for $5.5 million.
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<PAGE> 99
The cash provided in fiscal 1996 was due to the issuance of $35.0 million
of Hayes Series A Preferred Stock partially offset by the repurchase of $13.5
million of common stock less borrowings under Hayes' credit facilities. Cash
used in financing activities was $3.0 million in fiscal 1995 due to payments
exceeding borrowings under the GECC credit facility. Cash provided by financing
activities was $18.1 million in fiscal 1994 due to borrowings under Hayes'
credit facility with NationsBank of Georgia N.A.
At June 30, 1997, Hayes' principal sources of liquidity included cash and
cash equivalents and its credit facilities with CIT (the "CIT Facility"). The
CIT Facility, which expires on April 16, 2000, consists of two term loans and a
revolving loan which provide for maximum borrowings of $64.5 million. The
revolving loan provides for financing based upon eligible receivables and
inventory. The term loans are based upon appraised values of equipment and
intangibles. The CIT Facility bears interest at prime plus 2.125 percent. At
June 30, 1997, Hayes had borrowed to the full extent of availability under the
CIT Facility.
Management believed that such sources were insufficient to enable it to
expand its business and sought additional funding through the issuance of Hayes'
equity. In July 1997, Hayes entered into the Investor Letter of Intent for the
purchase of 1,350,743 shares of Hayes Series C Preferred Stock for $30.0
million. If such purchase is consummated, these shares will be converted into
6,252,454 shares of Common Stock upon the Effective Time. Management believes
the proceeds from the sale of the Hayes Series C Preferred stock if such sale is
consummated in addition to cash and cash equivalents and its CIT credit
facilities, will be sufficient to satisfy operating cash and capital expenditure
requirements through at least the next twelve months. Negotiations with this
prospective investor are continuing, and Hayes is also pursuing discussions with
other potential sources of capital funding There can be no assurance that the
proposed investment described in the Investor Letter of Intent will be
consummated.
Inflation
Hayes believes that inflation has not had a material impact on its
operating results and does not expect inflation to have a material impact on its
operating results in the foreseeable future.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997 CHANGE
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net Revenues:
Modem Products.................................... $139,873 $91,439 $(48,434)
Access Systems.................................... 5,712 3,458 (2,254)
-------- ------- --------
$145,585 $94,897 $(50,688)
======== ======= ========
</TABLE>
Net revenues in the six months ended June 30, 1997 decreased by $50.7
million, or 34.8%, from the same period in 1996 primarily due to lower revenues
in both the Modem Products and Access Systems businesses. The decrease in net
revenues was largely attributable to Hayes' introduction of modems with 56Kbs
speeds. In the third quarter of fiscal 1996, Rockwell and 3 Com announced the
introduction of modem technology that would permit data to be transmitted on
analog phone lines at 56Kbs. These announcements were followed by announcements
by most modem providers, including Hayes, indicating product availability in the
first and second quarters of 1997. As a result of these announcements and
commentary from various industry analysts, management believes that its channel
partners assumed that modem customers would move quickly to 56Kbs modems and
away from the then industry standard 33.6Kbs modems. Consequently, Hayes'
channel partners significantly reduced orders for 33.6Kbs products and
substantially reduced channel inventories of such products in the first quarter.
Instead of placing orders for 33.6Kbs products, Hayes' channel partners began
placing orders for Hayes' 56Kbs products. Due to the lack of availability of
56Kbs modem chips from its suppliers, Hayes was unable to fill many of these
orders and backlog rose to $10.5 million at March 31, 1997 from $4.6 million at
December 31, 1996.
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<PAGE> 100
In the second quarter of 1997, Hayes began to fill its channel partners
demand for 56Kbs product. Management believes that during this period its
channel partners realized that customer demand was weighted heavily toward
33.6Kbs products and the market had not yet accepted 56Kbs products. As a
result, Hayes' channel partners began to place significant orders for 33.6Kbs
products. Hayes had converted much of its manufacturing schedule to 56Kbs
products and was therefore unable to meet much of its channel partners' demand
for 33.6Kbs product during the second quarter. Although second quarter 1997
revenues increased 42.2% from the first quarter of 1997 to $55.7 million at June
30, 1997, backlog grew to $20.9 million at June 30, 1997.
Gross profit, as a percentage of net revenues, declined to 25.2% in the
first six months of 1997 from 28.0% in the first six months of 1996 due to
unfavorable manufacturing variances caused by disruption to manufacturing
schedules and lower average selling prices for 33.6Kbs products resulting from
the introduction of 56Kbs products.
Selling, general and administrative expenses decreased by $4.9 million in
the first six months of 1997 from the comparable period in 1996. Such expenses
represented 27.8% of revenue in the first six months of 1997 compared to 21.5%
in the first six months of 1996. Hayes reduced operating expenditures in
anticipation of lower revenues in the first six months of 1997, but expenses as
a percent of revenue were higher due to such lower revenues.
Research and development expense increased to $6.0 million from $4.5
million in the first six months of fiscal 1997 compared to the same period in
fiscal 1996 as a result of increased development expenses related to new
products for the network and broadband markets.
In the first six months of 1997 Hayes recognized a gain of $1.3 million
from the sale of stock in a French software company. Hayes also recognized a
gain in the first six months of 1996 of $8.2 million from the sale of certain
parcels of real estate.
Interest expense was $0.6 million lower in the first six months of 1997
compared to the same period in 1996. The interest expense in the first six
months of 1996 included interest at 12%, which was payable on most of the
pre-petition claims. These claims were paid in full in April of 1996.
Hayes reported a net loss of $7.8 million for the six months ended June 30,
1997 and net income of $5.2 million the six months ended June 30, 1996. On a per
share basis, net loss was $(1.57) and net income was $.70 in the six months
ended June 30, 1997 and June 30, 1996, respectively.
Fiscal 1996 Compared to Fiscal 1995
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1996 CHANGE
------------- ------------ --------
<S> <C> <C> <C>
Net Revenues:
Modem Products............................... $ 260,303 $245,438 $(14,865)
Access Systems............................... 8,852 12,014 3,162
-------- -------- --------
$ 269,155 $257,452 $(11,703)
======== ======== ========
</TABLE>
In fiscal 1996, Hayes reported net sales of approximately $257.5 million, a
decrease of 4.4% from fiscal 1995. Modem Products business net revenues
decreased 5.7% to $245.4 million in fiscal 1996. This decrease resulted from
price erosion in the Company's 14.4Kbs and 28.8Kbs modem products. Access
Systems business net revenues increased 35.7% in fiscal 1996 to $12.0 million
due to growth in Century product sales.
Gross profit, as a percentage of net sales, remained constant at 23.9% in
1996 and 1995. Although average sales prices declined in fiscal 1996 versus
fiscal year 1995, improved product designs and lower manufacturing and material
costs enabled Hayes to maintain its gross profit margins.
Selling, general and administrative expenses, excluding restructuring
charges and amortization and write-off of intangibles, increased by
approximately $6.1 million in fiscal 1996 and rose as a percentage of
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revenue to 24.0% versus 20.7% in fiscal 1995. The primary factors in the
increase were higher marketing expenses resulting from Hayes' sponsorship of a
NASCAR racing team at a cost of $3.8 million, higher marketing expenses and
recruiting and relocation expenses due to the employment of a new management
team as Hayes emerged from Chapter 11, partially offset by lower administrative
expenses.
Research and development expense declined $1.1 million in 1996 compared to
1995 due to management's curtailment of expenditures in the first half of 1996
as a result of the Chapter 11 filing.
Interest expense decreased 23.5% or approximately $1.5 million in fiscal
1996 as compared to fiscal 1995 as a result of the $35.0 million capital
investment made in Hayes, the sale of certain parcels of real estate, and a new
borrowing arrangement, all of which were part of the Plan by which Hayes emerged
from Chapter 11. The implementation of the Plan enabled Hayes to pay
pre-petition claims which generally accrued interest at 12%.
In fiscal 1996, Hayes recognized a gain of approximately $700,000 on the
sale of stock of a public company which it had previously received as settlement
of an intellectual property dispute. Hayes also recognized a gain of
approximately $8.2 million on the sale of certain parcels of real estate it had
previously acquired for development as a corporate campus.
Other income consists primarily of insert fees from third parties for the
inclusion of their software and related promotional materials in Hayes' products
and intellectual property license fees. Other income declined by approximately
$1.9 million or 45.2% in fiscal 1996 from approximately $4.2 million in fiscal
1995. The decline resulted from a reduction in license fees from Rockwell. In
July 1995, Hayes and Rockwell entered into an agreement in which, among other
things, Rockwell agreed to supply Hayes modem chips and Hayes agreed to waive
license fees from the date of the agreement through December 31, 1996 (the
"Rockwell Agreement").
The Hayes effective tax rate was 3.0% in 1996 compared to 6.1% in fiscal
1995. Hayes' effective tax rates have been significantly impacted by its losses,
nondeductible Chapter 11 expenses and the recognition of valuation allowances on
its deferred tax assets.
Hayes reported a net loss of $13.2 million for fiscal 1996 and a net loss
of $14.4 million for fiscal 1995. On a per share basis, net loss was $(2.52) for
fiscal 1996 and $(2.56) for fiscal 1995, respectively.
Fiscal 1995 Compared to Fiscal 1994
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1994 1995 CHANGE
------------- ------------- -------
<S> <C> <C> <C>
Net Revenues:
Modem Products................................ $ 243,315 $ 260,303 $16,988
Access Systems................................ 2,962 8,852 5,890
-------- -------- -------
$ 246,277 $ 269,155 $22,878
======== ======== =======
</TABLE>
Net revenues were 9.3% higher in fiscal 1994 than in fiscal 1995. Modem
Products business sales increased 7.0% to approximately $260.3 million in fiscal
1995. Hayes experienced strong growth in modem sales in its Asia Pacific
operations and modest growth in its North American operations. Access Systems
business sales increased 198.9% in fiscal 1995 due to the introduction of the
Century product line.
Fiscal 1995 gross profit as a percentage of net sales increased to 23.9%
from 20.7% in fiscal 1994. In March 1994 Hayes lowered prices which resulted in
a significant increase in unit volumes. Hayes experienced a number of
operational and manufacturing problems which led to unfavorable manufacturing
variances and inventory charges. In October 1994, Hayes employed a new vice
president of operations. Under his leadership, Hayes made significant
improvements in its operations, which resulted in improved margins in fiscal
year 1995. In addition, Hayes continued to introduce improved product designs
with lower material and manufacturing costs.
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<PAGE> 102
Selling, general and administrative expenses, excluding amortization and
write-off of intangibles, decreased by approximately $9.6 million in fiscal 1995
to $55.6 million compared to $65.2 million in fiscal 1994. These expenses also
decreased as a percentage of revenue to 20.7% in fiscal 1995 from 26.5% in
fiscal 1994. As a result of Hayes' November 15, 1994 Chapter 11 filing,
management significantly curtailed operating expenses in the areas of sales and
marketing.
Research and development expense declined $5.4 million in 1995 compared to
1994. As a result of the Chapter 11 filing, management curtailed spending.
Interest increased 242.6% or by approximately $4.7 million to $6.6 million
in fiscal 1995 compared to $1.9 million in fiscal 1994 as a result of Hayes'
Chapter 11 filing. Hayes was required to recognize interest on its pre-petition
claims at 12% unless the claimant otherwise agreed.
Other income declined $0.7 million in fiscal 1995 as compared to fiscal
1994 due to the decline in licensing fees to Hayes resulting from the Rockwell
Agreement.
Hayes' effective tax rate was 6.1% and 5.7% for fiscal 1995 and 1994,
respectively. Hayes' tax rates have been significantly impacted by its losses,
nondeductible Chapter 11 expenses and the recognition of valuation allowances on
its deferred tax assets.
Hayes reported a net loss of $14.4 million for fiscal 1995 and a net loss
of $28.1 million for fiscal 1994. On a per share basis net loss was $(2.56) and
$(4.98) in fiscal 1995 and fiscal 1994, respectively.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock and 3,000,000 shares of Preferred Stock. As of September 19,
1997 the Company had 12,495,291 shares of Common Stock issued and outstanding
and no shares of Preferred Stock issued and outstanding. At the Effective Time,
the Company will amend its certificate of incorporation to increase the
authorized capital stock of the Company to 100,000,000 shares, consisting of
shares of Common Stock and shares of Preferred Stock, of which
1,217,930 shares will be designated as Series A Preferred Stock.
The Common Stock is listed for trading on NASDAQ/NMS under the symbol
"ACCB". The transfer agent and registrar for the Common Stock is Continental
Stock Transfer and Trust Company.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to the vote of stockholders, including the
election of directors. The holders of Common Stock do not have cumulative voting
rights. Subject to any preferential rights held by holders of the Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends as may be declared from time to time by the Company Board out of funds
legally available therefor. In the event of the liquidation, dissolution or
winding up of the Company, holders of Common Stock will be entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of outstanding Preferred Stock, if any. Holders of Common Stock do
not have preemptive, conversion or redemption rights. All the issued and
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and nonassessable.
PREFERRED STOCK
The Company Board, without further approval or action by the stockholders,
is authorized to issue shares of Preferred Stock in one or more series and to
fix as to any such series the dividend rate, redemption prices, preferences on
liquidation or dissolution, sinking fund terms, if any, conversion rights,
voting rights and any other preference or special rights and qualifications.
Issuances of Preferred Stock may adversely affect the rights of holders of
Common Stock. Holders of Preferred Stock might, for example, be entitled to
preference in distributions to be made to stockholders upon the liquidation,
dissolution or winding up of the Company. In
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<PAGE> 103
addition, holders of Preferred Stock might enjoy voting rights that limit,
qualify or adversely affect the voting rights of holders of Common Stock. Such
rights of the holders of one or more series of Preferred Stock might include the
right to vote as a class with respect to the election of directors, major
corporate transactions or otherwise, or the right to vote together with the
holders of Common Stock with respect to any such matter. The holders of
Preferred Stock might be entitled to cast multiple votes per share. The issuance
of Preferred Stock could have the effect of delaying, deferring, or preventing a
change in control of the Company without further action by the stockholders. The
Company has no present plans to issue any shares of Preferred Stock, other than
the Series A Preferred Stock.
SERIES A PREFERRED STOCK
Voting Rights. The Series A Preferred Stock is nonvoting, except with
respect to (i) a change in the rights, preferences or privileges of the Series A
Preferred Stock, (ii) a change in the number of authorized shares of Series A
Preferred Stock, (iii) the issuance of securities senior to or on parity with
the Series A Preferred Stock, (iv) the redemption of or payment of dividends
with respect to the Common Stock, (v) the incurrence or guarantee of
indebtedness by the Company or (vi) the approval of creation of a mortgage,
pledge or security interest in all or substantially all of the Company's assets.
The foregoing matters require the approval of a majority of the holders of
Series A Preferred Stock.
Conversion Rights. Each share of Series A Preferred Stock is convertible,
at the option of the holder of such share, into one share of Common Stock,
subject to anti-dilution adjustment. The Series A Preferred Stock is also
subject to automatic conversion into Common Stock upon the affirmative vote of
at least a majority of the Series A Preferred Stock.
Redemption. Upon 90 days prior written notice from the holders of more
than 50% of the Series A Preferred Stock delivered to the Company not earlier
than November 1, 1999, the Company must redeem the Series A Preferred Stock for
a cash payment of $4.5159 per share plus accrued but unpaid dividends (the
"Redemption Price"). The Company may, at its sole option and discretion and upon
30 days prior written notice, redeem all of the Series A Preferred Stock for the
Redemption Price on April , 2000. Less than all of the Series A Preferred
Stock may be redeemed on a pro rata basis with the consent of a majority of the
holders of the Series A Preferred Stock.
Dividends. Holders of Series A Preferred Stock will be entitled to
receive, as and when declared by the Company's Board, cumulative compounding
dividends at the dividend rate of 10% per year of the original issue price per
share of the Series A Preferred Stock. Dividends accumulated on the Series A
Preferred Stock are to be declared by the Company Board and paid in cash upon
the redemption of the Series A Preferred Stock or in shares of Common Stock upon
the conversion of the Series A Preferred Stock.
ANTITAKEOVER PROVISIONS
The Certificate of Incorporation and the By-laws of the Company (i) provide
for three classes of directors on the Company Board from which directors may
only be removed by Stockholders for cause; (ii) generally provide that only a
majority of the Company Board shall have the authority to fill vacancies on the
Company Board; (iii) restrict the right to amend certain provisions of the
Certificate of Incorporation and By-laws; (iv) restrict the right of
stockholders to call annual meetings; (v) establish an advance notice procedure
regarding the nomination of directors by stockholders and stockholder proposals
to be brought before an annual meeting; and (vi) authorize the Company Board to
issue preferred stock without further stockholder approval. These provisions are
designed to encourage any person who desires to take control of and/or acquire
the Company to enter into negotiations with the Company Board, thereby making
more difficult the acquisition of the Company by means of a tender offer, a
proxy contest or other non-negotiated means. In addition to encouraging any
person intending to attempt a takeover of the Company to negotiate with the
Company Board, these provisions also curtail such person's use of a dominant
equity interest to control any negotiations with the Company Board. Under such
circumstances, the Company Board may be better able to make and implement
reasoned business decisions and protect the interests of all of the Company's
stockholders.
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<PAGE> 104
Classified Board. The Certificate of Incorporation provides for the
Company Board to be divided into three classes serving staggered terms so that
directors' initial terms will expire at the 1997, 1998 or 1999 annual meeting of
stockholders, and that starting with the 1997 annual meeting of the Company's
stockholders, one class of directors will be elected each year for a three-year
term. See "MANAGEMENT OF THE COMPANY -- Directors and Executive Officers." The
classes will be as nearly equal in number as possible. The classification of
directors makes it more difficult for a significant stockholder to change the
composition of the Company Board in a relatively short period of time and,
accordingly, provides the Company Board and stockholders time to review any
nomination that a significant stockholder may make and to pursue alternative
courses of action which it believes are fair to all the stockholders of the
Company.
Removal of and Filling Vacancies on the Company Board. The Certificate of
Incorporation provides that, subject to any rights of the holders of any class
or series of the capital stock of the Company entitled to vote generally in the
election of directors, only a majority vote of the members of the Company Board
then in office, although less than a quorum, shall have the authority to fill
any vacancies on the Company Board, including vacancies created by an increase
in the authorized number of directors. Moreover, because the Certificate of
Incorporation provides for a classified board, Delaware law provides that the
stockholders may remove a member of the Company Board only for cause and the
Certificate of Incorporation requires the affirmative vote of the holders of at
least 80% of the voting power of all the then-outstanding shares of the voting
stock of the Company, voting together as a single class, to remove a member of
the Company Board. These provisions relating to removal and filling of vacancies
on the Company Board of the Company preclude stockholders from enlarging the
Company Board or removing incumbent directors and filling vacancies with their
own nominees.
Amendment of the Certificate of Incorporation and Company By-laws. The
Certificate of Incorporation contains provisions requiring the affirmative vote
of the holders of at least 80% of the voting power of the Common Stock entitled
to vote generally in the election of directors to amend certain provisions of
the Certificate of Incorporation and Company By-laws (including certain of the
provisions discussed above). These provisions make it more difficult for
stockholders to make changes in the Certificate of Incorporation or Company
By-laws, including changes designed to facilitate the exercise of control over
the Company.
Annual Meetings. The Company By-laws provide that annual meetings of
stockholders can be called only by the Chairman of the Board, the Vice Chairman
of the Board, the President or any Vice President, the Secretary or by the
Company Board. Stockholders are not permitted to call an annual meeting but may,
upon a written request by stockholders owning a majority in amount of the entire
capital stock of the Company issued and outstanding and entitled to vote,
require that any of the foregoing call an annual meeting of stockholders. These
provisions prohibit a significant stockholder from authorizing stockholder
action without a meeting at which all stockholders would be entitled to
participate.
Nominations of Directors and Stockholder Proposals. The Company By-laws
establish an advance notice procedure with regard to the nomination other than
by, or at the direction of, the Company Board of candidates for election as
directors (the "Nomination Procedure") and with regard to stockholder proposals
to be brought before an annual meeting of stockholders (the "Business
Procedure"). The Nomination Procedure provides that only persons who are
nominated by, or at the direction of, the Company Board, or by a stockholder of
the Company entitled to vote for the election of directors who has given timely
written notice to the Secretary of the Company prior to the meeting at which
directors are to be elected, are eligible for election as directors of the
Company. The Business Procedure provides that to be properly brought before an
annual meeting, business must be specified in the notice of the annual meeting
given by or at the direction of the Company Board or brought before the meeting
by, or at the direction of, the Company Board or by a stockholder who has given
timely written notice to the Secretary of the Company of such stockholder's
intention to bring such business before such meeting. To be timely, notice for
nominations or stockholder proposals must be received by the Company not less
than 60 days prior to the annual meeting; provided, however, that in the event
that less than 70 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by a stockholder, to be
timely, must be received no later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made, whichever first occurs. In addition
to the foregoing
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requirements, the proxy rules under the Exchange Act set forth certain
requirements, including stockholder eligibility, timing and attendance
requirements, which must be satisfied in order for a stockholder proposal to be
included in the Company's proxy statement and form of proxy. These requirements
under the Exchange Act may differ from those set forth under the Nomination
Procedure or the Business Procedure.
Under the Nomination Procedure, notice to the Company from a stockholder
who proposes to nominate a person at an annual meeting for election as a
director must contain certain information about that person so nominated,
including age, business and residence addresses, principal occupation, the class
and number of shares of Common Stock beneficially owned, and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, and certain information about
the stockholder proposing to nominate that person. Under the Business Procedure,
notice relating to a stockholder proposal must contain certain information about
such proposal and about the stockholder who proposes to bring the proposal
before the meeting, including the class and number of shares of Common Stock
beneficially owned by such stockholder. If the officer of the Company presiding
at the meeting determines that a person was not nominated in accordance with the
Nomination Procedure, or that other business was not brought before the meeting
in accordance with the Business Procedure, such person is not eligible for
election as a director, or such business is not to be conducted as such meeting,
as the case may be.
The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the Company Board a meaningful opportunity
to consider the qualifications of the proposed nominees and, to the extent
deemed necessary or desirable by the Company Board, to inform stockholders about
such qualifications. The purpose of the Business Procedure is, by requiring
advance notice of stockholder proposals, to provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Company Board, to provide the Company Board with a
meaningful opportunity to inform stockholders, prior to such meetings, of any
proposal to be introduced at such meetings, together with any recommendation as
to the Company Board's position or belief as to action to be taken with respect
to such proposal, so as to enable stockholders better to determine whether they
desire to attend such meeting or grant a proxy to the Company Board as to the
disposition of any such proposal. Although the Company By-laws do not give the
Company Board any power to approve or disapprove stockholder nominations for the
election of directors or any other proposal submitted by stockholders, the
Company By-laws may have the effect of precluding a nomination for the election
of directors or precluding the conducting of business at a particular
stockholder meeting if the proper procedures are not followed, and may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
the Company, even if the conduct of such solicitation or such attempt might be
beneficial to the Company and its stockholders.
Issuance of Preferred Stock. The Certificate of Incorporation authorizes
the Company Board to issue preferred stock, without further stockholder
approval, which could have dividend, redemption, liquidation, conversion, voting
or other rights that could adversely affect the voting power and other rights of
holders of Common Stock. The ability of the Company Board to issue preferred
stock could have the effect of delaying, deferring, or preventing a change in
control of the Company without further action by the stockholders.
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DESCRIPTION OF THE CAPITAL STOCK OF HAYES
All references in this Section to Hayes capital stock and to conversion
prices are before application of and adjustment for the Conversion Ratio and the
Merger.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Hayes consists of 100,000,000 shares of
$.01 par value per share common stock and 10,263,113 shares of preferred stock,
without par value, of which 10,000,000 shares are designated Hayes Series A
Preferred Stock and 263,113 shares are designated Hayes Series B Preferred
Stock. As of October 1, 1997, Hayes had 4,991,750 shares of common stock
outstanding, 4,900,000 of Series A Preferred Stock outstanding and 263,113
shares of Hayes Series B Preferred Stock. In addition, 4,900,000 shares of
authorized, unissued common stock have been reserved for issuance upon
conversion of the Hayes Series A Preferred Stock, 263,113 shares of authorized,
unissued common stock have been reserved for issuance upon conversion of the
Hayes Series B Preferred Stock, 1,800,000 shares of authorized, unissued common
stock have been reserved for issuance to employees of Hayes upon exercise of
stock options granted and to be granted pursuant to the Hayes Option Plan,
600,000 shares of common stock have been reserved for issuance under the certain
board warrants and additional shares of common stock have been reserved for
possible issuance under the Anti-dilution Warrant issued to ACMA; however ACMA
has agreed to terminate its Anti-dilution Warrant as a part of the Merger.
HAYES COMMON STOCK
The holders of Hayes Common Stock are entitled to one vote per share of
record on all matters submitted to the shareholders for vote and do not have
cumulative voting rights. Subject to any preferential rights of the holders of
Hayes preferred stock, the holders of the Hayes Common Stock are entitled to
receive ratably such dividends as are legally declared by Hayes and are entitled
to share ratably in all assets remaining after payment of liabilities and
payment of any liquidation preference of outstanding preferred stock in the
event of liquidation, dissolution or winding up of Hayes. Issuance of additional
shares of Hayes Common Stock is restricted by the By-Laws of Hayes and by the
Shareholders' Agreement.
PREFERRED STOCK
The holders of preferred stock have the voting and other rights that are
ascribed to each Series of preferred stock. Issuance of additional shares of any
Series of preferred stock or creation of a new Series of preferred stock is
restricted by the By-Laws of Hayes and by the Shareholders' Agreement.
HAYES SERIES A PREFERRED STOCK
The holders of Hayes Series A Preferred Stock are entitled to one vote per
share of record on all matters submitted to the shareholders for vote and do not
have cumulative voting rights. The voting rights of the holders of Hayes Series
A Preferred Stock are equal to those of the holders of common stock. The holders
of Hayes Series A Preferred Stock are entitled to receive ratably such dividends
as are legally declared by Hayes which dividends are preferential to those paid
on common stock. Each share of Hayes Series A Preferred Stock is convertible, at
the option of the holder thereof, into such number of fully paid and
nonassessable shares of common stock as is determined by dividing $7.14 by the
Hayes Series A Conversion Price in effect on the date the certificate is
surrendered for conversion. The "Hayes Series A Conversion Price" is currently
$7.14. There are anti-dilution protections in the Hayes Articles of
Incorporation for the Hayes Series A Preferred Stock. Each share of Hayes Series
A Preferred Stock shall automatically be converted immediately prior to the
consummation of an initial public offering of Hayes under the Securities Act. In
the event of any liquidation, dissolution or winding up of Hayes, the holders of
the Hayes Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of Hayes to
the holders of the common stock or any other shares of Hayes other than Hayes
Series A Preferred Stock, from the entire assets and funds of Hayes legally
available for distribution, the amount of $7.14 per share (as adjusted for any
stock dividends, combinations or splits with respect to such shares), plus
cumulative
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interest on such amount from the issue date of such share at a rate of eight
percent (8%) per annum, for each share of Hayes Series A Preferred Stock then
held by them.
HAYES SERIES B PREFERRED STOCK
The holders of Hayes Series B Preferred Stock are not entitled to vote. The
holders of Hayes Series B Preferred Stock are entitled to receive ratably
cumulative compounding dividends at the dividend rate of ten percent (10%) per
annum of the original issue price per share of Hayes Series B Preferred Stock.
Dividends shall accrue quarterly, provided, however, that in the event of
conversion of the Hayes Series B Preferred Stock, dividends shall be accrued
through the day immediately prior to such conversion. The dividends are
preferential such that no dividends may be paid on the common stock, Hayes
Series A Preferred Stock or Hayes Series C Preferred Stock unless all accrued
and unpaid dividends on the Hayes Series B Preferred Stock are paid. Each share
of Hayes Series B Preferred Stock is convertible, at the option of the holder
thereof, into such number of fully paid and nonassessable shares of common stock
as is determined by dividing $20.9036 by the Hayes Series B Conversion Price in
effect on the date the certificate is surrendered for conversion. The "Hayes
Series B Conversion Price" is currently $20.9036. Each share of Hayes Series B
Preferred Stock shall automatically be converted immediately prior to the
consummation of a qualified public offering of Hayes if certain conditions are
met. There are anti-dilution protections in the Hayes Articles of Incorporation
for the Hayes Series B Preferred Stock. In the event of any liquidation,
dissolution or winding up of Hayes, after the holders of the Hayes Series A
Preferred Stock have been paid, the holders of the Hayes Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of Hayes to the holders of the common
stock or any other shares of Hayes other than Hayes Series B Preferred Stock,
from the entire assets and funds of Hayes legally available for distribution,
the amount of 100% of the original purchase price plus any accrued and unpaid
dividends.
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF THE COMPANY AND HAYES
If the Merger is consummated, holders of Hayes capital stock will become
holders of the Company's Securities and the rights of such holders will be
governed by the Company's Certificate of Incorporation and the Company's
By-laws. The rights of the Company's stockholders differ in certain respects
from the rights of Hayes Shareholders. Certain of the differences are summarized
below. This summary is qualified in its entirety by referenced to the full text
of such documents.
BUSINESS COMBINATIONS
Generally, under DGCL, the approval by the affirmative vote of the holders
of a majority of the outstanding stock (or, if the certificate of incorporation
provides for more or less than one vote per share, a majority of the votes of
the outstanding stock) of a corporation entitled to vote on the matter is
required for a merger or consolidation or sale, lease or exchange of all or
substantially all of the corporation's assets to be consummated.
The Company's Certificate of Incorporation does not contain provisions
regarding business combinations and does not impose requirements in addition to
or different from those imposed by the DGCL.
Under the GBCC, to approve a plan of merger, a majority of all votes
entitled to be cast on the plan must approve the plan; however, the articles or
by-laws may require a greater vote or may require a separate majority vote by
one or more voting groups of the corporation, in which case each such group must
approve the plan by a majority vote. Holders of non-voting shares are entitled
to vote on a plan of merger as members of a larger voting group including all
shares entitled to vote on the merger if the merger plan contains a provision
that, if contained in a proposed amendment to the articles of incorporation,
would require action by one or more separate voting groups on the proposed
amendment. The GBCC provides that unless the articles of incorporation or
by-laws require a greater vote, a majority of shareholders entitled to vote must
approve a corporation's sale, lease, exchange, or other disposal of all or
substantially all of its property.
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The Hayes By-Laws provide that the prior consent or approval of 70% of the
issued and outstanding shares of Hayes Common Stock and Hayes Series A Preferred
Stock shall be necessary for Hayes to take any action which results in a merger,
consolidation or reorganization with or into any other corporation or
corporations or a sale of all or substantially all of the assets of the
corporation.
AMENDMENTS TO CHARTERS
Under the DGCL, unless otherwise provided in the certificate of
incorporation, a proposed amendment to the certificate of incorporation requires
an affirmative vote of a majority of the outstanding stock entitled to vote
thereon. If any such amendment would adversely affect the rights of any holders
of shares of a class or series of stock, the vote of the holders of a majority
of all outstanding shares of the class or series, voting as a class, is also
necessary to authorize such amendment.
The Company's Certificate of Incorporation provides that no amendment to
the Company's Certificate of Incorporation shall amend, alter, change or repeal
the super majority voting provisions relating to the division of the Company
Board into classes; the number and removal of members of the Company Board; term
of office of members of the Company Board; and the filling of vacancies on the
Company Board unless the amendment, alteration, change or repeal shall have
received the affirmative vote of the holders of at least 80% of the outstanding
shares of Hayes Common Stock and Hayes Series A Preferred Stock entitled to vote
thereon. The Company's Certificate of Incorporation otherwise comports with the
DGCL.
The GBCC provides that unless the articles of incorporation require a
greater vote or a vote by voting groups, the amendment to be adopted must be
approved by a majority of the votes entitled to be cast on the amendment by each
voting group entitled to vote on the amendment. The holders of the outstanding
shares of a class are entitled to vote as a separate voting group on a proposed
amendment if the amendment would affect the rights of such holders even if the
articles of incorporation provide that the shares are nonvoting shares.
The Hayes By-Laws provide that the prior consent or approval of the holders
of at least seventy percent (70%) of the issued and outstanding shares of Hayes
Common Stock and Hayes Series A Preferred Stock shall be necessary for the
corporation to amend the Hayes Amended and Restated Articles of Incorporation
(the "Hayes Articles").
AMENDMENTS TO BY-LAWS
Under the DGCL, the power to adopt, alter and repeal the Company By-laws is
vested in the stockholders, except to the extent that the certificate of
incorporation vests it in the board of directors. The Company By-laws provide
that the Company By-laws, or any one of them, may be supplemented, amended or
repealed by the Board of Directors, or by the vote of a majority in interest of
the stockholders represented and entitled to vote thereon at any meeting at
which a quorum is present; provided, however, that the affirmative vote of the
holders of at least 80% of the voting power of the then-outstanding shares of
the Company voting stock, voting together as a single class, is required to
amend, alter or repeal the sections of the Company By-Laws which have the same
effect as those provisions of the Company's Certificate of Incorporation
governing (i) division of the Company Board into three classes serving staggered
three year terms; (ii) the number of directors; (iii) term of office of
directors; (iv) removal of directors and (v) the filling of vacancies on the
Company Board.
Under the GBCC, a corporation's shareholders may amend or repeal the
corporation's by-laws or adopt new by-laws even though the by-laws may also be
amended or repealed by its board of directors. A corporation's board of
directors may amend or repeal the corporation's by-laws or adopt new by-laws
unless the articles of incorporation provide otherwise or a particular by-law
adopted by the shareholders expressly provides that the board of directors may
not amend or repeal that by-law. A by-law limiting the authority of the board of
directors or establishing staggered terms for directors may only be adopted,
amended, or repealed by the shareholders.
The Hayes Articles provide that the Hayes By-Laws shall not be changed
without the approval of the holders of at least 70% of the outstanding Hayes
Common Stock and Hayes Series A Preferred Stock.
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REDEMPTION OF CAPITAL STOCK
Under the DGCL, subject to certain limitations, a corporation's stock may
be made subject to redemption by the corporation at its option, at the option of
the holders of such stock or upon the happening of a specified event. The DGCL
prohibits the purchase or redemption of stock when the capital of a corporation
is or would become impaired, but shares entitled to dividend or liquidation
preference may be purchased or redeemed out of capital if such shares are
retired and capital is reduced in accordance with legal requirements. The
Company's Certificate of Incorporation does not contain any provision relating
to the right to redeem outstanding shares of capital stock.
Under the GBCC a corporation's stock may be made subject to redemption at
the option of the corporation, the shareholder, or another person or upon the
occurrence of a specified event. At all times that shares of the corporation are
outstanding, however, the GBCC requires that one or more shares that together
have unlimited voting rights and one or more shares that together are entitled
to receive the net assets of the corporation upon dissolution must be
outstanding.
The Hayes Articles gives redemption rights to the holders of Hayes Series B
Preferred Stock upon 90 days prior written notice of 50% of such holders, and
Hayes has limited rights to redeem Hayes Series B Preferred Stock upon 30 days
prior written notice to the holders of such stock.
STOCKHOLDER ACTION
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a written consent or consents setting forth the action taken is signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote upon such action were present and voted. The
Company's Certificate of Incorporation and the Company's By-laws provide that
all elections and questions put to stockholders shall be decided by the vote of
a majority in interest of the stockholders present in person or represented by
proxy and entitled to vote at the meeting, except as otherwise permitted or
required by the DGCL, the Company's Certificate of Incorporation or the Company
By-Laws.
Under the GBCC, action required or permitted to be taken at a shareholders'
meeting may be taken without a meeting if the action is taken by all the
shareholders entitled to vote on the action or, if so provided in the articles
of incorporation, by persons who would be entitled to vote at a meeting those
shares having voting power to cast not less than the minimum number of votes
that would be necessary to authorize or take the action at a meeting at which
all shareholders entitled to vote were present and voted upon such action were
present and voted.
The Hayes Articles and the Hayes By-Laws provide that any action required
or permitted to be taken at a shareholders' meeting may be taken without a
meeting if written consent, setting forth the action so taken, is signed by
persons who would be entitled to vote at a meeting those shares having voting
power to cast not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote were present and voted.
SPECIAL STOCKHOLDER MEETINGS
The DGCL provides that an Annual Meeting of stockholders may be called by
the board of directors or by such person or persons as may be authorized by the
certificate of incorporation or by the by-laws. The Company By-laws provide that
an Annual Meeting may be called by the Chairman of the Board, the Vice Chairman
of the Board, the President, any Vice President or by the Company Board and
shall be called by any of the foregoing at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Company issued and outstanding and entitled to vote.
Under the GBCC, an annual meeting of shareholders may be called by the
board of directors, the person or persons authorized to do so by the articles of
incorporation or by-laws, or the holders of at least twenty-five percent (25%),
or such greater or lesser percentage as may be provided in the articles of
incorporation or
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by-laws, of all the votes entitled to be cast on any issue proposed to be
considered at the proposed annual meeting. The Hayes By-Laws provide that annual
meetings of the shareholders may be called at any time by the Chief Executive
Officer or the Board of Directors or upon the written request of any holder or
holders of not less than 10% of the outstanding capital stock of Hayes.
NUMBER AND ELECTION OF DIRECTORS
The DGCL permits the certificate of incorporation or the by-laws of a
corporation to contain provisions governing the number and terms of directors.
However, if the certificate of incorporation contains provisions fixing the
number of directors, such number may not be changed without amending the
certificate of incorporation. The Company's Certificate of Incorporation
provides that the number of directors shall be fixed from time to time pursuant
to a resolution adopted by a majority of the entire Company Board.
The DGCL permits the certificate of incorporation of a corporation or the
by-laws to provide that directors be divided into one, two or three classes. The
term of office of one class or directors shall expire each year with the terms
of office of no two classes expiring the same year. The Company Board consists
of five individuals divided into three classes with each director serving a
three year term (after the initial term). The Company's Certificate of
Incorporation divides the Company Board into three classes with each director
serving a three year term.
The GBCC allows the articles of incorporation or by-laws of a corporation
to specify or fix the number of directors, or may authorize the shareholders or
the board of directors to fix or change the number of directors, or may
establish a variable range for the size of the board of directors. The Hayes
By-Laws fixes the number of Directors at seven.
The GBCC provides that the terms of directors shall expire at the next
annual shareholders' meeting following their election unless their terms are
staggered. The articles of incorporation or a by-law adopted by the shareholders
may provide for staggering the terms of the directors by dividing the total
number of directors into two or three evenly divided groups. The initial term of
the first group shall expire at the first annual shareholders' meeting after
their election; the initial term of the second group shall expire at the second
annual shareholders' meeting after their election; and the initial term of the
third group, if any, shall expire at the third annual shareholders' meeting
after their election. At each annual shareholders' meeting held thereafter,
directors shall be chosen for a term of two years or three years, as the case
may be, to succeed those whose terms expire.
The Hayes By-Laws provide that the Directors shall be elected at each
annual meeting and shall serve for a term of one year. The Hayes Shareholders,
however, have entered into a Shareholders' Agreement which provides certain
shareholders with the right to designate members of the Hayes Board.
ANTITAKEOVER PROVISIONS
The Company's Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of the votes which all stockholders would be
entitled to cast at any annual election of directors or class of directors to
amend or repeal, or to adopt any provision inconsistent with certain provisions
of the Company's Certificate of Incorporation. The provisions of the Company's
Certificate of Incorporation subject to the 80% vote requirement include the
provisions which divide the Company Board into three classes serving staggered
three year terms, establish the term of office of directors and the standards
for removal of directors and the filling of vacancies on the Company Board. The
Company's Certificate of Incorporation also authorizes the Company Board to
issue preferred stock, without further stockholder approval, which could have
dividend, redemption, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of holders of Company stock.
In addition, the Company's By-laws contain certain antitakeover provisions which
establish an advance notice procedure regarding the nomination of directors by
stockholders and stockholder proposals to be brought before an annual meeting
and provisions which restrict the right of stockholders to call Annual Meetings.
The Hayes Articles require the affirmative vote of the holders of at least
70% of the issued and outstanding shares of Hayes Common Stock and Hayes Series
A Preferred Stock for Hayes to amend the Hayes Articles or By-Laws, take any
action which results in the merger, consolidation or reorganization with
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or into any other corporation or corporations, or take any action which results
in the voluntary dissolution or liquidation of Hayes.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the DGCL, a corporation may indemnify any director, officer, employee
or agent against expense (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation to procure a judgment in
its favor -- a "derivative action") if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, had
no reasonable cause to believe that his or her conduct was unlawful.
The Company's Certificate of Incorporation provides, among other things,
that the Company shall indemnify any person who is or was a director or officer
of the Company who is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company), by reason of the fact that he (i) is or was a director or
officer of the Company, or (ii) is or was serving at the request of the Company
as director, officer, employee, agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
Under the GBCC, a corporation may indemnify an individual who is a party to
a proceeding because he or she is or was a director against liability incurred
in the proceeding if such individual conducted himself or herself in good faith
and reasonably believed that such conduct was in the best interests of the
corporation or that such conduct was at least not opposed to the best interests
of the corporation and, in the case of any criminal proceeding, that the
individual had no reasonable cause to believe such conduct was unlawful. The
termination of a proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director did not meet the requisite standard of conduct.
A corporation may not indemnify a director in connection with a proceeding by or
in the right of the corporation, except for reasonable expenses incurred in
connection with the proceeding if it is determined that the director has met the
relevant standard of conduct under the GBCC, or in connection with any
proceeding with respect to conduct for which he or she was adjudged liable on
the basis that personal benefit was improperly received by him or her.
Hayes Articles provide that each person who is or was a director or officer
of Hayes, and each person who is or was a director or officer of Hayes who at
the request of Hayes is serving or has served as an officer or director of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall be indemnified in such capacity by Hayes against those
expenses (including attorneys' fees), judgments, fines, penalties and amounts
paid in settlement which are allowed to be paid or reimbursed by Hayes under the
GBCC and which are actually and reasonably incurred in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, in which such person may be involved
by reason of his being or having been a director or officer of Hayes or of such
other enterprises; provided, however, that except with respect to proceedings by
an officer or director to enforce his rights to indemnification hereunder, Hayes
shall indemnify any such director or officer in connection with a successful
proceeding (or part thereof) so initiated by such person in his capacity as a
director or officer of Hayes only if such proceeding (or part thereof) was
authorized by the Hayes Board.
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LEGAL MATTERS
The law firm of Morrison Cohen Singer & Weinstein, LLP, New York, New York,
has acted as counsel to the Company in connection with this offering and will
render an opinion as to the legality of the securities being offered hereby.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of July 31, 1997 and 1996 and for each of the three years in the period ended
July 31, 1997 included in this Proxy Statement/Prospectus and the related
Financial Statement Schedule have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Hayes and its subsidiaries as of
December 31, 1995 and1996 and for the years ended September 30, 1994 and 1995
the three months ended December 31, 1995 and the year ended December 31, 1996
included in this Proxy Statement/Prospectus have been audited by Coopers &
Lybrand L.L.P., independent accountants, as stated in their report appearing
herein and have been so included in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
ITEM 2
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JULY 31, 1998
The Board of Directors of the Company has selected Deloitte & Touche LLP,
certified public accountants, to be the Company's independent auditors for the
fiscal year ending July 31, 1998. If the stockholders do not ratify this
selection at the Annual Meeting, the Board of Directors may reevaluate the
selection of Deloitte & Touche LLP, but it would have the right to and would
consider retaining Deloitte & Touche LLP in any event. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting to
respond to appropriate stockholders' questions and to make a statement if such
representatives desire to do so.
Deloitte & Touche LLP served as the Company's independent auditors for the
fiscal year ended July 31, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
The Company anticipates that the 1998 Annual Meeting will be held in May,
1998. Therefore, proposals of stockholders of the Company intended to be
presented at the 1998 Annual Meeting of the Company must be received by the
Company not later than February 1, 1998 to be considered for inclusion in the
Company's proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
At the time of preparation of this Proxy Statement/Prospectus, the Company
Board knows of no other matters to be presented for action at the Annual
Meeting. As stated in the accompanying proxy card, if any other business should
come before the Annual Meeting, proxies have discretionary authority to vote
their shares according to their best judgment, including, without limitation, a
motion to adjourn or postpone the Annual Meeting to another time and/or place
for the purpose of soliciting additional proxies in order to approve the Merger
or otherwise.
102
<PAGE> 113
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ACCESS BEYOND, INC. AND SUBSIDIARIES AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report..................................................... F-2
Consolidated Statements of Operations for each of the years ended July 31,
1997, 1996 and 1995.......................................................... F-3
Consolidated Balance Sheets as of July 31, 1997 and 1996...................... F-4
Consolidated Statements of Cash Flows for each of the three years ended July
31, 1997, 1996 and 1995...................................................... F-5
Consolidated Statements of Stockholders' Equity for each of the three years
ended July 31, 1997, 1996 and 1995........................................... F-6
Notes to Consolidated Financial Statements for the years ended July 31, 1997,
1996, and 1995............................................................... F-7-19
HAYES
Consolidated Financial Statements of Hayes:
Independent Accountant's Report............................................... F-20
Consolidated Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997
(unaudited).................................................................. F-21
Consolidated Statements of Operations for the years ended September 30, 1994
and 1995, the three months ended December 31, 1995, the year ended December
31, 1996, and the six months ended June 30, 1996 and 1997 (unaudited)........ F-22
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
September 30, 1994 and 1995, the three months ended December 31, 1995, the
year ended December 31, 1996 and the six months ended June 30, 1997
(unaudited).................................................................. F-23
Consolidated Statements of Cash Flows for the years ended September 30, 1994
and 1995, the three months ended December 31, 1995, the year ended December
31, 1996, and the six months ended June 30, 1996 and 1997 (unaudited)........ F-24
Notes to Consolidated Financial Statements.................................... F-25-39
</TABLE>
F-1
<PAGE> 114
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Access Beyond, Inc.
Gaithersburg, Maryland
We have audited the accompanying consolidated balance sheets of Access
Beyond, Inc. and subsidiaries (the successor company to Penril DataComm
Networks, Inc.) as of July 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended July 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Access Beyond, Inc. and
subsidiaries as of July 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Washington, D.C.
August 29, 1997 (September 15, 1997 as to Note 11)
F-2
<PAGE> 115
ACCESS BEYOND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
NET REVENUES FROM CONTINUING OPERATIONS..................... $ 18,000 $ 39,435 $52,611
COSTS AND EXPENSES
Cost of revenues.......................................... 11,999 22,409 29,394
Selling, general and administrative....................... 12,887 18,611 18,765
Product development and engineering....................... 6,164 7,389 7,438
Merger related expenses................................... 4,077 500 --
Write-down of assets...................................... 864 -- --
Provision for restructuring costs......................... 238 9,718 --
Amortization of cost over net assets acquired............. -- 734 834
-------- -------- -------
36,229 59,361 56,431
OPERATING LOSS FROM CONTINUING OPERATIONS................... (18,229) (19,926) (3,820)
OTHER INCOME (EXPENSE)
Interest income........................................... 380 -- --
Interest expense.......................................... (200) (698) (1,228)
Other: settlement of lawsuit.............................. 3,547 -- --
Other income (expenses), net.............................. 612 (44) (144)
-------- -------- -------
4,339 (742) (1,372)
LOSS FROM CONTINUING OPERATIONS
Before Income Taxes......................................... (13,890) (20,668) (5,192)
Benefit For Income Taxes.................................. -- -- 578
-------- -------- -------
LOSS FROM CONTINUING OPERATIONS............................. (13,890) (20,668) (4,614)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
net of income taxes....................................... -- 404 (1,661)
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS,
net of income taxes....................................... (3,735) (640) (1,400)
-------- -------- -------
NET LOSS.................................................... $(17,625) $(20,904) $(7,675)
======== ======== =======
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Continuing operations..................................... $ (1.16) $ (2.14) $ (0.61)
Discontinued operations................................... -- 0.04 (0.22)
Loss on disposal of discontinued operations............... (0.31) (0.07) (0.19)
-------- -------- -------
$ (1.47) $ (2.17) $ (1.02)
======== ======== =======
Shares used in per share calculation........................ 11,956 9,650 7,559
======== ======== =======
</TABLE>
THE CONSOLIDATED FINANCIAL STATEMENTS OF ACCESS BEYOND, INC. INCLUDE THE
FINANCIAL INFORMATION OF PENRIL DATACOMM NETWORKS, INC. FOR THE PERIODS PRIOR TO
NOVEMBER 18, 1996 WHEN ACCESS BEYOND, INC. WAS SPUN-OFF FROM PENRIL DATACOMM
NETWORKS, INC. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE> 116
ACCESS BEYOND, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JULY 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 578 $ 4,237
Accounts receivable, less allowance for doubtful accounts of $215 in
1997 and $554 in 1996................................................ 3,050 7,044
Inventories............................................................ 5,678 9,684
Deferred income taxes.................................................. -- 1,700
Net assets of discontinued operations.................................. -- 7,337
Other current assets................................................... 167 249
-------- --------
TOTAL CURRENT ASSETS................................................... 9,473 30,251
Property and equipment, net............................................ 3,484 2,457
Other assets........................................................... 949 1,072
-------- --------
TOTAL ASSETS........................................................... $ 13,906 $ 33,780
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings.................................................. $ -- $ 4,000
Current portion of capital lease obligations........................... 287 272
Accounts payable....................................................... 3,458 6,076
Accrued compensation and commissions................................... 630 1,347
Other accrued expenses................................................. 1,467 1,758
-------- --------
TOTAL CURRENT LIABILITIES.............................................. 5,842 13,453
Long-Term portion of capital lease obligations......................... 456 633
Other Noncurrent Liabilities........................................... 297 1,479
-------- --------
TOTAL LIABILITIES...................................................... 6,595 15,565
-------- --------
Commitments and Contingencies (See Note 7)............................. -- --
SHAREHOLDERS' EQUITY
Serial preferred stock, $.01 par value; authorized, 100,000 shares;
issued, none...................................................... -- --
Common stock, $.01 par value; authorized, 30,000,000 shares; issued
and outstanding, 12,495,291 shares in 1997 and 10,849,647 shares
in 1996........................................................... 125 109
Additional paid-in capital........................................... 46,431 39,837
Accumulated deficit.................................................... (39,206) (21,581)
Accumulated foreign currency translation adjustment.................. (39) (150)
-------- --------
TOTAL SHAREHOLDERS' EQUITY............................................. 7,311 18,215
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $ 13,906 $ 33,780
======== ========
</TABLE>
THE CONSOLIDATED FINANCIAL STATEMENTS OF ACCESS BEYOND, INC. INCLUDE THE
FINANCIAL INFORMATION OF PENRIL DATACOMM NETWORKS, INC. FOR THE PERIODS PRIOR TO
NOVEMBER 18, 1996 WHEN ACCESS BEYOND, INC. WAS SPUN-OFF FROM PENRIL DATACOMM
NETWORKS, INC. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 117
ACCESS BEYOND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES
loss from operations...................................... $(13,890) $(20,668) $(4,614)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 1,269... 3,452 4,418
Benefit from deferred taxes............................ -- -- (578)
Provision for restructuring costs...................... 238 9,718 --
Other.................................................. 20 (93) 25
(Increase) decrease in assets:
Accounts receivable.................................... 1,406 6,477 2,508
Inventories............................................ 559 (472) 1,122
Other current assets................................... 19 529 (287)
Increase (decrease) in liabilities:
Accounts payable....................................... (1,093) (2,080) 1,792
Other liabilities...................................... (793) (731) (291)
-------- -------- -------
Net cash provided by (used in) continuing operating
activities................................................ (12,265) (3,868) 4,095
CASH FLOWS FROM DISCONTINUED OPERATIONS
Proceeds from the sale of discontinued operations......... 5,411 -- --
Loss from discontinued operations......................... (3,735) (236) (3,061)
Non-cash charges and changes in working capital........... (1,809) (2,832) 285
Provision for loss on disposal of discontinued
operations............................................. 3,735 640 1,400
-------- -------- -------
Net cash provided by (used in) discontinued operations...... 3,602 (2,428) (1,376)
Net cash used in provided by (used in) operations........... (8,663) (6,296) 2,719
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for purchased technology..................... (352) (800) (1,049)
Expenditures for property, equipment and other............ (714) (747) (417)
-------- -------- -------
Net cash used in investing activities....................... (1,066) (1,547) (1,466)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit....................... -- (1,095) 1,870
Payments on long-term debt................................ (282) (5,210) (3,300)
Issuance of common stock.................................. 6,241 17,486 74
Other..................................................... 111 (93) 94
-------- -------- -------
Net cash provided by (used in) financing activities......... 6,070 11,088 (1,262)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR...... 4,237 992 1,001
-------- -------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR............ $ 578 $ 4,237 $ 992
======== ======== =======
SUPPLEMENTAL INFORMATION
Cash payments for income taxes............................ $ -- $ 20 $ 113
======== ======== =======
Cash payments for interest................................ $ 200 $ 783 $ 1,103
======== ======== =======
</TABLE>
THE CONSOLIDATED FINANCIAL STATEMENTS OF ACCESS BEYOND, INC. INCLUDE THE
FINANCIAL INFORMATION OF PENRIL DATACOMM NETWORKS, INC. FOR THE PERIODS PRIOR TO
NOVEMBER 18, 1996 WHEN ACCESS BEYOND, INC. WAS SPUN-OFF FROM PENRIL DATACOMM
NETWORKS, INC. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 118
ACCESS BEYOND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------ PAID-IN UNEARNED EARNINGS CURRENCY
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) ADJUSTMENT
---------- ------ ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AUGUST 1, 1994............ 7,442,368 $ 74 $ 21,720 $(16) $ 6,998 $(196)
Net loss........................ (7,675)
Issuance of common stock --.....
Upon exercise of stock
options.................... 33,067 1 73
Upon exercise of warrants.... 80,000 1 194
For acquisition of patent
rights....................... 50,000 1 118
Shares retired in connection
with options, warrants, and
awards....................... (62,620) (1) (194) 16
Deferred tax benefit from
exercise of options.......... -- 473
Foreign currency translation
adjustment................... -- 136
---------- ---- ------- ----- -------- ----
BALANCE JULY 31, 1995............. 7,542,815 76 22,384 -- (677) (60)
Net loss........................ (20,904)
Issuance of common stock --
Upon sale in private
placements................. 2,607,267 26 14,718
Upon exercise of stock
options.................... 687,284 7 2,735
Upon exercise of warrants.... 25,000 -- --
Shares retired in connection
with options, warrants and
awards....................... (12,719) -- --
Foreign currency translation
adjustment................... -- (90)
---------- ---- ------- ----- -------- ----
BALANCE JULY 31, 1996............. 10,849,647 109 39,837 -- (21,581) (150)
Net loss........................ -- (17,625)
Issuance of common stock --
Upon exercise of stock
options.................... 1,124,951 11 6,124
Upon sale of stock........... 16,989 -- 115
For purchase of technology from
Paradyne..................... 503,704 5 1,695
For the effect of the merger of
Penril and Bay Networks, and
the spin-off of Access
Beyond....................... -- -- (1,340)
Foreign currency translation
adjustment................... 111
---------- ---- ------- ----- -------- ----
BALANCE JULY 31, 1997............. 12,495,291 $125 $ 46,431 $ -- $ (39,206) $(39)
========== ==== ======= ===== ======== ====
</TABLE>
THE CONSOLIDATED FINANCIAL STATEMENTS OF ACCESS BEYOND, INC. INCLUDE THE
FINANCIAL INFORMATION OF PENRIL DATACOMM NETWORKS, INC. FOR THE PERIODS PRIOR TO
NOVEMBER 18, 1996 WHEN ACCESS BEYOND, INC. WAS SPUN-OFF FROM PENRIL DATACOMM
NETWORKS, INC. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 119
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
EFFECTS OF THE SPIN-OFF AND MERGER TRANSACTIONS: Access Beyond, Inc.
("Access Beyond" or "the Company") was incorporated on July 23, 1996, and filed
a Form S-1 Registration Statement with the Securities and Exchange Commission
which became effective October 17, 1996. On November 18, 1996 Penril DataComm
Networks, Inc. ("Penril") distributed a dividend to its stockholders of record,
one share of common stock of Access Beyond for each share of Penril common stock
held. Penril transferred all of the assets and liabilities of Penril's remote
access business to Access Beyond before becoming a wholly owned subsidiary of
Bay Networks, Inc.("Bay") on November 18, 1996. As the successor company to
Penril, Access Beyond retains the historical financial information of Penril
through November 18, 1996, when Penril was merged into Bay. For accounting
purposes, the disposition of the modem business, as a result of the merger
agreement with Bay, has been accounted for as a reduction of paid in capital.
On November 18, 1996 Penril transferred all of its remote access business
assets and liabilities to Access Beyond as part of its spin-off of Access
Beyond. Assets and liabilities related to the modem business remained with
Penril and Penril became a wholly-owned subsidiary of Bay as part of the Merger
Agreement with Bay. Revenues from the modems prior to the sale of the modem
business to Bay were $4.2 million in fiscal 1997. Under the terms of the Merger
Agreement with Bay, assets and liabilities related to the modem business that
were acquired by Bay included the following at the date of the closing.
<TABLE>
<CAPTION>
NOVEMBER 18,
1996
-----------------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
ASSETS:
Accounts receivable, net................................ $ 2,542
Inventory, net.......................................... 2,740
Deferred tax asset...................................... 1,700
Other assets............................................ 761
------
Total Assets.............................................. 7,743
======
LIABILITIES:
Line of credit.......................................... $ 4,000
Accounts payable........................................ 1,525
Other liabilities....................................... 887
------
Total Liabilities......................................... 6,412
------
Net assets related to the modem business.................. $ 1,331
======
</TABLE>
As a result of the merger with Bay, the Company paid performance and
severance payments to certain employees. In addition, the Company incurred
investment banking, legal and consulting fees. The total merger related expenses
were approximately $4.1 million.
BUSINESS: The company is in the business of developing and marketing
products which enable local remote or mobile users to access network resources
(remote access business).
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its subsidiaries, all of which are wholly owned.
All significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS: The Company considers cash on hand, deposits in
banks, and highly liquid investments with an original maturity of three months
or less as cash and cash equivalents.
F-7
<PAGE> 120
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying values of cash and cash
equivalents, accounts receivable, and accounts payable approximate fair value
due to the short maturities of such instruments. Capital lease obligations are
carried at amounts approximating fair values based on current rates offered to
the Company for debt with similar collateral and guarantees, if any, and
maturities.
INVENTORIES: Inventories are stated at the lower of cost (first-in,
first-out method) or market. The inventories include the cost of material and,
when applicable, labor and manufacturing overhead. During the fourth quarter of
fiscal 1997 as a result of the introduction of the new AB2400/4400 product line,
the Company reviewed its reserve for obsolescence of VCS and CSX product
inventory. Based on this review, the Company recorded a charge of $864,000. The
following table shows the detail in the inventory account for the years ending
July 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Raw Materials and component parts........................... $ 3,433 $ 5,823
Work in process............................................. 42 541
Finished goods.............................................. 2,203 3,320
------ ------
Total inventories........................................... $ 5,678 $ 9,684
====== ======
</TABLE>
PROPERTY, EQUIPMENT, AND DEPRECIATION: Additions to property and equipment
are recorded at cost. The Company provides depreciation for financial reporting
purposes using primarily the straight-line method over the estimated useful
lives of the assets which range from 3 to 10 years. Leasehold improvements are
amortized over the term of the related lease or their estimated useful lives,
whichever is shorter. The following table shows the detail in property,
equipment and depreciation for the years ending July 31:
<TABLE>
<CAPTION>
USEFUL LIVES 1997 1996
------------ -------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C> <C>
Machinery, and equipment............................ 3-5 years $ 7,385 $ 10,875
Purchased software and technology................... 3 years 6,544 5,486
Leasehold improvements.............................. 3-5 years 949 879
-------- --------
Total property and equipment, at cost............... 14,878 17,240
Less accumulated depreciation and amortization...... (11,394) (14,783)
-------- --------
Total property and equipment, net................... $ 3,484 $ 2,457
======== ========
</TABLE>
REVENUE RECOGNITION: Revenues are recognized at the time of shipment of
the product or performance of product-related services. Revenues from the
license of product technology is recorded upon delivery of the technology
specification and the fulfilment of the other material obligations.
ACCOUNTING ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS: During fiscal 1996, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of", which requires the Company to review long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. As a result of events
occurring in the fourth quarter of fiscal 1996, the Company decided to
restructure and refocus its
F-8
<PAGE> 121
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
remaining business. Due to these events, the Company determined that the Excess
of Costs over Net Assets Acquired would not be recoverable, and a charge of
$4,952,000 was taken in the fourth quarter of fiscal 1996 against the carrying
value of this asset.
INCOME TAXES: Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future.
A valuation allowance is established to reduce deferred tax assets to the amount
expected to be realized.
EARNINGS PER SHARE: Earnings per share for the three years ended July 31,
1997 are calculated based on the weighted average common shares outstanding.
SOFTWARE DEVELOPMENT COSTS: Certain acquired software development costs are
being amortized over their estimated economic life, principally five years,
commencing when each product is available for general release. Internal software
development are expensed as incurred, except those costs applicable to third
party contracts.
STOCK-BASED COMPENSATION: Effective August 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has elected to continue to account for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, pro forma net income
and earnings per share information has been presented in Note 7 as required
under SFAS 123.
RELATED PARTY TRANSACTIONS: As described in Note 5, the Company entered
into a consulting agreement with Henry Epstein, the former CEO of Penril.
In November 1996, John Howard was appointed as a member of the Board of
Directors of the Company. Mr. Howard is the brother of Ronald A. Howard,
President and CEO of the Company.
CONCENTRATION OF RISK: Material and components for the Company's products
are purchased from outside suppliers. While most components are available from
several suppliers, a few are provided from sole-source vendors. The Company
believes that in most cases alternative sources could be obtained within a
reasonable time period; however, an interruption in the supply of such
components could have a temporary adverse effect on the Company's operations.
NEW ACCOUNTING PRONOUNCEMENTS: During fiscal 1997, the Financial Accounting
Standards Board issued Statements of Financial Accounting Standards No. 128,
129, 130, and 131. These statements establish standards for computing and
presenting earnings per share, disclosing information about an entity's capital
structure, reporting and displaying comprehensive income and its components in
financial statements, and reporting information about operating segments in
annual financial statements, respectively. Each of these statements are
effective for financial statements for periods beginning after December 15,
1997. The effect of adopting these statements in fiscal 1998 is not deemed to be
material.
RECLASSIFICATIONS: Certain reclassifications have been made to prior period
consolidated financial statements to conform to the July 31, 1995 presentation.
2. RESTRUCTURING
In the fourth quarter of fiscal 1996, Penril took actions to strategically
restructure its business to improve Penril's financial performance. The
restructuring included a plan to focus Penril's business operations on the
remote access server and remote connectivity markets ("Remote Access") and away
from the data transmission markets. As a result of this plan Penril recorded a
charge of $9,718,000 in the fourth quarter of
F-9
<PAGE> 122
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
fiscal 1996 and the Company recorded a charge of $238,000 in the fourth quarter
of fiscal 1997. These charges were for the following costs.
a. The excess of costs over the fair value of net assets acquired
through the Datability, Inc. acquisition in fiscal 1993, was related to
data transmission techniques and, due to the restructuring plan, has no net
realizable value. Accordingly the remaining book value of $4,952,000 was
written off in fiscal 1996.
b. A charge of $2,339,000 was taken for the write-off of inventory and
fixed assets related to the data transmission business. In fiscal 1997 an
additional charge of $238,000 was taken for the write-off of inventory
related to the data transmission business, and substantially all inventory
related to the data transmission business was disposed of.
c. A charge of $1,012,000 was taken for contractual obligations and
settlement costs incurred for leased facilities in Carlstadt, New Jersey,
Hong Kong and Malaysia. Under the restructuring plan the Hong Kong and
Malaysia facilities were vacated at the end of fiscal 1996, and
substantially all of the leased space in the Carlstadt, New Jersey facility
was vacated. As of July 31, 1997 a provision of $300,000 remained for the
future contractual obligations and settlement costs associated with the
Carlstadt, New Jersey facility.
d. A charge of $979,000 was taken for computer software related to the
data transmission business that was capitalized in accordance with FAS86,
which had no realizable value under the restructuring plan. In fiscal 1997
the remaining book value of this computer software was written off.
e. A charge of $436,000 was taken for severance costs associated with
employees terminated in connection with the restructuring plan. All costs
associated with these terminations were paid in fiscal 1997.
3. DISCONTINUED OPERATIONS
In fiscal 1995, the Board of Directors decided to sell Technipower, Inc.
("TPI"), a subsidiary manufacturing uninterruptible power supplies and power
regulating equipment. In October 1996, the Company completed the sale of TPI
business for $1,591,000 in cash and a $2,750,000 note. As of July 31, 1997, a
balance of $980,000 remained unpaid on the note which was due July 31, 1997. The
Company reserved the unpaid balance of this note with a charge of $980,000 to
loss on disposal of discontinued operations.
In fiscal 1996, the Board of Directors decided to sell Electro-Metrics,
Inc. ("EMI"), a subsidiary manufacturing test equipment and systems for analysis
of electromagnetic interference and communications security including
applications in satellite communications. In June 1997, the Company completed
the sale of the EMI business to EMI Holding Corp. (the "Borrower"), for
$2,000,000 in cash, $1,500,000 in subordinated term notes, and $500,000 in
warrants. The subordinated term notes include a $1,000,000 note with payments of
principal and interest to be made in seven (7) quarterly installments of $50,000
each, beginning on June 30, 1997, and one final installment together with
accrued interest being due on June 30, 1999. Interest on the $1,000,000 note is
at 3% above the highest interest rate being charged to the Borrower by the
Borrower's principal bank lender ("Bank Rate"). The remaining subordinated term
note of $500,000 accrues interest at 2% above the Bank Rate, accruing from June
30, 1997 and payable in monthly installments beginning on July 1, 1999. The
principal shall be paid in one (1) installment on June 30, 2002. The warrants
are exercisable on June 30, 2002, wherein the Borrower issues to the Company
shares of preferred stock of the Borrower equal to 19.678% of the shares of the
Borrower outstanding immediately after the exercise of these warrants.
F-10
<PAGE> 123
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
In accordance with the Securities and Exchange Commissions Staff Accounting
Bulletin No. 81, "Gain Recognition on the Sale of a Business or Operating Assets
to a Highly Leveraged Entity", a provision was charged to Loss from Disposal of
Discontinued Operations for the outstanding balance of the subordinated term
notes and warrants at July 31, 1997 of $1,950,000. The Company fully expects to
collect these notes and warrants, however the repayments will be recorded as
income when received due to the highly leveraged structure of the Borrower. As a
result, the Company recorded a loss on the disposition of the EMI business of
approximately $2.8 million.
The following table sets forth the selected financial data of both
discontinued operations for the three years ended July 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revenues...................................... $ 4,743 $10,469 $ 8,960
------- ------- -------
Income (loss) from operations, net of income
taxes....................................... -- 404 (1,661)
------- ------- -------
Loss on disposal, net of income taxes......... (3,735) (640) (1,400)
------- ------- -------
Total loss from discontinued operations....... $(3,735) $ (236) $(3,061)
======= ======= =======
Depreciation and amortization................. $ 153 $ 431 $ 415
------- ------- -------
Capital expenditures.......................... $ 114 $ 275 $ 245
======= ======= =======
</TABLE>
The Company disposed of both TPI and EMI operations through the sale of the
subsidiary companies net assets. Therefore at July 31, 1997 there were no
identifiable assets or income tax benefits for either discontinued operation.
4. FINANCING
BANK FINANCING: On November 18, 1996, pursuant to the Spin-off and Merger
transactions, Bay assumed the $4,000,000 outstanding line of credit which the
Company had prior to the transaction. As of July 31, 1997, the Company had no
line of credit with its principal bank.
5. LONG-TERM OBLIGATIONS
The accompanying Consolidated Statements of Operations include net rental
expense for the fiscal years 1997, 1996, and 1995 of $1,103,000, $1,673,000 and
$1,941,000 respectively. At July 31, 1997, the aggregate future minimum rental
commitments under all noncancelable operating lease agreements are as follows:
<TABLE>
<CAPTION>
GROSS RENTAL NET
RENTAL FROM RENTAL
FOR THE YEARS ENDING JULY 31, COMMITMENTS SUBLEASES COMMITMENTS
---------------------------------- ----------- --------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
1998.............................. $ 1,841 $ 1,011 $ 830
1999.............................. 1,678 87 1,591
2000.............................. 855 -- 855
2001.............................. 671 -- 671
2002.............................. 106 -- 106
------ ------ ------
$ 5,151 $ 1,098 $ 4,053
====== ====== ======
</TABLE>
F-11
<PAGE> 124
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
As described more fully in Note 7, the Company entered into an agreement
with Hibbing Electronics Corporation ("Hibbing") in March 1997 which allows
Hibbing to use certain of the Company's leased manufacturing equipment. Capital
lease obligations at July 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Capital leases.......................................... $743 $905
less current portion.................................. (287) (272)
----- -----
Long-term capital lease obligations..................... $456 $633
===== =====
</TABLE>
On November 18, 1996, the Company entered into a noncancelable four (4)
year consulting agreement with Henry Epstein/d.b.a. Ideonics, former CEO and
chairman of the board of Penril, which has a minimum commitment of $137,500 per
year.
6. INCOME TAXES
In November 1996, as a result of the merger of Penril DataComm Networks,
Inc. with Bay Networks, Inc., all federal net operating losses and general
business and other tax credits of Penril DataComm Networks, Inc., of
approximately $15.2 million and $1.2 respectively remained with Penril after the
Spin-off of the Company.
The following table sets forth the differences between the tax provision
(benefit) from continuing operations calculated at the statutory federal income
tax rate and the actual tax benefit for the fiscal years ended July 31, 1996 and
1995 for Penril:
<TABLE>
<CAPTION>
AS OF JULY 31,
-------------------
1996 1995
------- -------
(AMOUNTS IN
THOUSANDS OF
DOLLARS)
<S> <C> <C>
Tax provision at federal statutory rate.................. $(7,027) $(1,724)
Amortization of non-deductible intangibles............... 1,931 283
State & foreign taxes, net of federal benefit............ (1,137) (218)
Change in valuation allowance............................ 6,093 1,134
Other.................................................... 140 (53)
------- -------
Income tax benefit....................................... $ -- $ (578)
======= =======
</TABLE>
F-12
<PAGE> 125
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
The primary components of the temporary differences which give rise to
Penril's net deferred tax asset at July 31, 1996 are shown below:
<TABLE>
<CAPTION>
AS OF JULY 31,
1996
--------------
<S> <C>
Deferred tax assets:
Reserves and other contingencies.............................. $ 1,500
Depreciation and amortization................................. 65
Restructuring Reserve......................................... 1,859
Net operating loss............................................ 6,780
General Business and other tax credits........................ 1,248
Loss on discontinued operations............................... 546
Valuation reserve............................................. (9,837)
-------
Total deferred tax assets..................................... 2,161
Deferred tax liabilities
Amortization of technologies.................................. (461)
-------
Net deferred tax assets......................................... $ 1,700
=======
</TABLE>
Access Beyond, Inc., will file its first tax return for the period from
November 18, 1996 until the end of the fiscal year ended July 31, 1997. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying value of assets and liabilities for financial reporting purposes and
the amounts reported for income tax purposes. Significant components of the
Company's deferred income tax liabilities and assets are shown in the following
table.
<TABLE>
<CAPTION>
JULY 31,
1997
-------------
(IN THOUSANDS
OF DOLLARS)
<S> <C>
Deferred Tax Assets:
Reserves and other contingencies.............................. $ 721
Note receivable reserves...................................... 1,137
Net operating losses.......................................... 5,247
Excess tax depreciation over book............................. 65
-------
Net deferred tax assets......................................... 7,170
Valuation Allowance............................................. (7,170)
-------
Net Deferred Tax Assets Reported................................ $ --
=======
</TABLE>
No income tax provision or benefit was recorded in fiscal 1997.
The reconciliation of the effective income tax rates to the Federal
statutory rate is as follows:
<TABLE>
<CAPTION>
JULY 31,
1997
--------
<S> <C>
Statutory federal rate.............................................. -34.0%
State income taxes, net of federal income tax benefit............... -1.6%
Transaction Merger.................................................. -13.7%
Miscellaneous....................................................... 2.5%
Change in valuation allowance....................................... 46.8%
-----
Effective tax rates................................................. 0.0%
=====
</TABLE>
F-13
<PAGE> 126
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
At July 31, 1997 the Company had a net operating loss carryforward
(including EMI and TPI) of approximately $13.8 million which expires in 2012.
The Company has made no income tax payments for the year ended July 31, 1997.
7. COMMITMENTS AND CONTINGENCIES
PENDING TRANSACTION: On July 29, 1997, the Company entered into an
Agreement and Plan of Reorganization (the "Merger Agreement") with Hayes
Microcomputer Products, Inc. Under the terms of the Merger Agreement with Hayes
Microcomputer Products (the "Hayes Merger"), Hayes will become a wholly owned
subsidiary of the Company and the shareholders of Hayes at the time the Merger
becomes effective will own approximately 79% of the outstanding equity
securities of the Company. The Company will amend its certificate of
incorporation to (i) change its name to Hayes Communications Inc., (ii) increase
the number of authorized shares of capital stock, and (iii) create Series A
Preferred Stock and the Board of Directors of the Company will be increased to
seven members, five of whom will be designated by the Hayes shareholders. The
transaction is subject to regulatory and the Company's stockholders' approval
and certain conditions to closing as set forth in the Hayes Agreement. At the
time of the consummation of the merger, the Company is responsible for payment
of the investment banking fees of approximately $1.0 million and for change of a
control payment of $437,500 to Ronald Howard (president of the Company).
POSSIBLE LOSS OF HAWK TECHNOLOGY: On May 2, 1997, the Company and Paradyne
Corporation, A Delaware corporation ("Paradyne"), entered into the 2290 Remote
Access Gateway ("Hawk") Technology Transfer Agreement (the "Technology
Agreement") pursuant to which Paradyne (i) transferred to the Company technology
relating to certain open remote dial access cards (in the form of a
comprehensive set of specifications, technical information, hardware and
software)(the "Hawk Technology"), (ii) sold to the Company certain inventory,
tools and equipment used in the application of the Hawk Technology to develop
and manufacture products, ("Hawk Products") which include the Hawk Technology,
(iii) licensed to the Company certain intellectual property in connection with
the Hawk Technology, and (iv) agreed to provide the Company with technical,
engineering, manufacturing and marketing support, for an aggregate purchase
price of 503,704 shares of the Common Stock (the "Paradyne Shares"), and
$425,000 in cash. The shares of Common Stock were valued at the fair value at
date of issuance, approximately $1.7 million. The Company and Paradyne also
entered into a Stock Purchase Agreement, dated as of May 2, 1997 (the "Purchase
Agreement"), pursuant to which the Company sold and issued the Paradyne Shares
to Paradyne. Pursuant to the Purchase Agreement, the Company is required to
register the Paradyne Shares for Paradyne under the Securities Act within one
hundred twenty (120) days after the closing, with the right to extend such date
by 60 days, under certain circumstances.
Paradyne's transfer of Hawk Technology, license of Intellectual Property
and, to a certain extent, the inventory of Hawk Product are subject to an
"Unwind" provision in the Technology Agreement. Paradyne may elect to rescind
the Technology Agreement if the Company (a) fails to timely register the
Paradyne Shares or (b) fails to use its best efforts to maintain the
effectiveness of the registration statement, and does not cure such failure
within 30 days after Paradyne gives written notice. Such election would result
in the termination of the license of the Intellectual Property, the transfer of
the Hawk Technology and unsold Hawk Products to Paradyne, and the return to the
Company of the value of the consideration paid, subject to certain adjustments.
HIBBING AGREEMENT: In March 1997, the Company entered into an agreement
with Hibbing Electronics Corporation in which Hibbing manufactures and sells
printed circuit card products to the Company. Under the Agreement, Hibbing has
the right to use the lower level of the Company's Gaithersburg, Maryland
facility as well as certain equipment needed for the manufacturing process.
Hibbing pays the Company 50% of the monthly rent and utilities associated with
the facility and pays the current installment amounts on the
F-14
<PAGE> 127
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
manufacturing equipment that Hibbing uses and that the Company leases. This
agreement expires August 31, 1998 at which time Hibbing shall have the option to
purchase all of the equipment covered under the agreement and the Company will
assign all right, title, and interest in the covered leases and equipment to
Hibbing in exchange for Hibbing's agreement to pay and perform the Company's
obligations under those leases.
LEGAL PROCEEDINGS: The Company initiated a lawsuit in December 1994
against Network Systems Corporation ("NSC") for breach of contract, fraudulent
inducement and defamation. The suit is seeking specific performance,
compensatory damages of $2,000,000 and punitive damages of $5,000,000. The
litigation arises out of a contract in which the Company agreed to develop
certain computer hardware and software to NSC's specifications. NSC subsequently
brought a counterclaim alleging negligent misrepresentation, fraud and breach of
contract by the Company. NSC is seeking recision of the contract, restitution of
monies paid by NSC to the Company, compensatory damages of $5,000,000 and
punitive damages in an unspecified amount. As of July 31, 1997, the Company was
in discussions with NSC.
In 1993 the Company initiated a lawsuit against Standard Microsystems Corp.
("SMC") for breach of contract including failure to transfer technology, unfair
competition and false representations. In September 1996, the Company and SMC
agreed to drop the charges of false representation and settle the contractual
dispute. In October 1996, the Company received from SMC, in settlement of the
litigation, $3,500,000 cash, net of legal payments.
Digital Equipment Corporation ("DEC") has claimed, through a series of
written communications, that the Company has violated DEC patents related to DEC
LAT technology. In August 1997, the Company and DEC entered into an license
agreement including a specific release whereby the Company acquired a non-
exclusive license to develop, manufacture, and market specified products which
are compatible with Digital's LAT technology.
The Company is involved in other routine litigation.
Management believes none of the litigation will have a material adverse
effect on the Company's financial position or results of operations.
8. SHAREHOLDERS' EQUITY
COMMON STOCK: In the first quarter of fiscal 1997, as part of the Spin-off
and Merger with Bay described in Note 1, Penril issued 1,124,951 shares of its
common stock in connection with the accelerated vesting of Penril's outstanding
employee stock options and non-employee stock options. Penril received
approximately $6,135,000 from the exercise of those options. Also prior to the
Spin-off and Merger with Bay, Penril issued 16,989 shares of its common stock to
Ronald Howard for $115,000. Subsequently, Penril issued 11,991,587 shares of the
Company's common stock in a stock dividend which is described more fully in Note
1, and completed the Spin-off and Merger with Bay. The Company's common stock
began trading on
F-15
<PAGE> 128
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
the NASDAQ on November 18, 1996. A summary of stock option transactions for
Penril during the three years ended July 31, 1997 is as follows:
<TABLE>
<CAPTION>
1995 INCENTIVE
1986 INCENTIVE PLAN DIRECTORS' PLAN PLAN
------------------- ------------------ -----------------
AVERAGE AVERAGE AVERAGE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
OF PER OF PER OF PER
SHARES SHARE SHARES SHARE SHARES SHARE
--------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding August 1, 1994........ 1,037,419 $4.15 204,000 $3.64 -- $
Granted......................... 348,000 $3.12 18,000 $3.25 -- --
Exercised....................... (33,067) $2.23 -- -- -- --
Canceled........................ (233,617) $4.15 -- -- -- --
Outstanding July 31, 1995......... 1,118,735 $3.89 222,000 $3.61 -- --
Granted......................... 494,000 $7.34 18,000 $5.69 70,000 $6.77
Exercised....................... (539,284) $4.02 (148,000) $3.87 -- --
Canceled........................ (110,500) $4.32 -- -- -- --
Outstanding July 31, 1996......... 962,951 $5.54 92,000 $3.59 70,000 $6.77
Exercised....................... (962,951) $5.54 (92,000) $3.59 (70,000) $6.77
Outstanding July 31, 1997......... -- -- -- -- -- --
</TABLE>
EMPLOYEE STOCK OPTIONS AND STOCK AWARDS: On November 18, 1996, the Company
adopted the 1996 Long Term Incentive Plan (the "1996 Plan"). Under the 1996
Plan, which will terminate on November 18, 2006, awards may be granted to key
employees of the Company and its subsidiaries in one or more of the following
forms: (i) Incentive Stock Options; (ii) Non-qualified Stock Options; and (iii)
a combination of the foregoing. The option price per share of any option granted
under the 1996 Plan is the fair market value of a share of Common Stock on the
date the option is granted. No option will be exercisable more than ten years
from the date of grant and vest over three years. An aggregate of 2,000,000
shares of the Company's common stock were reserved for issuance at July 31, 1997
NON-EMPLOYEE DIRECTOR STOCK OPTIONS: On November 18, 1996, the Company
adopted the 1996 Non-Employee Directors' Stock Option Plan ("Directors Plan").
Under the Directors Plan an option to purchase 25,000 shares is automatically
granted to each non-employee director on the first day of his initial term. In
addition, options to purchase 5,000 shares are automatically granted to each
non-employee director on the fifth business day after the Annual Report on Form
10-K is filed with the Securities and Exchange Commission. The option price per
share of any option granted under the Directors Plan is the fair market value of
a share of Common Stock on the date the option is granted. No option will be
exercisable more than ten years from the date of grant and vest over three
years. An aggregate of 250,000 shares were reserved for issuance under the
Directors Plan at July 31, 1997.
A summary of the stock option transactions for the Company for the year
ended July 31, 1997 is as follows (amounts in thousands):
<TABLE>
<CAPTION>
1996 LONG TERM
INCENTIVE PLAN DIRECTORS' PLAN
----------------------- ---------------------
NUMBER AVERAGE NUMBER AVERAGE
OF PRICE OF PRICE
SHARES PER SHARE SHARES PER SHARE
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
Granted.................................. 1,469,000 $6.08 100,000 $7.74
Canceled................................. (100,000) $6.63 -- --
Outstanding at July 31, 1997............. 1,369,000 $6.04 100,000 $7.74
</TABLE>
F-16
<PAGE> 129
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
CHANGE OF CONTROL PROVISION: In the case of a "change in control" of the
Company, an option holder will generally have the right, commencing at least
five days prior to the "change in control" and subject to any other limitation
on the exercise of the option in effect on the date of exercise, to immediately
exercise any options in full to the extent not previously exercised, without
regard to any vesting limitations.
SFAS NO. 123: For the purposes of following pro forma disclosures required
by SFAS No. 123, the estimated fair value of the options is expensed in the year
that the options are granted using the Black-Scholes option valuation model. The
Black-Scholes model was developed for use in estimating the fair value of traded
options that have no vesting restriction and are fully transferable. In
addition, option valuation models, such as Black-Scholes model, require the
input of highly subjective assumptions including the expected stock price
volatility which are subject to change from time to time. For this reason, and
because SFAS No. 123 fair value-based method of accounting has not been applied
to options granted prior to August 1, 1995, the resulting pro forma compensation
costs are not necessarily indicative of costs to be expected in future years.
In preparing the pro forma information, the following assumptions were
made: risk-free weighted average interest rate was 5.5%; volatility factors of
the expected market price of the Company's common stock of 61.12% in fiscal 1997
and 86.2% for Penril's common stock in fiscal 1996, and option lives of less
than 12 months for both years. The following pro forma information has been
prepared as if the Company had accounted for its employee stock options using
the fair value-based method of accounting established by SFAS No. 123.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY
31,
-----------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE)
<S> <C> <C>
Net loss from continuing operations:
As reported........................................ $(13,890) $(20,668)
Pro forma.......................................... $(16,138) $(21,954)
Loss per share from continuing operations:
As reported........................................ $ (1.16) $ (2.14)
Pro forma.......................................... $ (1.35) $ (2.28)
</TABLE>
SERIAL PREFERRED STOCK: The Company's Serial Preferred Stock may be issued
in one or more series. The shares of any series may be convertible into Common
Stock, may have priority over Common Stock in the payment of dividends and in
the distribution of assets in the event of liquidation or dissolution of the
Company, and may have preferential or other voting rights, all as determined by
the Board of Directors at the time it approves the series.
WARRANTS: In March, 1987, Henry D. Epstein joined Penril as President and
Chief Executive Officer and was issued Class A warrants to purchase 400,000
shares of Penril's Common Stock at $2.23 per share and Class B warrants to
purchase 80,000 shares of Penril's Common Stock at $2.34 per share. Mr. Epstein
exercised 220,000 Class A warrants in January 1993, 80,000 Class A warrants in
January 1994 and 100,000 Class A warrants in February 1994. In February 1995,
Mr. Epstein exercised all 80,000 Class B warrants. All exercises were
accomplished by delivery of shares previously held.
In October 1992, Penril issued a warrant to purchase 166,000 shares of
common stock at $4.50 per share, the fair market value on the date of issuance,
to Coast Federal Savings Bank ("Coast") in settlement of a law suit brought
against the Company. In addition, Penril issued Class E warrants to purchase
25,000 shares of common stock at $3.625 per share, the fair market value on the
date of issuance, to Mr. Henry Epstein in consideration for Mr. Epstein, in his
capacity as a stockholder of Penril, assisting Penril in settling the
F-17
<PAGE> 130
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
litigation with Coast. The Coast warrant expired June 7, 1995. The Class E
warrants were exercised subsequent to July 31, 1995.
9. RETIREMENT AND SAVINGS PLAN
On November 18, 1996, the Company adopted the Penril Retirement and Savings
Plan as part of the Spin-off and Merger transaction with Bay described in Note
1. The Company's Retirement and Savings Plan ("401(k) Plan") is a defined
contribution plan including provisions of section 401(k) of the Internal Revenue
Code. Employees of the Company who have completed 90 days of service
("Participants") are eligible to participate in the 401(k) Plan. The 401(k) Plan
permits, but does not require, the Company to match employee contributions. In
addition, the Company may make discretionary contributions to the 401(k) Plan
which will be allocated to each Participant based on the ratio of such
Participant's eligible compensation to the total of all Participants' eligible
compensation. Amounts contributed by the Company vest as to 30% after 1 year of
eligible service, 60% after 2 years of eligible service and 100% after 3 years
of eligible service. Participants may elect to direct the investment of their
contributions in accordance with the provisions of the 401(k) Plan. The Company
made matching contributions of $46,000 in fiscal 1997 and Penril made matching
contributions of $61,000 and $45,000 during fiscal 1996 and 1995, respectively.
There were no additional Company contributions in any year. The Company provides
no post-employment or post-retirement benefits.
10. GEOGRAPHIC AREA INFORMATION
The Company's foreign operations for fiscal 1997 consisted principally of
sales and marketing activities through its Access Beyond, Ltd subsidiary located
in the United Kingdom. Certain information, including the effect of intercompany
transactions, relating to the Company's operations on a geographic basis for the
year
F-18
<PAGE> 131
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
ending July 31, 1997, and Penril's operations on a geographical basis for the
years ending July 31, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
REVENUES
U.S. Revenue
Domestic.................................................. $ 10,724 $ 19,350 $26,190
Exports:
Europe.................................................... 1,993 8,808 9,326
Pacific Rim............................................... 1,465 3,868 6,402
Central and South America................................. 973 2,393 3,487
Other International....................................... 1,191 2,235 4,403
-------- -------- -------
Total Exports.......................................... 5,622 17,304 23,618
-------- -------- -------
Total U.S. Revenue.......................................... 16,346 36,654 49,808
======== ======== =======
Revenue from foreign subsidiaries........................... 3,537 7,392 6,839
Adjustments and eliminations................................ (1,883) (4,611) (4,036)
-------- -------- -------
Total Revenues......................................... $ 18,000 $ 39,435 $52,611
======== ======== =======
Income (loss) from continuing operations before taxes
U.S......................................................... $(13,726) $(20,267) $(5,143)
Foreign..................................................... (457) (531) 688
Eliminations................................................ 293 130 (737)
-------- -------- -------
Total loss from continuing operations.................. $(13,890) $(20,668) $(5,192)
======== ======== =======
Identifiable Assets
U.S......................................................... $ 12,785 $ 31,325 $40,946
Foreign subsidiaries........................................ 1,121 2,455 3,441
-------- -------- -------
Total Identifiable Assets.............................. $ 13,906 $ 33,780 $44,387
======== ======== =======
</TABLE>
11. SUBSEQUENT EVENTS
On September 15, 1997, the Company received a commitment from a third party
lending institution approving a working capital facility of $3,000,000 with
borrowing based on qualified accounts receivable. Interest will be one half
percentage point ( 1/2%) above the Reference Rate publicly announced by Norwest
Bank. A fee of 1% of the total line and term loan commitment will be due and
payable at closing and at each annual anniversary date thereafter. The facility
will be for a two year period. In the event of the Hayes Merger, the Company may
prepay the line of credit by providing the lender with sixty days written
notice, and payment of the service charge (a monthly charge equal to the greater
of $2,000 or 1/3% of the average daily outstanding balance on all loans) times
the remaining months of the two year term. In all other cases the prepayment
penalty will be equal to 3% of the total line commitment in the first year and
2% of the line commitment in all subsequent years thereafter.
F-19
<PAGE> 132
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hayes Microcomputer Products, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Hayes
Microcomputer Products, Inc. and subsidiaries as of December 31, 1995 and 1996
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended September 30, 1994 and 1995, the
three months ended December 31, 1995, and the year ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hayes
Microcomputer Products, Inc. and subsidiaries as of December 31, 1995 and 1996
and the results of their operations and their cash flows for the years ended
September 30, 1994 and 1995, the three months ended December 31, 1995, and the
year ended December 31, 1996 in conformity with generally accepted accounting
principles.
Atlanta, Georgia
April 30, 1997, except for
Note 18, as to which the date
is July 29, 1997.
F-20
<PAGE> 133
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- ------- --------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 2,435 $ 5,687 $ 2,782
Restricted cash............................................ 3,501 594 519
Accounts receivable, less allowance for doubtful accounts
and product returns of $5,424 in 1995, $8,115 in 1996
and $5,916 in 1997...................................... 27,489 16,060 38,371
Receivables from related parties........................... 6,828 3,883
Inventories................................................ 38,304 25,422 34,891
Refundable income taxes.................................... 1,344 16
Prepaid expenses and other current assets.................. 2,187 4,437 4,601
------- ------- --------
Total current assets............................... 75,260 59,044 85,047
Property and equipment, net.................................. 6,207 7,387 9,185
Computer software costs, net................................. 813 307
Land held for sale........................................... 6,139 328
Intangibles and other long-term assets....................... 3,277 2,149 6,689
------- ------- --------
Total assets....................................... $91,696 $69,215 $100,921
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current debt............................................... $11,134 $13,973 $ 31,501
Accounts payable........................................... 4,307 10,414 28,043
Amounts due to related parties............................. 6,918 8,265
Accrued liabilities........................................ 34,549 23,221 22,083
Income taxes payable....................................... 864 926
------- ------- --------
Total current liabilities.......................... 49,990 55,390 90,818
Long-term debt, less current................................. 6,881 5,491
Liabilities subject to compromise............................ 44,581
Other long-term liabilities.................................. 137 1,203 1,577
------- ------- --------
Total liabilities.................................. 94,708 63,474 97,886
Commitments and contingencies
Redeemable preferred stock, Series B, no par value,
authorized 263,113 shares; issued and outstanding 263,113
at June 30, 1997........................................... 5,455
Stockholders' equity (deficit):
Common stock, $.01 par value; authorized 100,000,000
shares; issued and outstanding 17,328,479 shares at
December 31, 1995 and 4,991,750 shares at December 31,
1996 and June 30, 1997.................................. 173 50 50
Preferred stock, Series A, no par value, authorized
10,000,000 shares; issued and outstanding 4,900,000
shares at December 31, 1996 and June 30, 1997........... 35,000 35,000
Paid-in capital............................................ 496
Accumulated deficit........................................ (4,299) (30,312) (38,147)
Foreign currency translation adjustment.................... 308 1,003 677
Unrealized gain on marketable securities................... 310
------- ------- --------
Total stockholders' equity (deficit).................... (3,012) 5,741 (2,420)
------- ------- --------
Total liabilities and stockholders' equity......... $91,696 $69,215 $100,921
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE> 134
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1995 1996 1996 1997
------------- ------------- ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Sales......................... $ 246,277 $ 269,155 $ 70,111 $257,452 $ 145,585 $ 94,897
Cost of sales..................... 195,188 204,787 51,765 195,918 104,809 70,965
-------- -------- -------- -------- -------- --------
Gross profit................. 51,089 64,368 18,346 61,534 40,776 23,932
-------- -------- -------- -------- -------- --------
Operating expenses:
Sales and marketing............. 41,278 33,364 8,867 42,757 21,317 17,444
General and administrative...... 23,908 22,223 5,100 18,970 9,983 8,930
Research and development........ 16,153 10,713 2,281 9,640 4,549 5,981
Amortization and write-off of
intangibles.................. 6,463 5,907
Restructuring charges........... 3,600
-------- -------- -------- -------- -------- --------
Total operating expenses..... 87,802 72,207 16,248 74,967 35,849 32,355
-------- -------- -------- -------- -------- --------
Operating (loss) income........... (36,713) (7,839) 2,098 (13,433) 4,927 (8,423)
Interest expense, net............. (1,928) (6,605) (1,807) (5,056) (2,994) (2,375)
Gain on sale of investment........ 666 1,315
Gain on sale of land.............. 8,153 8,153
Other income (expense), net....... 4,893 4,155 (24) 2,279 1,406 1,710
-------- -------- -------- -------- -------- --------
(Loss) income before unusual
gain and income tax expense
(benefit).................. (33,748) (10,289) 267 (7,391) 11,492 (7,773)
Unusual gain, patent infringement
settlement...................... 3,993
Reorganization expense............ 5,026 4,301 5,378 5,378
-------- -------- -------- -------- -------- --------
(Loss) income before income
tax expense (benefit)...... (29,755) (15,315) (4,034) (12,769) 6,114 (7,773)
Income tax expense (benefit)...... (1,689) (932) 603 385 887 62
-------- -------- -------- -------- -------- --------
Net (loss) income............ $ (28,066) $ (14,383) $ (4,637) $(13,154) $ 5,227 $ (7,835)
-------- -------- -------- -------- -------- --------
Net (loss) income per share....... $ (4.98) $ (2.56) $ (0.82) $ (2.52) $ 0.70 $ (1.57)
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE> 135
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN UNREALIZED TOTAL
COMMON STOCK PREFERRED STOCK ACCUMULATED CURRENCY GAIN ON STOCKHOLDERS'
----------------- ---------------- PAID-IN EARNINGS TRANSLATION MARKETABLE EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT SECURITIES (DEFICIT)
------- -------- ------- ------- -------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance September 30,
1993.................. 17,418 $ 174 $ 998 $ 42,787 $ 166 $ 44,125
Stock repurchased from
profit sharing...... (90) (1) (502) (503)
Net loss.............. (28,066) (28,066)
Foreign currency
translation......... 340 340
------- ---- ----- --------- -----
Balance September 30,
1994.................. 17,328 $ 173 496 14,721 506 15,896
Net loss.............. (14,383) (14,383)
Foreign currency
translation......... (96) (96)
Unrealized gain on
securities held for
sale................ $ 266 266
------- ---- ----- --------- ----- --------
Balance September 30,
1995.................. 17,328 173 496 338 410 266 1,683
Net loss.............. (4,637) (4,637)
Foreign currency
translation......... (102) (102)
Unrealized gain on
securities held for
sale................ 44 44
------- ---- ----- --------- ----- --------
Balance December 30,
1995.................. 17,328 173 496 (4,299) 308 310 (3,012)
Net loss.............. (13,154) (13,154)
Stock repurchased and
retired............. (1,737) (17) (602) (12,859) (13,478)
Preferred stock
issued.............. 4,900 $35,000 35,000
Reverse split of
common stock........ (10,599) (106) 106
Foreign currency
translation......... 695 695
Unrealized gain on
securities held for
sale................ (310) (310)
------- ---- ----- -------- ----- --------- ----- --------
Balance December 31,
1996.................. 4,992 50 4,900 35,000 (30,312) 1,003 5,741
Net loss
(unaudited)......... (7,835) (7,835)
Foreign currency
translation
(unaudited)......... (326) (326)
------- ---- ----- -------- ----- --------- ----- --------
Balance June 30, 1997
(unaudited)........... 4,992 $ 50 4,900 $35,000 $ $ (38,147) $ 677 $ $ (2,420)
======= ==== ===== ======== ===== ========= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE> 136
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------- ------------- ------------ ------------ SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income..................... $ (28,066) $ (14,383) $ (4,637) $(13,154) $ 5,227 $ (7,835)
-------- -------- -------- -------- -------- --------
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation and amortization....... 5,795 5,989 1,301 4,799 1,769 3,198
Amortization and write-off of
intangibles....................... 6,463 5,543
Provision for doubtful accounts
receivable........................ (140) 2,390 (20) 345 173 (24)
Provision for inventory
write-downs....................... 3,832 12,727 575 5,440 2,217 2,002
Deferred income taxes............... 3,034
Gain on sale of investment.......... (666) (1,315)
Gain on sale of land................ (8,153) (8,153)
Changes in assets and liabilities,
net of effects of acquisition:
Accounts receivable............... (2,114) (11,513) 6,079 4,256 (2,164) (19,342)
Inventories....................... (18,448) 3,541 (161) 7,442 (4,593) (11,471)
Refundable income taxes........... (3,741) 3,011 1,328 1,328 16
Prepaid expenses and other current
assets.......................... (415) 1,043 (14) (1,338) (1,377) (105)
Accounts payable.................. 25,448 (47,850) 1,057 6,107 6,211 17,629
Amounts due to related parties.... 6,496 2,596 1,347
Accrued liabilities............... 1,373 8,441 7,605 (10,464) (10,875) (1,138)
Income taxes payable.............. 62
Liabilities subject to
compromise...................... 33,275 3,147 (44,581) (44,581)
Other long-term liabilities....... (753) (701) 3 1,066 1,429 374
-------- -------- -------- -------- -------- --------
Total adjustments............... 20,334 15,896 19,572 (27,923) (56,020) (8,767)
-------- -------- -------- -------- -------- --------
Net cash (used in) provided by
operating activities.......... (7,732) 1,513 14,935 (41,077) (50,793) (16,602)
-------- -------- -------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures.................. (4,915) (1,805) (453) (5,028) (1,113) (1,916)
Proceeds from sale of land............ 14,317 14,317
Payment for acquisition of Cardinal,
net of cash acquired of $3,057...... (38)
Proceeds from sale of investment...... 798 1,431
Proceeds from sale of property and
equipment........................... 759 73 782 85
Changes in other long-term assets..... (3,167) 2,636 189 333 561 699
Changes in escrowed and restricted
funds............................... (3,036) (465) 2,907 2,078 75
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities.......... (8,082) (1,446) (656) 14,109 15,928 251
-------- -------- -------- -------- -------- --------
Cash flows from financing activities:
Issuance of preferred stock........... 35,000 35,000 5,455
Payments on debt...................... (7,624) (28,685) (16,318) (17,915) (15,655) (60,271)
Proceeds from debt.................... 26,256 26,266 22,057 21,637 65,263
Issuance of convertible notes......... 6,000 6,000 4,000
Repurchase of stock................... (504) (13,478) (10,999)
Payment of debt issuance costs........ (618) (625) (2,139) (1,614) (675)
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities.......... 18,128 (3,037) (16,943) 29,525 34,369 13,772
-------- -------- -------- -------- -------- --------
Effect of exchange rate changes on
cash.................................. 340 (96) (102) 695 349 (326)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents........................... 2,654 (3,066) (2,766) 3,252 (147) (2,905)
Cash and cash equivalents at beginning
of period............................. 5,613 8,267 5,201 2,435 2,435 5,687
-------- -------- -------- -------- -------- --------
Cash and cash equivalents at end of
period................................ $ 8,267 $ 5,201 $ 2,435 $ 5,687 $ 2,288 $ 2,782
-------- -------- -------- -------- -------- --------
Supplemental information:
Interest paid......................... $ 896 $ 3,221 $ 1,203 $ 11,811 $ 8,084 $ 1,286
Income taxes paid..................... 3 15 7 658 233 62
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE> 137
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1996 IS UNAUDITED)
(IN THOUSANDS)
1. NATURE OF BUSINESS AND PLAN OF REORGANIZATION
Hayes Microcomputer Products, Inc. ("Hayes") along with its wholly owned
subsidiaries (collectively, the "Company"), is engaged in the development,
production and marketing of telecommunications equipment and software and sells
primarily to personal computer and peripheral distributors and resellers.
Reorganization
On November 15, 1994, Hayes filed a petition for relief under Chapter 11 of
the United States Bankruptcy Code due to its inability to pay its debts on a
current basis. Under Chapter 11, certain claims against the debtor in existence
prior to the filing of the petition for relief under the federal bankruptcy laws
were stayed while the Debtor continued business as a debtor-in-possession
("DIP"). These claims were reflected in the consolidated December 31, 1995
balance sheet as liabilities subject to compromise.
Hayes filed amended and restated plans of reorganization, the most recent
dated February 9, 1996 (the "Plan"). The Plan was confirmed by the U.S.
Bankruptcy Court on March 8, 1996 and became effective on April 16, 1996. From
November 1994 through April 1996, the Company operated as the DIP. The Plan
provided for the payment in full of all prepetition creditors on the effective
date, plus interest on such creditors' claims, except where such creditors have
agreed to accept payments over a period of time. Funding of the plan was
provided through three major sources. First, pursuant to an agreement and plan
of merger dated April 12, 1996 (the "Agreement") and entered into by and between
Rinzai Limited ("ACMA"), Kaifa Technology (H.K.) Limited, Rolling Profit
Holdings, Ltd., Lao Hotel (H.K.), Limited, Saliendra Pte Ltd., and S.P. Quek
Investments Pte. Ltd. (collectively, the "Investors"), certain subsidiaries were
created by the investors which collectively contributed $35.0 million and merged
with Hayes. The Investors received preferred stock representing a 49 percent
voting interest in the Company. Second, the Company entered into an agreement
with The CIT Group/Credit Finance, Inc. ("CIT") to borrow up to a total of $64.5
million through three separate debt instruments collateralized by the Company's
intellectual property, certain equipment, and accounts receivable and inventory
balances. Third, pursuant to the Plan, the Company sold certain parcels of real
property classified as land held for sale on the accompanying consolidated
balance sheets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Hayes
Microcomputer Products Inc. and its wholly owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
The Company's investments in 20 to 50 percent owned companies in which it has
the ability to exercise significant influence over operating and financial
policies are accounted for on the equity method. Accordingly, the Company's
share of the earnings of these companies and any realized gains and losses are
included in the consolidated statements of operations. Investments in other
companies are carried at cost. The cost of securities sold is based on the
specific identification method.
Effective October 1, 1995, the Company changed its year end from September
30 to December 31. Certain reclassifications have been made to prior period
financial statements in order to conform to the 1996 presentation.
Interim Financial Statements
The interim financial data as of and for the six months ended June 30, 1996
and 1997 is unaudited; however, in the opinion of the Company's management, the
interim data includes all adjustments, consisting
F-25
<PAGE> 138
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
only of normal recurring adjustments necessary for a fair statement of results
for the interim period. The interim period results of operations are not
necessarily indicative of results for the entire year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these
estimates.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Restricted cash at December 31, 1996 and at June 30, 1997 is based on a
Bankruptcy Court mandate to escrow funds. Restricted cash at December 31, 1995
is based on the Company's previous debt facility requirements.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and include labor and related manufacturing overhead. Market with respect to raw
materials is replacement cost and for work in process and finished goods is net
realizable value. Inventories are presented net of the reserve for obsolescence.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated for financial reporting purposes using
the straight-line method based on the estimated useful life of the assets (three
to five years). Leasehold improvements are depreciated over the shorter of the
lease term or useful life.
Maintenance and repairs are charged to expense as incurred. Upon sale,
retirement or other disposition of these assets, the cost and the related
accumulated depreciation are removed from the respective accounts and any gain
or loss on the disposition is included in the consolidated statements of
operations
Computer Software Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," the Company capitalizes costs incurred for the development of
computer software to be sold. Costs are capitalized upon the establishment of
technical feasibility of the product. Capitalized costs are being amortized
based on current and future projected revenues for each product with an annual
minimum equal to the straight-line amortization over the five year estimated
economic useful life of the product.
Intangibles and Other Long-Term Assets
The Company evaluates the recoverability of all long-lived assets including
related intangible assets and goodwill based upon a comparison of discounted
estimated future cash flows from the related operations with the then
corresponding carrying values of those assets. Realizability of non-related
goodwill is evaluated based on non-discounted future cash flow and operating
income.
Intangible assets consist principally of purchased software and goodwill
which is being amortized using the straight-line method over five years and ten
years, respectively. Accumulated amortization was $11.7 million, $12.2 million
and $12.4 million at December 31, 1995 and 1996 and at June 30, 1997,
respectively.
F-26
<PAGE> 139
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company's policy is to record revenue upon shipment of related goods to
customers. Sales to certain distributors are under terms which allow for those
distributors to receive price protection based on future price reductions. Some
sales made to distributors allow limited rights of return. The Company provides
an allowance for returns and price reductions based on historical experience.
Income Taxes
Income taxes have been provided using the asset and liability method in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Under SFAS 109, deferred tax liabilities and assets are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes. The differences
are primarily attributable to reserves on inventory and accounts receivable.
Future tax benefits, such as net operating loss carryforwards, are recognized to
the extent that realization of such benefits is more likely than not. The effect
of a change in the valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset in future years would be included in income in that
period.
Advertising
All advertising costs are expensed when incurred. Advertising expenses were
approximately $11.1 million, $9.9 million, $3.4 million and $18.0 million for
the years ended September 30, 1994 and 1995, the three months ended December 31,
1995, and the year ended December 31, 1996, respectively.
Foreign Currency Translation
The financial statements of subsidiaries of the Company outside the United
States are measured using the local currency as the functional currency.
Translation adjustments result from the process of translating those
subsidiaries' financial statements from functional currency into U.S. dollars.
Translation adjustments are reported separately and accumulated in a separate
component of equity. Assets and liabilities of these subsidiaries are translated
at the rates of exchange at the balance sheet dates. Income and expense items
are translated at monthly weighted average rates.
Future Adoption of Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), No. 130, "Reporting Comprehensive Income"
("SFAS 130"), No. 129, "Disclosure of Information About Capital Structure"
("SFAS 129"), and No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 131 specifies
revised guidelines for determining an entity's operating segments and the type
and level of financial information to be disclosed. SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. SFAS 129 provides increased disclosure about an entity's
capital structure, and SFAS 128 specifies the computation, presentation, and
disclosure requirements for earnings per share. These standards are effective
for periods ending after December 15, 1997.
The Company believes that the impact of these standards, when adopted, will
not have a material impact on the Company's consolidated financial statements.
F-27
<PAGE> 140
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash Equivalents
The Company estimates that the fair value of cash equivalents approximates
carrying value due to the relatively short maturity of these instruments.
Notes Payable
The Company estimates that the fair value of notes payable approximates
carrying value based upon its effective current borrowing rate for issuance of
debt with similar terms and remaining maturities.
Liabilities Subject to Compromise
The Company estimates that the fair value of prepetition liabilities
approximates carrying value based upon its effective borrowing rate for issuance
of debt with similar terms and remaining maturities.
4. SUPPLEMENTAL BALANCE SHEET INFORMATION
Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Raw materials....................................... $18,781 $ 9,199 $12,304
Work in process..................................... 3,728 4,728 3,106
Finished goods...................................... 15,795 11,495 19,481
------- ------- -------
$38,304 $25,422 $34,891
======= ======= =======
</TABLE>
Property and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment............................. $17,939 $19,735 $18,731
Data processing equipment........................... 14,164 15,069 15,509
Furniture and fixtures.............................. 6,585 6,662 6,447
Leasehold improvements.............................. 4,427 4,738 3,813
Construction in progress............................ 42 448 691
------- ------- -------
43,157 46,652 45,191
Less accumulated depreciation and amortization...... (36,950) (39,265) (36,006)
------- ------- -------
$ 6,207 $ 7,387 $ 9,185
======= ======= =======
</TABLE>
F-28
<PAGE> 141
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C>
Accounts payable.................................... $ 7,394 $ 8,444 $ 2,470
Payroll and benefits................................ 4,827 2,643 2,027
Vendor obligations.................................. 777 2,348 2,348
Restructuring....................................... 2,058 10,881
Professional fees................................... 7,571 333 537
Interest............................................ 6,383
Promotional and marketing........................... 2,901 1,497 891
Other............................................... 4,696 5,898 2,929
------- ------- -------
$34,549 $23,221 $22,083
======= ======= =======
</TABLE>
5. WRITE-OFF OF INTANGIBLES
In accordance with the Company's policy, management assessed the value of
the goodwill that was recorded as a result of the July 1989 acquisition of
Practical Peripherals, Inc., a computer products manufacturer with operations in
Thousand Oaks, California. As a result of changes in events and circumstances
related to the business, management determined that the goodwill should be
reduced significantly given the expected value that would be derived from these
intangible assets in the future. The Company recorded a charge to write-off
goodwill totaling $5.5 million in the year ended September 30, 1995.
6. RESTRUCTURING
In September 1996, the Company announced the closure of its Thousand Oaks,
California operations. During the year ended December 31, 1996, the Company
recorded a restructuring charge of $3.6 million related to exiting these
operations. The restructuring charge consists of the following items:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Lease obligation............................................... $1,700
Employee severance............................................. 965
Equipment disposals............................................ 705
Other.......................................................... 230
------
$3,600
======
</TABLE>
At December 31, 1996, the remaining restructuring reserve totaled $3.3
million of which $2.1 million is included in accrued liabilities and $1.2
million is included in other long-term liabilities. In addition, cost of sales
for the year ended December 31, 1996 includes $2.4 million of additional
inventory obsolescence charges associated with the termination of products
produced at the Thousand Oaks facility and the resulting disposal of excess
inventory. At June 30, 1997, the remaining restructuring reserve totaled $1.9
million of which $500,000 is included in accrued liabilities and $1.4 million is
included in other long-term liabilities.
F-29
<PAGE> 142
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
GECC DIP financing................................ $ 11,134
CIT line of credit................................ $ 6,035 $ 18,767
CIT term loan "A," due April 1, 2002.............. 1,802 1,333
CIT term loan "B," due April 1, 2002.............. 6,667 5,746
Convertible notes from Investors.................. 6,000 10,000
Other............................................. 350 1,146
--------- --------- ---------
11,134 20,854 36,992
Less current maturities........................... (11,134) (13,973) (31,501)
--------- --------- ---------
Total long-term debt.............................. $ $ 6,881 $ 5,491
========= ========= =========
</TABLE>
Prior to April 16, 1996, the Company completed a $45.0 million court
approved DIP financing with General Electric Capital Corporation ("GECC") under
which amounts owed to NationsBank of Georgia, N.A. were paid in full. In
accordance with the Plan, this financing agreement was paid in full and replaced
by the CIT agreements.
On April 16, 1996, the Company entered into two term loans and a revolving
loan facility (the "Line of Credit") with CIT which provide for maximum
borrowings of $64.5 million. The Line of Credit provides for financing based on
eligible accounts receivable and inventory, as defined in the agreement, and
expires April 16, 2000 unless otherwise renewed. The term loans are based on
eligible equipment and intangibles. Based on the applicable calculations, the
total available borrowings under the term loans and the Line of Credit are
approximately $17.2 million as of December 31, 1996. The term loans and the Line
of Credit bear interest at prime plus 1.625 percent (9.875 percent at December
31, 1996). The Line of Credit has covenants requiring minimum levels of tangible
net worth and net income, as defined. If these minimum levels are not met, CIT
may raise the interest rate to prime plus 2.125 percent and can accelerate the
existing loan amortization on the term facilities. The Company did not meet the
minimum levels at December 31, 1996 and at June 30, 1997. The interest rate was
raised effective January 1, 1997 and the loan amortization on the term
facilities was accelerated effective July 1, 1997.
In April 1996, the Company entered into convertible subordinated promissory
notes (the "Convertible Notes") totaling $6.0 million with certain investors.
The Convertible Notes bear interest at prime plus 1.625 percent and are due on
October 15, 1997. The Convertible Notes have conversion features whereby they
may be converted into shares of the Company's Series A preferred stock if not
paid in full by the maturity date. The Company has reserved authorized shares of
Series A Preferred stock for the Convertible Notes totaling 840,000 shares.
The Company's weighted average interest rate on short-term borrowings was
approximately 9.3%, 9.9%, and 10.5% at December 31, 1995 and 1996 and at June
30, 1997, respectively.
During March 1997, the Company issued additional Convertible Notes totaling
$4.0 million with certain investors. These Convertible Notes bear interest at
prime plus 1.625 percent and are due on October 15, 1997. The Convertible Notes
have conversion features whereby they may be converted into shares of the
Company's Series A preferred stock if not paid in full by the maturity date. The
Company has reserved 560,000 authorized shares of such stock.
F-30
<PAGE> 143
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of debt for the next five years are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fiscal year:
1997............................................ $ 13,973
1998............................................ 1,588
1999............................................ 1,588
2000............................................ 1,588
2001............................................ 1,588
Thereafter...................................... 529
-------
$ 20,854
=======
</TABLE>
8. INCOME TAXES
The differences between the federal statutory income tax rate and the
Company's effective tax rate were as follows for the years ended September 30,
1994 and 1995, the three months ended December 31, 1995, and the year ended
December 31, 1996:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Federal statutory rate........... (34.00)% (34.00)% (34.00)% (34.00)%
State income taxes, net of
federal benefit................ (4.00) (4.00) (4.00) (4.00)
Amortization and write-off of
intangibles.................... 13.74
Taxes on foreign income.......... (0.20) 3.20 14.95 3.00
Provision for valuation
allowance...................... 34.53 29.20 63.74 35.86
Equity in foreign subsidiaries
and foreign sales
corporation.................... 5.00 (0.41) (19.61) (3.43)
Other, net....................... (7.01) (13.82) (6.13) 5.59
---- ----- ----- -----
Total....................... (5.68)% (6.09)% 14.95% 3.02%
==== ===== ===== =====
</TABLE>
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1995 1995 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
(in thousands)
Current:
Federal........................ $(4,723) $(1,359)
Foreign........................ 427 $603 $385
State..........................
------- ------- ---- ----
(4,723) (932) 603 385
Deferred:
Federal........................ 2,967
Foreign........................ 67
State..........................
------- ------- ---- ----
3,034
------- ------- ---- ----
$(1,689) $ (932) $603 $385
======= ======= ==== ====
</TABLE>
F-31
<PAGE> 144
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of deferred income taxes as of December 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards.............................. $ 781 $ 12,183
Inventory obsolescence reserves............................... 6,358 2,915
Accrued employee benefits..................................... 828 519
Allowance for doubtful accounts and product returns........... 2,059 3,170
Reserves for warranty claims.................................. 854 856
Accrued advertising........................................... 468 568
Accrued reorganization expenses............................... 3,320 96
Other......................................................... 2,827 1,623
Valuation allowance........................................... (17,312) (21,892)
-------- --------
Total deferred tax assets.................................. 183 38
-------- --------
Deferred income tax liabilities:
Computer software costs....................................... (183) (38)
-------- --------
Total deferred tax liabilities............................. (183) (38)
-------- --------
Net deferred tax asset.......................................... $ $
======== ========
</TABLE>
Due to the Company's filing of a voluntary petition for bankruptcy in 1994,
subsequent emergence from bankruptcy proceedings in April 1996, and the results
of operations for the year ended December 31, 1996, the Company has recorded a
valuation allowance equal to the amount of its net deferred tax assets. The loss
carryforwards as of December 31, 1995 and 1996, are subject to annual
limitations and will expire in 2010 and 2011, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office, plant, and warehouse facilities and certain
vehicles and equipment under noncancelable operating leases. As of December 31,
1996, the approximate future minimum lease payments for noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fiscal year:
1997........................................... $ 3,399
1998........................................... 3,055
1999........................................... 2,241
2000........................................... 461
2001........................................... 461
Thereafter..................................... 1,318
-------
$ 10,935
=======
</TABLE>
The above payments for noncancelable operating leases includes $1.7 million
associated with the Thousand Oaks facility which has been accrued as part of the
restructuring.
Rental expense was approximately $4.5 million, $3.7 million, $1.0 million,
and $3.9 million for the twelve months ended September 30, 1994 and 1995, the
three months ended December 31, 1995, and the twelve months ended December 31,
1996, respectively.
F-32
<PAGE> 145
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There are various litigation proceedings and claims arising in the ordinary
course of business. The Company believes it has meritorious defenses and is
vigorously defending these matters. The Company believes that the resolution of
such contingencies will not have a material adverse effect on the consolidated
financial position, results of operations, or cash flows of the Company.
During 1994, resultant of patent infringement suits, the Company completed
the negotiation of patent license agreements with certain customers and
suppliers. These agreements provide for royalties to be paid by the customers
and suppliers to the Company on both past and future sales. In settlement of
past sales, the Company recorded approximately $4.0 million as an unusual gain
in 1994.
The Company has employment agreements with a stockholder and certain
management personnel with terms from six months to five years.
The Company has an agreement with a supplier of modem chips, under which
the Company committed, under certain circumstances, to purchase a minimum number
of modem chips during 1996. The Company did not purchase the required number of
modem chips and has accrued a potential estimated penalty due the supplier. The
Company and supplier are in negotiations to resolve the matter.
10. PROFIT SHARING AND 401(k) PLANS
Prior to October 1, 1994, the Company maintained a separate defined
contribution profit-sharing plan (the "Profit-Sharing Plan") covering
substantially all of the Company's full-time employees.
On June 22, 1995, the Company authorized an amendment of the Profit Sharing
Plan to allow the Profit-Sharing Plan to be split into separate 401(k) and
profit-sharing components, whereby the profit-sharing component was frozen
retroactive to October 1, 1994 and all balances immediately vested. The 401(k)
component began functioning as a separate plan as of July 1, 1995, and provides
for eligibility for substantially all employees after six months of service and
vesting of matching contributions ratably over a five-year period. The Company
contributed $0.2 million, $0.1 million and $0.3 million for the year ended
September 30, 1995, the three months ended December 31, 1995 and the year ended
December 31, 1996, respectively.
The Company contributions to the Profit-Sharing Plan were determined at the
discretion of the board of directors. The Company made no contributions to the
Profit-Sharing Plan for the periods presented.
Terminated employees are required to sell their stock to the Profit-Sharing
Plan at the appraised value of the stock. Under the terms of the Profit-Sharing
Plan, the Company had the right to repurchase any shares acquired by the
Profit-Sharing Plan at their appraised value. The Company repurchased and
retired 76,053 shares for $1.7 million in 1996. There were no shares repurchased
in 1995.
As part of the Plan, the Profit-Sharing Plan was amended to provide for a
one-time election whereby all active participants could convert all or part of
their Hayes Microcomputer Products, Inc. stock to cash. In 1996, the Company
paid approximately $0.7 million to the Profit-Sharing plan to repurchase and
retire 32,197 shares of its common stock.
11. CAPITAL STRUCTURE
(a) Common and Preferred Stock
The Company's Restated Articles of Incorporation authorize the issuance of
up to 100,000,000 shares of one cent ($.01) par value common stock. In
accordance with the Plan, the Company effected a 3.078-to-one reverse stock
split which reduced the number of outstanding shares by 10,599,595 shares.
In fiscal 1996, the Company authorized a new class of no par value Series A
Preferred Stock consisting of 10,000,000 shares. The Board of Directors is
authorized to issue the preferred stock in one or more series and to fix the
rights, preferences, privileges, and restrictions of such stock, including
dividend rights, preferences
F-33
<PAGE> 146
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and the number of shares constituting any series or the designation of such
series, without further vote or action by the shareholders. During 1997, the
Company authorized a new class of no par value Series B Preferred Stock
consisting of 263,113 shares.
As of December 31, 1996, the Company had issued and outstanding 4,900,000
shares of Series A Preferred Stock. These preferred shares have no dividend
rights but do have preference and priority payment of any dividends on Common
Stock if declared by the Board of Directors. Any such dividends are
noncumulative. The preferred shares also have voting rights and are convertible
by a stated formula at the option of the shareholder and are automatically
converted upon an Initial Public Offering.
(b) Stock Redemption Agreements
In 1988, the Company entered into an agreement with a stockholder whereby
the Company could be required to purchase 1,628,884 shares of common stock at
the option of the stockholder at any time after January 1, 1999 through June
2008. In April 1996, in accordance with the Plan, the Company repurchased all of
the common shares held by a stockholder for $11.0 million and subsequently
retired these shares. In conjunction with this payment, the shareholder
agreement was terminated.
12. REDEEMABLE PREFERRED STOCKS
During April 1997, the Company completed an agreement with Vulcan Ventures,
Inc. to issue 263,113 shares of Series B Preferred Stock for $5.5 million which
includes $45,000 of issuance costs. The stockholders are entitled to receive
cumulative compounding dividends at the rate of 10% per annum of the original
issue price per share of Series B Preferred Stock. Series B dividends have
preference and priority payment over Series A Preferred Stock and Common Stock.
These preferred shares have no voting rights except as required under applicable
law or as expressly stated in the agreement relating to the Series B Preferred
Stock. The Company could be required to redeem these preferred shares by a
stated formula at the option of the more than 50% of the stockholders at any
time after November 1, 1999. The Series B Preferred Stock also is convertible
into shares of common stock by a stated formula if the Company's share are
publicly traded at a stated value per share or in the aggregate or if the Series
B stockholders obtain an affirmative majority vote.
13. STOCK-BASED COMPENSATION
In connection with the Plan, the Company authorized 600,000 warrants to
purchase shares for the fair value at the date of grant. The Company issued
400,000 warrants during April 1996 at an exercise price of $0.714 per share. The
warrants will become exercisable and fully vested on the date the Company files
a registration statement for an Initial Public Offering with the Securities and
Exchange Commission or closes a significant transaction, as defined in the
warrant agreement. The warrants expire five years after the date on which they
become exercisable. The warrants were issued to Directors and are valued and
presented as options in the information below.
In addition, one of the holders of the preferred stock received an
anti-dilution warrant enabling the holder to purchase sufficient quantity to
maintain a 20.2 percent ownership interest of the Company at a price of $14.28
per share.
The Hayes Microcomputer Products, Inc. Stock Option Plan (the "Stock Option
Plan") was adopted by the Company's stockholders in June 1996. No options were
granted prior to that date. Options granted under the Stock Option Plan may be
either (i) options intended to qualify as incentive stock options ("ISO's")
under Section 422 of the Internal Revenue Code or (ii) non-qualified stock
options. None of the options granted in 1996 were intended to qualify as ISO's.
The Stock Option Plan allows for three types of grants: Executive, Management,
and Performance Grants. The Stock Option Plan, as amended in October 1996,
F-34
<PAGE> 147
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
allows for a total of 800,000 shares to be granted for Executive and Management
Grants and 1,000,000 shares to be granted for Performance Grants.
An explanation of each type of grant and a description of the options
awarded under each type of grant are as follows:
Executive Grant
During 1996, the Company granted 310,000 options to purchase shares as
Executive Grants at an exercise price of $0.714 per share. The options will
become exercisable on the first to occur of (i) the date on which the company
files a registration statement for an Initial Public Offering with the
Securities and Exchange Commission, or (ii) the date of a significant corporate
transaction, as defined, such as a merger, consolidation or sale. The options
expire five years after the date on which they become exercisable.
Management Grant
During 1996, the Company granted 282,500 options to purchase shares as
Management Grants at exercise prices ranging from $0.714 to $1 per share. The
options will become exercisable on the first to occur of (i) the date on which
the Company files a registration statement for an Initial Public Offering with
the Securities and Exchange Commission, or (ii) the date of a significant
corporate transaction, as defined, such as a merger, consolidation or sale. The
options expire ten years after the date of grant. Upon the date the options
first become exercisable, the amount vested at that time will be determined
based on a five-year ratable vesting schedule beginning at the date of grant.
Performance Grant
During 1996, the Company granted 600,000 options to purchase shares as
Performance Grants at an exercise price of $1 per share. The options begin
vesting on the date the Company completes an Initial Public Offering with the
Securities and Exchange Commission. Vesting will be determined based on the
attainment of specified average share prices as defined in the Stock Option
Plan. The average share prices range from $24.19 to $60.47. The number of
shares, if any, that may be vested will be based solely upon events occurring in
the first five years after the date of grant. The options expire ten years after
the date of grant.
Options historically have been granted based on an amount greater than or
equal to the fair value of the shares at the date of grant. Since no quoted
market price was available, the best estimate of the fair value of the stock was
determined by the Board of Directors.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in 1996: dividend yield of 0%, expected volatility of 0%, risk-free
interest rate of 6.38%, and an expected term of 5.3 years.
The Company did not grant stock options prior to April 1996 and as of
December 31, 1996 no options are exercisable. A summary of the Company's stock
option plan activity and related information for the year ended December 31,
1996 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options granted................................... 1,592,500 $0.835
Options canceled.................................. (71,500) $0.714
---------
Options outstanding at December 31, 1996.......... 1,521,000 $0.841
=========
Weighted average fair value of options granted
during the year at the share's fair value....... $ 0.23
</TABLE>
F-35
<PAGE> 148
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the stock options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF OPTIONS AVERAGE
OUTSTANDING AT REMAINING
DECEMBER 31, CONTRACTUAL
EXERCISE PRICES 1996 LIFE
----------------------------------------------- -------------- -----------
<S> <C> <C>
$0.714......................................... 844,500 7.5 years
$1.000......................................... 676,500 6.7 years
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. For the fiscal year ended December 31, 1996, no
compensation expense was recognized for its stock option plans, since certain
events have not occurred. Had compensation expense for the Company's stock-based
compensation plans been determined under the provisions consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss for the year ended December 31, 1996,
would have been the pro forma amounts indicated below (in thousands):
<TABLE>
<CAPTION>
NET LOSS LOSS PER SHARE
-------- --------------
<S> <C> <C>
As reported...................................... $(13,154) $(2.52)
Pro forma........................................ $(13,246) $(2.54)
</TABLE>
14. GEOGRAPHIC SEGMENTS
The Company operates in several geographic areas worldwide. Revenues can be
grouped into three primary geographic segments: North America, Europe and Asia.
Selected financial data by primary geographic area for the periods ended
September 30, 1994 and 1995 and December 31, 1995 and 1996 follow:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1994
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
NORTH AND
AMERICA EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $219,962 $19,591 $12,464 $ (5,740) $246,277
Operating profit (loss)......... (35,822) (1,674) 650 133 (36,713)
Identifiable assets............. 128,617 10,678 2,393 (16,724) 124,964
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
NORTH AND
AMERICA EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $228,983 $22,893 $18,315 $ (1,036) $269,155
Operating profit (loss)......... (7,098) (1,492) 751 (7,839)
Identifiable assets............. 99,919 8,656 7,687 (15,298) 100,964
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1995
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
NORTH AND
AMERICA EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $ 54,409 $ 8,102 $ 7,600 $ 70,111
Operating profit (loss)......... (445) 852 1,691 2,098
Identifiable assets............. 82,944 10,675 6,309 $ (8,232) 91,696
</TABLE>
F-36
<PAGE> 149
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1996
--------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
NORTH AND
AMERICA EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers..................... $202,001 $24,516 $38,800 $ (7,865) $257,452
Operating profit (loss)......... (10,118) (2,536) (856) 77 (13,433)
Identifiable assets............. 69,943 8,824 7,966 (17,518) 69,215
</TABLE>
Operating profit (loss) is calculated as total revenue less total operating
expenses. In calculating operating profit, none of the following items have been
added or deducted: net interest expense, net miscellaneous income,
reorganization items, or income taxes. Identifiable assets are those assets of
the Company that are identified with the operations in each geographic area,
including goodwill.
The Company generates significant sales outside the United States and is
subject to risks generally associated with international operations. The foreign
operations of the Company accounted for approximately 13%, 15%, 22% and 25% of
the Company's net sales for the years ended September 30, 1994 and 1995, the
three months ended December 31, 1995, and the year ended December 31, 1996,
respectively. Accordingly, the Company's financial results from international
operations may be affected by the economic, political, and regulatory climates
prevailing in the respective foreign countries and by fluctuations in currency
exchange rates.
15. ACQUISITION OF CARDINAL TECHNOLOGIES, INC.
During April 1997, the Company acquired 100% of the outstanding common
stock of Cardinal Technologies, Inc. ("Cardinal"), a private manufacturer of
modems and ISDN adapters, for $2.5 million. The acquisition has been accounted
for utilizing the purchase method of accounting. The estimated fair values
assigned to the assets and liabilities acquired were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Total consideration paid (including acquisition costs of
$595)........................................................ $ 3,095
Fair value of tangible and identifiable assets acquired........ (15,350)
Fair value of liabilities assumed.............................. 17,055
--------
Estimated goodwill........................................ $ 4,800
========
</TABLE>
The results of operations of Cardinal from the beginning of the period
through the acquisition date are not significant to the Company's consolidated
results of operations.
16. SIGNIFICANT RISKS AND UNCERTAINTIES
The communications industry is highly competitive and competition is
expected to intensify. There are numerous companies competing in various
segments of the market in which the Company does business. Competitors include
organizations significantly larger and with more development, marketing and
financial resources than the Company. The Company's success is dependent on its
ability to develop and market products that are innovative, cost-competitive and
meet customer expectations.
The markets for the Company's products are characterized by rapid
technological developments resulting in short product life cycles. The market
for modems is primarily dependent upon the market for personal computers. From
diminished product demand, production overcapacity, and resultant accelerated
erosion of average selling prices, the Company's business could be materially
and adversely affected by industry-wide
F-37
<PAGE> 150
HAYES MICROCOMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fluctuations in the personal computer marketplace in the future. The Company's
ten largest customers account for approximately 62%, 57%, 56% and 73% of net
sales for the years ended September 30, 1994 and 1995, the three months ended
December 31, 1995, and the year ended December 31, 1996, respectively.
The Company's accounts receivable are concentrated with a limited number of
customers. The amounts owed by the largest ten customers represented
approximately 48% and 55% of the total accounts receivable balances as of
December 31, 1995 and 1996, respectively.
17. RELATED PARTY TRANSACTIONS
As of December 31, 1996, the Company has the following related party
transactions:
The Company has a split-dollar life insurance policy on a shareholder of
the Company with the Company as the beneficiary. The split-dollar agreement is
included in other long-term assets in the amount of $1.1 million and $0.6
million as of December 31, 1995 and 1996, respectively. The cash surrender
value, included in prepaids and other current assets, is $0.3 million as of
December 31, 1995 and 1996, respectively.
A shareholder of the Company has a revolving credit arrangement with the
Company stating a maximum draw of $0.3 million. The balance outstanding,
included in prepaids and other current assets, is $0.2 million as of December
31, 1995 and 1996, respectively.
The Company has manufacturing subcontractor agreements with two of its
stockholders. During 1996, and as of June 30, 1997 the Company purchased $44.8
million, and $21.7 million, respectively, of finished goods from such
manufacturers.
18. SUBSEQUENT EVENTS (UNAUDITED)
On July 29, 1997, the Company signed a definitive merger agreement with
Access Beyond, Inc., a provider of remote access connectivity products. Under
the terms of the agreement, the merged company will be renamed Hayes
Communications Inc. Access Beyond will issue approximately 45.0 million shares
of common stock for 100% of the outstanding stock of Hayes. Subsequent to the
merger, Access Beyond shareholders will own approximately 21% of the combined
company. The combination will be accounted for using the purchase method and is
subject to the completion of due diligence and regulatory approvals.
In addition, the Company has signed a letter of commitment with a potential
investor, whereby the Company would receive approximately $30.0 million in
exchange for 1,350,743 shares of Hayes Series C Preferred Stock which is
convertible under certain circumstances to common stock. The investment is
subject to the completion of due diligence and regulatory approvals.
F-38
<PAGE> 151
EXHIBIT A TO PROXY STATEMENT
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
ACCESS BEYOND, INC.
AND
HAYES MICROCOMPUTER PRODUCTS, INC.
July 29, 1997
<PAGE> 152
TABLE OF CONTENTS
Page
----
I. PLAN OF REORGANIZATION ................................................2
1.1 The Merger.......................................................2
1.2 Fractional Shares................................................3
1.3 Hayes Options and Warrants.......................................4
1.4 Effects of the Merger............................................4
1.5 Tax-Free Reorganization..........................................6
1.6 Purchase Accounting Treatment....................................6
1.7 Charter Amendments ..............................................6
2. REPRESENTATIONS AND WARRANTIES OF HAYES................................6
2.1 Organization and Good Standing...................................6
2.2 Subsidiaries.....................................................7
2.3 Power, Authorization and Validity................................7
2.4 Capitalization...................................................8
2.5 No Conflict or Violation.........................................9
2.6 Litigation.......................................................9
2.7 Hayes Financial Statements.......................................9
2.8 Taxes...........................................................10
2.9 Title to Properties.............................................10
2.10 Absence of Certain Changes......................................11
2.11 Agreements and Commitments......................................12
2.12 Intellectual Property...........................................13
2.13 Compliance with Laws............................................14
2.14 Certain Transactions and Agreements.............................14
2.15 Employees.......................................................15
2.16 Corporate Documents.............................................16
2.17 Books and Records...............................................17
2.18 Insurance.......................................................17
2.19 Environmental Matters ..........................................17
2.20 Government Contracts............................................17
2.21 No Brokers......................................................18
2.22 Information Supplied............................................18
2.23 Interested Party Transactions...................................18
2.24 Real Property Holding Corporation Status .......................19
2.25 Disclosure......................................................19
3. REPRESENTATIONS AND WARRANTIES OF ACCESS BEYOND.......................19
3.1 Organization and Good Standing..................................19
3.2 Subsidiaries....................................................19
3.3 Power, Authorization and Validity...............................20
3.4 Capitalization..................................................20
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3.5 No Conflict or Violation........................................21
3.6 Litigation......................................................21
3.7 Access Beyond Financial Statements..............................22
3.8 Taxes...........................................................22
3.9 Title to Properties.............................................23
3.10 Absence of Certain Changes......................................23
3.11 Agreements and Commitments......................................25
3.12 Intellectual Property...........................................26
3.13 Compliance with Laws............................................27
3.14 Certain Transactions and Agreements.............................27
3.15 Employees.......................................................27
3.16 Corporate Documents.............................................28
3.17 Books and Records...............................................29
3.18 Insurance.......................................................29
3.19 Environmental Matters...........................................29
3.20 Government Contracts............................................29
3.21 Remote Access Products .........................................31
3.22 No Brokers......................................................31
3.23 Information Supplied............................................31
3.24 Interested Party Transactions...................................31
3.25 Disclosure......................................................31
3.26 SEC Filings ....................................................32
4. COVENANTS OF THE PARTIES..............................................32
4.1 Access; Advice of Changes.......................................32
4.2 Notification of Changes in Relationships........................33
4.3 Conduct of Business.............................................33
4.4 No Solicitation.................................................35
4.5 Registration on Form S-4........................................36
4.6 Regulatory Approvals............................................37
4.7 Stockholders Meetings...........................................38
4.8 Indemnification of Officers and Directors.......................39
4.9 Confidentiality.................................................40
4.10 Confidentiality and Disclosure..................................40
4.11 Affiliates Agreements...........................................40
4.12 New Capital Funding ............................................41
4.13 Other Actions Required..........................................41
5.41 HAYES PRECLOSING COVENANTS............................................41
5.1 Business Plan...................................................41
5.2 Hayes Dissenting Shares.........................................42
5.3 Other Actions Required .........................................42
6. CLOSING MATTERS.......................................................42
6.1 The Closing.....................................................42
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6.2 Exchange of Certificates........................................43
6.3 Assumption of Options and Warrants..............................43
6.4 Access Beyond Options ..........................................44
7. CONDITIONS TO OBLIGATIONS OF HAYES....................................44
7.1 Removal of Due Diligence and Other Conditions ..................44
7.2 Covenants, Representations and Warranties.......................44
7.3 Compliance with Law.............................................45
7.4 Government Consents.............................................45
7.5 Form S-4........................................................45
7.6 Documents and Consents..........................................45
7.7 Hart-Scott Rodino Compliance....................................45
7.8 No Litigation...................................................45
7.9 Opinion of Counsel..............................................45
7.10 Employment Agreements...........................................46
7.11 Tax-Free Transaction ...........................................46
7.12 Listing.........................................................46
7.13 Access Beyond Amended and Restated Certificate..................46
7.14 Satisfactory Form of Legal and Accounting Matters...............46
7.15 Access Beyond Board of Directors................................46
7.16 Resignations ...................................................46
7.17 Shareholders Agreement .........................................46
8. CONDITIONS TO OBLIGATIONS OF ACCESS BEYOND............................47
8.1 Removal of Due Diligence and Other Conditions...................47
8.2 Covenants, Representations and Warranties.......................47
8.3 Compliance with Law.............................................47
8.4 Government Consents.............................................47
8.5 Form S-4........................................................48
8.6 Hart-Scott-Rodino Compliance....................................48
8.7 Documents and Consents..........................................48
8.8 No Litigation...................................................48
8.9 Opinion of Counsel..............................................48
8.10 Employment Agreements...........................................48
8.11 Listing.........................................................48
8.12 Affiliate Agreements............................................48
8.13 Satisfactory Form of Legal and Accounting Matters...............49
8.14 Completion of other Actions.....................................49
8.15 Access Beyond Restated Certificate..............................49
8.16 Fairness Opinion................................................49
8.17 Access Beyond Board of Directors................................49
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9. TERMINATION OF AGREEMENT..............................................49
9.1 Termination.....................................................49
9.2 Effect of Termination...........................................51
9.3 Expenses; Termination Fees......................................52
10. SURVIVAL OF REPRESENTATIONS, CONTINUING COVENANTS.....................53
11. GENERAL PROVISIONS....................................................53
11.1 Governing Law; Dispute Resolution...............................53
11.2 Assignment; Binding Upon Successors and Assigns.................54
11.3 Severability....................................................54
11.4 Counterparts....................................................55
11.5 Other Remedies..................................................55
11.6 Amendment and Waivers...........................................55
11.7 No Waiver.......................................................55
11.8 Notices.........................................................55
11.9 Construction of Agreement.......................................57
11.10 No Joint Venture................................................57
11.11 Further Assurances..............................................57
11.12 Absence of Third Party Beneficiary Rights.......................57
11.13 Time is of the Essence..........................................57
11.14 Entire Agreement................................................57
Exhibits:
Exhibit A Form of Certificate of Merger
Exhibit C-1 Form of Voting Agreement
Exhibit C-2 Form of Market Standoff Agreement
Exhibit C-3 Form of Hayes Affiliates Agreement
Exhibit C-4 Form of Employment Agreement for Ronald A. Howard
Exhibit C-5 Form of Employment Agreement for Dennis C. Hayes
Exhibit 1.5A Certificate of Officer as to Tax Matters (Access
Beyond and Newco)
Exhibit 1.5B Certificate of Officer as to Tax Matters (Hayes)
Exhibit 7.13 Form of Restated Certificate
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is entered
into as of July __, 1997, by and between Access Beyond, Inc., a Delaware
corporation ("Access Beyond"), and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes") (and individually referred to as "Party" and jointly and
severally referred to herein as "Parties").
A. The Parties intend that, subject to the terms and conditions set forth
herein, a new corporation that will be organized in Georgia as a wholly owned
subsidiary of Access Beyond ("Newco") will merge with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger, all pursuant to the terms and conditions of this
Agreement and Certificate of Merger substantially in the form of Exhibit A (the
"Certificate of Merger") and the applicable provisions of the laws of Georgia.
B. Upon the effectiveness of the Merger, all the outstanding capital stock
of Hayes will be converted into capital stock of Access Beyond, and Access
Beyond will assume all outstanding options and warrants to purchase shares of
Hayes capital stock, in the manner and on the basis determined herein and as
provided in the Certificate of Merger.
C. The Merger is intended to be treated as a "purchase" for accounting
purposes and a tax-free reorganization pursuant to the provisions of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), by
virtue of the provisions of Section 368(a)(2)(E) of the Code.
D. Concurrent with the execution and delivery of this Agreement:
(i) Dennis C. Hayes, Chestnut Capital, LLC, Rinzai Limited and
Vulcan Ventures Incorporated, who together hold a majority or more of the issued
and outstanding shares of each class or series of Hayes capital stock, and a
sufficient number of shares of Hayes capital stock to approve the Merger (the
"Principal Hayes Shareholders"), are each executing and delivering to Access
Beyond a fully signed copy of a certain Voting Agreement substantially in the
form of Exhibit C-1 containing a market standoff agreement, an agreement to vote
in favor of the Merger, this Agreement, the Certificate of Merger and the
transactions provided for herein and against any transaction that could
adversely affect the Merger (collectively, the "Voting Agreements");
(ii) certain other shareholders of Hayes are entering into a "Market
Standoff Agreement" in substantially the form attached hereto as Exhibit C-2;
(iii) the Principal Hayes Shareholders and any other shareholder of
Hayes who is an "affiliate" of Hayes within the meaning of Rule 145 promulgated
by the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and the key corporate officers and directors of Hayes by the end of the
Due Diligence Period will be entering into the "Hayes Affiliates Agreements"
substantially in the form of Exhibit C-3 hereto;
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(iv) the shareholders of Hayes and Ronald A. Howard are entering
into a Shareholders' Agreement to be effective at the Effective Time (the
"Shareholders' Agreement"); and
(v) Ronald A. Howard and Dennis C. Hayes are entering into an
Employment Agreement or an amendment to Employment Agreement with Access Beyond
substantially in the form of Exhibits C-4 and C-5 hereto, respectively (the
"Employment Agreements").
The Parties acknowledge that in the event that the transactions
contemplated by this Agreement are not consummated, each Party 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 Merger, including but not limited to, a
condition that there shall be no material adverse change prior to the Effective
Time (as defined below) to either Party, its business, financial condition,
results of operations or prospects, or to either Party's industry or to general
business conditions.
NOW, THEREFORE, in reliance upon the recitals set forth above, the Parties
hereto agree as follows:
I. PLAN OF REORGANIZATION.
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, prior to the Closing Date (as defined in Section 6.1 below), Access
Beyond will incorporate and organize Newco and will cause the Board of Directors
and shareholders of Newco to approve the Merger and become a party to this
Agreement which is obligated to perform all of the duties of Newco set forth in
this Agreement. Subject to the terms and conditions of this Agreement, the
Certificate of Merger will be filed with the Secretary of State of the State of
Georgia on the Closing Date. The date and time that the Certificate of Merger is
filed with the Georgia Secretary of State and the Merger thereby becomes
effective will be referred to in this Agreement as the "Effective Time." Subject
to the terms and conditions of this Agreement and the Certificate of Merger,
Newco will be merged with and into Hayes in a statutory merger pursuant to the
Certificate of Merger and in accordance with applicable provisions of Georgia
law as follows.
1.1.1 Creation of Series A Stock. Prior to the Effective Time,
Access Beyond will have amended its Certificate of Incorporation to create the
Series A Preferred Stock of Access Beyond (the "Access Beyond Series A Stock"),
each share of which shall initially be convertible into one share of Access
Beyond Common Stock, $0.01 par value ("Access Beyond Common Stock") and shall
have the rights, preferences, privileges and restrictions as are specified in
the form of Restated Certificate of Incorporation attached hereto as Exhibit
7.13.
1.1.2 Conversion of Hayes Common Stock. Each share of Hayes
Common Stock, $0.01 par value (the "Hayes Common Stock") that is issued and
outstanding
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immediately prior to the Effective Time (other than shares, if any, for which
dissenters rights are perfected in compliance with applicable law), will, by
virtue of the Merger and at the Effective Time and without further action on the
part of any holder thereof, be converted into the right to receive that number
of fully paid and nonassessable shares of Access Beyond Common Stock, that is
equal to the Conversion Ratio.
1.1.3 Conversion of Hayes Series A Stock. Each share of Hayes
Series A Preferred Stock, no par value (the "Hayes Series A Stock"), that is
issued and outstanding immediately prior to the Effective Time (other than
shares, if any, for which dissenters rights are perfected in compliance with
applicable law), will, by virtue of the Merger and at the Effective Time and
without further action on the part of any holder thereof, be converted into the
right to receive that number of fully paid and nonassessable shares of Access
Beyond Common Stock that is equal to the Conversion Ratio multiplied by the
number of shares of Hayes Common Stock into which such share of Hayes Series A
Stock is then convertible.
1.1.4 Conversion of Hayes Series B Stock. Each share of Hayes
Series B Preferred Stock, no par value (the "Hayes Series B Stock"), that is
issued and outstanding immediately prior to the Effective Time (other than
shares, if any, for which dissenters rights are perfected in compliance with
applicable law), will, by virtue of the Merger and at the Effective Time and
without further action on the part of any holder thereof, be converted into the
right to receive that number of fully paid and nonassessable shares of Access
Beyond Series A Stock that is equal to the Conversion Ratio multiplied by the
number of shares of Hayes Common Stock into which such share of Hayes Series B
Stock is then convertible.
1.1.5 Conversion Ratio Defined. For purposes of this
Agreement, the "Conversion Ratio" shall be determined as follows,
First, take the percentage ownership immediately after Closing of the issued and
outstanding shares of Access Beyond Common Stock and Access Beyond Series A
Stock that the holders of all classes of Hayes Common, Series A Preferred Stock
and Series B Preferred Stock in the aggregate are entitled to receive as a
result of and immediately following the Merger, which the Parties hereby agree
is seventy-nine percent (79%) (the "Hayes Percentage").
Next, calculate the "Conversion Ratio" according to the following formula:
Conversion Ratio = [ B ( {C} OVER {1.0 - B} ) ] / D
Where: B = .79 (the "Hayes Percentage")
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C = The number of shares of Access Beyond common and preferred
stock issued and outstanding on a fully diluted basis
(excluding all issued and outstanding Access Beyond stock
options) immediately prior to the Effective Time
D = The number of shares of Hayes common and preferred stock
issued and outstanding on a fully diluted basis immediately
prior to the Effective Time, excluding all issued and
outstanding Hayes stock options and warrants in accordance with
Sections 2.4.2 and 5.4 hereof
Thus, for example only, assuming that the number of fully diluted shares of
Access Beyond common and preferred stock (excluding shares issuable upon
exercise of Access Beyond stock options) outstanding immediately prior to the
Effective Time, or "C," equals 12,500,000 and that the number of fully diluted
shares of Hayes common and preferred stock outstanding (excluding shares
issuable upon exercise of Hayes stock options and warrants) immediately prior to
the Effective Time, or "D," equals 10,000,000, then the Conversion Ratio would
be 4.702381.
1.1.6 Dissenting Shares. Holders of Hayes Common Stock, Hayes
Series A Stock and/or Hayes Series B Stock (the "Hayes Stock") who have complied
with all requirements for perfecting shareholders' rights of appraisal, if any,
as set forth in Section 14-2-1301 et seq. of the Georgia Business Corporation
Code ("Georgia Law"), shall be entitled to their rights under the Georgia Law,
if any, with respect to such shares ("Dissenting Shares") and not to any portion
of the Access Beyond Common Stock or Access Beyond Series A Stock receivable by
the shareholders of Hayes by reason of the Merger.
1.1.7 Conversion of Newco Shares. Each share of Newco Common
Stock, par value $0.01 ("Newco Common Stock"), that is issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without further action on the part of the sole shareholder of Newco, be
converted into and become one share of Hayes Common Stock that is to be issued
and outstanding immediately after the Effective Time, and the share of Hayes
Common Stock into which the shares of Newco Common Stock are so converted shall
be the only share of Hayes Stock that is issued and outstanding immediately
after the Effective Time.
1.2 FRACTIONAL SHARES. No fractional shares of Access Beyond Common
Stock or Access Beyond Series A Stock (the "Access Beyond Stock") will be issued
in connection with the Merger, but in lieu thereof, the record holder of any
shares of Hayes Stock who would otherwise be entitled to receive a fraction of a
share of Access Beyond Stock, upon aggregation of all shares and fractional
shares owned by such holder, will receive from Access Beyond, promptly after the
Effective Time, without interest, an amount of cash equal to the per share
market value of Access Beyond Stock (based on the closing sale price of Access
Beyond Common Stock on the last trading day prior to the Closing Date, as quoted
on the Nasdaq National Market and reported in the Western Edition of The Wall
Street Journal) multiplied by
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the fraction of a share of Access Beyond Stock to which such holder would
otherwise be entitled.
1.3 HAYES OPTIONS AND WARRANTS.
1.3.1 Assumption of Options and Warrants. At the Effective
Time, each outstanding option (collectively, the "Hayes Options") to purchase
Hayes Common Stock granted under Hayes' Stock Option Plan, as amended (the
"Hayes Plan"), and each warrant for the purchase of Hayes Stock (the "Hayes
Warrants") shall be assumed by Access Beyond in accordance with the terms of
such option or warrant, and converted into rights with respect to that number of
shares of Access Beyond Common Stock, determined by multiplying the number of
shares of Hayes Stock subject to such Hayes Option or Hayes Warrant (on an as if
exercised basis) immediately prior to the Effective Time by the Conversion
Ratio, and the exercise price per share for each such option or warrant will
equal the exercise price of the Hayes Option or the Hayes Warrant immediately
prior to the Effective Time divided by the Conversion Ratio (rounded up to the
nearest whole cent). If the foregoing calculation results in an assumed option
or warrant being exercisable for a fraction of a share, then the number of
shares of Access Beyond Common Stock subject to such option or warrant will be
rounded down to the nearest whole number with no cash being payable for such
fractional share.
1.3.2 Terms of Assumed Options and Warrants. Access Beyond
will administer the Hayes Plan assumed pursuant to this Section 1.3 in a manner
that complies with Rule 16b-3 promulgated by the SEC under the Securities
Exchange Act of 1934 ("Exchange Act"). Continuous employment with Hayes will be
credited to an optionee for purposes of determining the number of shares subject
to exercise after the Effective Time. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the Code,
if applicable, and all other terms of the Hayes Options and Hayes Warrants will
otherwise be unchanged. Access Beyond will cause the Access Beyond Common Stock
issued upon exercise of the assumed Hayes Options and Hayes Warrants (to the
extent that such Hayes Warrants were issued in a compensatory transaction and
are otherwise eligible to be registered on Form S-8) together with the Access
Beyond stock option plans in effect after the Effective Time, to the extent same
qualify for such registration and have not previously been registered, to be
registered on Form S-8 of the Securities and Exchange Commission ("SEC") within
90 days after the Effective Time, will exercise reasonably diligent efforts to
maintain the effectiveness of such registration statement for so long as such
assumed Hayes Options and such eligible Hayes Warrants remain outstanding and
will reserve a sufficient number of shares of Access Beyond Common Stock for
issuance upon exercise of the assumed Hayes Options and Hayes Warrants.
1.4 EFFECTS OF THE MERGER. At the Effective Time: (a) the separate
existence of Newco will cease and Newco will be merged with and into Hayes and
Hayes will be the surviving corporation pursuant to the terms of the Certificate
of Merger; (b) the Articles of Incorporation and Bylaws of Hayes will remain the
Articles of Incorporation and Bylaws of the surviving corporation; (c) each
share of Newco Common Stock outstanding immediately prior
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to the Effective Time will be converted into one outstanding share of Hayes
Common Stock; (d) the directors of Hayes to be in effect subsequent to the
Effective Time will be the directors of Hayes as the surviving corporation and
the officers of Hayes will remain the officers of Hayes as the surviving
corporation; (e) each share of Hayes Stock and each Hayes Option and Hayes
Warrant outstanding immediately prior to the Effective Time will be converted as
provided in Section 1.1, 1.2 and 1.3; and (f) the Merger will, at and after the
Effective Time, have all of the effects provided by applicable law.
1.5 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)(A) of the Code. The Parties
believe that the value of the Access Beyond Stock to be received in the Merger
is equal, in each instance, to the value of the Hayes Stock to be surrendered in
exchange therefor. The Access Beyond Stock issued in the Merger will be issued
solely in exchange for the Hayes Stock, and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to, the
consideration paid for the Hayes Stock. Except for cash paid in lieu of
fractional shares or for Dissenting Shares, no consideration that could
constitute "other property" within the meaning of Section 356 of the Code is
being paid by Access Beyond for the Hayes Stock in the Merger. The Parties shall
not take a position on any tax returns inconsistent with this Section 1.5. In
addition, Access Beyond represents now, and as of the Closing, that it presently
intends to continue Hayes' historic business or use a significant portion of
Hayes' business assets in a business. At the Closing, officers of each of Access
Beyond and Hayes shall execute and deliver officers' certificates in the forms
of Exhibits 1.5A-B. The provisions and representations contained or referred to
in this Section 1.5 shall survive until the expiration of the applicable statute
of limitations.
1.6 PURCHASE ACCOUNTING TREATMENT. The Parties intend that the
Merger be treated as a "purchase" for accounting purposes.
1.7 CHARTER AMENDMENTS. Contemporaneously with or immediately prior
to the Closing, the name of Access Beyond will be changed to "Hayes
Communications Inc.", and the Amended and Restated Certificate of Incorporation
of Access Beyond attached hereto as Exhibit 7.13 will become effective,
accomplishing inter alia, the creation of the Access Beyond Series A Stock.
2. REPRESENTATIONS AND WARRANTIES OF HAYES.
Except as set forth in the Hayes disclosure letter (the "Hayes
Disclosure Letter") a draft of which dated July __, 1997, has been delivered by
Hayes to Access Beyond herewith (which letter may be updated in an immaterial
manner up to the Closing), including items in the Hayes Disclosure Letter
referred to as "Items" below, and except as disclosed in the Hayes Financial
Statements (as defined below) which have heretofore been delivered to Access
Beyond, Hayes hereby represents and warrants to Access Beyond as follows:
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2.1 ORGANIZATION AND GOOD STANDING. Hayes is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and is qualified as a
foreign corporation in each jurisdiction listed on Item 2.1. Hayes does not own
or lease any real property, has no employees and does not maintain a place of
business in any foreign country or in any state of the United States other than
as shown on Item 2.1.
2.2 SUBSIDIARIES. Except for the subsidiaries of Hayes listed on
Item 2.2 (collectively, the "Hayes Subsidiaries," and each, a "Hayes
Subsidiary"), each of which is wholly owned by Hayes, Hayes does not have any
subsidiaries or any interest, direct or indirect, in any corporation,
partnership, joint venture or other business entity. Each Hayes Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its formation, has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and is qualified as a foreign corporation in each jurisdiction listed on Item
2.2, and in any jurisdiction in which qualification is required, except in those
jurisdictions where failure to be qualified would not have a material adverse
effect on the business or operations of Hayes.
2.3 POWER, AUTHORIZATION AND VALIDITY.
2.3.1 Organization. Hayes has the corporate right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement, and all agreements to which Hayes or its shareholders are or
will be parties that are required to be executed pursuant to this Agreement.
This Agreement has been duly and validly approved by the Hayes Board of
Directors and, upon submission to, and majority vote in favor of the Merger by
the Hayes shareholders, by the Hayes shareholders, as required by applicable
law.
2.3.2 Authorization. No filing, authorization or approval,
governmental or otherwise, is necessary to enable Hayes or to Hayes' knowledge
any of the Principal Hayes Shareholders and other Hayes shareholders, officers
or directors parties thereto to enter into, and to perform their obligations
under, this Agreement, the Hayes Affiliate Agreements, the Voting Agreements and
the Market Standoff Agreements, except for: (a) the filing of the Certificate of
Merger with the Secretary of State of Georgia, the filing of such officers'
certificates and other documents as are required to effectuate the Merger under
Georgia law and the filing of appropriate documents with the relevant
authorities of the states other than Georgia in which Hayes is qualified to do
business, if any, (b) such filings as may be required to comply with federal and
state securities laws, (c) consents required under contracts disclosed in Item
2.5 as exceptions to the representation made in the last sentence of Section 2.5
below, (d) the approval of the Hayes shareholders of the transactions
contemplated hereby and (e) the filings required by the HSR Act (defined in
Section 4.6).
2.3.3 Enforceability. This Agreement, the Hayes Affiliate
Agreements, the Voting Agreement and the Market Standoff Agreements are, or when
executed and delivered
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<PAGE> 163
by Hayes and the other parties thereto will be, valid and binding obligations of
Hayes and, as applicable, the Principal Hayes Shareholders and other Hayes
shareholders, directors and officers parties thereto enforceable against such
persons or entities in accordance with their respective terms, except as to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.4 CAPITALIZATION.
2.4.1 Capital Stock. The authorized capital stock of Hayes
consists of 100,000,000 shares of Hayes Common Stock, $0.01 par value per share,
10,000,000 shares of Hayes Series A Stock and 263,113 shares of Hayes Series B
Stock. 4,991,750 shares of Hayes Common Stock, 4,900,000 shares of Hayes Series
A Stock and 263,113 shares of Hayes Series B Stock are issued or outstanding as
of the date of this Agreement and will be immediately prior to the Closing, all
of which are held of record and owned by the Hayes shareholders identified in
Item 2.4. Except as set forth in the Hayes Amended and Restated Articles of
Incorporation, each share of Hayes Series A Stock and each share of Hayes Series
B Stock is convertible into one share of Hayes Common Stock. None of the
outstanding Hayes Stock carries any mandatory redemption rights, other than the
Hayes Series B Preferred Stock. All issued and outstanding shares of Hayes Stock
have been duly authorized and validly issued, are fully paid and nonassessable,
are not subject to any right of rescission and have been offered, issued, sold
and delivered by Hayes in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws.
2.4.2 Options/Warrants/Rights. As of the date hereof, 400,000
shares of Hayes Common Stock are subject to issued and outstanding warrants to
purchase shares of Hayes Common Stock. As of the date hereof, an aggregate of
1,800,000 shares of Hayes Common Stock are reserved and authorized for issuance
pursuant to the Hayes Plan, of which options to purchase a total of 1,414,750
shares of Hayes Common Stock are issued and outstanding. Also, shares of Hayes
Common Stock are reserved and authorized for issuance pursuant to conversion of
the Notes described in Section 5.3.1 of this Agreement, which notes constitute
all issued and outstanding debt that is convertible into any shares of Hayes
Stock. A list of all holders of Hayes Stock and options or warrants to purchase
Hayes Stock as of the date hereof, and the number of shares, options and
warrants held by each has been delivered by Hayes to Access Beyond as Item 2.4,
which will be updated at the Closing. Except as set forth in this Section, there
are no options, warrants, calls, commitments, conversion privileges or
preemptive or other rights or agreements outstanding to purchase any of Hayes',
or any of the Hayes Subsidiaries' authorized but unissued capital stock or any
securities convertible into or exchangeable for shares of Hayes Stock or the
securities of any Hayes Subsidiary or obligating Hayes or any such Hayes
Subsidiary to grant, extend, or enter into any such option, warrant, call,
right, commitment, conversion privilege or other right or agreement, and there
is no liability for dividends accrued but unpaid. There are no voting
agreements, rights of first refusal or other restrictions (other than normal
restrictions on transfer under applicable federal and state securities laws)
applicable to any of Hayes' or any Hayes Subsidiaries' outstanding securities.
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Neither Hayes nor any Hayes Subsidiary is under any obligation to register under
the Securities Act of 1933, as amended (the "Securities Act") any of its
presently outstanding securities or any securities that may be subsequently
issued.
2.5 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement nor the consummation of the transactions provided for herein,
will conflict with, or (with or without notice or lapse of time, or both) result
in a termination, breach, impairment or violation of, (a) any provision of the
Articles of Incorporation or Bylaws of Hayes, as currently in effect, (b) any
material instrument or contract to which Hayes or any Hayes Subsidiary is a
Party or by which Hayes or any Hayes Subsidiary is bound (including, without
limitation, the Hayes Material Agreements described in Section 2.11) or (c) any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to, and that would have a material adverse effect on,
Hayes or any Hayes Subsidiary or any of their assets or properties. The
consummation of the Merger in and of itself will not require the consent of any
third party, will not have a material adverse effect upon any such rights,
licenses, franchises, leases or agreements pursuant to the terms of the Hayes
Material Agreements and will not be affected by, or require compliance with,
Section 14-2-1111 of the Georgia Law.
2.6 LITIGATION. There is no action, proceeding or investigation
pending or, to Hayes' actual knowledge, threatened against Hayes or any Hayes
Subsidiary before any court or administrative agency that, if determined
adversely to Hayes or such subsidiary, may reasonably be expected to have a
material adverse effect on the present or future operations or financial
condition of Hayes or, except as set forth in Item 2.6, in which the adverse
party or parties seek to recover in excess of $200,000 against Hayes or such
subsidiary. Except as set forth in Item 2.6, there is no basis for any person,
firm, corporation or entity to assert a claim against Hayes, any Hayes
Subsidiary or Access Beyond as the sole shareholder of Hayes immediately
following the Closing based upon: (a) ownership or rights to ownership of any
shares of Hayes Stock or Hayes Subsidiary capital stock, (b) any rights as a
Hayes or Hayes Subsidiary securities holder, including, without limitation, any
option or other right to acquire any Hayes or Hayes Subsidiary securities, any
preemptive rights or any rights to notice or to vote or (c) any rights under any
agreement between Hayes or any Hayes Subsidiary and any Hayes or Hayes
Subsidiary securities holder or former securities holder in such holder's
capacity as such.
2.7 HAYES FINANCIAL STATEMENTS. Hayes has delivered to Access Beyond
Hayes' audited consolidated balance sheet as of December 31, 1996 (the "Hayes
Balance Sheet Date") and a consolidated income statement and statement of cash
flows for the year then ended, and Hayes' consolidated unaudited balance sheet,
income statement and cash flow statement for the period from January 1, 1997
through June 30, 1997 (collectively, the "Hayes Financial Statements"). The
Hayes Financial Statements, in all material respects, (a) are in accordance with
the books and records of Hayes, (b) fairly and accurately present the financial
condition of Hayes and its subsidiaries at the respective dates specified
therein and the results of operations for the respective periods specified
therein and (c) except as may be indicated in the notes thereto, were prepared
in accordance with generally accepted accounting principles consistently
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applied (subject in the case of unaudited financial statements to normal,
year-end audit adjustments and the absence of footnotes) ("GAAP"). Hayes and the
Hayes Subsidiaries have no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, that is not reflected, reserved against or disclosed in the Hayes Financial
Statements, except for those that may have been incurred after the Hayes Balance
Sheet Date in the ordinary course of business, or are not required to be
included in a balance sheet prepared in accordance with GAAP. The inventories of
Hayes and the Hayes Subsidiaries are of quality and quantity usable or salable
in the ordinary course of business, the aggregate value of which has been
written down on the books of said corporations to realizable market value or
with respect to which adequate reserves have been provided in accordance with
GAAP.
2.8 TAXES. Hayes and the Hayes Subsidiaries have filed all federal,
state, local and foreign tax and material information returns required to be
filed prior to the date hereof, have paid all taxes required to be paid in
respect of all periods prior to the date hereof for which returns have been
filed, have made all necessary estimated tax payments, and have no liability for
taxes in excess of the amount so paid, except to the extent adequate reserves
have been established in the Hayes Financial Statements. True and complete
copies of all such tax and information returns have been provided or made
available by Hayes to Access Beyond. Neither Hayes nor any Hayes Subsidiary is
delinquent in the payment of any tax or in the filing of any tax returns, and no
deficiencies for any tax have been threatened, claimed, proposed or assessed
which have not been settled or paid. No tax return of Hayes or any Hayes
Subsidiary has been audited by the Internal Revenue Service or any state taxing
agency or authority during the past seven fiscal years or the current fiscal
year. For the purposes of this Section 2.8 and Section 3.8. the terms "tax" and
"taxes" include all federal, state, local and foreign income, gains, franchise,
excise, property, sales, use, employment, license, payroll. occupation,
recording, value added or transfer taxes, governmental charges, fees, levies or
assessments (whether payable directly or by withholding), and, with respect to
such taxes, any estimated tax, interest and penalties or additions to tax and
interest on such penalties and additions to tax. Hayes has no current or
deferred federal income tax liabilities on a consolidated basis, and will not as
a result of the Merger become liable for any income tax not adequately reserved
against on the Financial Statements. Neither Hayes nor any Hayes Subsidiary has
filed a consent pursuant to Section 341(f) of the Code.
2.9 TITLE TO PROPERTIES. Hayes and each Hayes Subsidiary has good
and marketable title to all of its assets as shown on the balance sheet as of
the Hayes Balance Sheet Date included in the Hayes Financial Statements, free
and clear of all liens, charges or encumbrances (other than for taxes not yet
due and payable and Hayes Permitted Liens as defined below), other than such
assets as were sold by Hayes in the ordinary course of business since the Hayes
Balance Sheet Date or which are subject to capitalized leases. "Hayes Permitted
Liens" means any lien, mortgage, encumbrance or restriction which is reflected
in the Hayes Financial Statements and is not in excess of $50,000 and which does
not materially detract from the value or materially interfere with the use, as
currently utilized, of the properties subject thereto or affected thereby or
otherwise materially impair the business operations being
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conducted thereon. There are no UCC financing statements of record with the
State of Georgia, or any other State where Hayes and each Hayes Subsidiary owns
or leases property, naming Hayes and each Hayes Subsidiary as debtor. The
machinery and equipment included in such assets are, in all material respects,
in good condition and repair, normal wear and tear excepted. All leases of real
or personal property to which Hayes and each Hayes Subsidiary is a party are
fully effective and afford Hayes and each Hayes Subsidiary adequate possession
of the subject matter of the lease. To its knowledge, neither Hayes nor any
Hayes Subsidiary is in violation of any material zoning, building, safety or
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties, and Hayes and each
Hayes Subsidiary has not received any notice of such violation with which it has
not complied or had waived.
2.10 ABSENCE OF CERTAIN CHANGES. Since the Hayes Balance Sheet Date,
Hayes and the Hayes Subsidiaries have carried on their business in the ordinary
course substantially in accordance with the procedures and practices in effect
on the Hayes Balance Sheet Date, and there has not been with respect to Hayes
and the Hayes Subsidiaries:
(a) any contingent liability incurred by Hayes or any Hayes
Subsidiary as guarantor or surety with respect to the obligations of
others;
(b) any mortgage, encumbrance or lien placed on any of the
properties of Hayes or any Hayes Subsidiary, other than liens for taxes
not yet due and payable and Hayes Permitted Liens;
(c) any material obligation or liability incurred by Hayes or
any Hayes Subsidiary other than in the ordinary course of business;
(d) any purchase or sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any of the properties or assets of Hayes or any Hayes
Subsidiary other than in the ordinary course of business or in amounts
that are not material to Hayes and the Hayes Subsidiaries or their
businesses considered as a whole;
(e) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business
of Hayes and the Hayes Subsidiaries or their businesses considered as a
whole;
(f) any declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, the capital
stock of Hayes, any split, stock dividend, combination or recapitalization
of the capital stock of Hayes or any direct or indirect redemption,
purchase or other acquisition by Hayes of any Hayes Stock;
(g) any unresolved labor dispute or claim of material unfair
employment or labor practices, any change in the compensation payable, or
to become
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payable, to any of Hayes' or of any Hayes Subsidiaries' officers,
employees or agents earning compensation at an anticipated annual rate in
excess of $50,000, or any bonus payment or arrangement made to or with any
of such officers, employees or agents; or any change in the compensation
payable or to become payable to any of Hayes' or of any Hayes
Subsidiaries' other officers, employees or agents other than normal annual
raises and bonuses in accordance with past practice;
(h) any change with respect to the senior management or other
key personnel of Hayes (each of whom is listed in Item 2.15) or of any
Hayes Subsidiary, except as contemplated by this Agreement and its
Exhibits;
(i) any payment or discharge of a material lien or liability
thereof, which lien or liability was not either (i) shown on the balance
sheet as of the Hayes Balance Sheet Date included in the Hayes Financial
Statements or (ii) incurred in the ordinary course of business after the
Hayes Balance Sheet Date;
(j) any obligation or liability incurred by Hayes or any Hayes
Subsidiary to any of their officers, directors or shareholders, or any
loans or advances made to any of their officers, directors. shareholders
or affiliates, except normal compensation and expense allowances payable
to officers; or
(k) any material deterioration in the relationship of Hayes or
any of the Hayes Subsidiaries with any customer or supplier, which would
have a material adverse effect on the businesses of Hayes and the Hayes
Subsidiaries, taken as a whole.
2.11 AGREEMENTS AND COMMITMENTS. A list of oral or written executory
agreements, obligations or commitments that are material to Hayes, any Hayes
Subsidiary or their businesses, taken as a whole (the "Hayes Material
Agreements"), is included as Item 2.11, true and complete copies of which have
been or will be delivered to Access Beyond or Access Beyond's counsel. Each
Hayes Material Agreement is valid and in full force and effect. Neither Hayes
nor, to the knowledge of Hayes, any other party, is in breach of, or default
under, any material term of any such Hayes Material Agreement. Except for the
Hayes Material Agreements, neither Hayes nor any Hayes Subsidiary is a party or
subject to any oral or written executory agreement, obligation or commitment
that is material to Hayes, any Hayes Subsidiary or their businesses, taken as a
whole, that is not terminable within 60 days without cost or penalty to Hayes or
any Hayes Subsidiary, including but not limited to the following:
(a) Any contract, commitment, letter agreement, quotation or
purchase order providing for payment by or to Hayes or any Hayes
Subsidiary of $200,000 or more, or any contract or arrangement that Hayes
reasonably believes will have a material adverse effect on their
businesses, taken as a whole;
(b) Any license agreement under which Hayes or any Hayes
Subsidiary is licensor or licensee (except for any nonexclusive software
license granted
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by Hayes or any Hayes Subsidiary to end-user customers where the form of
the license, excluding standard immaterial deviations, has been provided
to Access Beyond's counsel or for standard "shrink wrap" licenses for
off-the-shelf software products);
(c) Any agreement by Hayes or any Hayes Subsidiary to
encumber, transfer or sell rights in or with respect to any Hayes
Intellectual Property (as defined in Section 2.12 hereof);
(d) Any agreement for the sale or lease of real or personal
property involving more than $200,000 per year;
(e) Any dealer, distributor. sales representative, original
equipment manufacturer, value added remarketer or other agreement for the
distribution of any Hayes product or the product of any Hayes Subsidiary;
(f) Any franchise agreement or financing statement covering a
substantial portion of the assets of Hayes and the Hayes Subsidiaries
taken as a whole;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person;
(i) Any instrument evidencing indebtedness for borrowed money
by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, or any advance to any employee
of Hayes or any Hayes Subsidiary, except for trade indebtedness incurred
in the ordinary course of business or as disclosed in the Hayes Financial
Statements; or
(j) Any contract containing covenants purporting to limit
Hayes' or any Hayes Subsidiary's freedom to compete in any line of
business in any geographic area.
2.12 INTELLECTUAL PROPERTY. Hayes and the Hayes Subsidiaries own all
right, title and interest in, or have the right to use, all patent applications,
patents, trademark applications, trademarks, service marks, trade names,
copyright applications, copyrights, trade secrets, know-how, technology and
other intellectual property and proprietary rights used in or reasonably
necessary to the conduct of its business as presently conducted and the business
of the development, production, marketing, licensing and sale of commercial
products using such intellectual property and proprietary rights ("Hayes
Intellectual Property"). Hayes and the Hayes Subsidiaries have taken all
reasonable measures to protect all Hayes Intellectual Property, and Hayes is not
aware of any infringement of any Hayes Intellectual Property by any third party.
Set forth in Item 2.12 delivered to Access Beyond herewith is a true and
complete list of all copyright, mask work and trademark registrations and
applications and all patents and patent
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applications for Hayes Intellectual Property owned by Hayes or any of the Hayes
Subsidiaries. Hayes is not aware of any material loss, cancellation, termination
or expiration of any such registration or patent. To Hayes' knowledge, the
business of Hayes and the Hayes Subsidiaries, as conducted as of the date
hereof, does not infringe or violate any of the patents, trademarks, service
marks, trade names, mask works, copyrights, trade secrets, proprietary rights or
other intellectual property of any other person, and neither Hayes nor any Hayes
Subsidiary has received any written or oral claim or notice of infringement or
potential infringement of property of any other person which could be expected
to have a material adverse effect on Hayes, and Hayes Subsidiary or their
businesses, taken as a whole.
2.13 COMPLIANCE WITH LAWS. Hayes and the Hayes Subsidiaries have
complied, or prior to the Closing (as defined in Section 6.1 hereof) will have
complied, and are or will be at the Closing, in full compliance in all respects
material to Hayes or any Hayes Subsidiary with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards, judgments and
decrees, applicable to Hayes or any Hayes Subsidiary or to the properties and
business of Hayes or such subsidiary, including, without limitation: (a) all
applicable federal and state securities laws and regulations, (b) all applicable
federal, state and local laws, ordinances and regulations, and all orders,
writs, injunctions, awards, judgments and decrees, pertaining to (i) the sale,
licensing, leasing, ownership or management of Hayes' or any Hayes Subsidiary's
owned, leased or licensed real or personal property, products or technical data,
(ii) employment or employment practices, terms and conditions of employment, or
wages and hours or (iii) safety, health, fire prevention, environmental
protection (including toxic waste disposal and related matters described in
Section 2.19 hereof), building standards, zoning or other similar matters, (c)
laws, regulations, rules, orders, writs, injunctions, judgments or decrees
applicable to the export or re-export of controlled commodities or technical
data or (d) the Immigration Reform and Control Act. Hayes and the Hayes
Subsidiaries have received all material permits and approvals from, and have
made all material filings with, third parties, including government agencies and
authorities, that are necessary to the conduct of their businesses as presently
conducted.
2.14 CERTAIN TRANSACTIONS AND AGREEMENTS. No person who is an
officer or director of Hayes or any Hayes Subsidiary, or a member of any
officer's or director's immediate family, has any direct or indirect ownership
interest in, or any employment or consulting agreement with any firm or
corporation that competes with Hayes, any Hayes Subsidiary or Access Beyond
(except with respect to any interest in less than 1% of the outstanding voting
shares of any corporation whose stock is publicly traded). No person who is an
officer or director of Hayes or any Hayes Subsidiary, or any member of any
officer's or director's immediate family, is directly or indirectly interested
in any material contract or informal arrangement with Hayes or any Hayes
Subsidiary, including, but not limited to, any loan arrangements, except for
compensation for services as an officer, director or employee of Hayes or such
subsidiary and except for the normal rights of a shareholder. None of such
officers or directors, the compensation arrangements for whom are described in
Item 2.15, or family members has any interest in any property, real or personal,
tangible or intangible, including, without limitation, inventions, patents,
copyrights, trademarks, trade names or trade secrets,
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used in the business of Hayes or any Hayes Subsidiary, except for the normal
rights of a shareholder.
2.15 EMPLOYEES.
2.15.1 Identification. A list of all officers, key employees
and key consultants (other than attorneys and accountants of Hayes and the Hayes
Subsidiaries and the current compensation and benefits of such persons as of the
date of this Agreement is set forth in Item 2.15. Except as contemplated by this
Agreement, Hayes has no knowledge of any facts indicating that any of its
officers, directors or key employees (each of whom is identified in Item 2.15)
intends to leave Hayes' or any Hayes Subsidiary's employ.
2.15.2 Contracts. Neither Hayes nor any Hayes Subsidiary has
any employment contract or consulting agreement currently in effect that is not
terminable at will without penalty or payment of compensation by Hayes or any
Hayes Subsidiary other than (a) severance compensation as provided in the
applicable contracts, and (b) agreements with the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions. All
employees and consultants of Hayes and the Hayes Subsidiaries have executed
Hayes' standard form of assignments to Hayes and the Hayes Subsidiaries of
copyright and other intellectual property rights. To Hayes' knowledge, no
employee of Hayes or any Hayes Subsidiary is in material violation of any term
of any employment contract, nondisclosure agreement or noncompetition agreement
or any restrictive covenant, relating to the right of any such employee to be
employed by Hayes or any Hayes Subsidiary or to use trade secrets or proprietary
information of others.
2.15.3 Organized Labor. Neither Hayes nor any Hayes Subsidiary
(a) has been or is now subject to a union organizing effort, (b) is subject to
any collective bargaining agreement with respect to any of its employees, (c) is
subject to any other contract, written or oral, with any trade or labor union,
employees' association or similar organization or (d) has any labor dispute that
has not been resolved.
2.15.4 Identification of Hayes Employee Plans. Item 2.15
delivered by Hayes to Access Beyond in the Hayes Disclosure Letter contains a
list of all employment and consulting agreements, pension, retirement,
disability, medical, dental or other health plans, life insurance or other death
benefit plans, profit sharing, deferred compensation agreements, stock, option,
bonus or other incentive plans, vacation, sick, holiday or other paid leave
plans, severance plans or other similar employee benefit plans maintained by
Hayes or any of the Hayes Subsidiaries (the "Hayes Employee Plans"), including
without limitation all "employee benefit plans" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Hayes
has delivered true and complete copies or descriptions of all the Hayes Employee
Plans to Access Beyond and Access Beyond's counsel.
2.15.5 Conduct of Hayes Employee Plans. All contributions due
from Hayes or any Hayes Subsidiary with respect to any of the Hayes Employee
Plans have been
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made or accrued on Hayes' financial statements, and no further contributions
will be due or will have accrued thereunder as of the Closing. Each of the Hayes
Employee Plans, and its operation and administration, is, in all material
respects, in compliance with all applicable, federal, state, local and other
governmental laws and ordinances, orders, rules and regulations, including the
requirements of ERISA and the Code. All such Hayes Employee Plans that are
"employee pension benefit plans" (as defined in Section 3(2) of ERISA) which are
intended to qualify under Section 401(a)(8) of the Code have received favorable
determination letters that such plans satisfy the qualification requirements of
the Tax Equity and Fiscal Responsibility Act of 1982, the Deficit Reduction Act
of 1984 and the Retirement Equity Act of 1984. In addition, neither Hayes nor
any Hayes Subsidiary has been a participant in any "prohibited transaction,"
within the meaning of Section 406 of ERISA with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) which Hayes or any Hayes
Subsidiary sponsors as employer or in which Hayes or any Hayes Subsidiary
participates as an employer, which was not otherwise exempt pursuant to Section
408 of ERISA (including any individual exemption granted under Section 408(a) of
ERISA), or which could result in an excise tax under the Code. The group health
plans, as defined in Section 4980B(g) of the Code, that benefit employees of
Hayes or any Hayes Subsidiaries are in material compliance with the continuation
coverage requirements of subsection 4980B of the Code. There are no outstanding
violations of Section 4980B of the Code with respect to any Hayes Employee Plan,
covered employees or qualified beneficiaries.
2.15.6 Effect of Agreement. Neither Hayes nor any Hayes
Subsidiary is a party to any agreement with any executive officer or other key
employee (a) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Hayes in 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 employee.
Neither Hayes nor any Hayes Subsidiary is a party to any agreement or plan,
including, without limitation, any stock option plan, stock appreciation rights
plan or stock purchase plan, (a) any of the benefits of which will be materially
increased, or the vesting of benefits of which will be materially accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
(b) the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement, except for the vesting
of certain exercisability rights under the Hayes Warrant Plan and the Hayes
Stock Option Plan, and except as described on Exhibit C-5 hereto. Neither Hayes
nor any Hayes Subsidiary is obligated to make any excess parachute payment, as
defined in Section 280G(b)(1) of the Code, nor will any excess parachute payment
be deemed to have occurred as a result of or arising out of the Merger to the
extent Section 280G of the Code is applicable to Hayes or any Hayes Subsidiary.
2.16 CORPORATE DOCUMENTS. Hayes will make available to Access Beyond
for examination all documents and information listed in the Hayes Disclosure
Letter that are requested by Access Beyond's legal counsel, including, without
limitation, the following: (a) copies of Hayes' and each Hayes Subsidiary's
Articles of Incorporation and Bylaws as currently
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in effect; (b) Hayes' and each Hayes Subsidiary's minute book containing all
records of all proceedings, consents, actions and meetings of their directors
and shareholders; (c) stock records reflecting all stock issuances and transfers
of the securities of Hayes and the Hayes Subsidiaries; and (d) all permits,
orders and consents issued by any regulatory agency with respect to Hayes or any
Hayes Subsidiary, or any securities of Hayes or any Hayes Subsidiary, and all
applications for such permits, orders and consents.
2.17 BOOKS AND RECORDS. The books, records and accounts of Hayes and
each Hayes Subsidiary (a) are in all material respects true and complete, (b)
have been maintained in accordance with reasonable business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of Hayes and
such subsidiary and (d) accurately and fairly reflect the basis for the Hayes
Financial Statements.
2.18 INSURANCE. Hayes and the Hayes Subsidiaries maintain fire and
casualty, workers compensation and general liability insurance as listed in Item
2.18.
2.19 ENVIRONMENTAL MATTERS. During the period that Hayes or any
Hayes Subsidiary has leased the premises currently occupied by it and those
premises occupied by it since the date of its incorporation, there have been no
disposals, releases or threatened releases by Hayes or any Hayes Subsidiary of
Hazardous Materials (as defined below) on any such premises that would have a
material adverse effect upon Hayes, any Hayes Subsidiary or any of their
businesses. Hayes has no knowledge of any presence, disposals, releases or
threatened releases of Hazardous Materials on or from any of such premises,
which may have occurred prior to Hayes or any Hayes Subsidiary having taken
possession of any of such premises that would have a material adverse effect
upon Hayes, any Hayes Subsidiary or any of their businesses. For purposes of
this Agreement, the terms "disposal," "release," and "threatened release" have
the definitions assigned thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA"). For the purposes of this Agreement, "Hazardous Materials"
mean any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing Date (as defined in Section 6.1 hereof) regulated under, or
defined as a "hazardous substance," "pollutant," "contaminant," "toxic
chemical," "hazardous material," "toxic substance" or "hazardous chemical" under
(a) CERCLA; (b) the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; (c) the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq.; (d) the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (e) the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.; (f) regulations promulgated under any of the above
statutes; or (g) any applicable state or local statute, ordinance, rule or
regulation that has a scope or purpose similar to those identified above.
2.20 GOVERNMENT CONTRACTS. All representations, certifications and
disclosures made by Hayes or any Hayes Subsidiary to any Government Contract
Party (as defined below) have been in all material respects current, complete
and accurate at the times they were made.
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There have been no acts, omissions or noncompliance with regard to any
applicable public contracting statute, regulation or contract requirement
(whether express or incorporated by reference) relating to any of Hayes' or any
Hayes Subsidiary's contracts with any Government Contract Party in either case
that have led to or could lead to, either before or after the Closing, (a,) any
claim or dispute involving Hayes, any Hayes Subsidiary and any Government
Contract Party or (b) any suspension, debarment. contract renegotiation, or
contract termination, or proceeding related thereto. There has been no act or
omission that relates to the marketing, licensing or selling to any Government
Contract Party of any of Hayes' or any Hayes Subsidiary's technical data and
computer software and that has led to or could lead to, either before or after
the Closing, any material cloud on any of Hayes' or any Hayes Subsidiary's
rights in and to its technical data and computer software. All of Hayes' and the
Hayes Subsidiaries' development of technical data and computer software was
developed exclusively at private expense. For purposes of this Agreement, the
term "Government Contract Party" means any independent or executive agency,
division, subdivision, audit group or procuring office of the federal
government, including any prime contractor of the federal government and any
higher level subcontractor of a prime contractor of the federal government, and
including any employees or agents thereof, in each case acting in such capacity.
2.21 NO BROKERS. Neither Hayes or any of the Hayes Subsidiaries is
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction provided for herein.
2.22 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Hayes for inclusion in the Form S-4 and the Prospectus/Proxy
Statement, at the date such information is supplied and at the time of the
meetings of the Hayes shareholders and the Access Beyond stockholders to be held
to approve the Merger, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, or will, in the
case of the Form S-4, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
2.23 INTERESTED PARTY TRANSACTIONS. Except as set forth in Item
2.23, no officer or director of Hayes or any Hayes Subsidiary or any "affiliate"
or "associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directory or indirectly, a
material interest in: (a) any person or entity which purchases from or sells,
licenses or furnishes to Hayes or any Hayes Subsidiary any goods, property,
technology or intellectual or other property rights or services; or (b) any
contract or agreement to which Hayes or any Hayes Subsidiary is a party or by
which it may be bound or affected.
2.24 REAL PROPERTY HOLDING CORPORATION STATUS. Since its inception,
neither Hayes nor any Hayes Subsidiary has been a "United States real property
holding corporation,"
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as defined in Section 897(c)(2) of the Code, and in Section 1.897-2(b) of the
Treasury Regulations issued thereunder, and neither Hayes nor any Hayes
Subsidiary has filed with the Internal Revenue Service any statement with any of
its United States income tax returns that are required under Section 1.897-2(h)
of such regulations.
2.25 DISCLOSURE. This Agreement, its exhibits and schedules, and any
of the certificates or documents to be delivered by Hayes to Access Beyond under
this Agreement, taken together, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF ACCESS BEYOND.
Except as set forth in (i) the Access Beyond disclosure letter (the
"Access Beyond Disclosure Letter") delivered by Access Beyond to Hayes herewith
(which letter may be updated in an immaterial manner up to the Closing),
including items in the Access Beyond Disclosure Letter referred to as "Items"
below, and (ii) all registration statements, exhibits thereto, proxy statements,
quarterly and other reports and other materials filed by Access Beyond with the
SEC, Access Beyond hereby represents and warrants to Hayes as follows.
3.1 ORGANIZATION AND GOOD STANDING. Access Beyond is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and is
qualified as a foreign corporation in each jurisdiction listed on Item 3.1.
Access Beyond does not own or lease any real property, has no employees and does
not maintain a place of business in any foreign country or in any state of the
United States, except as set forth in Item 3.1.
3.2 SUBSIDIARIES. Except for the subsidiaries of Access Beyond
listed on Item 3.7 (collectively the "Access Beyond Subsidiaries," and each, an
"Access Beyond Subsidiary"), each of which is wholly owned by Access Beyond,
Access Beyond does not have any subsidiaries or any interest, direct or
indirect, in any corporation, partnership, joint venture or other business
entity. Each Access Beyond Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of its formation, has
the corporate power and authority to own, operate and lease its properties and
to carry on its business as now conducted and is qualified as a foreign
corporation in each Jurisdiction listed on Item 3.2.
3.3 POWER, AUTHORIZATION AND VALIDITY.
3.3.1 Organization. Access Beyond has and Newco will have the
corporate right, power, legal capacity and authority to enter into and perform
its obligations under this Agreement and all agreements to which such entity is
or will be a party that are required to be executed pursuant to this Agreement
(the "Access Beyond Ancillary Agreements"). This Agreement has been duly and
validly approved by the Access Beyond Board
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of Directors, and, upon submission to, and majority vote in favor of the Merger
by, the Access Beyond stockholders, the stockholders of Access Beyond, as
required by applicable law and will be duly and validly approved by the Newco
Board of Directors and Shareholders.
3.3.2 Authorization. No filing, authorization or approval,
governmental or otherwise, is necessary to enable Access Beyond to enter into,
and to perform its obligations under, this Agreement and the Access Beyond
Ancillary Agreements, except for: (a) the filing of the Certificate of Merger
with the Secretary of State of Georgia, the filing of such officers'
certificates and other documents as are required to effectuate the Merger under
Georgia law and the filing of appropriate documents with the relevant
authorities of the states other than Georgia in which Access Beyond is qualified
to do business, if any, (b) such filings as may be required to comply with
federal and state securities laws, (c) consents required under contracts
disclosed in Item 3.5 as exceptions to the representation made in the last
sentence of Section 3.5 below, (d) the approval of the Access Beyond
stockholders of the transactions contemplated hereby and (e) the filings
required by the HSR Act. Newco has not entered into any Agreement that would
require the consent of any Party thereto in order to consummate the Merger.
3.3.3 Enforceability. This Agreement and the Access Beyond
Ancillary Agreements are, or when executed and delivered by Access Beyond and
the other parties thereto will be, valid and binding obligations of Access
Beyond enforceable against Access Beyond in accordance with their respective
terms, except as to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (b) rules of law
specific performance, injunctive relief and other equitable remedies.
3.4 CAPITALIZATION.
3.4.1 Capital Stock. The authorized capital stock of Access
Beyond consists of 30,000,000 shares of Access Beyond Common Stock, $.01 par
value per share, and 3,000,000 shares of Preferred Stock, the rights,
preferences and privileges of which have not yet been designated as of the date
of this Agreement. 12,495,291 shares of Access Beyond Common Stock and no shares
of Preferred Stock are issued and outstanding as of the date of this Agreement
and as of immediately prior to the Closing. All issued and outstanding shares of
Access Beyond Common Stock have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to any right of rescission and
have been offered, issued, sold and delivered by Access Beyond in compliance
with all registration or qualification requirements (or applicable exemptions
therefrom) of applicable federal and state securities laws.
3.4.2 Options/Warrants/Rights. As of the date hereof, an
aggregate of 2,250,000 shares of Access Beyond Common Stock are reserved and
authorized for issuance pursuant to the following employee benefit plans of
Access Beyond (the "Access Beyond Plans"): (a) 2,000,000 shares reserved for
issuance under the 1996 Long-Term Incentive Plan, the number of shares
underlying outstanding options under such plan being set forth in the Disclosure
Letter and no shares have been purchased upon exercise of such options; and (b)
250,000 shares reserved for issuance under the Amended and Restated 1996
Nonemployee
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Director Stock Option Plan, the number of shares underlying options under such
Plan being set forth in the Disclosure Letter. A list of all holders of Access
Beyond options or warrants to purchase Access Beyond Stock as of the date
hereof, and the number of options and warrants held by each has been delivered
by Access Beyond to Hayes as Item 3.4, which will be updated at the Closing.
Except as set forth in this Section, there are no options, warrants, calls,
commitments, conversion privileges or preemptive or other rights or agreements
outstanding to purchase any of Access Beyond's, or any of the Access Beyond
Subsidiaries' authorized but unissued capital stock or any securities
convertible into or exchangeable for shares of Access Beyond Stock or the
securities of any Access Beyond Subsidiary or obligating Access Beyond or any
such Access Beyond Subsidiary to grant, extend, or enter into any such option,
warrant, call, right, commitment, conversion privilege or other right or
agreement, and there is no liability for dividends accrued but unpaid. There are
no voting agreements, rights of first refusal or other restrictions (other than
normal restrictions on transfer under applicable federal and state securities
laws) applicable to any of Access Beyond's or any Access Beyond Subsidiaries'
outstanding securities. Except with respect to the obligation to register
approximately 503,704 shares of Access Beyond common stock issued to Paradyne
Corporation, and except for registration of shares issuable upon exercise of
options granted under Access Beyond Plans, neither Access Beyond nor any Access
Beyond Subsidiary is under any obligation to register under the Securities Act
any of its presently outstanding securities or any securities that may be
subsequently issued.
3.5 NO CONFLICT OR VIOLATION. Neither the execution and delivery of
this Agreement or any Access Beyond Ancillary Agreement, nor the consummation of
the transactions provided for herein or therein, will conflict with, or (with or
without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of, (a) any provision of the Certificate of
Incorporation or Bylaws of Access Beyond, as currently in effect, (b) any
material instrument or contract to which Access Beyond or any Access Beyond
Subsidiary is a party or by which Access Beyond or any Access Beyond Subsidiary
is bound (including, without limitation, the Access Beyond Material Agreements
described in Section 3.11) or (c) any federal, state, local or foreign judgment,
writ, decree, order, statute, rule or regulation applicable to, and that would
have a material adverse effect on, Access Beyond or any Access Beyond Subsidiary
or any of their assets or properties. The consummation of the Merger in and of
itself will not require the consent of any third party and will not have a
material adverse effect upon any such rights, licenses, franchises, leases or
agreements pursuant to the terms of the Access Beyond Material Agreements.
3.6 LITIGATION. There is no action, proceeding or investigation
pending or, to Access Beyond's actual knowledge, threatened against Access
Beyond or any Access Beyond Subsidiary before any court or administrative agency
that, if determined adversely to Access Beyond or such subsidiary, may
reasonably be expected to have a material adverse effect on the present or
future operations or financial condition of Access Beyond or, except as set
forth in Item 3.6, in which the adverse party or parties seek to recover in
excess of $100,000.00 against Access Beyond or such subsidiary. There is no
basis for any person, firm, corporation or entity to assert a claim against
Access Beyond or any Access Beyond Subsidiary based upon: (a)
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ownership or rights to ownership of any shares of Access Beyond Stock or Access
Beyond Subsidiary capital stock, (b) any rights as an Access Beyond or Access
Beyond Subsidiary securities holder, including, without limitation, any option
or other right to acquire any Access Beyond or Access Beyond Subsidiary
securities, any preemptive rights or any rights to notice or to vote or (c) any
rights under any agreement between Access Beyond or any Access Beyond Subsidiary
and any Access Beyond or Access Beyond Subsidiary securities holder or former
securities holder in such holder's capacity as such.
3.7 ACCESS BEYOND FINANCIAL STATEMENTS. Access Beyond has delivered
to Hayes Access Beyond's audited consolidated balance sheet as of July 31, 1996
(the "Access Beyond Balance Sheet Date") and a consolidated income statement and
statement of cash flows for the year then ended, and Access Beyond's
consolidated unaudited balance sheet, income statement and cash flow statement
for the period from August 1, 1996 through April 30, 1997 (collectively, the
"Access Beyond Financial Statements"). The Access Beyond Financial Statements,
in all material respects, (a) are in accordance with the books and records of
Access Beyond, (b) fairly and accurately present the financial condition of
Access Beyond and its subsidiaries at the respective dates specified therein and
(c) except as may be indicated in the notes thereto, were prepared in accordance
with GAAP. Access Beyond and Access Beyond Subsidiaries have no material debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, that is not reflected, reserved
against or disclosed in the Access Beyond Financial Statements, except for those
that may have been incurred after the Access Beyond Balance Sheet Date in the
ordinary course of business, or are not required to be included in a balance
sheet prepared in accordance with GAAP. The inventories of Access Beyond and the
Access Beyond Subsidiaries are of a quality and quantity usable or salable in
the ordinary course of business, the aggregate value of which has been
written-down on the books of said corporations to realizable market value or
with respect to which adequate reserves have been provided in accordance with
GAAP.
3.8 TAXES. Access Beyond and the Access Beyond Subsidiaries have
filed all federal, state, local and foreign tax and material information returns
required to be filed prior to the date hereof, have paid all taxes required to
be paid in respect of all periods prior to the date hereof for which returns
have been filed, have made all necessary estimated tax payments, and have no
liability for taxes in excess of the amount so paid, except to the extent
adequate reserves have been established in the Access Beyond Financial
Statements. True and complete copies of all such tax and information returns
have been provided or made available by Access Beyond to Hayes. Neither Access
Beyond nor any Access Beyond Subsidiary is delinquent in the payment of any tax
or in the filing of any tax returns, and no deficiencies for any tax have been
threatened, claimed, proposed or assessed which have not been settled or paid.
- -No tax return of Access Beyond or any Access Beyond Subsidiary has been audited
by the Internal Revenue Service or any state taxing agency or authority during
the past seven fiscal years or the current fiscal year. For the purposes of this
Section 3.8, the terms "tax" and "taxes" shall have the meanings given to those
terms in Section 2.8. Access Beyond has no current or deferred federal income
tax liabilities on a consolidated basis, and will not as a result of the Merger
become liable for any income tax not adequately reserved against on the
Financial Statements.
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Neither Access Beyond nor any Access Beyond Subsidiary has filed a consent
pursuant to Section 341(f) of the Code.
3.9 TITLE TO PROPERTIES. Access Beyond has good and marketable title
to all of its assets as shown on the balance sheet as of the Access Beyond
Balance Sheet Date included in the Access Beyond Financial Statements, free and
clear of all liens, charges or encumbrances (other than for taxes not yet due
and payable and Access Beyond Permitted Liens as defined below), other than such
assets as were sold by Access Beyond in the ordinary course of business since
the Access Beyond Balance Sheet Date or which are subject to capitalized leases.
"Access Beyond Permitted Liens" means any lien, mortgage, encumbrance or
restriction which is reflected in the Access Beyond Financial Statements and is
not in excess of $50,000 and which does not materially detract from the value or
materially interfere with the use, as currently utilized, of the properties
subject thereto or affected thereby or otherwise materially impair the business
operations being conducted thereon. There are no UCC financing statements of
record with the State of Maryland naming Access Beyond as debtor and Access
Beyond neither owns or leases any property in any other state. The machinery and
equipment included in such assets are, in all material respects, in good
condition and repair, normal wear and tear excepted. All leases of real or
personal property to which Access Beyond is a party are fully effective and
afford Access Beyond adequate possession of the subject matter of the lease. To
its knowledge, Access Beyond is not in violation of any material zoning,
building, safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of owned or leased properties, and
Access Beyond has not received any notice of such violation with which it has
not complied or had waived.
3.10 ABSENCE OF CERTAIN CHANGES. Since the Access Beyond Balance
Sheet Date, Access Beyond and the Access Beyond Subsidiaries have carried on
their business in the ordinary course substantially in accordance with the
procedures and practices in effect on the Access Beyond Balance Sheet Date, and
there has not been with respect to Access Beyond and the Access Beyond
Subsidiaries:
(a) any contingent liability incurred by Access Beyond or any
Access Beyond Subsidiary as guarantor or surety with respect to the
obligations of others;
(b) any mortgage, encumbrance or lien placed on any of the
properties of Access Beyond or any Access Beyond Subsidiary, other than
liens for taxes not yet due and payable and Access Beyond Permitted Liens;
(c) any material obligation or liability incurred by Access
Beyond or any Access Beyond Subsidiary other than in the ordinary course
of business,
(d) any purchase or sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any of the properties or assets of Access Beyond or any
Access Beyond Subsidiary other than in the ordinary course of business or
in amounts that are not material to Access Beyond and the Access Beyond
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Subsidiaries or their businesses considered as a whole, except for
disposition of discontinued assets or operations identified in Item
3.10(d) and acquisition of certain technology from Paradyne Corporation;
(e) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business
of Access Beyond and the Access Beyond Subsidiaries or their businesses
considered as a whole;
(f) any declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, the capital
stock of Access Beyond, any split, stock dividend, combination or
recapitalization of the capital stock of Access Beyond or any direct or
indirect redemption, purchase or other acquisition by Access Beyond of any
Access Beyond Stock;
(g) any unresolved labor dispute or claim of material unfair
employment or labor practices, any change in the compensation payable, or
to become payable, to any of Access Beyond's or of any Access Beyond
Subsidiaries' officers, employees or agents earning compensation at an
anticipated annual rate in excess of $50,000, or any bonus payment or
arrangement made to or with any of such officers, employees or agents; or
any change in the compensation payable or to become payable to any of
Access Beyond's or of any Access Beyond Subsidiaries' other officers,
employees or agents other than normal annual raises and bonuses in
accordance with past practice, except for "stay-put" bonuses and severance
pay arrangements which do not exceed $600,000 in the aggregate;
(h) any change, not in the ordinary course of business, with
respect to the management, supervisory, development or other key personnel
of Access Beyond (each of whom is listed in Item 3.15) or of any Access
Beyond Subsidiary, except as contemplated by this Agreement and its
Exhibits;
(i) any payment or discharge of a material lien or liability
thereof, which lien or liability was not either (i) shown on the balance
sheet as of the Access Beyond Balance Sheet Date included in the Access
Beyond Financial Statements or (ii) incurred in the ordinary course of
business after the Access Beyond Balance Sheet Date;
(j) any obligation or liability incurred by Access Beyond or
any Access Beyond Subsidiary to any of their officers, directors or
shareholders, or any loans or advances made to any of their officers,
directors, shareholders or affiliates, except normal compensation and
expense allowances payable to officers; or
(k) any material deterioration in the relationship of Access
Beyond or any of the Access Beyond Subsidiaries with any customer or
supplier, which would have a material adverse effect on the businesses of
Access Beyond and the Access Beyond Subsidiaries, taken as a whole.
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3.11 AGREEMENTS AND COMMITMENTS. A list of oral or written executory
agreements, obligations or commitments that are material to Access Beyond, any
Access Beyond Subsidiary or their businesses, taken as a whole (the "Access
Beyond Material Agreements"), is included as Item 3.11, true and complete copies
of which have been or will be delivered to Hayes or Hayes' counsel. Each Access
Beyond Material Agreement is valid and in full force and effect. Neither Access
Beyond nor, to the knowledge of Access Beyond, any other party, is in breach of,
or default under, any material term of any such Access Beyond Material
Agreement. Except for the Access Beyond Material Agreements, neither Access
Beyond nor any Access Beyond Subsidiary is a party or subject to any oral or
written executory agreement, obligation or commitment that is material to Access
Beyond, any Access Beyond Subsidiary or their businesses, taken as a whole, that
is not terminable within 60 days without cost or penalty to Access Beyond or any
Access Beyond Subsidiary, including but not limited to the following:
(a) Any contract, commitment, letter agreement, quotation or
purchase order providing for payment by or to Access Beyond or any Access
Beyond Subsidiary of $100,000 or more, or any contract or arrangement that
Access Beyond reasonably believes will have a material adverse effect on
their businesses, taken as a whole;
(b) Any license agreement under which Access Beyond or any
Access Beyond Subsidiary is licensor or licensee (except for any
nonexclusive software license granted by Access Beyond or any Access
Beyond Subsidiary to end-user customers where the form of the license,
excluding standard immaterial deviations, has been provided to Hayes'
counsel or for standard "shrink wrap" licenses for off-the-shelf software
products);
(c) Any agreement by Access Beyond or any Access Beyond
Subsidiary to encumber, transfer or sell rights in or with respect to any
Access Beyond Intellectual Property (as defined in Section 3.12 hereof);
(d) Any agreement for the sale or lease of real or personal
property involving more than $100,000 per year;
(e) Any dealer, distributor, sales representative, original
equipment manufacturer, value added remarketer or other agreement for the
distribution of any Access Beyond product or the product of any Access
Beyond Subsidiary;
(f) Any franchise agreement or financing statement covering a
substantial portion of the assets of Access Beyond and the Access Beyond
Subsidiaries taken as a whole;
(g) Any stock redemption or purchase agreement;
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(h) Any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the
payment of royalties to any other person;
(i) Any instrument evidencing indebtedness for borrowed money
by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, or any advance to any employee
of Access Beyond or any Access Beyond Subsidiary, except for trade
indebtedness incurred in the ordinary course of business or as disclosed
in the Access Beyond Financial Statements; or
(j) Any contract containing covenants purporting to limit
Access Beyond or any Access Beyond Subsidiary's freedom to compete in any
line of business in any geographic area.
3.12 INTELLECTUAL PROPERTY. Access Beyond and the Access Beyond
Subsidiaries own all right, title and interest in, or have the right to use, all
patent applications, patents, trademark applications, trademarks, service marks,
trade names, copyright applications, copyrights, trade secrets, know-how,
technology and other intellectual property and proprietary rights used in or
reasonably necessary to the conduct of its business as presently conducted and
the business of the development, production, marketing, licensing and sale of
commercial products using such intellectual property and proprietary rights
("Access Beyond Intellectual Property"). Access Beyond and the Access Beyond
Subsidiaries have taken all reasonable measures to protect all Access Beyond
Intellectual Property, and Access Beyond is not aware of any infringement of any
Access Beyond Intellectual Property by any third party. Set forth in Item 3.12
delivered to Hayes herewith is a true and complete list of all copyright, mask
work and trademark registrations and applications and all patents and patent
applications for Access Beyond Intellectual Property owned by Access Beyond or
any of the Access Beyond Subsidiaries. Access Beyond is not aware of any
material loss, cancellation, termination or expiration of any such registration
or patent. To Access Beyond's knowledge, the business of Access Beyond and the
Access Beyond Subsidiaries, as conducted as of the date hereof, does not
infringe or violate any of the patents, trademarks, service marks, trade names,
mask works, copyrights, trade secrets, proprietary rights or other intellectual
property of any other person, and neither Access Beyond nor any Access Beyond
Subsidiary has received any written or oral claim or notice of infringement or
potential infringement of the intellectual property of any other person which
could be expected to have a material adverse effect on Access Beyond, and Access
Beyond Subsidiary or their businesses, taken as a whole.
3.13 COMPLIANCE WITH LAWS. Access Beyond and the Access Beyond
Subsidiaries have complied, or prior to the Closing will have complied, and are
or will be at the Closing, in full compliance in all respects material to Access
Beyond or any Access Beyond Subsidiary with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards, judgments and
decrees, applicable to Access Beyond or any Access Beyond Subsidiary or to the
properties and business of Access Beyond or such subsidiary, including, without
limitation, (a) all applicable federal and state securities laws and
regulations, (b) all
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applicable federal, state and local laws, ordinances and regulations, and all
orders, writs, injunctions, awards, judgments and decrees, pertaining to (i) the
sale, licensing, leasing, ownership or management of Access Beyond's or any
Access Beyond Subsidiary's owned, leased or licensed real or personal property,
products or technical data, (ii) employment or employment practices, terms and
conditions of employment, or wages and hours or (iii) safety, health, fire
prevention, environmental protection (including toxic waste disposal and related
matters described in Section 3.19 hereof), building standards, zoning or other
similar matters, (c) laws, regulations, rules, orders, writs, injunctions,
judgments or decrees applicable to the export or re-export of controlled
commodities or technical data or (d) the Immigration Reform and Control Act.
Access Beyond and the Access Beyond Subsidiaries have received all material
permits and approvals from, and have made all material filings with, third
parties, including government agencies and authorities, that are necessary to
the conduct of their businesses as presently conducted.
3.14 CERTAIN TRANSACTIONS AND AGREEMENTS. No person who is an
officer or director of Access Beyond or any Access Beyond Subsidiary, or a
member of any officer's or director's immediate family, has any direct or
indirect ownership interest in, or any employment or consulting agreement with,
any firm or corporation that competes with Access Beyond or any Access Beyond
Subsidiary (except with respect to any interest in less than 1% of the
outstanding voting shares of any corporation whose stock is publicly traded). No
person who is an officer or director of Access Beyond or any Access Beyond
Subsidiary, or any member of any officer's or director's immediate family, is
directly or indirectly interested in any material contract or informal
arrangement with Access Beyond or any Access Beyond Subsidiary, including, but
not limited to, any loan arrangements, except for compensation for services as
an officer, director or employee of Access Beyond or such subsidiary and except
for the normal rights of a stockholder. None of such officers or directors, the
compensation arrangements for whom are described in Item 3.15, or family members
has any interest in any property, real or personal, tangible or intangible,
including, without limitation, inventions, patents, copyrights, trademarks,
trade names or trade secrets, used in the business of Access Beyond or any
Access Beyond Subsidiary, except for the normal rights of a stockholder.
3.15 EMPLOYEES.
3.15.1 Identification. A list of all officers, key employees
and key consultants (other than attorneys and accountants) of Access Beyond and
the Access Beyond Subsidiaries and the current compensation and benefits of such
persons as of the date of this Agreement is set forth in Item 3.15. Except as
contemplated by this Agreement, Access Beyond has no knowledge of any facts
indicating that any of its key sales or engineering staff (each of whom is
identified in Item 3.15) intends to leave Access Beyond's or any Access Beyond
Subsidiary's employ, provided that Item 3.15 lists any such persons known or
expected to be leaving the employ of Access Beyond within ninety (90) days after
the Effective Time.
3.15.2 Contracts. Neither Access Beyond nor any Access Beyond
Subsidiary has any employment contract or consulting agreement currently in
effect that is not
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terminable at will without penalty or payment of compensation in excess of that
remaining under the contract by Access Beyond or any Access Beyond Subsidiary
(other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions). All key
engineering staff and consultants of Access Beyond and the Access Beyond
Subsidiaries have executed Access Beyond's standard form of assignments to
Access Beyond and the Access Beyond Subsidiaries of copyright and other
intellectual property rights. To Access Beyond's knowledge, no employee of
Access Beyond or any Access Beyond Subsidiary is in material violation of any
term of any employment contract, nondisclosure agreement or noncompetition
agreement or any restrictive covenant, relating to the right of any such
employee to be employed by Access Beyond or any Access Beyond Subsidiary or to
use trade secrets or proprietary information of others.
3.15.3 Organized Labor. Neither Access Beyond nor any Access
Beyond Subsidiary (a) has been or is now subject to a union organizing effort,
(b) is subject to any collective bargaining agreement with respect to any of its
employees, (c) is subject to any other contract, written or oral, with any trade
or labor union, employees' association or similar organization or (d) has any
labor dispute that has not been resolved.
3.15.4 Identification of Access Beyond Employee Plans. Item
3.15 delivered by Access Beyond to Hayes in the Access Beyond Disclosure Letter
contains a list of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans, life insurance or
other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by Access Beyond or any of the Access Beyond Subsidiaries (the
"Access Beyond Employee Plans"), including without limitation all "employee
benefit plans" as defined in Section 3(3) of ERISA. Access Beyond has delivered
true and complete copies or descriptions of all the Access Beyond Employee Plans
to Hayes and Hayes' counsel.
3.15.5 Conduct of Access Beyond Employee Plans. All
contributions due from Access Beyond or any Access Beyond Subsidiary with
respect to any of the Access Beyond Employee Plans have been made or accrued on
Access Beyond's financial statements, and no further contributions will be due
or will have accrued thereunder as of the Closing. Each of the Access Beyond
Employee Plans, and its operation and administration, is, in all material
respects, in compliance with all applicable, federal, state, local and other
governmental laws and ordinances, orders, rules and regulations, including the
requirements of ERISA and the Code. All such Access Beyond Employee Plans that
are "employee pension benefit plans" (as defined in Section 3(2) of ERISA) which
are intended to qualify under Section 401(a)(8) of the Code have received
favorable determination letters that such plans satisfy the qualification
requirements of the Tax Equity and Fiscal Responsibility Act of 1982, the
Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984. In
addition, neither Access Beyond nor any Access Beyond Subsidiary has been a
participant in any "prohibited transaction," within the meaning of Section 406
of ERISA with respect to any employee pension benefit plan (as defined in
Section 3(2) of ERISA) which Access Beyond or any Access Beyond
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Subsidiary sponsors as employer or in which Access Beyond or any Access Beyond
Subsidiary participates as an employer, which was not otherwise exempt pursuant
to Section 408 of ERISA (including any individual exemption granted under
Section 408(a) of ERISA), or which could result in an excise tax under the Code.
The group health plans, as defined in Section 4980B(g) of the Code, that benefit
employees of Access Beyond any the Access Beyond Subsidiaries are in material
compliance with the continuation coverage requirements of subsection 4980B of
the Code. There are no outstanding violations of Section 4980B of the Code with
respect to any Access Beyond Employee Plan, covered employees or qualified
beneficiaries.
3.15.6 Effect of Agreement. Neither Access Beyond nor any
Access Beyond Subsidiary is a party to any agreement with any executive officer
or other key employee (a) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Access Beyond in 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 employee, other than Access Beyond's contract with Ronald A.
Howard which provides for certain compensation contingent upon completion of a
transaction such as the transaction contemplated hereby. Neither Access Beyond
nor any Access Beyond Subsidiary is a Party to any agreement or plan, including,
without limitation, any stock option plan, stock appreciation rights plan or
stock purchase plan, (a) any of the benefits of which will be materially
increased, or the vesting of benefits of which will be materially accelerated,
by the occurrence of any of the transactions contemplated by this Agreement,
except as provided in the Access Beyond Plans, or (b) the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Neither Access Beyond nor any Access Beyond
Subsidiary is obligated to make any excess parachute payment, as defined in
Section 280G(b)(1) of the Code, nor will any excess parachute payment be deemed
to have occurred as a result of or arising out of the Merger to the extent
Section 280G of the Code is applicable to Access Beyond or any Access Beyond
Subsidiary.
3.16 CORPORATE DOCUMENTS. Access Beyond will make available to Hayes
for examination all documents and information listed in the Access Beyond
Disclosure Letter that are requested by Hayes' legal counsel, including, without
limitation, the following: (a) copies of Access Beyond's and each Access Beyond
Subsidiary's Agreement of Incorporation and Bylaws as currently in effect; (b)
Access Beyond's and each Access Beyond Subsidiary's minute book containing all
records of all proceedings, consents, actions and meetings of their directors
and shareholders; (c) stock records reflecting all stock issuances and transfers
of the securities of Access Beyond and the Access Beyond Subsidiaries; and (d)
all permits, orders and consents issued by any regulatory agency with respect to
Access Beyond or any Access Beyond Subsidiary, or any securities of Access
Beyond or any Access Beyond Subsidiary, and all applications for such permits,
orders and consents.
3.17 BOOKS AND RECORDS. The books, records and accounts of Access
Beyond and each Access Beyond Subsidiary (a) are in all material respects true
and complete, (b) have been maintained in accordance with reasonable business
practices on a basis consistent with prior
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years, (c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of Access Beyond and such subsidiary
and (d) accurately and fairly reflect the basis for the Access Beyond Financial
Statements.
3.18 INSURANCE. Access Beyond and the Access Beyond Subsidiaries
maintain fire and casualty, workers compensation and general liability insurance
as listed in Item 3.18.
3.19 ENVIRONMENTAL MATTERS. During the period that Access Beyond or
any Access Beyond Subsidiary has leased the premises currently occupied by it
and those premises occupied by it since the date of its incorporation, there
have been no disposals, releases or threatened releases by Access Beyond or any
Access Beyond Subsidiary of Hazardous Materials on any such premises that would
have a material adverse effect upon Access Beyond, any Access Beyond Subsidiary
or any of their businesses. Access Beyond has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on or from any
of such premises, which may have occurred prior to Access Beyond or any Access
Beyond Subsidiary having taken possession of any of such premises that would
have a material adverse effect upon Access Beyond, any Access Beyond Subsidiary
or any of their businesses.
3.20 GOVERNMENT CONTRACTS. All representations, certifications and
disclosures made by Access Beyond or any Access Beyond Subsidiary to any
Government Contract Party (as defined in Section 2.20 above) have been in all
material respects current, complete and accurate at the times they were made.
There have been no acts, omissions or noncompliance with regard to any
applicable public contracting statute, regulation or contract requirement
(whether express or incorporated by reference) relating to any of Access
Beyond's or any Access Beyond Subsidiary's contracts with any Government
Contract Party in either case that have led to or could lead to, either before
or after the Closing, (a) any claim or dispute involving Access Beyond or any
Access Beyond Subsidiary and any Government Contract Party or (b) any
suspension, debarment, contract renegotiation or contract termination, or
proceeding related thereto. There has been no act or omission that relates to
the marketing, licensing or selling to any Government Contract Party of any of
Access Beyond's or any Access Beyond Subsidiary's technical data and computer
software and that has led to or could lead to, either before or after the
Closing, any material cloud on any of Access Beyond's or any Access Beyond
Subsidiary's rights in and to its technical data and computer software. All of
Access Beyond's and the Access Beyond Subsidiaries' development of technical
data and computer software was developed exclusively at private expense.
3.21 REMOTE ACCESS PRODUCTS. Development of the remote access
products designated as Access Beyond 1000, Access Beyond 3400, Access Beyond
4400 and Hawk Access Products, including eight (8) analogue modem, six (6) BRI
SDN, 16 port asynch, twelve (12) digital modem card and T1 link module have
passed Access Beyond's quality testing and are ready to be manufactured in
volume production.
3.22 NO BROKERS. Neither Access Beyond nor any of the Access Beyond
Subsidiaries is obligated for the payment of fees or expenses of any investment
banker, broker
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or finder, other than Donaldson, Lufkin & Jenrette Securities Corporation, in
connection with the origin, negotiation or execution of this Agreement or In
connection with any transaction provided for herein.
3.23 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Access Beyond for inclusion in the Form S-4 and the Prospectus/Proxy
Statement, at the date such information is supplied and at the time of the
meetings of the Hayes shareholders and the Access Beyond stockholders to be held
to approve the Merger, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, or will, in the
case of the Form S-4, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
3.24 INTERESTED PARTY TRANSACTIONS. Except as set forth in Item
3.24, no officer or director of Access Beyond or any Access Beyond Subsidiary or
any "affiliate" or "associate" (as those terms are defined in Rule 405
promulgated under the Securities Act) of any such person has had, either
directory or indirectly, a material interest in: (a) any person or entity which
purchases from or sells, licenses or furnishes to Access Beyond or any Access
Beyond Subsidiary any goods, property, technology or intellectual or other
property rights or services; or (b) any contract or agreement to which Access
Beyond or any Access Beyond Subsidiary is a party or by which it may be bound or
affected.
3.25 DISCLOSURE. This Agreement, its exhibits and schedules, and any
of the certificates or documents to be delivered by Access Beyond to Hayes under
this Agreement, taken together, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
3.26 SEC FILINGS. Access Beyond has timely filed all reports,
filings and other documents required to be filed with the SEC under the
Securities Act of 1933 and the Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
4. COVENANTS OF THE PARTIES.
4.1 ACCESS; ADVICE OF CHANGES. During the period from the date of
this Agreement until the Effective Time (unless this Agreement is earlier
terminated in accordance herewith), each Party covenants to and agrees with the
other Party as follows.
4.1.1 Access to Information. Until the Closing and subject to
the terms and conditions hereof or in any other agreement between the Parties
relating to the
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confidentiality and use of confidential and proprietary information, each Party
will provide the other and the other's agents with reasonable access to the
files, books, records and offices of the Party making the covenant (the
"Promising Party"), including any and all information relating to such Party's
taxes, commitments, contracts, leases, licenses, real, personal and intangible
property, and financial condition.
4.1.2 Discussions with Customers and Suppliers. Through the
Due Diligence Period (as defined in Section 7.1), each Party will be entitled to
hold meetings and discussions with material customers and suppliers of the other
Party in order to determine any business issues that may exist concerning the
customer's or supplier's relationship with the other Party. Prior to holding any
such discussion, the other Party shall be given at least 24 hours notice of the
pendency of and given a reasonable opportunity to be present at the same. Such
notice will specify the persons to be present and the nature of the discussions
to be held. No such discussions may be held after the expiration of the Due
Diligence Period without the prior written consent of the other Party, which
consent may not be unreasonably withheld or delayed.
4.1.3 Notification of Changes. Each Party will promptly advise
the other Party in writing (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of such Party
contained in this Agreement, if and to the extent required to be made at the
Closing, untrue or inaccurate in any material respect and (b) of any material
action, suit, proceeding or investigation by or before any court, board or
governmental agency, initiated by or against such Party or any of its
subsidiaries or known by such Party to be threatened against it or any
subsidiary. The Promising Party hereby agrees to deliver to the other Party
within 30 days after the end of each monthly accounting period ending after the
date of this Agreement and before the Closing, an unaudited balance sheet and
statement of operations, which financial statements shall be prepared in the
ordinary course of business consistent with past practice, in accordance with
the Promising Party's books and records and generally accepted accounting
principles and shall fairly present the financial position of the Promising
Party and its subsidiaries as of their respective dates and the results of the
Promising Party's and its subsidiaries' operations for the periods then ended.
4.2 NOTIFICATION OF CHANGES IN RELATIONSHIPS. If the Promising Party
becomes aware of a material deterioration in the relationship with any material
customer, supplier or key employee of the Promising Party, such Party will
promptly bring such information to the attention of the other Party in writing
and, if requested by the other Party, will exert all reasonable efforts to
restore the relationship.
4.3 CONDUCT OF BUSINESS. During the period from the date of this
Agreement until the Effective Time, unless earlier terminated, each Promising
Party (including, without limitation, Newco) covenants to and agrees with the
other Party that, except as provided otherwise herein or as approved or
recommended by the other Party, prior to the Effective Time each Promising Party
indicated below (which for purposes of this Section 4.3 will include the
subsidiaries of such Party) will not, without the prior written consent of an
officer of the other Party, such consent not to be unreasonably withheld or
delayed:
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(a) Enter into any transaction not in the ordinary course of
business or enter into any transaction or make any commitment involving a
capital expenditure in excess of $100,000 with respect to Access Beyond,
$10,000 with respect to Newco and $5,000,000 with respect to Hayes;
(b) Borrow any money or encumber or permit to be encumbered
any of its assets except in the ordinary course of its business consistent
with past practice and to an extent that is not material to the Promising
Party or its business, provided that Access Beyond may establish a credit
facility with Signet Bank or any other institutional lender prior to the
Effective Time in the approximate amount of $3.0 million and may grant
security interests in all or substantially all of its assets in connection
therewith, and Access Beyond shall not agree to any prepayment fees or
penalties in excess of $100,000 in connection therewith without Hayes'
prior consent;
(c) Dispose of any of its material assets except in the
ordinary course of business consistent with past practice and to an extent
that is not material to the Promising Party or its business;
(d) Enter into any material agreement of the types described
in Section 3.11, except in the ordinary course of business consistent with
past practice without the consent of Hayes;
(e) Fail to maintain its equipment and other assets that are
material to the operation of its business in good working condition and
repair according to the standards it has maintained to the date of this
Agreement, subject only to ordinary wear and tear;
(f) Except as contemplated by this Agreement and for severance
and "stay put" bonuses, pay any bonus, royalty, increased salary (except
for annual increases in the ordinary course of business consistent with
past practice) or special remuneration to any officer, employee or
consultant (except pursuant to existing arrangements previously disclosed
in writing to the other Party or in connection with the transactions
contemplated hereby) or enter into any new employment or consulting
agreement with any such person, or enter into any new agreement or plan of
the type described in Section 2.15.4 or Section 3.15.4, as the case may
be;
(g) Change accounting methods, unless required by generally
accepted accounting principles;
(h) Declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, or except as necessary to
redeem any or all of the issued and outstanding shares of Hayes Series B
Preferred Stock, redeem or otherwise acquire any of its capital stock;
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(i) Amend or terminate any Material Agreements to which Access
Beyond is a Party, except those amended or terminated in the ordinary
course of business consistent with past practice;
(j) Lend any amount to any person or entity, other than
advances for travel and expenses which are incurred in the ordinary course
of business consistent with past practice, which travel and expenses shall
be documented by receipts for the claimed amounts;
(k) Guarantee or act as a surety for any obligation, except
for the endorsement of checks and other negotiable instruments in the
ordinary course of business consistent with past practice;
(l) Waive or release any material right or claim, except in
the ordinary course of business consistent with past practice;
(m) Split or combine the outstanding shares of its capital
stock of any class or enter into any recapitalization affecting the number
of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(n) Except for the Merger, merge, consolidate or reorganize
with, or acquire the business, stock or assets of any entity, provided
that Hayes may enter into any merger or acquisition with any party in
which the amount of the transaction consideration does not exceed $10.0
million, provided that no such transaction will be entered into by Hayes
in which the percentage of shares of Access Beyond issuable to or retained
by the shareholders of either Party, as the case may be, immediately after
the Effective Time, would be affected, without the consent of Access
Beyond; and no such transaction will be entered into by either Party after
filing the S-4 as contemplated in Section 4.5 until the earlier of the
Effective Time or termination of this Agreement.
(o) Amend its Articles of Incorporation or Bylaws, except as
contemplated by, and in accordance with, this Agreement;
(p) Agree to any audit assessment by any tax authority or file
any federal or state income or franchise tax return unless copies of such
returns have been delivered to the other Party for its review prior to
filing;
(q) License any Access Beyond or Hayes Intellectual Property,
as the case may be, except in the ordinary course of business consistent
with past practice;
(r) Terminate the employment of any, officer, director or key
employee listed in Item 2.15 with respect to Hayes or Item 3.15 with
respect to Access Beyond, as the case may be;
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(s) Agree to do any of the things described in the preceding
clauses 4.3(a) through 4.3(r);
(t) File a Registration Statement with the SEC, other than a
Form S-8 in respect of the Access Beyond Plans, or become subject to the
1934 Securities Exchange Act by directly or indirectly merging with or
acquiring an entity which is a reporting company; or
(u) Nothing herein shall prohibit Hayes or other parties from
entering into the agreements referred to herein as Exhibits C-2 through
C-5, the Dennis Hayes Partnership Pledge Agreement, amendment to the Notes
referred to in Section 5.3.1 hereof, or any other agreements expressly set
forth as a condition or covenant to be performed by Hayes.
4.4 NO SOLICITATION.
4.4.1 General Prohibition. Subject to Section 4.4.2, neither
of the Parties hereto shall directly or indirectly, nor shall either Party
authorize or permit any subsidiary of such Party (a Party and its subsidiaries
being collectively referred to as a "Party") or any representative of such Party
directly or indirectly to, (a) solicit, initiate, encourage or induce the
making, submission or announcement of any offer or proposal (other than an offer
or proposal by the other Party hereto) contemplating or otherwise relating to
any "Acquisition Transaction" (an "Acquisition Proposal"), or take any action
that could reasonably be expected to lead to an Acquisition Proposal, (b)
furnish any nonpublic information regarding such Party to any person or entity
(each, a "Person") in connection with, or in response to, an Acquisition
Proposal, (c) engage in discussions with any Person with respect to any
Acquisition Proposal, (d) approve, endorse or recommend any Acquisition Proposal
or (e) enter into any letter of intent or similar document or any agreement
contemplating or otherwise relating to any Acquisition Transaction. As of the
date of this Agreement, each Party shall immediately cease and cause to be
terminated any existing discussions with any other Person that relate to any
Acquisition Proposal.
4.4.2 Exceptions. Notwithstanding anything to the contrary
contained in this Agreement, this Section 4.4 shall not prohibit such Party from
taking any action described in clauses (c), (d) and (e) of Section 4.4.1 in
response to an unsolicited bona fide written Acquisition Proposal submitted (and
not withdrawn) by such Person if (a) the Board of Directors of such Party
concludes in good faith, based upon the written advice of its financial advisor,
that such Acquisition Proposal could reasonably be expected to result in a
transaction that is more favorable from a financial point of view to such
Party's stockholders than the Merger, (b) the Board of Directors of such Party
concludes in good faith, after consultation with, and the receipt of written
advice from, outside legal counsel, that such action is required in order for
the Board of Directors of such Party to comply with its fiduciary obligations to
such Party's stockholders under applicable law, (c) prior to furnishing any such
nonpublic information to, or entering into discussions with, such Person, such
Party gives the other Party written notice of the identity of such Person and of
such Party's intention to furnish nonpublic information to, or enter into
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discussions with, such Person, and such Party receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of such Party, and (d) prior to furnishing any such
nonpublic information to such Person, such Party furnishes such nonpublic
information to the other Party (to the extent such nonpublic information has not
been previously furnished by such Party to the other Party).
4.4.3 Definition of Acquisition Transaction. "Acquisition
Transaction" shall mean any transaction or series of related transactions
involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, acquisition of securities, tender
offer, exchange offer or other similar transaction) in which (i) the Party
is a constituent corporation, (ii) a Person or "group" (as defined in the
Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires such Party or more than 50% of such Party's business
or, directly or indirectly, acquires beneficial or record ownership of
securities representing more than 50% of the outstanding securities of any
class of voting securities of such Party, or (iii) in which such Party
issues securities representing more than 50% of the outstanding securities
of any class of voting securities of such Party; or
(b) any sale, lease (other than in the ordinary course
of business), exchange, transfer, license (other than in the ordinary
course of business) or disposition of more than 50% of the assets of the
Party.
4.5 REGISTRATION ON FORM S-4. The Access Beyond Stock to be issued
in the Merger shall be registered under the Securities Act on Form S-4. As
promptly as practicable after the date of this Agreement, Access Beyond and
Hayes shall prepare and file with the SEC a Form S-4 registration statement (the
"Form S-4") together with the prospectus/proxy statement included therein (the
"Prospectus/Proxy Statement") and any other documents required by the Securities
Act or the Exchange Act in connection with the Merger.
4.5.1 Filing of Form S-4 and Amendments. Access Beyond and
Hayes shall use reasonable, diligent efforts to cause the Form S-4 (including
the Prospectus/Proxy Statement) to comply with the rules and regulations
promulgated by the SEC, to respond promptly to any comments of the SEC or its
staff and to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after it is filed with the SEC. Hayes shall promptly
furnish to Access Beyond all information concerning Hayes, Hayes' Subsidiaries
and such Hayes' shareholders that may be required or reasonably requested in
connection with any action contemplated by this Section 4.5. If any event
relating to any of Hayes or any Hayes Subsidiary occurs, or if Hayes becomes
aware of any information, that should be set forth in an amendment or supplement
to the Form S-4 or the Prospectus/Proxy Statement, then Hayes shall promptly
inform Access Beyond thereof, shall cooperate with Access Beyond in filing such
amendment or supplement with the SEC and, if appropriate, in mailing such
amendment or
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supplement to the shareholders of Hayes. Any opinion required to be given in
connection with the Form S-4 with respect to the tax consequences of the Merger
as they relate to the Hayes Shareholders shall be provided by Hayes' accountants
or counsel.
4.5.2 Other Regulatory Approvals. Prior to the Effective Time,
Access Beyond shall use reasonable, diligent efforts to obtain all regulatory
approvals needed to ensure that the Access Beyond Stock to be issued in the
Merger will be registered or qualified under the securities law, or exempt from
the same, of every jurisdiction of the United States in which any holder of the
Hayes Stock has an address of record on the record date for determining the
shareholders entitled to notice of, and to vote at, the Hayes Shareholders
Meeting described below. Hayes shall use reasonable, diligent efforts to assist
Access Beyond to the extent necessary to comply with the securities and Blue Sky
laws of all applicable jurisdictions in connection with the Merger.
4.6 REGULATORY APPROVALS. Each of Access Beyond and Hayes shall use
reasonable, diligent efforts to file, as soon as practicable after the date of
this Agreement, all notices, reports and other documents required to be filed
with any governmental body or agency with respect to the Merger and the other
transactions contemplated by this Agreement, and to submit promptly any
additional information requested by any such governmental body or agency.
Without limiting the generality of the foregoing, Access Beyond and Hayes shall,
promptly after the date of this Agreement, prepare and file the notifications
required under the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act")
in connection with the Merger. Access Beyond and Hayes shall respond as promptly
as practicable to (a) any inquiries or requests received from the Federal Trade
Commission or the Department of Justice for additional information or
documentation and (b) any inquiries or requests received from any state attorney
general or other governmental body or agency in connection with antitrust or
related matters. Each of the Parties hereto shall (a) give the other Party
prompt notice of the commencement of any action, suit, arbitration, proceeding,
hearing, audit or active investigation commenced, conducted or heard by or
before, any court or other governmental body or agency (each a "Legal Proceeding
) with respect to the Merger or any of the other transactions contemplated by
this Agreement, (b) keep the other Party informed as to the status of any such
Legal Proceeding, and (c) promptly inform the other Party of any communication
to or from the Federal Trade Commission, the Department of Justice or any other
governmental body or agency regarding the Merger. The Parties will consult and
cooperate with one another, and will consider in good faith the views of one
another, in connection with any analysis, appearance, presentation, memorandum,
brief, argument, opinion or proposal made or submitted in connection with any
Legal Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair act law. In addition, except as may be prohibited by any
governmental body or agency or by any legal requirement, in connection with any
Legal Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair trade law or any other similar Legal Proceeding, each of the
Parties hereto agrees to permit authorized representatives of the other Party to
be present at each meeting or conference relating to any such Legal Proceeding
and to have access to, and be consulted in connection with, any document,
opinion
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or proposal made or submitted to any governmental body or agency in connection
with any such Legal Proceeding.
4.7 STOCKHOLDERS MEETINGS.
4.7.1 Convening Meetings. Each Party hereto shall, and Access
Beyond will cause Newco to, take all action necessary under all applicable legal
requirements to call, give notice of, convene and hold a meeting of the holders
of such Party's voting securities to consider, act upon and vote upon the
adoption of this Agreement and approval of the Merger and the transactions
contemplated thereby, including without limitation, approving the Amended and
Restated Charter of Access Beyond, approving the Access Beyond Series A Stock,
voting on new director nominees to the Access Beyond Board, and changing the
name of Access Beyond to "Hayes Communications Inc." (as to Access Beyond, the
"Access Beyond Stockholders Meeting," as to Hayes, the "Hayes Shareholders
Meeting" and, as to both of such meetings, the "Stockholders Meeting"). Each
Party's Stockholders Meeting and the stockholder meeting of Newco will be held
as promptly as practicable and in any event Access Beyond shall hold its
Stockholders Meeting within 60 days and Hayes shall hold the Hayes Shareholders
Meeting within ten (10) business days after the Form S-4 is declared effective
by the SEC. Each Promising Party, including, without limitation, Newco, shall
ensure such Parties' Stockholders Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited in connection with such Party's
Stockholders Meeting are solicited, in compliance with all applicable legal
requirements.
4.7.2 Approval Recommendation. Subject to Sections 4.7.3 and
4.7.4 below: (a) the Board of Directors of each Promising Party, including
without limitation Newco, shall unanimously recommend that such Party's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at such Party's Stockholders Meeting; (b) the Prospectus/Proxy Statement
shall include a statement to the effect that the Board of Directors of such
Party has unanimously recommended that such Party's stockholders vote in favor
of and adopt and approve this Agreement and the Merger at such Party's
Stockholders Meeting; and (c) neither the Board of Directors of such Party nor
any committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify, in a manner adverse to the other Party, the unanimous
recommendation of the Board of Directors of the Promising Party that such
Party's stockholders vote in favor or and adopt and approve this Agreement and
the Merger.
4.7.3 Withdrawal or Amendment of Recommendation. Nothing in
clause (d) of Section 4.4.1 or in Section 4.7.2 shall prevent the Board of
Directors of the Promising Party from withdrawing, amending or modifying its
unanimous recommendation in favor of the Merger if (a) an unsolicited bona fide
written Acquisition Proposal is submitted to such Party and is not withdrawn,
(b) the Board of Directors of such Party concludes in good faith, based upon the
written advice of its financial advisor, that such Acquisition Proposal could
reasonably be expected to result in a transaction that is more favorable from a
financial point of view to such Party's stockholders than the Merger, (c)
neither the Promising Party nor any of its
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representatives shall have violated any of the restrictions set forth in Section
4.4.1 and (d) the Board of Directors of such Party concludes in good faith,
after consultation with, and the receipt of written advice from, outside legal
counsel, that the withdrawal, amendment or modification of such recommendation
is required in order for the Board of Directors of such Party to comply with its
fiduciary obligations to such Party's stockholders under applicable law.
4.7.4 Recommendation as to Other Offer. Nothing in clause
"(d)" of Section 4.4.1 or in Section 4.7.2 shall prevent the Board of Directors
of the Promising Party from recommending that its stockholders accept an
unsolicited Acquisition Proposal if (a) the Board of Directors of such Party
shall have withdrawn, amended or modified its recommendation in favor of the
Merger in accordance with and as permitted by Section 4.7.3, (b) the Board of
Directors of such Party shall have concluded in good faith, based upon the
written advice of its financial advisor, that such Acquisition Proposal is more
favorable from a financial point of view to such Party's stockholders than the
Merger, (c) neither the Promising Party nor any of its representatives shall
have violated any of the restrictions set forth in Section 4.4.1, and (d) the
Board of Directors of such Party shall have concluded in good faith, after
consultation with, and the receipt of written advice from, its outside legal
counsel, that the recommendation in favor of acceptance of such tender offer or
exchange offer is required in order for the Board of Directors of such Party to
comply with its fiduciary obligations to such Party's stockholders under
applicable law.
4.8 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
4.8.1 Maintenance of Rights. All rights to indemnification
existing in favor of the current directors and officers of each Party for acts
and omissions occurring prior to the Effective Time, as provided in each Party's
Articles or Certificate of Incorporation and/or Bylaws (as in effect as of the
date of this Agreement) and as provided in the indemnification agreements
between such Party and said directors and officers (as in effect as of the date
of this Agreement), shall survive the Merger and shall be maintained by Access
Beyond and Hayes, as the surviving corporation in the Merger, for a period of
not less than six years from the Effective Time.
4.8.2 Maintenance of Insurance. From the Effective Time until
the sixth anniversary of the date on which the Merger becomes effective, Access
Beyond shall maintain in effect, for the benefit of the current directors and
officers of the Parties with respect to acts or omissions occurring prior to the
Effective Time, the directors' and officers' liability insurance policy
currently carried; provided, however, that Access Beyond may substitute for such
policy a policy or policies of comparable coverage.
4.9 CONFIDENTIALITY. The Mutual Confidentiality and Nondisclosure
Agreement, dated May 5, 1997, between the Parties hereto will remain in full
force and effect from the date hereof through the Effective Time.
4.10 CONFIDENTIALITY AND DISCLOSURE. Neither Party shall, nor shall
permit any
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of its representatives to, issue any press release or otherwise publicly
disseminate any document or other written material relating to the Merger or any
of the other transactions contemplated by this Agreement unless (a) each Party
shall have approved such press release or written material (it being understood
that neither Party shall unreasonably withhold or delay its approval of any such
press release or written material), or (b) Access Beyond shall have been advised
by its outside legal counsel that the issuance of such press release or the
dissemination of such written material is required by any applicable law or
regulation, and Access Beyond shall have consulted with Hayes and shall have
used its best efforts to modify such release so that it is reasonably acceptable
to Hayes prior to issuing such press release or disseminating such written
material; provided, however, that Access Beyond shall be entitled to file with
the SEC, after the execution and delivery of this Agreement, a report on Form
8-K (together with a copy of this Agreement (including the exhibits hereto) and
the press release (all of which shall have been approved by Hayes) announcing
this Agreement. Each Party shall use reasonable, diligent efforts to ensure that
none of its representatives makes any public statement, whether oral or written,
that is materially inconsistent with any press release issued or any written
material approved in advance by Hayes and Access Beyond and publicly
disseminated by Access Beyond or Hayes with respect to the Merger or with
respect to any of the other transactions contemplated by this Agreement. Hayes
will take all reasonable precautions to prevent any trading in the securities of
Access Beyond by officers, directors, employees and agents of Hayes having
knowledge of any material information regarding Access Beyond provided
hereunder, or any disclosure by any such persons to anyone outside of Access
Beyond or Hayes of any material non-public information concerning Access Beyond,
any Access Beyond Subsidiary or the transactions contemplated by this Agreement,
until the information in question has been adequately and publicly disclosed.
4.11 AFFILIATE AGREEMENTS. To ensure that the issuance of Access
Beyond Stock in the Merger complies with the Securities Act, concurrently with
the execution of this Agreement Hayes will deliver to Access Beyond a letter
identifying all persons who are, in Hayes' reasonable judgment, "affiliates" of
Hayes (for purposes of Rule 145 promulgated under the Securities Act) at the
time this Agreement is executed. Hayes will provide Access Beyond with all
information and documents needed to evaluate this list for compliance with
securities laws. Concurrent with the execution of this Agreement, Hayes will
cause each of its affiliates to deliver to Access Beyond, written agreements
(the "Hayes Affiliate Agreements") in the form of Exhibit C-3, providing, among
other things, that such persons will not offer to sell, sell or otherwise
dispose of any of the Access Beyond Stock issued to such person in the Merger in
violation of the Securities Act and Rule 145 promulgated thereunder, as they may
be amended from time to time, and will make no disposition of Access Beyond
Stock for certain periods of time after the Effective Time.
4.12 NEW CAPITAL FUNDING. Both Hayes and Access Beyond shall make
diligent efforts to obtain equity capital for Access Beyond or Hayes prior to or
after the Merger in the aggregate amount of up to $35.0 million. In the event
either Party is successful in obtaining such additional capital, then each Party
agrees that it will be proportionately diluted by the new stock required to be
issued or issuable to any new investor, and that the respective
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percentages of the shares of Access Beyond to be held immediately after the
Effective Time by the Access Beyond and Hayes shareholders as contemplated by
Section 1.1.5 shall be appropriately adjusted to accommodate the dilution
occasioned by the new capital funding. No binding contract for such new capital
funding prior to the Effective Time shall be entered into without the consent of
the other Party, which shall not be unreasonably withheld. The Parties
acknowledge that Hayes has entered into a commitment letter with respect to the
issuance of $30 million in capital stock dated July 16, 1997, and agree that the
consummation of the transaction described therein and as approved by Access
Beyond by letter of even date herewith shall not be deemed a breach of any
representation, warranty or covenant herein on the part of Hayes.
4.13 OTHER ACTIONS REQUIRED. During the period from the date of this
Agreement until the Effective Time or earlier termination of this Agreement in
accordance herewith, each Party covenants to, and agrees with, the other to use
reasonable, diligent efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 7 or 8 as to such Party, as
the case may be, and to cause the transactions provided for in this Agreement to
be consummated, and, without limiting the generality of the foregoing, to use
reasonable, diligent efforts to obtain all consents and authorizations of third
parties and to make all filings with, and give all notices to, third parties
that may be necessary or reasonably required on its part in order to effect the
transactions provided for herein.
5. HAYES PRECLOSING COVENANTS.
5.1 BUSINESS PLAN. By the end of the Due Diligence Period, Hayes
will prepare a proposed "high level" business plan for the combination of the
two companies. The business plan will be prepared with input from Access Beyond
and will be constructed in such a manner that indicates ongoing operating
profitability within the year following the Closing of the Merger, with
reasonable contingencies. The business plan may be modified following the
Closing.
5.2 HAYES DISSENTING SHARES. As promptly as practicable after the
date of the Hayes Shareholders Meeting and prior to the Closing Date, Hayes
shall furnish Access Beyond with the name and address of each Hayes dissenting
shareholder, if any, and the number of Hayes Dissenting Shares owned by such
Hayes dissenting shareholders.
5.3 OTHER ACTIONS REQUIRED. Hayes shall use reasonable, diligent
efforts to cause the following to occur:
5.3.1 Convertible Debt. Effective upon the Effective Time,
with an appropriate agreement to be signed at or prior to the expiration of the
Due Diligence Period, the Convertible Subordinated Promissory Notes in favor of
Rinzai Limited, Kaifa Technology (H.K.) Limited, Rolling Profit Holdings, Ltd.,
Lao Hotel (H.K.) Limited, Saliendra Pte. Ltd. and S.P. Quek Investments Ltd.
issued by Hayes in 1996 and 1997 (the "Notes") shall be converted to Hayes
Common Stock or amended to terminate the convertibility feature of the Notes and
to adjust the repayment (after Closing of the Merger) by Hayes or Access Beyond
of
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the Notes to occur only upon a determination of the Board of Access Beyond, in
the exercise of its fiduciary duties, that sufficient cash flow is available to
make such repayment, in whole or in part.
5.3.2 Antidilution Warrant. Termination of that certain
Warrant to Purchase Stock issued to Rinzai Limited by Hayes on April 16, 1996
(the "Antidilution Warrant") shall be executed at or prior to the expiration of
the Due Diligence Period, effective upon the Effective Time.
5.3.3 Preferred Stock. The Hayes Series A Stock and the Hayes
Series B Stock shall have been converted to Hayes Common Stock at or prior to
the Effective Time, terminating all rights to any preference on liquidation that
may result from the operation of Article V. Section 5 of the Hayes Articles of
Incorporation as a consequence of the Merger. Alternatively, as to the Hayes
Series B Stock only, the terms of such stock shall be revised at or prior to the
Effective Time and be clarified to provide that the Merger shall not trigger any
liquidation rights or preference or any such rights shall have been waived.
5.4 HAYES STOCK OPTION PLAN. Prior to the Effective Time, Hayes
shall not grant any more warrants or any more options to its employees under the
Hayes Stock Option Plan, provided that Hayes may, in the ordinary course
consistent with past practices, issue options to employees pursuant to the
provisions of its Stock Option Plan permitting the award of Management Grant
Options.
6. CLOSING MATTERS.
6.1 THE CLOSING. Subject to termination of this Agreement as
provided in Section 9 below, the closing of the transactions provided for herein
(the "Closing") will take place at the offices of Morrison, Cohen, Singer &
Weinstein, 750 Lexington Avenue, New York, New York 10022, at 10:00 a.m.,
Eastern Time on a date to be designated by Access Beyond (the "Closing Date"),
which (subject to the satisfaction or waiver of the conditions set forth in
Sections 7 and 8) shall be no later than the 5th business day after satisfaction
of the latest to occur of the conditions set forth in Sections 7.5 and 8.5
(effectiveness of the Form S-4), 7.7 and 8.6 (obtaining approvals under the HSR
Act) and 7.6 and 8.7 (obtaining stockholder approval). Prior to, or concurrently
with, the Closing, the Certificate of Merger and such officers' certificates or
other documents as may be required to effectuate the Merger will be filed in the
office of the Georgia Secretary of State and the Merger will thereby become
effective.
6.2 EXCHANGE OF CERTIFICATES.
6.2.1 Hayes Stock Converted. As of the Effective Time, all
shares of Hayes Stock that are outstanding immediately prior thereto will, by
virtue of the Merger and without further action, cease to exist, and all such
shares, except for Dissenting Shares, will be converted into the right to
receive from Access Beyond the number of shares and type of Access
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Beyond Stock determined as set forth in Section 1 hereof. At and after the
Effective Time, each certificate representing outstanding shares of Hayes Stock,
except for Dissenting Shares, will represent the right to receive the number of
shares of Access Beyond Stock into which such shares of Hayes Stock have been
converted, and such shares of Access Beyond Stock will be registered in the name
of the holder of such certificate. Unless surrendered to Access Beyond for
exchange at the Closing, as soon as practicable after the Effective Time, each
holder of shares of Hayes Stock, except for holders of Dissenting Shares, will
surrender (a) the certificates for such shares (the "Hayes Certificates") to
Access Beyond for cancellation or (b) an affidavit of lost (or nonissued)
certificate and indemnity with respect to the same, in form reasonably
satisfactory to Access Beyond. Promptly following the Effective Time and receipt
of the Hayes Certificates, Access Beyond will cause its transfer agent to issue
to each such surrendering holder, certificate(s) for the number of shares of
Access Beyond Stock to which such holder is entitled pursuant to Section 1.1,
subject to Section 1.1.6 hereof, and Access Beyond will distribute any cash
payable under Section 1.2. After the Effective Time, there will be no further
registration of transfers of the shares of Hayes Stock on the stock transfer
books of Hayes.
6.2.2 Certificates Not Tendered. Until Hayes Certificates
representing Hayes Stock outstanding prior to the Merger are surrendered
pursuant to Section 6.2.1 above, such certificates, except for certificates
representing Dissenting Shares, will be deemed, for all purposes, to evidence
solely the right to receive (a) the number and type of shares of Access Beyond
Stock into which such shares of Hayes Stock will have been converted and (b) if
applicable, cash in lieu of fractional shares.
6.3 ASSUMPTION OF OPTIONS AND WARRANTS. Promptly after the Effective
Time, Access Beyond will notify in writing each holder of a Hayes Option or a
Hayes Warrant of the assumption of such Hayes Option or Hayes Warrant by Access
Beyond, and the number of shares of Access Beyond Stock that are then subject to
such option or warrant and the exercise price of such option or warrant, as
determined pursuant to Section 1 hereof.
6.4 ACCESS BEYOND OPTIONS. To the extent that the transactions
contemplated hereby constitute a "Change of Control" (as defined in the Access
Beyond Plans), and outstanding Access Beyond options are terminated as a result
thereof, the Parties shall cause Access Beyond to issue substantially identical
replacement options to those employees remaining employed by Access Beyond after
the Effective Time, exercisable at the "Fair Market Value" of the shares (as
defined in the Access Beyond Plans) at the date of grant. Credit shall be given
to Access Beyond's employees for time of employment attained under the
terminated Access Beyond options. For purposes hereof, the date of grant shall
be the earlier of the ninetieth (90th) day following the Effective Time or the
date on which a remaining employee irrevocably waives his or her right to
receive his or her option.
7. CONDITIONS TO OBLIGATIONS OF HAYES.
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Hayes' obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Hayes, but only in a writing signed on
behalf of Hayes by its Chairman or President).
7.1 REMOVAL OF DUE DILIGENCE AND OTHER CONDITIONS. During the thirty
(30) day period following the date of this Agreement (the "Due Diligence
Period"), Hayes shall have completed its discussions with customers and
suppliers of Access Beyond and shall have completed other due diligence and the
agreements referred to in Section 5.3 shall have been executed. A notice to that
effect shall have been sent to Access Beyond on or before the expiration of the
Due Diligence Period. If Hayes determines in its reasonable discretion that the
representations and warranties of Access Beyond contained herein are not true
and correct in all material respects or if Access Beyond has not received the
fairness opinion described in Section 8.16 by the end of the Due Diligence
Period, then Hayes may terminate this Agreement without liability to Access
Beyond therefor by sending written notice to Access Beyond on or before the
expiration of the Due Diligence Period. If such notice is not sent by such date,
the condition described in this Section 7.1 conclusively will be deemed
satisfied. Hayes agrees that information disclosed in the Disclosure Letter and
in documents heretofore filed by Access Beyond with the SEC (but not including
documents referenced in the Disclosure Letter or such filings, unless said
documents were themselves provided to Hayes or filed with the SEC) is acceptable
and to the extent that such information is true, correct and complete, shall not
be the basis for Hayes electing to terminate this Agreement under this Section
7.1
7.2 COVENANTS, REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Access Beyond set forth in Sections 3.1 through 3.13, 3.15,
3.21, 3.22, 3,23, 3.25 and 3.26 shall be true and complete in every material
respect as of the Closing with the same force and effect as if they had been
made at the Closing, Access Beyond shall have performed and complied in all
material respects with all of its covenants contained in Section 4 to be
performed before the Closing and Hayes shall have received a certificate to such
effect executed on behalf of Access Beyond by its President or Chief Financial
Officer.
7.3 COMPLIANCE WITH LAW. There shall be no order, decree, ruling or
pending action by any court or governmental agency, or threat thereof, or any
other fact or circumstance, which would prohibit or render illegal the
transactions contemplated by this Agreement.
7.4 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the Closing such permits or authorizations, and there shall have been taken
such other actions, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the Parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
7.5 FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order and the Prospectus/Proxy Statement shall on the Closing not
be subject to any proceedings commenced or threatened by the SEC.
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7.6 DOCUMENTS AND CONSENTS. Hayes shall have received all written
consents, assignments, waivers, authorizations or other certificates of third
parties reasonably deemed necessary by Hayes' legal counsel to consummate the
transactions provided for herein, including, without limitation, the approvals
and consents of Access Beyond and Hayes shareholders. Access Beyond shall have
deposited with Access Beyond's Transfer Agent the certificates representing the
shares of Access Beyond Stock to be issued as a consequence of the Merger
pending the return of the Hayes Certificates therefor; and Hayes shall have
received the Certificate of Officer as to Tax Matters from Access Beyond and
Newco in substantially the form attached hereto as Exhibit 1.5A.
7.7 HART-SCOTT-RODINO COMPLIANCE. All applicable waiting periods
under the HSR Act shall have expired or early termination shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice.
7.8 NO LITIGATION. No litigation or proceeding shall be pending
which will have the probable effect of enjoining or preventing the consummation
of any of the transactions provided for in this Agreement.
7.9 OPINION OF COUNSEL. Hayes shall have received from Morrison,
Cohen, Singer & Weinstein, counsel to Access Beyond, an opinion reasonably
satisfactory to Hayes' counsel.
7.10 EMPLOYMENT AGREEMENTS. Access Beyond, Ronald A. Howard and
Dennis C. Hayes will have executed and delivered to Access Beyond Employment
Agreements substantially in the forms attached as Exhibits C-4 and C-5. Each of
such agreements will become effective at the Effective Time.
7.11 TAX-FREE TRANSACTION. The amount of the cash consideration
payable for Dissenting Shares pursuant to Section 1.1.6 hereof shall not cause
the Merger to fail to qualify as a tax-free reorganization under the Code.
7.12 LISTING. The shares of Access Beyond Common Stock to be issued
in the Merger shall have been approved for listing (subject to notice of
issuance) on the Nasdaq National Market.
7.13 ACCESS BEYOND RESTATED CERTIFICATE. The stockholders of Access
Beyond shall have approved and the Secretary of State of Delaware shall have
accepted for filing the Amended and Restated Certificate of Incorporation
substantially in the form attached hereto as Exhibit 7.13 (the "Restated
Certificate") in order to (a) change Access Beyond's name to Hayes
Communications Inc.; (b) create the Access Beyond Series A Stock in an amount
sufficient to provide for conversion of the Hayes Series B Stock; and (c) to
eliminate the classes of the Board of Directors.
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7.14 SATISFACTORY FORM OF LEGAL AND ACCOUNTING MATTERS. The form,
scope and substance of all legal and accounting matters contemplated hereby and
all closing documents and other papers delivered hereunder shall be reasonably
acceptable to Hayes' counsel.
7.15 ACCESS BEYOND BOARD OF DIRECTORS. The Board of Access Beyond
will consist of seven (7) Directors, as follows:
Chairman of the Board of Hayes (Dennis C. Hayes) - Class III
One (1) designee of the shareholders of Hayes (Chiang Lam) - Class II
Chairman of the Board of Access Beyond (Ronald A. Howard) - Class III
Three (3) outside directors designated by Hayes Shareholders - 2
Two in Class II; One in Class I One (1) outside director designated
by Access Beyond - Class II
The above Directors will be appointed effective as of the Closing, except for
Dennis C. Hayes and Chiang Lam, who will be appointed as of the day after
Closing.
7.16 RESIGNATIONS. The current officers and directors of Access
Beyond shall resign their positions effective as of the Effective Time, and
Access Beyond shall use its best efforts to include in the resignation with
respect to such officers a general release of Access Beyond from any liability
for acts, events or circumstances prior to the Effective Time.
7.17 SHAREHOLDERS AGREEMENT. Access Beyond and Ronald A. Howard will
have executed and delivered the Shareholders Agreement.
8. CONDITIONS TO OBLIGATIONS OF ACCESS BEYOND.
The obligations of Access Beyond hereunder are subject to the fulfillment
or satisfaction as of the Closing, of each of the following conditions (any one
or more of which may be waived by Access Beyond, but only in a writing signed on
behalf of Access Beyond by its President or Chief Financial Officer).
8.1 REMOVAL OF DUE DILIGENCE AND OTHER CONDITIONS. The business plan
prepared by Hayes for the period subsequent to the Closing with input from
Access Beyond shall be completed by the expiration of the Due Diligence Period
and Access Beyond shall have completed its discussions with customers and
suppliers of Hayes and other due diligence by the expiration of the Due
Diligence Period. If Access Beyond determines in its reasonable discretion that
the representations and warranties of Hayes contained herein are not true and
correct in all material respects or if Hayes has not, by the expiration of the
Due Diligence Period received the agreements required to be delivered hereunder
in Section 5.3 by such time, or if Access Beyond has not received the fairness
opinion described in Section 8.16 by the end of the Due Diligence Period, then
Access Beyond may terminate this Agreement without liability to Hayes therefor
by sending written notice to Hayes on or before the expiration of the Due
Diligence Period. If
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the notice described in this Section 8.1 is not sent by the date specified
above, the conditions described in this Section 8.1 to which such notice relates
(except for such fairness opinion) conclusively will be deemed satisfied. Access
Beyond agrees that information disclosed in the draft Disclosure Letter (but not
including documents referenced therein, unless said documents were themselves
provided to Access Beyond), the Hayes 1996 audited financial statements, and the
Hayes interim unaudited financial statements through June 30, 1997, is
acceptable and shall not, to the extent that such information is true, correct
and complete, be the basis for Access Beyond electing to terminate this
Agreement under this Section 8.1
8.2 COVENANTS, REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Hayes set forth in Sections 2.1 through 2.13, 2.15, 2.21, 2.22
and 2.25 shall be true and complete in every material respect as of the Closing
with the same force and effect as if they had been made at the Closing, Hayes
shall have performed and complied in all material respects with all of its
covenants contained in Sections 4 and 5 to be performed before the Closing and
Access Beyond shall have received a certificate to such effect executed on
behalf of Hayes by its President or Chief Financial Officer.
8.3 COMPLIANCE WITH LAW. There shall be no order, decree, ruling or
pending action by any court or governmental agency or threat thereof, or any
other fact or circumstance, which would prohibit or render illegal the
transactions provided for in this Agreement.
8.4 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the Closing such permits or authorizations, and there shall have been taken
such other actions, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the Parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
8.5 FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order and the Prospectus/Proxy Statement shall on the Closing not
be subject to any proceedings commenced or threatened by the SEC.
8.6 HART-SCOTT-RODINO COMPLIANCE. All applicable waiting periods
under the HSR Act shall have expired or early termination shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice.
8.7 DOCUMENTS AND CONSENTS. Access Beyond shall have received all
written consents, assignments, waivers, authorizations or other certificates of
third parties reasonably deemed necessary by Access Beyond's legal counsel to
provide for the continuation in full force and effect of any and all material
contracts and leases of Hayes and for Access Beyond to consummate the
transactions contemplated hereby, including, without limitation, the consents of
the securities holders described in Sections 5.3.1 through 5.3.4 above to
cancellation or amendment, as described therein, and the approvals and consents
of Access Beyond and Hayes
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shareholders. Access Beyond shall have received the Certificate of Officer as to
Tax Matters from Hayes in substantially the form attached hereto as Exhibit
1.5B.
8.8 NO LITIGATION. No litigation or proceeding shall be pending
which will have the probable effect of enjoining or preventing the consummation
of any of the transactions provided for in this Agreement.
8.9 OPINION OF COUNSEL. Access Beyond shall have received from
Womble Carlyle Sandridge & Rice, PLLC, counsel to Hayes, an opinion reasonably
satisfactory to Access Beyond's counsel.
8.10 EMPLOYMENT AGREEMENTS. Access Beyond, Ronald A. Howard and
Dennis C. Hayes will have executed and delivered to Access Beyond Employment
Agreements substantially in the forms attached as Exhibits C-4 and C-5,
respectively. Each of such agreements will become effective at the Effective
Time.
8.11 LISTING. The shares of Access Beyond Common Stock to be issued
in the Merger shall have been approved for listing (subject to notice of
issuance) on the Nasdaq National Market.
8.12 AFFILIATE AGREEMENTS. Each of the Hayes Affiliate Agreements,
the Voting Agreements, the Market Standoff Agreement and the Shareholders
Agreement shall have been executed and delivered prior to the expiration of the
Due Diligence Period and shall remain in full force and effect as of the
Effective Time.
8.13 SATISFACTORY FORM OF LEGAL AND ACCOUNTING MATTERS. The form,
scope and substance of all legal and accounting matters contemplated hereby and
all closing documents and other papers delivered hereunder shall be reasonably
acceptable to Access Beyond's counsel.
8.14 COMPLETION OF OTHER ACTIONS. Hayes shall have accomplished the
matters set forth in paragraphs 5.3.1 and 5.3.2 not later than the expiration of
the Due Diligence Period.
8.15 ACCESS BEYOND RESTATED CERTIFICATE. The stockholders of Access
Beyond shall have approved and the Secretary of State of Delaware shall have
accepted for filing the Restated Certificate.
8.16 FAIRNESS OPINION. Access Beyond shall have received an opinion
from Donaldson, Lufkin & Jenrette, its Investment Bankers, by no later than the
expiration of the Due Diligence Period, stating that the Merger is fair to
Access Beyond and its stockholders from a financial point of view of the
Conversion Ratio, which opinion shall be updated at the Closing and shall
otherwise be reasonably acceptable to Access Beyond.
8.17 ACCESS BEYOND BOARD OF DIRECTORS. The Board of Access Beyond
will consist of seven (7) Directors, as follows:
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Chairman of the Board of Hayes (Dennis C. Hayes) - Class III
One (1) designee of the shareholders of Hayes (Chiang Lam) - Class I
Chairman of the Board of Access Beyond (Ronald A. Howard) -
Class III Three (3) outside directors designated by Hayes
Shareholders - Two in Class II; One in Class I
One (1) outside director designated by Access Beyond - Class II
The above Directors will be appointed effective as of the Closing, except for
Dennis C. Hayes and Chiang Lam, who will be appointed as of the day after
Closing.
9. TERMINATION OF AGREEMENT.
9.1 TERMINATION. This Agreement may be terminated prior to the
Effective time, whether before or after approval of the Merger by the
stockholders or shareholders of either or both of the Parties:
(a) by mutual written consent of Access Beyond and Hayes;
(b) by either Access Beyond or Hayes if the Merger shall not
have been consummated by 5:00 p.m. (Eastern Time) on December 31, 1997
(unless the failure to consummate the Merger is attributable to a failure
on the part of the Party seeking to terminate this Agreement to perform
any material obligation required to be performed by such Party at or prior
to the Effective Time);
(c) by either Access Beyond or Hayes if a court of competent
jurisdiction or other governmental body or agency shall have issued a
final and nonappealable order, decree or ruling, or shall have taken any
other action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(d) by either Access Beyond or Hayes if (i) any of the
applicable Hayes Shareholders repudiate the Voting Agreements (Exhibit
C-1) entered into by them, or if (ii) the Hayes Shareholders Meeting shall
have been held and this Agreement and the Merger shall not have been
adopted and approved at such meeting by the vote required by law or if
(iii) the required Hayes Shareholder Meeting to vote on the Agreement is
not held within ten (10) business days after SEC clearance of Form S-4 as
contemplated in Sections 7.5 and 8.5; provided, however, that (i) Access
Beyond shall not be permitted to terminate this Agreement pursuant to this
clause (d) if the failure of the Hayes shareholders to adopt and approve
this Agreement and the Merger at the Hayes Shareholders Meeting is
attributable to a failure on the part of Access Beyond to perform any
material obligation required to have been performed by Access Beyond under
this Agreement, or if the Voting Agreements have terminated in accordance
with their terms prior to the Hayes Shareholders' Meeting and (ii) Hayes
shall not be permitted to terminate this Agreement pursuant to this clause
(d) if the failure of the Hayes
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shareholders to adopt and approve this Agreement and the Merger at the
Hayes Shareholders Meeting is attributable to a failure on the part of
Hayes to perform any material obligation required to have been performed
by Hayes under this Agreement;
(e) by either Access Beyond or Hayes if (i) the Access Beyond
Stockholders Meeting shall have been held and (ii) this Agreement and the
Merger shall not have been adopted and approved at such meeting by the
vote required by law; or if the required Access Beyond Stockholders
Meeting to vote on the Agreement is not held within sixty (60) days after
SEC clearance of Form S-4, as contemplated in Sections 7.5 and 8.5;
provided, however, that (i) Hayes shall not be permitted to terminate this
Agreement pursuant to this clause (e) if the failure of the Access Beyond
stockholders to adopt and approve this Agreement and the Merger at the
Access Beyond Stockholders Meeting is attributable to a failure on the
part of Hayes to perform any material obligation required to have been
performed by Hayes under this Agreement, (ii) Access Beyond shall not be
permitted to terminate this Agreement pursuant to this clause (e) if the
failure of the Access Beyond stockholders to adopt and approve this
Agreement and the Merger at the Access Beyond Stockholders Meeting is
attributable to a failure on the part of Access Beyond to perform any
material obligation required to have been performed by Access Beyond under
this Agreement;
(f) by Access Beyond (at any time prior to the adoption and
approval of this Agreement and the Merger by the Hayes shareholders by the
vote required by law) if a "Triggering Event" with respect to Hayes as the
"Triggering Party" shall have occurred. A "Triggering Event" shall have
occurred if (i) the Board of Directors of one of the Parties hereto (the
"Triggering Party") shall have failed to recommend, or shall for any
reason have withdrawn or shall have amended or modified in a manner
adverse to the other Party its unanimous recommendation in favor of, the
Merger or approval or adoption of this Agreement; (ii) the Triggering
Party shall have failed to include in the Prospectus/Proxy Statement the
unanimous recommendation of the Board of Directors of the Triggering Party
in favor of approval and adoption of this Agreement and the Merger, (iii)
the Board of Directors of the Triggering Party shall have approved,
endorsed or recommended any Acquisition Proposal, or (iv) the Triggering
Party shall have failed to hold the Triggering Party Stockholders Meeting
as promptly as practicable and in any event within 60 days after the Form
S-4 is declared effective;
(g) by Hayes (at any time prior to the adoption and approval
of this Agreement and the Merger by the Access Beyond stockholders by the
vote required by law) if a Triggering Event with respect to Access Beyond
as the Triggering Party shall have occurred;
(h) by Access Beyond if any of the Hayes' representations and
warranties contained in this Agreement shall be or shall have become
materially inaccurate, or if any of Hayes' material covenants contained in
this Agreement shall have been breached in any material respect or failure
of a condition set forth in Section 8 to
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be met, which is incapable of being cured or satisfied; provided, however,
that if an inaccuracy in Hayes' representations and warranties or a breach
of covenant by Hayes is curable by Hayes and Hayes is continuing to
exercise reasonable efforts to cure such inaccuracy or breach, then Access
Beyond may not terminate this Agreement under this Section 9.1(h) on
account of such inaccuracy or breach; or
(i) by Hayes if any of Access Beyond's representations and
warranties contained in this Agreement shall be materially inaccurate as
of the date of this Agreement or those representations and warranties
listed in Section 7.2 shall have become materially inaccurate, or if any
of Access Beyond's material covenants contained in this Agreement shall
have been breached in any material respect or failure of a condition set
forth in Section 7 to be met, which is incapable of being cured or
satisfied; provided, however, that if any inaccuracy in Access Beyond's
representations and warranties or a breach of a covenant by Access Beyond
is curable by Access Beyond and Access Beyond is continuing to exercise
reasonable efforts to cure such inaccuracy or breach, then Hayes may not
terminate this Agreement under this Section 9.1 (i) on account of such
inaccuracy or breach.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect; provided, however, that (a) this Section 9.2, Section 9.3,
Section 10 and Section 11 shall survive the termination of this Agreement and
shall remain in full force and effect, and (b) the termination of this Agreement
shall not relieve any Party, from any liability for any breach of this Agreement
by such Party.
9.3 EXPENSES; TERMINATION FEES.
9.3.1 Allocation. Except as set forth in this Section 9.3,
each Party will bear its respective expenses and fees of its own accountants,
attorneys, investment bankers and other professionals incurred with respect to
this Agreement and the transactions contemplated hereby, whether or not the
Merger is consummated; provided, however, that Hayes and Access Beyond shall
share equally all fees and expenses, other than attorneys' fees, incurred in
connection with the printing and filing of the Form S-4 and the Prospectus/Proxy
Statement and any amendments or supplements thereto. Each Party shall promptly
reimburse its principal shareholders, stockholders, officers and directors for
amounts paid by them as filing fees to governmental agencies and other
reasonable and necessary expenses that are incurred by such persons to comply
with any consent or approval required to be obtained in order to perform this
Agreement.
9.3.2 Break-up Fee.
(a) If this Agreement is terminated by Access Beyond pursuant
to Section 9.1(f) or by Hayes pursuant to Section 9.1(g), and the
stockholders of Hayes or Access Beyond, respectively, fail to approve the
Merger, then the non-terminating Party
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shall pay to the terminating Party, as nonrefundable liquidated damages,
in cash upon the last to occur of the Triggering Events, the total
out-of-pocket expenses of the terminating Party incurred in connection
with the negotiation and performance of this Agreement, plus $200,000,
provided, however, that the aggregate amount of such payment shall not
exceed $500,000;
(b) In addition, if either Party publicly announces the
entering into of an agreement relating to an Acquisition Transaction
within six months after the date of termination pursuant to Section 9.1(f)
or 9.1(g), then the nonrefundable liquidated damages described in Section
9.3.2(a) shall increase to $2,000,000, with the additional amount to be
paid in cash within three business days after the closing of such
Acquisition Transaction. Such liquidated damages shall be the sole remedy
of Hayes against Access Beyond for its termination under Section 9.1(g)
and the sole remedy of Access Beyond against Hayes for its termination
under Section 9.1(f);
(c) If this Agreement is terminated by Hayes pursuant to
Section 7.1 of this Agreement as provided therein or by Access Beyond due
to its failure to satisfy the condition set forth in Section 8.16, Access
Beyond shall pay to Hayes a termination fee in the amount of Hayes' total
out-of-pocket expenses incurred in connection with negotiation and
performance of this Agreement, provided that the aggregate amount of such
termination fee shall not exceed $250,000, whereupon this Agreement shall
be of no further force or effect and such remedy shall be Hayes' sole
remedy for termination pursuant to Section 7.1;
(d) If this Agreement is terminated by Access Beyond pursuant
to Section 8.1 of this Agreement as provided therein other than for
failure to obtain the required fairness opinion, Hayes shall pay to Access
Beyond a termination fee in the amount of Access Beyond's total
out-of-pocket expenses incurred in connection with negotiation and
performance of this Agreement, provided that the aggregate amount of such
termination fee shall not exceed $250,000, whereupon this Agreement shall
be of no further force or effect and such remedy shall be Access Beyond's
sole remedy for termination pursuant to Section 8.1; and
(e) If this Agreement is terminated by either Party pursuant
to Section 9.1(d) as provided therein or is terminated by Hayes for
failure of the condition set forth in Section 7.11 to be met, then Hayes
shall pay Access Beyond a termination fee in the amount of $2,000,000, as
nonrefundable liquidated damages. Such liquidated damages shall be the
sole remedy of Access Beyond against Hayes in such event.
10. NO SURVIVAL OF REPRESENTATIONS.
All representations and warranties of the Parties contained in this
Agreement will expire as of the Effective Time and be of no further force or
effect subsequent to such time. Except for the obligations of the Parties under
Section 11 below, the representations and warranties of
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the Parties contained in this Agreement will terminate as of the termination of
this Agreement in accordance with Section 9.1, clauses (a), (b) or (c).
11. GENERAL PROVISIONS.
11.1 GOVERNING LAW; DISPUTE RESOLUTION. The internal laws of the
State of Delaware (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the Parties hereto.
Any dispute hereunder ("Dispute") shall be settled by arbitration in Dover,
Delaware, and, except as herein specifically stated, in accordance with the
commercial arbitration rules of the American Arbitration Association ("AAA
Rules") then in effect. However, in all events, these arbitration provisions
shall govern over any conflicting rules which may now or hereafter be contained
in the AAA Rules. Any judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction over the subject matter thereof. The
arbitrator shall have the authority to grant any equitable and legal remedies
that would be available in any judicial proceeding instituted to resolve a
Dispute.
11.1.1 Compensation of Arbitrator. Any such arbitration will
be conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the Parties or, if the Parties are unable
to agree, by the American Arbitration Association (the "AAA").
11.1.2 Selection of Arbitrator. The AAA will have the
authority to select an arbitrator from a list of five arbitrators who are
lawyers familiar with Delaware contract law; provided, however, that such
lawyers cannot work for a firm then performing services for either Party, that
each Party will have the opportunity to make such reasonable objection to any
two of the arbitrators listed as such Party may desire and that the AAA will
select the arbitrator from the list of arbitrators as to whom neither Party
makes any such objection.
11.1.3 Payment of Costs. Access Beyond and, before the
Closing, Hayes, will bear the expense of deposits and advances required by the
arbitrator in equal proportions, but either Party may advance such amounts,
subject to recovery as an addition or offset to any award. The arbitrator will
award to the prevailing Party, as determined by the arbitrator, all costs, fees
and expenses related to the arbitration, including reasonable fees and expenses
of attorneys, accountants and other professionals that were incurred by the
prevailing Party.
11.1.4 Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
11.1.5 Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written
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opinion setting forth the basis and reasons for any decision reached and will
deliver such documents to each Party to this Agreement along with a signed copy
of the award.
11.1.6 Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions.
11.1.7 Exclusive Remedy. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the Parties for any Dispute arising out of this Agreement.
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. None of the
Parties hereto may assign any of its or his rights or obligations hereunder
without the prior written consent of the other Parties hereto. This Agreement
will be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the Parties hereto. The Parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be an original as regards any Party whose name appears
thereon and all of which together will constitute one and the same agreement.
This Agreement will become binding when one or more counterparts hereof,
individually or taken together, bear the signatures of all Parties reflected
hereon as signatories.
11.5 OTHER REMEDIES. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a Party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by law on such
Party, and the exercise of any one remedy will not preclude the exercise of any
other.
11.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the Parties to be bound thereby. The
waiver by a Party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the Parties hereto at any
time before or after approval of the Hayes or Access Beyond shareholders or
stockholders, respectively.
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11.7 NO WAIVER. The failure of any Party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
Party thereafter to enforce such provisions. The waiver by any Party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such Party to enforce such provision on
any other occasion.
11.8 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and by any
one or more of the following means: (i) if mailed by prepaid first class mail or
certified mail, return receipt requested, at any time other than during a
general discontinuance of postal service due to strike, lockout or otherwise,
such notice shall be deemed to have been received on the earlier of the date
shown on the receipt or three (3) business days after the postmarked date
thereof; (ii) if telexed or telecopied, such notice shall be followed forthwith
by letter and shall be deemed to have been received on the next business day
following dispatch and acknowledgment of receipt by the recipient's telex or
telecopy machine; (iii) if delivered by hand, such notice shall be deemed
effective when delivered; or (iv) if delivered by overnight courier, such notice
shall be deemed to have been received on the next business day following
delivery to such courier. All notices and other communications under this
Agreement shall be given to the Parties hereto at the following addresses:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Hayes:
(If via hand delivery or overnight courier)
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092-3404
Attention: Chairman of the Board and
Contracts Administration
55
<PAGE> 211
(If via mail)
Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Attention: Chairman of the Board and
Contracts Administration
Facsimile: (770) 840-6830
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309-3574
Attention: G. Donald Johnson, Esq.
Facsimile: (404) 888-7490
Any Party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 11.8.
11.9 CONSTRUCTION OF AGREEMENT. The language hereof will not be
construed for or against either Party. A reference to an article, section or
exhibit will mean an article or section in, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
11.10 NO JOINT VENTURE. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership among or between
any of the Parties hereto. No Party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other Party. No Party will
have the power to control the activities and operations of any other. No Party
will have any power or authority to bind or commit any other. No Party will hold
itself out as having any authority or relationship in contravention of this
Section.
11.11 FURTHER ASSURANCES. Each Party agrees to cooperate fully with
the other Party and to execute such further documents and agreements and to give
such further written assurances as may be reasonably requested by the other
Party to evidence and reflect the transaction provided for herein and to carry
into effect the intent of this Agreement.
11.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of
this Agreement are intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner or employee of any Party hereto or any other person
or entity, unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely among the Parties to
this Agreement; provided that the provisions of Section 4.8 shall be for the
benefit of the
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officers and directors of Hayes and Access Beyond; provided, however, that
Section 6.4 shall be for the benefit of the Access Beyond optionees, and
Sections 1.3.1 and 6.3 shall be for the benefit of the holders of the Hayes
Options and Hayes Warrants.
11.13 TIME IS OF THE ESSENCE. The Parties hereto acknowledge and
agree that time is of the essence in connection with the execution, delivery and
performance of this Agreement.
11.14 ENTIRE AGREEMENT. Except as specifically set forth herein,
this Agreement, the exhibits hereto and the documents and certificates to be
delivered hereunder constitute the entire understanding and agreement of the
Parties hereto with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the Parties with respect to the
subject matter hereof. The express terms hereof control and supersede any course
of performance or usage of trade inconsistent with any of the terms hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
BY: /s/ Ronald A. Howard By: /s/ Dennis C. Hayes
------------------------------- -----------------------------
Ronald A. Howard, President Dennis C. Hayes, Chairman
Signature Page to Agreement and
Plan of Reorganization
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EXHIBITS TO THE AGREEMENT AND PLAN OF REORGANIZATION ARE NOT INCLUDED
<PAGE> 215
Exhibit B to Proxy Statement
August 26, 1997
Board of Directors
Access Beyond, Inc.
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of common stock, $0.01 per value per share ("Company
Common Stock"), of Access Beyond, Inc. (the "Company") of the Conversion Ratio
(as defined below) provided for in the Agreement and Plan of Reorganization (the
"Agreement") dated as of July 29, 1997 by and between the Company and Hayes
Microcomputer Products, Inc. ("Hayes"). Pursuant to the Agreement, a wholly
owned subsidiary of the Company will be merged (the "Merger") with and into
Hayes, with Hayes to become a wholly owned subsidiary of the Company.
Pursuant to the Agreement, each share of common stock, $0.01 par value
per share ("Hayes Common Stock"), of Hayes will be converted into the right to
receive, subject to certain exceptions, that number of shares of Company Common
Stock equal to the Conversion Ratio; each share of Hayes Series A Preferred
Stock, no par value, will be converted into the right to receive, subject to
certain exceptions, that number of shares of Company Common Stock equal to the
product of the Conversion Ratio and the number of shares of Hayes Common Stock
into which such share is convertible immediately prior to consummation of the
Merger; and each share of Hayes Series B Preferred Stock, no par value, will be
converted into the right to receive, subject to certain exceptions, that number
of shares of Series A Preferred Stock of Access Beyond ("Access Beyond Series A
Stock) equal to the product of the Conversion Ratio and the number of shares of
Hayes Common Stock into which such share is convertible immediately prior to
consummation of the Merger. "Conversion Ratio" as set forth in the Agreement
means the quotient of (i) the product of (a) 3.76 and (b) the number of shares
of Access Beyond common and preferred stock issued and outstanding immediately
prior to consummation of the Merger and (ii) the number of shares of Hayes
common and preferred stock issued and outstanding immediately prior to
consummation of the Merger.
As reflected in the Company's financial statements for the fiscal
year ended July 31, 1997, the Company's operating performance has not met
management's expectations and its overall financial position has deteriorated
over the past eight months. For the quarter ended July 31, 1997, the Company had
an operating loss of $4.1 million. In addition, as of July 31, 1997, the Company
had approximately $576,000 of cash and limited borrowing capacity. The Company
advised us that it was pursuing capital sources including the repayment of
certain notes receivable and attempting to obtain a credit facility; however,
the Company is uncertain as to the timing and likelihood of the receipt of these
funds. In August 1997, the Company prepared a fiscal 1998 budget (the "1998
Budget") dated August 19, 1997 including a liquidity assessment (the "Liquidity
Assessment") which indicated that under the current circumstances the Company
would require an additional $2.9 million of liquidity for the periods through
August 1998. If the Company is not able to meet the financial performance
targets as outlined in the 1998 Budget and Liquidity Assessment, the Company's
liquidity needs would be greater.
<PAGE> 216
Board of Directors Access Beyond, Inc. Page 2
August 26, 1997
The Company has advised us that in order to preserve liquidity until the
consummation of the Merger, the Company intends to lower its operating costs by
significantly reducing non-manufacturing personnel and reducing certain other
operating expenses. In August 1997, the Company prepared a revised fiscal 1998
budget (the "Revised 1998 Budget") and liquidity assessment (the "Revised
Liquidity Assessment") including the planned cost reductions. Under the Revised
Liquidity Assessment the Company's cash balance is forecast to decrease to
$52,000 by December 31, 1997. If the Company is not able to meet the revised
financial performance targets as outlined in the 1998 Revised Budget and Revised
Liquidity Assessment, the Company's liquidity needs would be greater.
If the Merger is consummated, Hayes will be required to fund, among other
things, the Company's losses from operations. In addition, Hayes has
experienced operating losses and for the twelve months ended June 30, 1997, had
a loss from operations of $27.1 million. As of June 30, 1997, Hayes had $3.3
million of cash, $37.0 million of debt and limited borrowing availability under
its revolving credit facility. Hayes has informed us that it has entered into
an agreement with a prospective investor (the "Private Equity Agreement") dated
July 16, 1997 pursuant to which the prospective investor will purchase $30
million of Hayes Series C Preferred Stock. For the purposes of our opinion, we
have assumed that either (i) the contemplated equity purchase will be completed
on the terms set forth in the Private Equity Agreement or (ii) alternative
sources of sufficient liquidity will be available to Hayes, on a timely basis,
that would not materially affect the Conversion Ratio in a manner adverse to
the Company as compared with the Conversion Ratio that is anticipated to result
from the contemplated equity purchase pursuant to the Private Equity Agreement.
In arriving at our opinion, we have reviewed the Agreement, the terms of
the Access Beyond Series A Stock and the Private Equity Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and Hayes including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections of the Company for the period beginning August 1, 1997
and ending July 31, 1998 prepared by the management of the Company and certain
financial projections for Hayes for the period beginning August 1, 1997 and
ending December 31, 2001, prepared by the management of Hayes. In addition, we
have compared certain financial and securities data of the Company with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of Company Common Stock, reviewed
prices and premiums paid in other certain business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion. We were not requested to, nor did we,
solicit the interest of any party with respect to any transaction with the
Company.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company and
Hayes or their respective representatives, or that was otherwise reviewed by us.
With respect to the financial projections (including projections as to the
Company's liquidity) supplied to us, we have assumed that they have been
reasonably prepared and are based on the best currently available estimates and
judgments of the management of the Company and Hayes as to the future operating
and financial performance of the Company and Hayes respectively. We have not
assumed any responsibility for making an independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have relied as to all legal matters on advice of counsel to
the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood, that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise
<PAGE> 217
Board of Directors Access Beyond, Inc. Page 3
August 26, 1997
or reaffirm this opinion. Our opinion does not address the relative merits of
the Merger and any other business strategies being considered by the Company's
Board of Directors, nor does it address the Board's decision to proceed with the
Merger. Our opinion does not constitute recommendation to any stockholder as to
how such stockholder should vote on any matter relating to the transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that, as of the date hereof, the Conversion Ratio is fair to
the holders of Company Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ____________________________
Martin C. Murrer
Managing Director
<PAGE> 218
Exhibit C to Proxy Statement
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACCESS BEYOND, INC.
(ORIGINALLY INCORPORATED ON JULY 23, 1996)
ARTICLE I
The name of the Corporation is Hayes Communications Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware. The
name of its registered agent at that address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
has authority to issue is one hundred million (100,000,000) shares, consisting
of two classes: __________________ (__________) shares of Common Stock, $.01 par
value per share, and __________________ (__________) shares of Preferred Stock,
$.01 par value per share. __________________ ( 1 ) shares of the Preferred Stock
are designated as Series A Preferred Stock.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such wholly unissued series and any qualifications, limitations
or restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then
outstanding). The number of authorized shares of Preferred Stock may also be
increased or decreased (but not below the number of shares thereof then
outstanding) by the
- --------
1 This number will be equal to the number of shares of Series A Preferred
Stock issued in exchange for the Hayes Series B Preferred Stock.
<PAGE> 219
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, unless a vote of any other holders is required pursuant to a
certificate or certificates establishing a series of Preferred Stock.
Except as otherwise expressly provided in Article V or in any Certificate
of Designation designating any series of Preferred Stock pursuant to the
foregoing provisions of this Article IV, any new series of Preferred Stock may
be designated, fixed and determined as provided herein by the Board of Directors
without approval of the holders of the Common Stock or the holders of Preferred
Stock, or any series thereof, and any such new series may have powers,
preferences and rights, including, without limitation, voting rights, dividend
rights, liquidation rights, redemption rights and conversion rights, senior to,
junior to or pari passu with the rights of the Common Stock, the Preferred
Stock, or any future class or series of Preferred Stock or Common Stock.
ARTICLE V
The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock and the Common Stock are as follows:
1. DIVIDEND RIGHTS. The holders of Series A Preferred Stock shall be
entitled to receive, as and when declared by the Board, but only out of
funds legally available therefor, cumulative compounding dividends at the
dividend rate of ten percent (10%) per annum of $______. [THIS BLANK WILL
EQUAL THE ORIGINAL ISSUE PRICE PER SHARE OF HAYES SERIES B PREFERRED STOCK
($20.9036) DIVIDED BY THE CONVERSION RATIO] Dividends shall accrue
quarterly as if such dividends had commenced to accrue on April 24, 1997,
provided, however, that in the event of conversion of the Series A
Preferred Stock (as set forth in Section 3), dividends shall be accrued
through the day immediately prior to such conversion. Subject to the
restrictions set forth in this Section 1, dividends accumulated on the
Series A Preferred Stock shall be declared by the Board and paid on the
Redemption Date provided that the Redemption Request is provided as set
forth in Section 7. Such dividends shall be paid in cash upon redemption,
or in additional shares of Common Stock upon conversion of the Series A
Preferred Stock as provided in Section 3 below. Dividends accumulated on
the Series A Preferred Stock shall be declared by the Board and paid in
cash every three (3) months to the extent permitted by law. No dividends
may be paid on the Common Stock unless all accrued and unpaid dividends on
the Series A Preferred Stock are paid.
2. VOTING RIGHTS.
(a) Common Stock. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share thereof held.
(b) Preferred Stock. Each holder of shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which such shares of Series A Preferred
Stock could be converted pursuant to the
2
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provisions of Section 3 below at the record date for the determination of
the shareholders entitled to vote on such matters or, if no such record
date is established, the date such vote is taken or any written consent of
shareholders is solicited.
(c) Vote Required. Subject to the foregoing provisions of this
Section 2, each holder of Preferred Stock shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled to notice of any shareholders' meeting in
accordance with the bylaws of the Company (as in effect at the time in
question) and applicable law, and shall be entitled to vote, together with
the holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote, except as may be otherwise
provided by applicable law. Except as otherwise required by law or by the
provisions of Section 5 of this Article V, the holders of Preferred Stock
and the holders of Common Stock shall vote together and not as separate
classes.
3. CONVERSION RIGHTS. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing US
$______ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION RATIO]
by the Series A Conversion Price determined as hereinafter provided, in
effect on the date the certificate is surrendered for conversion. If any
holder elects to convert his shares of Series A Preferred Stock as
provided above, all unpaid and accrued dividends on the Series A Preferred
Stock existing immediately prior to the conversion of the Series A
Preferred Stock will be converted into such number of fully paid and
nonassessable shares of Common Stock as determined by dividing all unpaid
and accrued dividends by the Series A Conversion Price, determined as
hereinafter provided. The "Series A Conversion Price" shall initially be
US $__________ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION
RATIO]. Such initial Series A Conversion Price shall be adjusted as
hereinafter provided.
(b) Automatic Conversion. Each share of Series A Preferred Stock
shall automatically be converted (as set forth below) into such number of
fully paid and nonassessable shares of Common Stock as determined by
dividing US $_____ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE
CONVERSION RATIO] (adjusted for any stock splits, stock dividends, stock
combinations or similar events) plus the per share amount of all unpaid
and accrued dividends on the Series A Preferred Stock existing immediately
prior to the conversion of the Series A Preferred Stock by the Series A
Conversion Price, determined as hereinafter provided, in effect (i)
immediately prior to the consummation of a Qualified Public Offering (as
defined below) under the Securities Act of 1933, as amended (the
"Securities Act"); or (ii) at such time as the Corporation has registered
Common Stock pursuant to an underwritten public offering under the
Securities Act and
3
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(a) the Corporation has listed or would be qualified to list its shares on
the NASDAQ National Market System; (b) the average market value of the
Common Stock equals or exceeds the lesser of US $_________ [THIS BLANK
WILL EQUAL $33.00 DIVIDED BY THE CONVERSION RATIO] per share or two (2)
times the then-current Series A Conversion Price (in either such case as
adjusted for stock splits, stock dividends, stock combinations or similar
events) determined by the median of the high and low sales price each day
for a consecutive twenty (20) day period; (c) the aggregate market value
of the shares of Common Stock held in the public market equals or exceeds
US $25,000,000, determined by the 20 trading day average of the high and
low sales price described in (b) above; and (d) the holders of the Series
A Preferred Stock have the unrestricted right at such time to sell in a
registered offering or pursuant to Rule 144 at least one-half of the
number of shares of Common Stock into which such Series A Preferred Stock
would be converted; or (iii) upon the affirmative vote of holders of at
least a majority of the Series A Preferred Stock (any such event described
in subsections (i), (ii) and (iii) above being referred to herein as a
"Series A Conversion Event"). All unpaid and accrued dividends on the
Series A Preferred Stock existing immediately prior to the Series A
Conversion Event shall automatically be converted into such number of
fully paid and nonassessable shares of Common Stock as determined by
dividing all unpaid and accrued dividends by the Series A Conversion
Price, determined as hereinafter provided, in effect immediately prior to
the Series A Conversion Event. As used herein, "Qualified Public Offering"
means an underwritten sale to the public of Common Stock pursuant to an
effective registration statement under the Securities Act in connection
with which (a) the gross proceeds to the Corporation for the Common Stock
actually sold to the public in such sale, prior to deducting the amount of
brokers' commissions and expense allowances paid by the Corporation in
connection with the original sale of such Common Stock, is US $25,000,000
or more, and (b) the public offering price per share (prior to
underwriters' commissions and expenses) equals or exceeds the lesser of
(i) US $______ [THIS BLANK WILL EQUAL $33.00 DIVIDED BY THE CONVERSION
RATIO] per share or (ii) two (2) times the then-current Series A
Conversion Price, in either such case as adjusted for stock splits, stock
dividends, stock combinations or similar events. Immediately prior to the
Qualified Public Offering, or promptly upon the occurrence of another
Series A Conversion Event, each share of Series A Preferred Stock shall be
automatically converted, without cost, on the terms of this Section 3(b),
into the number of shares of Common Stock into which such share of Series
A Preferred Stock would be convertible under Section 3 immediately prior
to such Series A Conversion Event.
(c) Mechanics of Conversion.
(i) Before any holder of Series A Preferred Stock shall be
entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for such stock,
and shall give written notice to the Corporation at such
office that such holder elects to convert the same and
shall state therein the name or names in which such
holder wishes the
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certificate or certificates for shares of Common Stock
to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office
to such holder of Series A Preferred Stock, a
certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the
date of surrender of the shares of Series A Preferred
Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common
Stock on such date.
(ii) If a conversion is in connection with an underwritten
offering of securities pursuant to the Securities Act,
the conversion may, at the option of any holder
tendering shares of Series A Preferred Stock for
conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series A
Preferred Stock shall not be deemed to have converted
such Series A Preferred Stock until immediately prior to
the closing of such sale of securities.
(d) Adjustments to Conversion Price for Certain Diluting Issues.
(i) Special Definitions. For purposes of this Section 3(d),
the following definitions apply:
(A) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities
(defined below).
(B) "Original Issue Date" shall mean, with respect to
the Series A Preferred Stock, the date on which a
share of Series A Preferred Stock was first
issued.
(C) "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than Common Stock
and Series A Preferred Stock) or other securities
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to
Section 3(d)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
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<PAGE> 223
(1) upon conversion of shares of Series A
Preferred Stock;
(2) up to _______ [THIS NUMBER WILL EQUAL THE
NUMBER OF SHARES OF ACCESS BEYOND COMMON
STOCK CURRENTLY SUBJECT TO OUTSTANDING
OPTIONS OR RESERVED FOR FUTURE ISSUANCE,
PLUS 1,800,000 MULTIPLIED BY THE CONVERSION
RATIO] shares, subject to adjustment for all
stock splits, stock dividends, subdivisions
and combinations of shares of Common Stock
issued (or, pursuant to Section 3(d)(iii),
deemed to be issued) to officers and
employees of the Corporation pursuant to the
Corporation's stock option, purchase or
similar plans, or other options or warrants
as approved by the Corporation's Board of
Directors;
(3) as a dividend or distribution on Series A
Preferred Stock; and
(4) upon exercise or conversion of, or otherwise
pursuant to, securities of the Corporation
outstanding as of the Original Issue Date of
the Series A Preferred Stock (including any
securities assumed by the Corporation on
such date or otherwise assumed or issued in
connection with the transactions consummated
by the Corporation on such date).
(E) "Board" shall mean the Board of Directors of the
Corporation.
(ii) No Adjustment of Conversion Price. Any provision herein
to the contrary notwithstanding, no adjustment in the
Series A Conversion Price shall be made in respect of
the issuance of Additional Shares of Common Stock unless
the consideration per share (determined pursuant to
Section 3(d)(v) hereof) for an Additional Share of
Common Stock issued or deemed to be issued by the
Corporation is less than the Series A Conversion Price
in effect on the date of, and immediately prior to, such
issue.
(iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to
time after the Original Issue Date of the Series A
Preferred Stock shall issue any Options or Convertible
Securities, then the maximum number of
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<PAGE> 224
shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein
designed to protect against dilution) of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, provided that in
any such case in which Additional Shares of Common Stock
are deemed to be issued:
(A) no further adjustments in the Series A Conversion
Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Corporation, or
decrease or increase in the number of shares of
Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series A
Conversion Price computed upon the original issue
thereof, and any subsequent adjustments based
thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such
Options or the rights of conversion or exchange
under such Convertible Securities (provided,
however, that no such adjustment of the Series A
Conversion Price shall affect the Common Stock
previously issued upon conversion of the Series A
Preferred Stock);
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Series A Conversion Price computed
upon the original issue thereof (or upon the
occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only
Additional Shares of Common Stock issued
were the shares of Common Stock, if any,
actually issued upon the exercise of such
Options or the conversion or exchange of
such Convertible Securities and the
consideration
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<PAGE> 225
received therefor was the consideration
actually received by the Corporation for the
issue of all such Options, whether or not
exercised, plus the consideration actually
received by the Corporation upon such
exercise, or for the issue of all such
Convertible Securities which were actually
converted or exchanged, plus the additional
consideration, if any, actually received by
the Corporation upon such conversion or
exchange, and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities,
if any, actually issued upon the exercise
thereof were issued at the time of issue of
such Options, and the consideration received
by the Corporation for the Additional Shares
of Common Stock deemed to have been then
issued was the consideration actually
received by the Corporation for the issue of
all such Options, whether or not exercised,
plus the consideration deemed to have been
received by the Corporation (determined
pursuant to Section 3(d)(v)) upon the issue
of the Convertible Securities with respect
to which such Options were actually
exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the
Series A Conversion Price to an amount which
exceeds the lower of (1) the Series A Conversion
Price on the original adjustment date, or (2) the
Series A Conversion Price that would have resulted
from any issuance of Additional Shares of Common
Stock between the original adjustment date and
such readjustment date; and
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the
date of issue thereof, no adjustment of the Series
A Conversion Price shall be made until the
expiration or exercise of all such Options,
whereupon such adjustment shall be made in the
same manner provided in clause (C) above.
(iv) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event this
corporation, at any time after the Original Issue Date
shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued
pursuant to Section
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<PAGE> 226
3(d)(iii)), without consideration or for a consideration
per share less than US $______ [THIS BLANK WILL EQUAL
$20.9036 DIVIDED BY THE CONVERSION RATIO] per share but
equal to or greater than US $______ [THIS BLANK WILL
EQUAL $7.14 DIVIDED BY THE CONVERSION RATIO] per share
(in each case as adjusted for any stock splits, stock
dividends, stock combinations or similar events) then
and in such event, the Series A Conversion Price shall
be reduced concurrently with such issue, to a price
equal to the lowest per share consideration received by
the Corporation for any of the Additional Shares of
Common Stock. If such price per share of Additional
Shares is less than US $________ [THIS BLANK WILL EQUAL
$7.14 DIVIDED BY THE CONVERSION RATIO] (adjusted for any
stock splits, stock dividends, stock combinations or
similar events) then and in such event, the Series A
Conversion Price shall first be reduced to US $_______
[THIS BLANK WILL EQUAL $7.14 DIVIDED BY THE CONVERSION
RATIO] and then the Series A Conversion Price shall be
further reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by
multiplying such Series A Conversion Price by a
fraction, (i) the numerator of which shall be the number
of shares of Common Stock issuable upon conversion of
the shares of the Series A Preferred Stock actually
issued and outstanding (or deemed issued pursuant to
Section 3(d)(iii)) immediately prior to such issue plus
the quotient obtained by dividing (x) the aggregate
consideration received by the Corporation for the total
number of Additional Shares of Common Stock so issued
(or deemed issued pursuant to Section 3(d)(iii)) by (y)
the Series A Conversion Price in effect immediately
prior to such issuance, and (ii) the denominator of
which shall be the number of shares of Common Stock
issuable upon conversion of the shares of the Series A
Preferred Stock actually issued and outstanding (or
deemed issued pursuant to Section 3(d)(iii)) immediately
prior to such issue plus the number of such Additional
Shares of Common Stock so issued (or deemed issued
pursuant to Section 3(d)(iii)).
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received by the
Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be computed
at the aggregate amount of cash received by
the Corporation (without deducting any
discounts or commissions paid by the
Corporation);
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<PAGE> 227
(2) insofar as it consists of property other
than cash, be computed at the fair value
thereof at the time of such issue, as
determined in good faith by the Board; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares
or securities or other assets of the
Corporation for consideration which covers
both, be the proportion of such
consideration so received, computed as
provided in clauses (1) and (2) above, as
determined in good faith by the Board.
(B) Options and Convertible Securities. The
consideration per share received by the
Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section
3(d)(iii), relating to Options and Convertible
Securities shall be determined by dividing:
(1) the maximum amount, if any, received or
receivable by the Corporation as
consideration for the issue of such Options
or Convertible Securities, plus the minimum
aggregate amount of additional consideration
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect
against dilution) payable to the Corporation
upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by
(2) the maximum number of shares of Common Stock
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect
against dilution) issuable upon the exercise
of such Options or conversion or exchange of
such Convertible Securities.
(e) Adjustments for Stock Dividends, Subdivisions, or Split-ups of
Common Stock. If the number of shares of Common Stock outstanding at any time
after the filing of this Restated Certificate of Incorporation is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, effective at
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<PAGE> 228
the close of business upon the record date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend, subdivision or
split-up, the Series A Conversion Price shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase of
outstanding shares of Common Stock.
(f) Adjustments for Combinations of Common Stock. If the number of
shares of Common Stock outstanding at any time after the filing of this Restated
Certificate of Incorporation is decreased by a combination of the outstanding
shares of Common Stock, then, effective at the close of business upon the record
date of such combination, the Series A Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Series A Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
(g) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received had their
Series A Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 3(g) with respect to the rights of the
holders of the Series A Preferred Stock.
(h) Adjustments for Reorganizations, Reclassifications, etc. If the
Common Stock issuable upon conversion of the Series A Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock or other securities or property, whether by reclassification, a
merger or consolidation of this corporation with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of this
corporation (but only if the stockholders of this corporation hold more than
fifty percent (50%) of the outstanding voting equity securities of the surviving
corporation in such merger, consolidation or sale of assets reorganization), or
otherwise (other than a subdivision or combination of shares provided for above
or a merger or other transaction referred to in Section 4(c) below) the Series A
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted such that
the Series A Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock or
securities or other property equivalent to the number of shares of Common Stock
that would have been subject to receipt by the holders upon conversion of the
Series A Preferred Stock immediately before such event; and, in any such case,
appropriate adjustment (as determined by the Board) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the
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<PAGE> 229
Series A Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Series A Conversion Price) shall thereafter be applicable, as nearly as may be
reasonable, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock. In the event of
any conflict between this Section 3(h) and Section 4(b), Section 4(b) shall be
controlling.
(i) No Impairment. The corporation will not, except by a properly
approved amendment of its Certificate of Incorporation, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(j) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series A Preferred Stock, a certificate executed by the
Corporation's President/Chief Executive Officer or Treasurer/Chief Financial
Officer setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustments and readjustments, (B) the Conversion Price
at the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the Series A Preferred Stock.
(k) Notices of Record Date. In the event that the Corporation shall
propose at any time: (a) to declare any special dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities, whether
or not out of earnings or earned surplus; (b) to offer to subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (c) to effect any reclassification
or recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or (d) to merge or consolidate with or into any other corporation
(other than a mere reincorporation transaction), or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series A Preferred Stock:
(A) at least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the
date on which the holders of Common Stock shall be
entitled thereto) or for determining
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<PAGE> 230
rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; and
(B) in the case of the matters referred to in (c) and (d)
above, at least twenty (20) days' prior written notice
of the date when the same shall take place (and
specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the
occurrence of such event).
(l) Issue Taxes. The corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(m) Reservation of Stock Issuable Upon Conversion. The corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in its best efforts to obtain
the requisite stockholder approval of any necessary amendment to the Certificate
of Incorporation.
(n) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board).
(o) Notices. Any notice required by the provisions of this Section 3
to be given to the holders of shares of Series A Preferred Stock shall be given
in writing and it or any certificates or other documents delivered hereunder
shall be deemed effectively given or delivered (as the case may be) upon
personal delivery; when deposited with a recognized international courier, five
(5) days after deposit (or if earlier, upon delivery against a signed receipt
therefor); when transmitted by telecopy, which transmission is confirmed, at the
address appearing on the books of the Corporation.
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<PAGE> 231
4. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holder of each share of
the Series A Preferred Stock then outstanding shall be entitled to receive out
of the remaining assets of the Corporation available for distribution to
stockholders, and before any payment or declaration and setting apart for
payment of any amount shall be made in respect of Common Stock, an amount equal
to $________. [THIS BLANK WILL EQUAL THE ORIGINAL ISSUE PRICE PER SHARE OF HAYES
SERIES B PREFERRED STOCK ($20.9036) DIVIDED BY THE CONVERSION RATIO] (which
amount shall be adjusted proportionately in the event the shares of Series A
Preferred Stock are subdivided into a greater number or combined into a lesser
number) plus an amount equal to any accrued but unpaid dividends through the
date of such liquidation, dissolution or winding up of the Corporation (the
"Series A Preferred Stock Liquidation Preference"). If, upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed to the holders of Series A Preferred Stock shall be
insufficient to permit the payment of the full Series A Preferred Stock
Liquidation Preference pursuant to this Section 4(a), then all of the remaining
assets of the Corporation to be distributed shall be distributed ratably to the
holders of Series A Preferred Stock.
(b) A merger, consolidation or reorganization of the Corporation
with or into any other corporation or corporations that results in the transfer
of fifty percent (50%) or more of the outstanding voting stock of the
Corporation (other than a transaction effected primarily for the purpose of
changing the domicile of the Corporation), a sale of all or substantially all of
the assets of the Corporation, or a transaction or series of related
transactions (other than a public offering of the Corporation's securities,
following which a majority of the Board is comprised of those persons who were
members of the Board prior to such offering) in which the Corporation issues
shares representing more than fifty percent (50%) of the voting power of the
Corporation immediately after giving effect to such transaction, shall be
treated as a liquidation, dissolution or winding up for purposes of this Section
4. Any securities to be delivered to the holders of the Series A Preferred Stock
and Common Stock pursuant to such event shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or reported on
a national inter dealer quotation system, the
value shall be deemed to be the average of the
closing prices of the securities on such exchange
over the 30-day period ending three (3) days prior
to the closing;
(B) If actively traded over the counter and not
reported on a national inter dealer quotation
system, the value shall be deemed to be the
average of the closing bid prices over the
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<PAGE> 232
30-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as
determined in good faith by the Board.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free
marketability shall be to make an appropriate discount
from the market value determined as above in (i)(A), (B)
or (C) to reflect the approximate fair market value
thereof, as determined in good faith by the Board.
(c) In the event of a transaction (or series of related
transactions) to be treated as a liquidation pursuant to this Section 4, the
Corporation shall give each holder of record of Series A Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 4, and the
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the Corporation has given the first notice provided for herein or
sooner than ten (10) days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of a majority of the shares of
Series A Preferred Stock.
5. RESTRICTIONS AND LIMITATIONS. So long as any of the Series A Preferred
Stock remain outstanding, this corporation shall not, without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the total number of shares of Series A Preferred Stock
outstanding:
(i) alter or change the rights, preferences or privileges of the
Series A Preferred Stock;
(ii) increase the aggregate number of authorized shares of Series A
Preferred Stock (other than an increase pursuant to a stock
split) or decrease the aggregate number of authorized shares
of Series A Preferred Stock below the number of shares of
Series A Preferred Stock then outstanding;
(iii) authorize or issue, or obligate itself to issue, any other
equity security senior to or on a parity with the Series A
Preferred Stock as to dividends or assets in liquidation or
create or reclassify any obligation or security convertible
into or exchangeable for, or having any option rights to
purchase, any such equity security other than shares of
capital stock
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<PAGE> 233
issuable upon conversion or exercise of securities outstanding
as of the Original Issue Date of the Series A Preferred Stock;
(iv) take any action which results in the redemption of, or payment
of dividends or the distribution of cash or any property with
respect to, any shares of Common Stock (other than pursuant to
(x) Section 4(a); (y) payments made to a stockholder who is
not a stockholder of the Corporation as of the Original Issue
Date of the Series A Preferred Stock in connection with an
acquisition or merger transaction by the Corporation which is
not deemed to be a liquidation pursuant to Section 4(b) above;
or (z) redemptions of employee or director owned stock or
options);
(v) incur or guarantee any indebtedness other than (a) in the
ordinary course of business; (b) under the Loan and Security
Agreement dated December 21, 1995, by and between Hayes
Microcomputer Products, Inc., an affiliate of the Corporation
and The CIT Group/Credit Finance, Inc., as amended thereafter,
or any replacement credit facility with a commercial lender
under which the Corporation or its subsidiaries maintains its
primary borrowing relationship; (c) indebtedness existing as
of the Original Issue Date of the Series A Preferred Stock;
(d) in an amount not to exceed $2,000,000 in the aggregate; or
(e) in connection with an acquisition or merger transaction by
the Corporation which is not deemed to be a liquidation under
Section 4(b) above; or
(vi) approve or create any mortgage, pledge or security interest in
all or substantially all of the assets or property of the
Corporation, except for such security interests or liens
arising under the Corporation's borrowings permitted under
Subsection 5(v) above.
6. NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or shares of Series
A Preferred Stock acquired by the Corporation by reason of purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue. The corporation may, from time to time, take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Series A Preferred Stock, but not below the number of shares of such Series then
outstanding.
7. REDEMPTION.
(a) Redemption Date. "Redemption Date" means April 23, 2000, or such
other date determined in accordance with Section 7(b) or 7(c) below.
(b) Stockholder Redemption Request. Subject to the limitations set
forth herein and in Section 7(f) below, on ninety (90) days prior written notice
from the holders of more than fifty percent (50%) of the Series A Preferred
Stock ("Redemption Request") delivered
16
<PAGE> 234
to the Corporation not earlier than November 1, 1999, the Corporation shall
redeem all of the shares of Series A Preferred Stock held by each holder as of
the date of such notice by paying in cash therefor, US $_________ [THIS BLANK
WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION RATIO] per share of Series A
Preferred Stock (such amount to be adjusted proportionately in the event the
shares of Series A Preferred Stock are subdivided into a greater number or
combined into a lesser number and in the event the Corporation at any time pays
a dividend, or makes any other distribution, to holders of Series A Preferred
Stock payable in shares of Series A Preferred Stock) plus all accrued but unpaid
dividends on such shares (the "Redemption Price") on such Redemption Date.
(c) Corporation Redemption Request. The corporation may, at its sole
option and discretion, at any time at which it has funds legally available to do
so, redeem all (or, if the holders of a majority of the outstanding Series A
Preferred Stock consent thereto, any part) of the Series A Preferred Stock upon
thirty (30) days prior written notice to the holders of the Series A Preferred
Stock, by paying the Redemption Price on the Redemption Date. Any partial
redemption hereunder shall be made pro rata among all holders of the Series A
Preferred Stock. Notwithstanding the foregoing, any holder of Series A Preferred
Stock may elect to convert to Common Stock all or any part of the Series A
Preferred Stock shares which the Corporation has elected to redeem by providing
written notice of its conversion election to the Corporation within twenty (20)
days after the date of the Corporation's redemption notice. In such event, those
shares of Series A Preferred Stock shall convert to Common Stock at the Series A
Conversion Price as provided in, and subject to the terms and conditions of
Section 3.
(d) Surrender of Certificates. On or before the Redemption Date,
each holder of shares of Series A Preferred Stock being redeemed shall surrender
the certificate or certificates representing such shares to the Corporation, at
the Corporation's principal place of business. Upon such surrender (but not
earlier than the Redemption Date) the Redemption Price for such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. If a certificate is surrendered and all the shares
evidenced thereby are not being redeemed, the Corporation shall cause
certificates evidencing the shares not being redeemed to be issued in the name
of the registered owner of such shares and to be delivered to such person.
(e) Termination of Stock Rights. If the Corporation elects to redeem
the Series A Preferred Stock as provided above, or if a holder of Series A
Preferred Stock gives a Redemption Request and holds shares of Series A
Preferred Stock on the Redemption Date, and if on the Redemption Date the
Redemption Price is either paid or made available for payment through the
deposit arrangement specified in Section 7(f) below, then notwithstanding that
the certificates evidencing any of the shares of Series A Preferred Stock to be
redeemed shall not have been surrendered, all rights with respect to such shares
shall terminate as of the Redemption Date, except only the right of the holder
to receive the Redemption Price upon surrender of the certificate evidencing
such shares.
(f) Deposit of Redemption Price. On or prior to a Redemption Date,
the Corporation shall deposit with any bank or trust company in the United
States having a capital
17
<PAGE> 235
and surplus of at least US $50,000,000, as a trust fund, a sum equal to the
aggregate Redemption Price of all shares of Series A Preferred Stock to be
redeemed on the Redemption Date, with irrevocable instructions and authority to
the bank or trust company to pay, on or after the Redemption Date or prior
thereto, the Redemption Price to the respective holders upon the surrender of
their share certificates. From and after the date of such deposit ("Redemption
Deposit"), the shares so called for redemption shall be redeemed. The deposit
shall constitute full payment of the shares to their holders, and from and after
the Redemption Date the shares shall be deemed to be no longer outstanding, and
the holders thereof shall cease to be stockholders with respect thereto and
shall have no rights with respect thereto except the rights to receive from the
bank or trust company payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor. Any funds so deposited
and unclaimed at the end of one year from the Redemption Date shall be released
or repaid to the holders of the shares called for redemption shall be entitled
to receive payment of the Redemption Price with respect to such shares only from
the Corporation.
(g) Insufficient Funds. If the funds of the Corporation legally
available therefor shall be insufficient to discharge the redemption
requirements under Section 7(b) in full due on any Redemption Date, funds to the
maximum extent legally available for such purpose shall be set aside on or
before the Redemption Date in accordance with Section 7(b). The maximum number
of full shares of Series A Preferred Stock that can be redeemed with such funds
shall be redeemed ratably from the holders of shares of Series A Preferred Stock
to be redeemed as of the Redemption Date. Thereafter, the Corporation shall
redeem shares of Series A Preferred Stock ratably from the holders thereof as
funds legally available therefor become available. Dividends shall continue to
accrue on shares of Series A Preferred Stock scheduled to be redeemed on a
Redemption Date but not yet redeemed until funds sufficient to redeem such
shares become legally available therefor and are paid or set aside in accordance
with this Section 7.
ARTICLE VI
The Board of Directors of the Corporation shall have the power to adopt,
amend or repeal Bylaws of the Corporation.
ARTICLE VII
The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by the affirmative
vote of a majority of the entire Board of Directors. The directors shall be
divided into three classes, designated as Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of the total number of
directors, initially, with the directors of Class I elected for a term of one
year, the directors of Class II elected for a term of two years and the
directors of Class III elected for a term of three years. At each succeeding
annual meeting of stockholders following such classification and election,
directors elected to succeed those directors whose terms expire shall be elected
for a three-year term.
18
<PAGE> 236
Subject to the rights of the holders of any class or series of the
capital stock of the Corporation entitled to vote generally in the election of
directors (hereinafter in this Article VII and in the first proviso of Article
VIII of this Certificate of Incorporation, such stock is referred to as the
"Voting Stock") then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office, or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires.
No decrease in the number of authorized directors constituting the entire Board
of Directors shall shorten the term of any incumbent director. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Subject to the rights of the holders of any class or series of the
Voting Stock then outstanding, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of the Voting Stock, voting together as a single
class (it being understood that, for all purposes of this Article VII, and the
provisions of the By-Laws of the Corporation which require the affirmative vote
of the holders of at least 80% of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class,
to alter, amend or repeal any provision of the By-Laws which is to the same
effect as the provisions of this Certificate of Incorporation enumerated in the
first proviso of Article VIII hereof, each share of the Voting Stock shall have
the number of votes granted to it pursuant to Article V of this Certificate of
Incorporation or any designation of the rights, powers and preferences of any
class or series of Preferred Stock made pursuant to said Article IV (a
"Preferred Stock Designation")).
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal this Article VII.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by
19
<PAGE> 237
the terms of this Certificate of Incorporation applicable thereto (including the
resolutions of the Board of Directors pursuant to Article IV), and such
Directors so elected shall not be divided into classes pursuant to this Article
VII unless expressly provided by such terms.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the bylaws of the Corporation;
provided, however, that notwithstanding any other provisions of the
Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of
the Voting Stock required by law, this Certificate of Incorporation
or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal (i) any
provision of the By-laws which is to the same effect as Article VII
of this Certificate of Incorporation, or (ii) this proviso of this
Article VIII.
To authorize and cause to be executed mortgages and liens upon
the real property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was
created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the
directors of the Corporation.
When and as authorized by the stockholders in accordance with
this Certificate of Incorporation and applicable statutes, to sell,
lease or exchange all or substantially all of the property and
assets of the Corporation, including its goodwill and its corporate
franchises, upon such terms and conditions and for such
consideration (which may consist, in whole or in part, of money or
property, including shares of stock in, and/or other securities of,
any other corporation or corporations) as the Corporation's Board of
Directors shall deem appropriate and in the best interests of the
Corporation.
20
<PAGE> 238
ARTICLE IX
To the fullest extent permitted by law, no director of the Corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article IX, nor the adoption of
any provision of this Restated Certificate of Incorporation inconsistent with
this Article IX, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
This Amended and Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been duly executed by the Corporation as of the ____ day of _________, 1997.
ACCESS BEYOND, INC.
BY:______________________________________
Name:_________________________________
Title:________________________________
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<PAGE> 239
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL permits the indemnification of the directors and
officers of the Company. The By-laws of the Company do not contain any
provisions on indemnification.
The Certificate of Incorporation provides for the indemnification of
directors and officers and employees of the Company, and persons who serve or
served at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred with respect to any action, suit
or proceeding, if such person acted in good faith and in a manner he reasonably
believed to being or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The indemnification provisions set forth in the
Certificate of Incorporation do not preclude the indemnification of, and
advancement of expenses to, any other person to whom the Company has the power
or obligation to indemnify under the provisions of the DGCL, or otherwise. The
right to indemnification conferred in the Certificate of Incorporation is a
contract right and shall include the right to have paid by the Company the
expenses incurred in defending any such proceeding in advance of its final
disposition. The Company maintains insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Company against any such
expense, liability or loss, whether or not the Company would have the power or
the obligation to indemnify such person against such expense, liability or loss
under state law or under the terms of the Certificate of Incorporation. Each
director of the Company entered into a Director Indemnification Agreement with
the Company. The Director Indemnification Agreements provide that, subject to
certain exclusions, the Company will indemnify each director against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action, suit or proceeding to which such
director is or is threatened to be made a party by reason of his or her position
as an officer or director of the Company or who serves or served at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the extent of the
highest and most advantageous of the indemnification provisions set forth in the
Certificate of Incorporation, the Company's By-laws, the DGCL, the laws of the
jurisdiction under which the Company exists, the terms of any liability
insurance or any other benefits available to such director.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-------- ---------------------------------------------------------------------------------
<C> <S>
2.1 Form of Distribution Agreement between Access Beyond, Inc. (the "Company") and
Penril DataComm Networks, Inc. ("Penril") (filed as Exhibit 2.1 to the Company's
registration statement on Form S-1, as amended (Commission File Number
333-10741).
2.2 Plan and Agreement of Merger dated as of June 16, 1996, as amended August 5,
1996, among Penril, Bay Networks, Inc. ("Bay") and Beta Acquisition Corp. (filed
as Exhibit 2.2 to the Company's registration statement on Form S-1, as amended
(Commission File Number 333-10741).
2.3 Agreement and Plan of Reorganization between Access Beyond, Inc. (the "Company")
and Hayes Microcomputer Products, Inc. ("Hayes") dated July 29, 1997 (filed as
Exhibit 10.1 to the Company's Form 8-K filed August 7, 1997).
2.4 Form of draft of Certificate of Merger.
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the
Company's registration statement on Form S-1, as amended (Commission File Number
333-1074)).
3.2 Form of Draft of Amended and Restated Certificate of Incorporation of the
Company.
</TABLE>
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<PAGE> 240
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-------- ---------------------------------------------------------------------------------
<C> <S>
3.3 By-Laws of the Company (filed as Exhibit 3.2 to the Company's registration
statement on Form S-1, as amended (Commission File Number 333-10741)).
4.1.1 Voting Agreement dated July 29, 1997 between the Company and Chestnut Capital
Limited Partnership.
4.1.2 Voting Agreement dated July 29, 1997 between the Company and Rinzai Limited.
4.1.3 Voting Agreement dated July 29, 1997 between the Company and Vulcan Ventures
Incorporated.
4.2.1 Affiliate Agreement dated July 29, 1997 between the Company and Kaifa Technology
(H.K.) Limited.
4.2.2 Affiliate Agreement dated July 29, 1997 between the Company and Rinzai Limited.
4.2.3 Affiliate Agreement dated July 29, 1997 between the Company and Chestnut Limited
Partnership.
*4.2.4 Affiliate Agreement dated July 29, 1997 between the Company and S.P. Quek
Investments Pte Ltd.
4.2.5 Affiliate Agreement dated July 29, 1997 between the Company and Dennis Hayes.
4.3.1 Market Standoff Agreement dated July 29, 1997 between the Company and Kaifa
Technology (H.K.) Limited.
4.3.2 Market Standoff Agreement dated July 29, 1997 between the Company and Rinzai
Limited.
4.3.3 Market Standoff Agreement dated July 29, 1997 between the Company and S.P. Quek
Investments Pte Ltd.
4.3.4 Market Standoff Agreement dated July 29, 1997 between the Company and Rollig
Profits Holdings Limited.
4.3.5 Market Standoff Agreement dated July 29, 1997 between the Company and Saliendra
Pte Ltd.
4.3.6 Market Standoff Agreement dated July 29, 1997 between the Company and Lao Hotel
(H.K.) Limited.
4.3.7 Market Standoff Agreement dated July 29, 1997 between the Company and Dennis
Hayes.
*5.1 Opinion of Morrison Cohen Singer & Weinstein, LLP.
8.1 Opinion of Womble Carlyle Sandridge & Rice, PLLC re tax matters.
10.1 Technology License Agreement, dated as of November 16, 1996 between Penril and
the Company (filed as Exhibit 10.1 to the Company's registration statement on
Form S-1, as amended (Commission File Number 333-10741)).
10.2 Development and License Agreement dated as of June 16, 1996 between Bay and
Penril, on behalf of the Company (filed as Exhibit 10.2 to the Company's
registration statement on Form S-1, as amended (Commission File Number
333-10741)).
10.3 Indemnification Agreement dated as of November 16, 1996 between Penril and the
Company (filed as Exhibit 10.3 to the Company's registration statement on Form
S-1, as amended (Commission File Number 333-10741)).
10.4 Transitional Services Agreement dated as of November 16, 1996 between the Company
and Penril (filed as Exhibit 10.7 to the Company's registration statement on Form
S-1, as amended (Commission File Number 333-10741)).
10.5.1 Lease Agreement between Penril and Real Estate Income Partners dated as of March
31, 1989, as amended on May 14, 1990 and November 15, 1996 (filed as Exhibit
10.8.1 to the Company's Form 10-K filed October 16, 1997).
10.5.2 Assignment and Assumption of Lease between Penril and the Company dated as of
November 18, 1996 (filed as Exhibit 10.8.2 to the Company's Form 10-K filed
October 16, 1997).
**10.6 The Company's Amended and Restated 1996 Long-Term Incentive Plan (filed as
Exhibit 10.9 to the Company's Form 10-K filed October 16, 1997).
**10.7 Form of Option Agreement for the grant of non-qualified options under the Amended
and Restated 1996 Long-Term Incentive Plan (filed as Exhibit 10.10 to the
Company's Form 10-K filed October 16, 1997).
</TABLE>
II-2
<PAGE> 241
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-------- ---------------------------------------------------------------------------------
<C> <S>
**10.8 The Company's Amended and Restated 1996 Non-Employee Directors' Stock Option
Plan. (filed as Exhibit 10.11 to the Company's Form 10-K filed October 16, 1997).
**10.9 Form of Option Agreement for the grant of options under the Amended and Restated
1996 Non-Employee Directors' Stock Option Plan (filed as Exhibit 10.12 to the
Company's Form 10-K filed October 16, 1997).
10.10 2290 Remote Access Gateway ("Hawk") Technology Transfer Agreement dated as of May
2, 1997 between the Company and Paradyne Corporation (filed as Exhibit 10.13 to
the Company's Form 10-K filed October 16, 1997).
10.11 Stock Purchase Agreement dated as of May 2, 1997 between the Company and Paradyne
Corporation, and First Amendment thereto dated September, 1997 (filed as Exhibit
10.14 to the Company's Form 10-K filed October 16, 1997).
**10.12 Employment Agreement dated as of November 18, 1996 between the Company and Ronald
A. Howard (filed as Exhibit 10.15 to the Company's Form 10-K filed October 16,
1997).
10.13 Manufacturing Agreement dated as of March 1, 1997 between the Company and Hibbing
Electronics Corporation (filed as Exhibit 10.16 to the Company's Form 10-K filed
October 16, 1997).
*
**10.14 Form of Employment Agreement between the Company and Ronald Howard.
*
**10.15 Form of Employment Agreement between the Company and Dennis Hayes.
10.16 Agreement between the Company and EMI Holding Corp., dated November 13, 1996,
relating to the sale of Electro-Metrics, Inc., as amended on January 6, 1997,
February 26, 1997 and April 17, 1997 (filed as Exhibit 10.17 to the Company's
Form 10-K filed October 16, 1997).
**10.17 Hayes Stock Option Plan.
**10.18 First Amendment to Hayes Stock Option Plan.
**10.19 Forms of Hayes Stock Option Agreements, as amended
21. List of Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP (included in Part II of this Registration
Statement).
23.2 Consent of Coopers & Lybrand LLP (included in Part II of this Registration
Statement).
23.3 Consent of Donaldson, Lufkin & Jenrette Securities Corporation (included in Part
II of this Registration Statement).
*23.4 Consent of Morrison Cohen Singer & Weinstein, LLP (contained in its opinion filed
as Exhibit 5.1 hereto).
23.5 Consent of Womble Carlyle Sandridge & Rice, PLLC (contained in its opinion filed
as Exhibit 8.1 hereto).
24. Powers of Attorney for the Company (included on the signature page hereto).
27. Financial Data Schedule.
</TABLE>
- -------------
* To be filed by amendment.
** Management contract, compensation plan or arrangement
(b) Financial Statement Schedules
Independent Auditor's Report on Schedule
Schedule II -- Valuation and Qualifying Accounts
All other schedules specified under Regulation S-X for the Company have
been omitted because they are either not applicable, not required or because the
information required is included in the consolidated financial statements or
notes thereto.
II-3
<PAGE> 242
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers of sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration when it became effective.
II-4
<PAGE> 243
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Gaithersburg, State of
Maryland, on October 15, 1997.
ACCESS BEYOND, INC.
By: /s/ RONALD HOWARD
------------------------------------
Ronald Howard
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ronald Howard and Mark Fields, or either
of them, each with the power of substitution, his or her attorney-in-fact, to
sign any amendments to this Registration Statement and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or his or her substitute, may do or choose to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- -------------------------------------- -----------------
<C> <S> <C>
/s/ RONALD HOWARD President and Chief Executive Officer October 15, 1997
- ------------------------------------- (Principal Executive Officer) and
Ronald Howard Chairman of the Board
/s/ MARK FIELDS Controller and Acting Chief Financial October 15, 1997
- ------------------------------------- Officer (Principal Financial and
Mark Fields Accounting Officer)
/s/ BARBARA PERRIER DREYER Director October 15, 1997
- -------------------------------------
Barbara Perrier Dreyer
/s/ JOHN HOWARD Director October 15, 1997
- -------------------------------------
John Howard
/s/ ARTHUR SAMBERG Director October 15, 1997
- -------------------------------------
Arthur Samberg
/s/ PAUL SCHALLER Director October 15, 1997
- -------------------------------------
Paul Schaller
</TABLE>
II-5
<PAGE> 244
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. ) of our report dated April 30, 1997, except for Note 18 as to which
the date is July 29, 1997 on our audits of the consolidated financial statements
of Hayes Microcomputer Products, Inc. We also consent to the references to our
firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
October 15, 1997
II-6
<PAGE> 245
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Access Beyond, Inc.
on Form S-4 of our report dated August 29, 1997 (September 15, 1997 as to Note
11), appearing in the Proxy Statement/Prospectus, which is part of this
Registration Statement, and of our report dated August 29, 1997 (September 15,
1997 as to Note 11) relating to the financial statement schedule appearing
elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Proxy Statement/Prospectus.
/s/ DELOITTE & TOUCHE LLP
Washington, D.C.
October 14, 1997
II-7
<PAGE> 246
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We consent to the inclusion in this registration/proxy statement on Form
S-4 filed by Access Beyond, Inc. (the "Registrant") of our fairness opinion
relating to the "Conversion Ratio" provided for in the Agreement and Plan of
Reorganization dated as of July 29, 1997 by and between the Registrant and Hayes
Microcomputer Products, Inc.
/s/ Michael Kramer
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
New York, New York
October 14, 1997
II-8
<PAGE> 247
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Access Beyond, Inc.
Gaithersburg, Maryland
We have audited the consolidated financial statements of Access Beyond,
Inc. and subsidiaries (the successor company to Penril DataComm Networks, Inc.)
as of July 31, 1997 and 1996, and for each of the three years in the period
ended July 31, 1997, and have issued our report thereon dated August 29, 1997
(September 15, 1997 as to Note 11), included elsewhere herein. Our audits also
included the financial statement schedule of Access Beyond, Inc. listed in Item
21(b) of this Registration Statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Washington, D.C.
August 29, 1997 (September 15, 1997 as to Note 11)
S-1
<PAGE> 248
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C COLUMN D
COLUMN B ----------------------- ------------- COLUMN E
---------- CHARGES TO RECOVERY WRITE-OFF ----------
BALANCE AT S, G & A OF BAD OF BAD DEBTS, BALANCE AT
AUGUST 1, EXPENSES DEBTS(A) OTHER (B) JULY 31,
---------- ---------- -------- ------------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
APPLICABLE TO ACCOUNTS RECEIVABLE
Fiscal 1997.......................... $ 554 $462 $ 91 $ (893) $215
Fiscal 1996.......................... $1,067 $502 $ 20 $(1,035) $554
</TABLE>
- ---------------
(a) Included in fiscal 1997's recovery of bad debts was an exchange rate
adjustment of $8,000 and a transfer of bad debt reserves of $66,000 related
to the Spin-off and Merger transaction with Bay Networks, Inc.
(b) Included in fiscal 1997's write-off of bad debts was $250,000 of reserves
transfer to Bay Networks, Inc. related to the Spin-off and Merger
transaction with Bay Networks, Inc.
S-2
<PAGE> 249
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
-------- ---------------------------------------------------------------------- ----------
<C> <S> <C>
2.1 Form of Distribution Agreement between Access Beyond, Inc. (the
"Company") and Penril DataComm Networks, Inc. ("Penril") (filed as
Exhibit 2.1 to the Company's registration statement on Form S-1, as
amended (Commission File Number 333-10741).
2.2 Plan and Agreement of Merger dated as of June 16, 1996, as amended
August 5, 1996, among Penril, Bay Networks, Inc. ("Bay") and Beta
Acquisition Corp. (filed as Exhibit 2.2 to the Company's registration
statement on Form S-1, as amended (Commission File Number 333-10741).
2.3 Agreement and Plan of Reorganization between Access Beyond, Inc. (the
"Company") and Hayes Microcomputer Products, Inc. ("Hayes") dated July
29, 1997 (filed as Exhibit 10.1 to the Company's Form 8-K filed August
7, 1997).
2.4 Form of draft of Certificate of Merger.
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Company's registration statement on Form S-1, as amended
(Commission File Number 333-1074)).
3.2 Form of Draft of Amended and Restated Certificate of Incorporation of
the Company.
3.3 By-Laws of the Company (filed as Exhibit 3.2 to the Company's
registration statement on Form S-1, as amended (Commission File Number
333-10741)).
4.1.1 Voting Agreement dated July 29, 1997 between the Company and Chestnut
Capital Limited Partnership.
4.1.2 Voting Agreement dated July 29, 1997 between the Company and Rinzai
Limited.
4.1.3 Voting Agreement dated July 29, 1997 between the Company and Vulcan
Ventures Incorporated.
4.2.1 Affiliate Agreement dated July 29, 1997 between the Company and Kaifa
Technology (H.K.) Limited.
4.2.2 Affiliate Agreement dated July 29, 1997 between the Company and Rinzai
Limited.
4.2.3 Affiliate Agreement dated July 29, 1997 between the Company and
Chestnut Limited Partnership.
*4.2.4 Affiliate Agreement dated July 29, 1997 between the Company and S.P.
Quek Investments Pte Ltd.
4.2.5 Affiliate Agreement dated July 29, 1997 between the Company and Dennis
Hayes.
4.3.1 Market Standoff Agreement dated July 29, 1997 between the Company and
Kaifa Technology (H.K.) Limited.
4.3.2 Market Standoff Agreement dated July 29, 1997 between the Company and
Rinzai Limited.
4.3.3 Market Standoff Agreement dated July 29, 1997 between the Company and
S.P. Quek Investments Pte Ltd.
4.3.4 Market Standoff Agreement dated July 29, 1997 between the Company and
Rollig Profits Holdings Limited.
4.3.5 Market Standoff Agreement dated July 29, 1997 between the Company and
Saliendra Pte Ltd.
</TABLE>
<PAGE> 250
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
-------- ---------------------------------------------------------------------- ----------
<C> <S> <C>
4.3.6 Market Standoff Agreement dated July 29, 1997 between the Company and
Lao Hotel (H.K.) Limited.
4.3.7 Market Standoff Agreement dated July 29, 1997 between the Company and
Dennis Hayes.
*5.1 Opinion of Morrison Cohen Singer & Weinstein, LLP.
8.1 Opinion of Womble Carlyle Sandridge & Rice, PLLC re tax matters.
10.1 Technology License Agreement, dated as of November 16, 1996 between
Penril and the Company (filed as Exhibit 10.1 to the Company's
registration statement on Form S-1, as amended (Commission File Number
333-10741)).
10.2 Development and License Agreement dated as of June 16, 1996 between
Bay and Penril, on behalf of the Company (filed as Exhibit 10.2 to the
Company's registration statement on Form S-1, as amended (Commission
File Number 333-10741)).
10.3 Indemnification Agreement dated as of November 16, 1996 between Penril
and the Company (filed as Exhibit 10.3 to the Company's registration
statement on Form S-1, as amended (Commission File Number 333-10741)).
10.4 Transitional Services Agreement dated as of November 16, 1996 between
the Company and Penril (filed as Exhibit 10.7 to the Company's
registration statement on Form S-1, as amended (Commission File Number
333-10741)).
10.5.1 Lease Agreement between Penril and Real Estate Income Partners dated
as of March 31, 1989, as amended on May 14, 1990 and November 15, 1996
(filed as Exhibit 10.8.1 to the Company's Form 10-K filed October 16,
1997).
10.5.2 Assignment and Assumption of Lease between Penril and the Company
dated as of November 18, 1996 (filed as Exhibit 10.8.2 to the
Company's Form 10-K filed October 16, 1997).
**10.6 The Company's Amended and Restated 1996 Long-Term Incentive Plan
(filed as Exhibit 10.9 to the Company's Form 10-K filed October 16,
1997).
**10.7 Form of Option Agreement for the grant of non-qualified options under
the Amended and Restated 1996 Long-Term Incentive Plan (filed as
Exhibit 10.10 to the Company's Form 10-K filed October 16, 1997).
**10.8 The Company's Amended and Restated 1996 Non-Employee Directors' Stock
Option Plan. (filed as Exhibit 10.11 to the Company's Form 10-K filed
October 16, 1997).
**10.9 Form of Option Agreement for the grant of options under the Amended
and Restated 1996 Non-Employee Directors' Stock Option Plan (filed as
Exhibit 10.12 to the Company's Form 10-K filed October 16, 1997).
10.10 2290 Remote Access Gateway ("Hawk") Technology Transfer Agreement
dated as of May 2, 1997 between the Company and Paradyne Corporation
(filed as Exhibit 10.13 to the Company's Form 10-K filed October 16,
1997).
10.11 Stock Purchase Agreement dated as of May 2, 1997 between the Company
and Paradyne Corporation, and First Amendment thereto dated September,
1997 (filed as Exhibit 10.14 to the Company's Form 10-K filed October
16, 1997).
**10.12 Employment Agreement dated as of November 18, 1996 between the Company
and Ronald A. Howard (filed as Exhibit 10.15 to the Company's Form
10-K filed October 16, 1997).
10.13 Manufacturing Agreement dated as of March 1, 1997 between the Company
and Hibbing Electronics Corporation (filed as Exhibit 10.16 to the
Company's Form 10-K filed October 16, 1997).
*
**10.14 Form of Employment Agreement between the Company and Ronald Howard.
*
**10.15 Form of Employment Agreement between the Company and Dennis Hayes.
</TABLE>
<PAGE> 251
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
-------- ---------------------------------------------------------------------- ----------
<C> <S> <C>
10.16 Agreement between the Company and EMI Holding Corp., dated November
13, 1996, relating to the sale of Electro-Metrics, Inc., as amended on
January 6, 1997, February 26, 1997 and April 17, 1997 (filed as
Exhibit 10.17 to the Company's Form 10-K filed October 16, 1997).
**10.17 Hayes Stock Option Plan.
**10.18 First Amendment to Hayes Stock Option Plan.
**10.19 Forms of Hayes Stock Option Agreements, as amended
21. List of Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP (included in Part II of this
Registration Statement).
23.2 Consent of Coopers & Lybrand LLP (included in Part II of this
Registration Statement).
23.3 Consent of Donaldson, Lufkin & Jenrette Securities Corporation
(included in Part II of this Registration Statement).
*23.4 Consent of Morrison Cohen Singer & Weinstein, LLP (contained in its
opinion filed as Exhibit 5.1 hereto).
23.5 Consent of Womble Carlyle Sandridge & Rice, PLLC (contained in its
opinion filed as Exhibit 8.1 hereto).
24. Powers of Attorney for the Company (included on the signature page
hereto).
27. Financial Data Schedule.
</TABLE>
- -------------
* To be filed by amendment.
** Management contract, compensation plan or arrangement
<PAGE> 1
EXHIBIT 2.4
HAYES MICROCOMPUTER PRODUCTS, INC.
CERTIFICATE OF MERGER
Pursuant to the provisions of Section 14-2-1105 of the Georgia Business
Corporation Code, HAYES MICROCOMPUTER PRODUCTS, INC., a corporation organized
and existing under the laws of the State of Georgia (hereinafter referred to as
"Hayes") hereby executes the following Certificate of Merger.
I.
H&A MERGER SUB, INC. (hereinafter referred to as "H&A"), a corporation
organized and existing under the laws of the State of Georgia, shall be merged
with and into Hayes, so that Hayes is the surviving corporation of such merger
(hereinafter referred to as the "Merger"). The name of the surviving corporation
shall be HAYES MICROCOMPUTER PRODUCTS, INC.
II.
The Merger shall be effective at [5:00] p.m. on ______________, 1997.
III.
The Merger has been duly approved by the shareholders of Hayes and H&A.
IV.
The executed Agreement and Plan of Reorganization is on file at the
principal place of business of Hayes, the surviving corporation, which
address on the date hereof is:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
A copy of said Agreement and Plan of Reorganization will be furnished by Hayes,
the surviving corporation, on request and without cost to any shareholder of
Hayes or H&A.
V.
The undersigned hereby certifies that Hayes is the surviving corporation,
has delivered the request for publication of a notice relating to the filing of
this Certificate of Merger, together with payment therefor, as required by
Section 14-2-1105.1(b) of the Georgia Business Corporations Code.
60
<PAGE> 2
IN WITNESS WHEREOF, the undersigned HAYES MICROCOMPUTER
PRODUCTS, INC. has caused this CERTIFICATE OF MERGER to be executed by its
authorized officer this _____ day of ____________, 1997.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:_______________________________________
Dennis C. Hayes, Chairman
ATTEST:
_________________________________
James A. Jones, Secretary
61
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACCESS BEYOND, INC.
(ORIGINALLY INCORPORATED ON JULY 23, 1996)
ARTICLE I
The name of the Corporation is Hayes Communications Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware. The
name of its registered agent at that address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
has authority to issue is one hundred million (100,000,000) shares, consisting
of two classes: __________________ (__________) shares of Common Stock, $.01 par
value per share, and __________________ (__________) shares of Preferred Stock,
$.01 par value per share. __________________ ( 1 ) shares of the Preferred Stock
are designated as Series A Preferred Stock.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such wholly unissued series and any qualifications, limitations
or restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then
outstanding). The number of authorized shares of Preferred Stock may also be
increased or decreased (but not below the number of shares thereof then
outstanding) by the
- --------
1 This number will be equal to the number of shares of Series A Preferred
Stock issued in exchange for the Hayes Series B Preferred Stock.
<PAGE> 2
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, unless a vote of any other holders is required pursuant to a
certificate or certificates establishing a series of Preferred Stock.
Except as otherwise expressly provided in Article V or in any Certificate
of Designation designating any series of Preferred Stock pursuant to the
foregoing provisions of this Article IV, any new series of Preferred Stock may
be designated, fixed and determined as provided herein by the Board of Directors
without approval of the holders of the Common Stock or the holders of Preferred
Stock, or any series thereof, and any such new series may have powers,
preferences and rights, including, without limitation, voting rights, dividend
rights, liquidation rights, redemption rights and conversion rights, senior to,
junior to or pari passu with the rights of the Common Stock, the Preferred
Stock, or any future class or series of Preferred Stock or Common Stock.
ARTICLE V
The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock and the Common Stock are as follows:
1. DIVIDEND RIGHTS. The holders of Series A Preferred Stock shall be
entitled to receive, as and when declared by the Board, but only out of
funds legally available therefor, cumulative compounding dividends at the
dividend rate of ten percent (10%) per annum of $______. [THIS BLANK WILL
EQUAL THE ORIGINAL ISSUE PRICE PER SHARE OF HAYES SERIES B PREFERRED STOCK
($20.9036) DIVIDED BY THE CONVERSION RATIO] Dividends shall accrue
quarterly as if such dividends had commenced to accrue on April 24, 1997,
provided, however, that in the event of conversion of the Series A
Preferred Stock (as set forth in Section 3), dividends shall be accrued
through the day immediately prior to such conversion. Subject to the
restrictions set forth in this Section 1, dividends accumulated on the
Series A Preferred Stock shall be declared by the Board and paid on the
Redemption Date provided that the Redemption Request is provided as set
forth in Section 7. Such dividends shall be paid in cash upon redemption,
or in additional shares of Common Stock upon conversion of the Series A
Preferred Stock as provided in Section 3 below. Dividends accumulated on
the Series A Preferred Stock shall be declared by the Board and paid in
cash every three (3) months to the extent permitted by law. No dividends
may be paid on the Common Stock unless all accrued and unpaid dividends on
the Series A Preferred Stock are paid.
2. VOTING RIGHTS.
(a) Common Stock. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share thereof held.
(b) Preferred Stock. Each holder of shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which such shares of Series A Preferred
Stock could be converted pursuant to the
2
<PAGE> 3
provisions of Section 3 below at the record date for the determination of
the shareholders entitled to vote on such matters or, if no such record
date is established, the date such vote is taken or any written consent of
shareholders is solicited.
(c) Vote Required. Subject to the foregoing provisions of this
Section 2, each holder of Preferred Stock shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled to notice of any shareholders' meeting in
accordance with the bylaws of the Company (as in effect at the time in
question) and applicable law, and shall be entitled to vote, together with
the holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote, except as may be otherwise
provided by applicable law. Except as otherwise required by law or by the
provisions of Section 5 of this Article V, the holders of Preferred Stock
and the holders of Common Stock shall vote together and not as separate
classes.
3. CONVERSION RIGHTS. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing US
$______ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION RATIO]
by the Series A Conversion Price determined as hereinafter provided, in
effect on the date the certificate is surrendered for conversion. If any
holder elects to convert his shares of Series A Preferred Stock as
provided above, all unpaid and accrued dividends on the Series A Preferred
Stock existing immediately prior to the conversion of the Series A
Preferred Stock will be converted into such number of fully paid and
nonassessable shares of Common Stock as determined by dividing all unpaid
and accrued dividends by the Series A Conversion Price, determined as
hereinafter provided. The "Series A Conversion Price" shall initially be
US $__________ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION
RATIO]. Such initial Series A Conversion Price shall be adjusted as
hereinafter provided.
(b) Automatic Conversion. Each share of Series A Preferred Stock
shall automatically be converted (as set forth below) into such number of
fully paid and nonassessable shares of Common Stock as determined by
dividing US $_____ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE
CONVERSION RATIO] (adjusted for any stock splits, stock dividends, stock
combinations or similar events) plus the per share amount of all unpaid
and accrued dividends on the Series A Preferred Stock existing immediately
prior to the conversion of the Series A Preferred Stock by the Series A
Conversion Price, determined as hereinafter provided, in effect (i)
immediately prior to the consummation of a Qualified Public Offering (as
defined below) under the Securities Act of 1933, as amended (the
"Securities Act"); or (ii) at such time as the Corporation has registered
Common Stock pursuant to an underwritten public offering under the
Securities Act and
3
<PAGE> 4
(a) the Corporation has listed or would be qualified to list its shares on
the NASDAQ National Market System; (b) the average market value of the
Common Stock equals or exceeds the lesser of US $_________ [THIS BLANK
WILL EQUAL $33.00 DIVIDED BY THE CONVERSION RATIO] per share or two (2)
times the then-current Series A Conversion Price (in either such case as
adjusted for stock splits, stock dividends, stock combinations or similar
events) determined by the median of the high and low sales price each day
for a consecutive twenty (20) day period; (c) the aggregate market value
of the shares of Common Stock held in the public market equals or exceeds
US $25,000,000, determined by the 20 trading day average of the high and
low sales price described in (b) above; and (d) the holders of the Series
A Preferred Stock have the unrestricted right at such time to sell in a
registered offering or pursuant to Rule 144 at least one-half of the
number of shares of Common Stock into which such Series A Preferred Stock
would be converted; or (iii) upon the affirmative vote of holders of at
least a majority of the Series A Preferred Stock (any such event described
in subsections (i), (ii) and (iii) above being referred to herein as a
"Series A Conversion Event"). All unpaid and accrued dividends on the
Series A Preferred Stock existing immediately prior to the Series A
Conversion Event shall automatically be converted into such number of
fully paid and nonassessable shares of Common Stock as determined by
dividing all unpaid and accrued dividends by the Series A Conversion
Price, determined as hereinafter provided, in effect immediately prior to
the Series A Conversion Event. As used herein, "Qualified Public Offering"
means an underwritten sale to the public of Common Stock pursuant to an
effective registration statement under the Securities Act in connection
with which (a) the gross proceeds to the Corporation for the Common Stock
actually sold to the public in such sale, prior to deducting the amount of
brokers' commissions and expense allowances paid by the Corporation in
connection with the original sale of such Common Stock, is US $25,000,000
or more, and (b) the public offering price per share (prior to
underwriters' commissions and expenses) equals or exceeds the lesser of
(i) US $______ [THIS BLANK WILL EQUAL $33.00 DIVIDED BY THE CONVERSION
RATIO] per share or (ii) two (2) times the then-current Series A
Conversion Price, in either such case as adjusted for stock splits, stock
dividends, stock combinations or similar events. Immediately prior to the
Qualified Public Offering, or promptly upon the occurrence of another
Series A Conversion Event, each share of Series A Preferred Stock shall be
automatically converted, without cost, on the terms of this Section 3(b),
into the number of shares of Common Stock into which such share of Series
A Preferred Stock would be convertible under Section 3 immediately prior
to such Series A Conversion Event.
(c) Mechanics of Conversion.
(i) Before any holder of Series A Preferred Stock shall be
entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for such stock,
and shall give written notice to the Corporation at such
office that such holder elects to convert the same and
shall state therein the name or names in which such
holder wishes the
4
<PAGE> 5
certificate or certificates for shares of Common Stock
to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office
to such holder of Series A Preferred Stock, a
certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the
date of surrender of the shares of Series A Preferred
Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common
Stock on such date.
(ii) If a conversion is in connection with an underwritten
offering of securities pursuant to the Securities Act,
the conversion may, at the option of any holder
tendering shares of Series A Preferred Stock for
conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series A
Preferred Stock shall not be deemed to have converted
such Series A Preferred Stock until immediately prior to
the closing of such sale of securities.
(d) Adjustments to Conversion Price for Certain Diluting Issues.
(i) Special Definitions. For purposes of this Section 3(d),
the following definitions apply:
(A) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities
(defined below).
(B) "Original Issue Date" shall mean, with respect to
the Series A Preferred Stock, the date on which a
share of Series A Preferred Stock was first
issued.
(C) "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than Common Stock
and Series A Preferred Stock) or other securities
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to
Section 3(d)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
5
<PAGE> 6
(1) upon conversion of shares of Series A
Preferred Stock;
(2) up to _______ [THIS NUMBER WILL EQUAL THE
NUMBER OF SHARES OF ACCESS BEYOND COMMON
STOCK CURRENTLY SUBJECT TO OUTSTANDING
OPTIONS OR RESERVED FOR FUTURE ISSUANCE,
PLUS 1,800,000 MULTIPLIED BY THE CONVERSION
RATIO] shares, subject to adjustment for all
stock splits, stock dividends, subdivisions
and combinations of shares of Common Stock
issued (or, pursuant to Section 3(d)(iii),
deemed to be issued) to officers and
employees of the Corporation pursuant to the
Corporation's stock option, purchase or
similar plans, or other options or warrants
as approved by the Corporation's Board of
Directors;
(3) as a dividend or distribution on Series A
Preferred Stock; and
(4) upon exercise or conversion of, or otherwise
pursuant to, securities of the Corporation
outstanding as of the Original Issue Date of
the Series A Preferred Stock (including any
securities assumed by the Corporation on
such date or otherwise assumed or issued in
connection with the transactions consummated
by the Corporation on such date).
(E) "Board" shall mean the Board of Directors of the
Corporation.
(ii) No Adjustment of Conversion Price. Any provision herein
to the contrary notwithstanding, no adjustment in the
Series A Conversion Price shall be made in respect of
the issuance of Additional Shares of Common Stock unless
the consideration per share (determined pursuant to
Section 3(d)(v) hereof) for an Additional Share of
Common Stock issued or deemed to be issued by the
Corporation is less than the Series A Conversion Price
in effect on the date of, and immediately prior to, such
issue.
(iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to
time after the Original Issue Date of the Series A
Preferred Stock shall issue any Options or Convertible
Securities, then the maximum number of
6
<PAGE> 7
shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein
designed to protect against dilution) of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, provided that in
any such case in which Additional Shares of Common Stock
are deemed to be issued:
(A) no further adjustments in the Series A Conversion
Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Corporation, or
decrease or increase in the number of shares of
Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series A
Conversion Price computed upon the original issue
thereof, and any subsequent adjustments based
thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such
Options or the rights of conversion or exchange
under such Convertible Securities (provided,
however, that no such adjustment of the Series A
Conversion Price shall affect the Common Stock
previously issued upon conversion of the Series A
Preferred Stock);
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Series A Conversion Price computed
upon the original issue thereof (or upon the
occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only
Additional Shares of Common Stock issued
were the shares of Common Stock, if any,
actually issued upon the exercise of such
Options or the conversion or exchange of
such Convertible Securities and the
consideration
7
<PAGE> 8
received therefor was the consideration
actually received by the Corporation for the
issue of all such Options, whether or not
exercised, plus the consideration actually
received by the Corporation upon such
exercise, or for the issue of all such
Convertible Securities which were actually
converted or exchanged, plus the additional
consideration, if any, actually received by
the Corporation upon such conversion or
exchange, and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities,
if any, actually issued upon the exercise
thereof were issued at the time of issue of
such Options, and the consideration received
by the Corporation for the Additional Shares
of Common Stock deemed to have been then
issued was the consideration actually
received by the Corporation for the issue of
all such Options, whether or not exercised,
plus the consideration deemed to have been
received by the Corporation (determined
pursuant to Section 3(d)(v)) upon the issue
of the Convertible Securities with respect
to which such Options were actually
exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the
Series A Conversion Price to an amount which
exceeds the lower of (1) the Series A Conversion
Price on the original adjustment date, or (2) the
Series A Conversion Price that would have resulted
from any issuance of Additional Shares of Common
Stock between the original adjustment date and
such readjustment date; and
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the
date of issue thereof, no adjustment of the Series
A Conversion Price shall be made until the
expiration or exercise of all such Options,
whereupon such adjustment shall be made in the
same manner provided in clause (C) above.
(iv) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event this
corporation, at any time after the Original Issue Date
shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued
pursuant to Section
8
<PAGE> 9
3(d)(iii)), without consideration or for a consideration
per share less than US $______ [THIS BLANK WILL EQUAL
$20.9036 DIVIDED BY THE CONVERSION RATIO] per share but
equal to or greater than US $______ [THIS BLANK WILL
EQUAL $7.14 DIVIDED BY THE CONVERSION RATIO] per share
(in each case as adjusted for any stock splits, stock
dividends, stock combinations or similar events) then
and in such event, the Series A Conversion Price shall
be reduced concurrently with such issue, to a price
equal to the lowest per share consideration received by
the Corporation for any of the Additional Shares of
Common Stock. If such price per share of Additional
Shares is less than US $________ [THIS BLANK WILL EQUAL
$7.14 DIVIDED BY THE CONVERSION RATIO] (adjusted for any
stock splits, stock dividends, stock combinations or
similar events) then and in such event, the Series A
Conversion Price shall first be reduced to US $_______
[THIS BLANK WILL EQUAL $7.14 DIVIDED BY THE CONVERSION
RATIO] and then the Series A Conversion Price shall be
further reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by
multiplying such Series A Conversion Price by a
fraction, (i) the numerator of which shall be the number
of shares of Common Stock issuable upon conversion of
the shares of the Series A Preferred Stock actually
issued and outstanding (or deemed issued pursuant to
Section 3(d)(iii)) immediately prior to such issue plus
the quotient obtained by dividing (x) the aggregate
consideration received by the Corporation for the total
number of Additional Shares of Common Stock so issued
(or deemed issued pursuant to Section 3(d)(iii)) by (y)
the Series A Conversion Price in effect immediately
prior to such issuance, and (ii) the denominator of
which shall be the number of shares of Common Stock
issuable upon conversion of the shares of the Series A
Preferred Stock actually issued and outstanding (or
deemed issued pursuant to Section 3(d)(iii)) immediately
prior to such issue plus the number of such Additional
Shares of Common Stock so issued (or deemed issued
pursuant to Section 3(d)(iii)).
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received by the
Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be computed
at the aggregate amount of cash received by
the Corporation (without deducting any
discounts or commissions paid by the
Corporation);
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<PAGE> 10
(2) insofar as it consists of property other
than cash, be computed at the fair value
thereof at the time of such issue, as
determined in good faith by the Board; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares
or securities or other assets of the
Corporation for consideration which covers
both, be the proportion of such
consideration so received, computed as
provided in clauses (1) and (2) above, as
determined in good faith by the Board.
(B) Options and Convertible Securities. The
consideration per share received by the
Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section
3(d)(iii), relating to Options and Convertible
Securities shall be determined by dividing:
(1) the maximum amount, if any, received or
receivable by the Corporation as
consideration for the issue of such Options
or Convertible Securities, plus the minimum
aggregate amount of additional consideration
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect
against dilution) payable to the Corporation
upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by
(2) the maximum number of shares of Common Stock
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect
against dilution) issuable upon the exercise
of such Options or conversion or exchange of
such Convertible Securities.
(e) Adjustments for Stock Dividends, Subdivisions, or Split-ups of
Common Stock. If the number of shares of Common Stock outstanding at any time
after the filing of this Restated Certificate of Incorporation is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, effective at
10
<PAGE> 11
the close of business upon the record date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend, subdivision or
split-up, the Series A Conversion Price shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase of
outstanding shares of Common Stock.
(f) Adjustments for Combinations of Common Stock. If the number of
shares of Common Stock outstanding at any time after the filing of this Restated
Certificate of Incorporation is decreased by a combination of the outstanding
shares of Common Stock, then, effective at the close of business upon the record
date of such combination, the Series A Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Series A Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
(g) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received had their
Series A Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 3(g) with respect to the rights of the
holders of the Series A Preferred Stock.
(h) Adjustments for Reorganizations, Reclassifications, etc. If the
Common Stock issuable upon conversion of the Series A Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock or other securities or property, whether by reclassification, a
merger or consolidation of this corporation with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of this
corporation (but only if the stockholders of this corporation hold more than
fifty percent (50%) of the outstanding voting equity securities of the surviving
corporation in such merger, consolidation or sale of assets reorganization), or
otherwise (other than a subdivision or combination of shares provided for above
or a merger or other transaction referred to in Section 4(c) below) the Series A
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted such that
the Series A Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock or
securities or other property equivalent to the number of shares of Common Stock
that would have been subject to receipt by the holders upon conversion of the
Series A Preferred Stock immediately before such event; and, in any such case,
appropriate adjustment (as determined by the Board) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the
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<PAGE> 12
Series A Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Series A Conversion Price) shall thereafter be applicable, as nearly as may be
reasonable, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock. In the event of
any conflict between this Section 3(h) and Section 4(b), Section 4(b) shall be
controlling.
(i) No Impairment. The corporation will not, except by a properly
approved amendment of its Certificate of Incorporation, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(j) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series A Preferred Stock, a certificate executed by the
Corporation's President/Chief Executive Officer or Treasurer/Chief Financial
Officer setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustments and readjustments, (B) the Conversion Price
at the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the Series A Preferred Stock.
(k) Notices of Record Date. In the event that the Corporation shall
propose at any time: (a) to declare any special dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities, whether
or not out of earnings or earned surplus; (b) to offer to subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (c) to effect any reclassification
or recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or (d) to merge or consolidate with or into any other corporation
(other than a mere reincorporation transaction), or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series A Preferred Stock:
(A) at least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the
date on which the holders of Common Stock shall be
entitled thereto) or for determining
12
<PAGE> 13
rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; and
(B) in the case of the matters referred to in (c) and (d)
above, at least twenty (20) days' prior written notice
of the date when the same shall take place (and
specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the
occurrence of such event).
(l) Issue Taxes. The corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(m) Reservation of Stock Issuable Upon Conversion. The corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in its best efforts to obtain
the requisite stockholder approval of any necessary amendment to the Certificate
of Incorporation.
(n) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board).
(o) Notices. Any notice required by the provisions of this Section 3
to be given to the holders of shares of Series A Preferred Stock shall be given
in writing and it or any certificates or other documents delivered hereunder
shall be deemed effectively given or delivered (as the case may be) upon
personal delivery; when deposited with a recognized international courier, five
(5) days after deposit (or if earlier, upon delivery against a signed receipt
therefor); when transmitted by telecopy, which transmission is confirmed, at the
address appearing on the books of the Corporation.
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<PAGE> 14
4. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holder of each share of
the Series A Preferred Stock then outstanding shall be entitled to receive out
of the remaining assets of the Corporation available for distribution to
stockholders, and before any payment or declaration and setting apart for
payment of any amount shall be made in respect of Common Stock, an amount equal
to $________. [THIS BLANK WILL EQUAL THE ORIGINAL ISSUE PRICE PER SHARE OF HAYES
SERIES B PREFERRED STOCK ($20.9036) DIVIDED BY THE CONVERSION RATIO] (which
amount shall be adjusted proportionately in the event the shares of Series A
Preferred Stock are subdivided into a greater number or combined into a lesser
number) plus an amount equal to any accrued but unpaid dividends through the
date of such liquidation, dissolution or winding up of the Corporation (the
"Series A Preferred Stock Liquidation Preference"). If, upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed to the holders of Series A Preferred Stock shall be
insufficient to permit the payment of the full Series A Preferred Stock
Liquidation Preference pursuant to this Section 4(a), then all of the remaining
assets of the Corporation to be distributed shall be distributed ratably to the
holders of Series A Preferred Stock.
(b) A merger, consolidation or reorganization of the Corporation
with or into any other corporation or corporations that results in the transfer
of fifty percent (50%) or more of the outstanding voting stock of the
Corporation (other than a transaction effected primarily for the purpose of
changing the domicile of the Corporation), a sale of all or substantially all of
the assets of the Corporation, or a transaction or series of related
transactions (other than a public offering of the Corporation's securities,
following which a majority of the Board is comprised of those persons who were
members of the Board prior to such offering) in which the Corporation issues
shares representing more than fifty percent (50%) of the voting power of the
Corporation immediately after giving effect to such transaction, shall be
treated as a liquidation, dissolution or winding up for purposes of this Section
4. Any securities to be delivered to the holders of the Series A Preferred Stock
and Common Stock pursuant to such event shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or reported on
a national inter dealer quotation system, the
value shall be deemed to be the average of the
closing prices of the securities on such exchange
over the 30-day period ending three (3) days prior
to the closing;
(B) If actively traded over the counter and not
reported on a national inter dealer quotation
system, the value shall be deemed to be the
average of the closing bid prices over the
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<PAGE> 15
30-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as
determined in good faith by the Board.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free
marketability shall be to make an appropriate discount
from the market value determined as above in (i)(A), (B)
or (C) to reflect the approximate fair market value
thereof, as determined in good faith by the Board.
(c) In the event of a transaction (or series of related
transactions) to be treated as a liquidation pursuant to this Section 4, the
Corporation shall give each holder of record of Series A Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 4, and the
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the Corporation has given the first notice provided for herein or
sooner than ten (10) days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of a majority of the shares of
Series A Preferred Stock.
5. RESTRICTIONS AND LIMITATIONS. So long as any of the Series A Preferred
Stock remain outstanding, this corporation shall not, without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the total number of shares of Series A Preferred Stock
outstanding:
(i) alter or change the rights, preferences or privileges of the
Series A Preferred Stock;
(ii) increase the aggregate number of authorized shares of Series A
Preferred Stock (other than an increase pursuant to a stock
split) or decrease the aggregate number of authorized shares
of Series A Preferred Stock below the number of shares of
Series A Preferred Stock then outstanding;
(iii) authorize or issue, or obligate itself to issue, any other
equity security senior to or on a parity with the Series A
Preferred Stock as to dividends or assets in liquidation or
create or reclassify any obligation or security convertible
into or exchangeable for, or having any option rights to
purchase, any such equity security other than shares of
capital stock
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<PAGE> 16
issuable upon conversion or exercise of securities outstanding
as of the Original Issue Date of the Series A Preferred Stock;
(iv) take any action which results in the redemption of, or payment
of dividends or the distribution of cash or any property with
respect to, any shares of Common Stock (other than pursuant to
(x) Section 4(a); (y) payments made to a stockholder who is
not a stockholder of the Corporation as of the Original Issue
Date of the Series A Preferred Stock in connection with an
acquisition or merger transaction by the Corporation which is
not deemed to be a liquidation pursuant to Section 4(b) above;
or (z) redemptions of employee or director owned stock or
options);
(v) incur or guarantee any indebtedness other than (a) in the
ordinary course of business; (b) under the Loan and Security
Agreement dated December 21, 1995, by and between Hayes
Microcomputer Products, Inc., an affiliate of the Corporation
and The CIT Group/Credit Finance, Inc., as amended thereafter,
or any replacement credit facility with a commercial lender
under which the Corporation or its subsidiaries maintains its
primary borrowing relationship; (c) indebtedness existing as
of the Original Issue Date of the Series A Preferred Stock;
(d) in an amount not to exceed $2,000,000 in the aggregate; or
(e) in connection with an acquisition or merger transaction by
the Corporation which is not deemed to be a liquidation under
Section 4(b) above; or
(vi) approve or create any mortgage, pledge or security interest in
all or substantially all of the assets or property of the
Corporation, except for such security interests or liens
arising under the Corporation's borrowings permitted under
Subsection 5(v) above.
6. NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or shares of Series
A Preferred Stock acquired by the Corporation by reason of purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue. The corporation may, from time to time, take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Series A Preferred Stock, but not below the number of shares of such Series then
outstanding.
7. REDEMPTION.
(a) Redemption Date. "Redemption Date" means April 23, 2000, or such
other date determined in accordance with Section 7(b) or 7(c) below.
(b) Stockholder Redemption Request. Subject to the limitations set
forth herein and in Section 7(f) below, on ninety (90) days prior written notice
from the holders of more than fifty percent (50%) of the Series A Preferred
Stock ("Redemption Request") delivered
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<PAGE> 17
to the Corporation not earlier than November 1, 1999, the Corporation shall
redeem all of the shares of Series A Preferred Stock held by each holder as of
the date of such notice by paying in cash therefor, US $_________ [THIS BLANK
WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION RATIO] per share of Series A
Preferred Stock (such amount to be adjusted proportionately in the event the
shares of Series A Preferred Stock are subdivided into a greater number or
combined into a lesser number and in the event the Corporation at any time pays
a dividend, or makes any other distribution, to holders of Series A Preferred
Stock payable in shares of Series A Preferred Stock) plus all accrued but unpaid
dividends on such shares (the "Redemption Price") on such Redemption Date.
(c) Corporation Redemption Request. The corporation may, at its sole
option and discretion, at any time at which it has funds legally available to do
so, redeem all (or, if the holders of a majority of the outstanding Series A
Preferred Stock consent thereto, any part) of the Series A Preferred Stock upon
thirty (30) days prior written notice to the holders of the Series A Preferred
Stock, by paying the Redemption Price on the Redemption Date. Any partial
redemption hereunder shall be made pro rata among all holders of the Series A
Preferred Stock. Notwithstanding the foregoing, any holder of Series A Preferred
Stock may elect to convert to Common Stock all or any part of the Series A
Preferred Stock shares which the Corporation has elected to redeem by providing
written notice of its conversion election to the Corporation within twenty (20)
days after the date of the Corporation's redemption notice. In such event, those
shares of Series A Preferred Stock shall convert to Common Stock at the Series A
Conversion Price as provided in, and subject to the terms and conditions of
Section 3.
(d) Surrender of Certificates. On or before the Redemption Date,
each holder of shares of Series A Preferred Stock being redeemed shall surrender
the certificate or certificates representing such shares to the Corporation, at
the Corporation's principal place of business. Upon such surrender (but not
earlier than the Redemption Date) the Redemption Price for such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. If a certificate is surrendered and all the shares
evidenced thereby are not being redeemed, the Corporation shall cause
certificates evidencing the shares not being redeemed to be issued in the name
of the registered owner of such shares and to be delivered to such person.
(e) Termination of Stock Rights. If the Corporation elects to redeem
the Series A Preferred Stock as provided above, or if a holder of Series A
Preferred Stock gives a Redemption Request and holds shares of Series A
Preferred Stock on the Redemption Date, and if on the Redemption Date the
Redemption Price is either paid or made available for payment through the
deposit arrangement specified in Section 7(f) below, then notwithstanding that
the certificates evidencing any of the shares of Series A Preferred Stock to be
redeemed shall not have been surrendered, all rights with respect to such shares
shall terminate as of the Redemption Date, except only the right of the holder
to receive the Redemption Price upon surrender of the certificate evidencing
such shares.
(f) Deposit of Redemption Price. On or prior to a Redemption Date,
the Corporation shall deposit with any bank or trust company in the United
States having a capital
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<PAGE> 18
and surplus of at least US $50,000,000, as a trust fund, a sum equal to the
aggregate Redemption Price of all shares of Series A Preferred Stock to be
redeemed on the Redemption Date, with irrevocable instructions and authority to
the bank or trust company to pay, on or after the Redemption Date or prior
thereto, the Redemption Price to the respective holders upon the surrender of
their share certificates. From and after the date of such deposit ("Redemption
Deposit"), the shares so called for redemption shall be redeemed. The deposit
shall constitute full payment of the shares to their holders, and from and after
the Redemption Date the shares shall be deemed to be no longer outstanding, and
the holders thereof shall cease to be stockholders with respect thereto and
shall have no rights with respect thereto except the rights to receive from the
bank or trust company payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor. Any funds so deposited
and unclaimed at the end of one year from the Redemption Date shall be released
or repaid to the holders of the shares called for redemption shall be entitled
to receive payment of the Redemption Price with respect to such shares only from
the Corporation.
(g) Insufficient Funds. If the funds of the Corporation legally
available therefor shall be insufficient to discharge the redemption
requirements under Section 7(b) in full due on any Redemption Date, funds to the
maximum extent legally available for such purpose shall be set aside on or
before the Redemption Date in accordance with Section 7(b). The maximum number
of full shares of Series A Preferred Stock that can be redeemed with such funds
shall be redeemed ratably from the holders of shares of Series A Preferred Stock
to be redeemed as of the Redemption Date. Thereafter, the Corporation shall
redeem shares of Series A Preferred Stock ratably from the holders thereof as
funds legally available therefor become available. Dividends shall continue to
accrue on shares of Series A Preferred Stock scheduled to be redeemed on a
Redemption Date but not yet redeemed until funds sufficient to redeem such
shares become legally available therefor and are paid or set aside in accordance
with this Section 7.
ARTICLE VI
The Board of Directors of the Corporation shall have the power to adopt,
amend or repeal Bylaws of the Corporation.
ARTICLE VII
The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by the affirmative
vote of a majority of the entire Board of Directors. The directors shall be
divided into three classes, designated as Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of the total number of
directors, initially, with the directors of Class I elected for a term of one
year, the directors of Class II elected for a term of two years and the
directors of Class III elected for a term of three years. At each succeeding
annual meeting of stockholders following such classification and election,
directors elected to succeed those directors whose terms expire shall be elected
for a three-year term.
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<PAGE> 19
Subject to the rights of the holders of any class or series of the
capital stock of the Corporation entitled to vote generally in the election of
directors (hereinafter in this Article VII and in the first proviso of Article
VIII of this Certificate of Incorporation, such stock is referred to as the
"Voting Stock") then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office, or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires.
No decrease in the number of authorized directors constituting the entire Board
of Directors shall shorten the term of any incumbent director. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Subject to the rights of the holders of any class or series of the
Voting Stock then outstanding, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of the Voting Stock, voting together as a single
class (it being understood that, for all purposes of this Article VII, and the
provisions of the By-Laws of the Corporation which require the affirmative vote
of the holders of at least 80% of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class,
to alter, amend or repeal any provision of the By-Laws which is to the same
effect as the provisions of this Certificate of Incorporation enumerated in the
first proviso of Article VIII hereof, each share of the Voting Stock shall have
the number of votes granted to it pursuant to Article V of this Certificate of
Incorporation or any designation of the rights, powers and preferences of any
class or series of Preferred Stock made pursuant to said Article IV (a
"Preferred Stock Designation")).
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal this Article VII.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by
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<PAGE> 20
the terms of this Certificate of Incorporation applicable thereto (including the
resolutions of the Board of Directors pursuant to Article IV), and such
Directors so elected shall not be divided into classes pursuant to this Article
VII unless expressly provided by such terms.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the bylaws of the Corporation;
provided, however, that notwithstanding any other provisions of the
Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of
the Voting Stock required by law, this Certificate of Incorporation
or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal (i) any
provision of the By-laws which is to the same effect as Article VII
of this Certificate of Incorporation, or (ii) this proviso of this
Article VIII.
To authorize and cause to be executed mortgages and liens upon
the real property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was
created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the
directors of the Corporation.
When and as authorized by the stockholders in accordance with
this Certificate of Incorporation and applicable statutes, to sell,
lease or exchange all or substantially all of the property and
assets of the Corporation, including its goodwill and its corporate
franchises, upon such terms and conditions and for such
consideration (which may consist, in whole or in part, of money or
property, including shares of stock in, and/or other securities of,
any other corporation or corporations) as the Corporation's Board of
Directors shall deem appropriate and in the best interests of the
Corporation.
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<PAGE> 21
ARTICLE IX
To the fullest extent permitted by law, no director of the Corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article IX, nor the adoption of
any provision of this Restated Certificate of Incorporation inconsistent with
this Article IX, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
This Amended and Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been duly executed by the Corporation as of the ____ day of _________, 1997.
ACCESS BEYOND, INC.
BY:______________________________________
Name:_________________________________
Title:________________________________
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<PAGE> 1
EXHIBIT 4.1.1
VOTING AGREEMENT CHESTNUT
This Voting Agreement is entered into as of July 29, 1997, by and
between Access Beyond, Inc., a Delaware corporation ("Access Beyond") and
Chestnut Capital Limited Partnership ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), have entered into an Agreement and Plan of Reorganization
of even date herewith (the "Merger Agreement", which term is deemed to include
all Exhibits and Schedules thereto), which provides (subject to the conditions
set forth therein) for the merger of a wholly-owned subsidiary of Access Beyond
("Newco") with and into Hayes in a reverse triangular merger (the "Merger"),
with Hayes to be the surviving corporation of the Merger. Capitalized terms used
but not otherwise defined in this Voting Agreement have the meanings ascribed to
such terms in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock or the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (4,212,958 of such shares being
referred to herein as the "Subject Shares").
C. As a condition to the willingness of Access Beyond to enter into the
Merger Agreement, Access Beyond has required that Shareholder agree, and in
order to induce Access Beyond to enter into the Merger Agreement Shareholder has
agreed to enter into this Voting Agreement.
NOW, THEREFORE, the parties to this Voting Agreement, intending to be
legally bound, agree as follows:
1. RESTRICTIONS ON TRANSFER
1.1 NO DISPOSITION OF OR ENCUMBRANCES ON SUBJECT SHARES.
(a) Shareholder hereby covenants and agrees that prior to the
Expiration Date (as defined below), Shareholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale, or grant of any option to purchase or
other disposition or transfer of) any of the Subject Shares to any person or
entity (each, a "Person") other than Access Beyond, (ii) create, or permit to
exist any encumbrances on any of the Subject Shares or (iii) reduce its
beneficial ownership of, interest in, or economic risk relating to, any of the
Subject Shares.
<PAGE> 2
(b) As used in this Voting Agreement, the term "Expiration
Date" shall mean the earlier of (i) the date upon which the Merger Agreement is
validly terminated, (ii) the date upon which the Merger becomes effective, or
(iii) any waiver of either any closing condition in favor of Hayes or any
obligation of Access Beyond under or any amendment of the Merger Agreement, the
giving of any required consent of Hayes under Section 4.3 or any other provision
of the Merger Agreement unless such waiver, amendment or consent is approved
either by the Board of Directors of Hayes or the Transaction Committee thereof
established by the Hayes Board on July 28, 1997.
1.2 TRANSFER OF VOTING RIGHTS. Shareholder covenants and agrees that,
prior to the Expiration Date, Shareholder will not deposit any of the Subject
Shares into a voting trust or grant a proxy or enter into a voting agreement
with respect to any of the Subject Shares, except as contemplated hereby.
1.3 POST-EFFECTIVE TIME MARKET STANDOFF.
(a) Shareholder hereby covenants and agrees that, in the event
the Merger is consummated, for a period of ninety (90) days after the
Effective Time of the Merger (the "Stand-Off Period"), Shareholder will
not, directly or indirectly, (i) offer, sell, offer to sell, contract
to sell, pledge, grant any option to purchase or otherwise, dispose of
or transfer (or announce any offer, sale, offer of sale, contract of
sale or grant of any option to purchase or other disposition or
transfer of) any of the Access Beyond Securities (as defined below) to
any Person, (ii) create or permit to exist any encumbrances on any of
the Access Beyond Securities or (iii) reduce its beneficial ownership
of, interest in, or risk relating to, any of the Access Beyond
Securities.
(b) Shareholder hereby covenants and agrees that in the event
the Merger is consummated, for a period of one hundred eighty (180)
days after the Stand-Off Period, Shareholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise, dispose of or transfer (or
announce any offer, sale, offer of sale, contract of sale or grant of
any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities to any Person, (ii) create or permit to exist
any encumbrances on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of
the Access Beyond Securities; provided that paragraph 1.3(a) and (b)
shall not apply to any of the Subject Shares pledged by Chestnut
Capital, LLC pursuant to a Pledge Agreement of even date securing the
Subordinated Convertible Notes, as amended, described in the Hayes
Disclosure Letter; and, provided further that this paragraph 1.3(b)
shall not apply to any sale of the Subject Shares by Chestnut Capital,
LLC in an amount not to exceed $3.0 Million.
(c) As used in this Voting Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond
received by Shareholder in the Merger or otherwise acquired or held by
Shareholder. The Access Beyond Securities
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<PAGE> 3
shall not include the shares of Chestnut Capital, LLC pledged to
certain shareholders of Hayes pursuant to that certain Stock Pledge
Agreement of even date between Chestnut Capital, LLC and certain other
shareholders of Hayes.
2. VOTING AGREEMENTS
2.1 PRE-TERMINATION VOTING AGREEMENT. Shareholder hereby agrees that,
prior to the Expiration Date, at any meeting of the shareholders of Hayes,
however called, and in any written action by consent of shareholders of Hayes,
unless otherwise directed in writing by Access Beyond, Shareholder shall vote
the Subject Shares:
(i) in favor of the Merger, the execution and delivery by
Hayes of the Merger Agreement and the adoption and approval of the
terms thereof and in favor of each of the other actions contemplated by
the Merger Agreement and any action required in furtherance hereof and
thereof;
(ii) against any Acquisition Proposal (other than the Merger)
and against any action or agreement that would result in a breach of
any covenant or obligation of Hayes in the Merger Agreement; and
(iii) against any other action which is intended, or could
reasonably be expected to, materially impede, interfere with, delay,
postpone, or adversely affect the Merger or any of the other
transactions contemplated by the Merger Agreement.
Prior to the Expiration Date, Shareholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)", or "(iii)" of the preceding sentence.
3. WAIVER OF APPRAISAL RIGHTS
Shareholder hereby irrevocably waives and agrees with respect to the
Subject Shares not to assert any and all rights of appraisal or dissenters'
rights that Shareholder may have or hereafter acquire pursuant to Article 13 of
the Georgia Business Corporation Code or any other applicable laws in connection
with the Merger.
4. NOTICE OF SHAREHOLDER MEETINGS AND PROPOSED CONSENTS
For the purpose of effectively carrying out and furthering the intent
of this Voting Agreement and allowing Access Beyond to exercise its rights
hereunder, Shareholder agrees to give Access Beyond prompt written notice of any
meeting of the shareholders of Hayes or proposed written consent of the
shareholders of Hayes with respect to the matters covered by the Proxy (which
notice shall, in any event be given in a manner to be received not later than
two (2) days before such meeting or consent). Access Beyond acknowledges that
the obligations of this Section 4 will be satisfied with respect to a given
meeting or proposed written consent
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<PAGE> 4
once it has received notice with respect to such meeting or proposed written
consent from any of Shareholder, Hayes or any other shareholder of Hayes
executing a similar voting agreement.
5. MISCELLANEOUS
5.1 INDEMNIFICATION. Shareholder shall hold harmless and indemnify
Access Beyond from and against any and all claims, demands, actions, losses,
costs, damages, liabilities and expenses including, without limitation,
attorney's fees (collectively "Damages") (regardless of whether or not such
Damages relate to a third-party claim) which are incurred by Access Beyond to
the extent that such Damages arise from any breach of any covenant or obligation
of Shareholder contained herein.
5.2 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses; provided, however, that the Shareholder's
legal costs and expenses shall be promptly paid by Hayes.
5.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 5.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
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<PAGE> 5
(b) If to Shareholder:
At the address set forth below Shareholder's
signature on the signature page hereto
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 5.3.
5.4 SEVERABILITY. Any term or provision of this Voting Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting Agreement in any other jurisdiction. If any
provision of this Voting Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
5.5 ENTIRE AGREEMENT. This Voting Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto.
5.6 AMENDMENT AND WAIVERS. Any term or provision of this Voting
Agreement may be amended, and the observance of any term of this Voting
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the parties to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
5.7 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Voting Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Voting Agreement shall be binding upon and shall inure
to the benefit of (i) Shareholder and his heirs, successor and assigns and (ii)
Access Beyond and its successors and assigns.
5.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Voting
Agreement are not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that Access Beyond shall be
entitled to an injunction or injunctions to prevent breaches of this Voting
5
<PAGE> 6
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which Access Beyond is entitled at law
or in equity.
5.9 OTHER AGREEMENTS. Nothing in this Voting Agreement shall limit any
of the rights or remedies of Access Beyond or Shareholder, or any of the
obligations of either party under any Affiliate Agreement between Access Beyond
and Shareholder or any other agreement.
5.10 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Voting Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.11 COUNTERPARTS. This Voting Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Voting Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Voting Agreement, or their duly authorized representatives,
shall be legally binding and enforceable. All such facsimile copies are declared
as originals and, accordingly, are admissible in any jurisdiction or tribunal
having jurisdiction over any matter relating to this Voting Agreement.
5.12 CONSTRUCTION. The language hereof will not be construed for or
against either party. A reference to a section or exhibit will mean a section
in, or an exhibit to, this Voting Agreement, unless otherwise explicitly set
forth. The titles and headings in this Voting Agreement are for reference
purposes only and will not in any manner limit the construction of this Voting
Agreement. For the purposes of such construction, this Voting Agreement will be
considered as a whole.
5.13 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by ANY other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under,
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Voting Agreement do not constitute any
liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
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<PAGE> 7
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused this
Voting Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
CHESTNUT CAPITAL LIMITED PARTNERSHIP
By:_______________________________________
DENNIS C. HAYES, General Partner
Address: c/o Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Facsimile: (770) 840-6830
Address of Shareholder's
counsel, if any, for copy
of Notices under Section
5.3:
Davis, Matthews & Quigley, P.C.
Fourteenth Floor, Lenox Towers II
3400 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Baxter L. Davis, Esq.
Facsimile: (404) 261-0159
Shares of Hayes Common Stock owned as of the date hereof: 4,400,000
Shares of Hayes Series A Preferred Stock owned as of the date hereof: None
Shares of Hayes Series B Preferred Stock owned as of the date hereof: None
7
<PAGE> 1
EXHIBIT 4.1.2
VOTING AGREEMENT RINZAI
This Voting Agreement is entered into as of July 29, 1997, by and
between Access Beyond, Inc., a Delaware corporation ("Access Beyond") and Rinzai
Limited ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), have entered into an Agreement and Plan of Reorganization
of even date herewith (the "Merger Agreement", which term is deemed to include
all Exhibits and Schedules thereto), which provides (subject to the conditions
set forth therein) for the merger of a wholly-owned subsidiary of Access Beyond
("Newco") with and into Hayes in a reverse triangular merger (the "Merger"),
with Hayes to be the surviving corporation of the Merger. Capitalized terms used
but not otherwise defined in this Voting Agreement have the meanings ascribed to
such terms in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock or the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (2,581,559 of such shares being
referred to herein as the "Subject Shares").
C. As a condition to the willingness of Access Beyond to enter into the
Merger Agreement, Access Beyond has required that Shareholder agree, and in
order to induce Access Beyond to enter into the Merger Agreement Shareholder has
agreed to enter into this Voting Agreement.
NOW, THEREFORE, the parties to this Voting Agreement, intending to be
legally bound, agree as follows:
1. RESTRICTIONS ON TRANSFER
1.1 NO DISPOSITION OF OR ENCUMBRANCES ON SUBJECT SHARES.
(a) Shareholder hereby covenants and agrees that prior to the
Expiration Date (as defined below), Shareholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale, or grant of any option to purchase or
other disposition or transfer of) any of the Subject Shares to any person or
entity (each, a "Person") other than Access Beyond, (ii) create, or permit to
exist any encumbrances on any of the Subject Shares or
<PAGE> 2
(iii) reduce its beneficial ownership of, interest in, or risk economic relating
to, any of the Subject Shares.
(b) As used in this Voting Agreement, the term "Expiration
Date" shall mean the earlier of (i) the date upon which the Merger Agreement is
validly terminated, (ii) the date upon which the Merger becomes effective, or
(iii) any waiver of either any closing condition in favor of Hayes or any
obligation of Access Beyond under or any amendment of the Merger Agreement, or
the giving of any required consent of Hayes under Section 4.3 or any other
provision of the Merger Agreement unless such waiver, amendment or consent is
approved either by the Board of Directors of Hayes or the Transaction Committee
thereof established by the Hayes Board on July 28, 1997.
1.2 TRANSFER OF VOTING RIGHTS. Shareholder covenants and agrees that,
prior to the Expiration Date, Shareholder will not deposit any of the Subject
Shares into a voting trust or grant a proxy or enter into a voting agreement
with respect to any of the Subject Shares, except as contemplated hereby.
1.3 POST-EFFECTIVE TIME MARKET STANDOFF.
(a) Shareholder hereby covenants and agrees that, in the event
the Merger is consummated, for a period of ninety (90) days after the
Effective Time of the Merger (the "Stand-Off Period"), Shareholder will
not, directly or indirectly, (i) offer, sell, offer to sell, contract
to sell, pledge, grant any option to purchase or otherwise, dispose of
or transfer (or announce any offer, sale, offer of sale, contract of
sale or grant of any option to purchase or other disposition or
transfer of) any of the Access Beyond Securities (as defined below) to
any Person, (ii) create or permit to exist any encumbrances on any of
the Access Beyond Securities or (iii) reduce its beneficial ownership
of, interest in, or risk relating to, any of the Access Beyond
Securities.
(b) As used in this Voting Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond
received by Shareholder in the Merger or otherwise acquired or held by
Shareholder. The Access Beyond Securities shall not include the shares
of Dennis C. Hayes pledged to certain shareholders of Hayes pursuant to
that certain Stock Pledge Agreement of even date between Dennis C.
Hayes and certain other shareholders of Hayes.
2. VOTING AGREEMENTS
2.1 PRE-TERMINATION VOTING AGREEMENT. Shareholder hereby agrees that,
prior to the Expiration Date, at any meeting of the shareholders of Hayes,
however called, and in any written action by consent of shareholders of Hayes,
unless otherwise directed in writing by Access Beyond, Shareholder shall vote
the Subject Shares:
2
<PAGE> 3
(i) in favor of the Merger, the execution and delivery by
Hayes of the Merger Agreement and the adoption and approval of the
terms thereof and in favor of each of the other actions contemplated by
the Merger Agreement and any action required in furtherance hereof and
thereof;
(ii) against any Acquisition Proposal (other than the Merger)
and against any action or agreement that would result in a breach of
any covenant or obligation of Hayes in the Merger Agreement; and
(iii) against any other action which is intended, or could
reasonably be expected to, materially impede, interfere with, delay,
postpone, or adversely affect the Merger or any of the other
transactions contemplated by the Merger Agreement.
Prior to the Expiration Date, Shareholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)", or "(iii)" of the preceding sentence.
2.2 PROXY. Contemporaneously with the execution of this Voting
Agreement, Shareholder delivers to Dennis C. Hayes a proxy in the form attached
hereto as Exhibit A (the "Proxy").
3. WAIVER OF APPRAISAL RIGHTS
Shareholder hereby irrevocably waives and agrees with respect to the
Subject Shares not to assert any and all rights of appraisal or dissenters'
rights that Shareholder may have or hereafter acquire pursuant to Article 13 of
the Georgia Business Corporation Code or any other applicable laws in connection
with the Merger.
4. NOTICE OF SHAREHOLDER MEETINGS AND PROPOSED CONSENTS
For the purpose of effectively carrying out and furthering the intent
of this Voting Agreement and allowing Access Beyond to exercise its rights
hereunder, Shareholder agrees to give Access Beyond prompt written notice of any
meeting of the shareholders of Hayes or proposed written consent of the
shareholders of Hayes with respect to the matters covered by the Proxy (which
notice shall, in any event be given in a manner to be received not later than
two (2) days before such meeting or consent). Access Beyond acknowledges that
the obligations of this Section 4 will be satisfied with respect to a given
meeting or proposed written consent once it has received notice with respect to
such meeting or proposed written consent from any of Shareholder, Hayes or any
other shareholder of Hayes executing a similar voting agreement.
3
<PAGE> 4
5. MISCELLANEOUS
5.1 INDEMNIFICATION. Shareholder shall hold harmless and indemnify
Access Beyond from and against any and all claims, demands, actions, losses,
costs, damages, liabilities and expenses including, without limitation,
attorney's fees (collectively "Damages") (regardless of whether or not such
Damages relate to a third-party claim) which are incurred by Access Beyond to
the extent that such Damages arise from any breach of any covenant or obligation
of Shareholder contained herein, excluding any action or omission of the holder
of the Proxy.
5.2 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses; provided, however, that the Shareholder's
legal costs and expenses shall be promptly paid by Hayes.
5.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 5.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
Rinzai Limited
c/o Acma Limited
Jurong Port Road
4
<PAGE> 5
Singapore 2661
Attention: President
Facsimile: 011 65 264-0125
with a copy to:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 5.3.
5.4 SEVERABILITY. Any term or provision of this Voting Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting Agreement in any other jurisdiction. If any
provision of this Voting Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
5.5 ENTIRE AGREEMENT. This Voting Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto.
5.6 AMENDMENT AND WAIVERS. Any term or provision of this Voting
Agreement may be amended, and the observance of any term of this Voting
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the parties to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
5.7 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Voting Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Voting Agreement shall be binding upon and shall inure
to the benefit of (i) Shareholder and its heirs, successor and assigns and (ii)
Access Beyond and its successors and assigns.
5.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Voting
Agreement are not performed in
5
<PAGE> 6
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that Access Beyond shall be entitled to an injunction or injunctions to
prevent breaches of this Voting Agreement and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which
Access Beyond is entitled at law or in equity.
5.9 OTHER AGREEMENTS. Nothing in this Voting Agreement shall limit any
of the rights or remedies of Access Beyond or Shareholder, or any of the
obligations of either party under any Affiliate Agreement between Access Beyond
and Shareholder or any other agreement.
5.10 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Voting Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.11 COUNTERPARTS. This Voting Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Voting Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Voting Agreement, or their duly authorized representatives,
shall be legally binding and enforceable. All such facsimile copies are declared
as originals and, accordingly, are admissible in any jurisdiction or tribunal
having jurisdiction over any matter relating to this Voting Agreement.
5.12 CONSTRUCTION. The language hereof will not be construed for or
against either party. A reference to a section or exhibit will mean a section
in, or an exhibit to, this Voting Agreement, unless otherwise explicitly set
forth. The titles and headings in this Voting Agreement are for reference
purposes only and will not in any manner limit the construction of this Voting
Agreement. For the purposes of such construction, this Voting Agreement will be
considered as a whole.
5.13 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by ANY other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under,
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Voting Agreement do not constitute any
liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
[EXECUTION ON THE FOLLOWING PAGE]
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<PAGE> 7
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused this
Voting Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
RINZAI LIMITED
By:_______________________________________
Name:_______________________, President
Address: c/o Acma Limited
Jurong Port Road
Singapore 2661
Facsimile: 011 65 264-0125
Address of Shareholder's
counsel, if any, for copy
of Notices under Section
5.3:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Shares of Hayes Common Stock owned as of the date hereof: None
Shares of Hayes Series A Preferred Stock owned as of the date hereof: 2,817,500
Shares of Hayes Series B Preferred Stock owned as of the date hereof: None
7
<PAGE> 8
EXHIBIT A
FORM OF IRREVOCABLE PROXY
The undersigned shareholder of Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes"), hereby irrevocably (to the fullest extent
permitted by law) appoints and constitutes Dennis C. Hayes the attorney and
proxy of the undersigned with full power of substitution and resubstitution, to
the full extent of the undersigned's rights with respect to __________ shares of
capital stock of Hayes owned by the undersigned as of the date of this proxy,
which shares are specified below. (The number of shares of the capital stock of
Hayes referred to above are referred to as the "Shares"). Upon the execution
hereof, all prior proxies given by the undersigned with respect to any of the
Shares are hereby revoked, and no subsequent proxies will be given with respect
to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is
granted in connection with the Voting Agreement, dated as of the date hereof,
between Access Beyond, Inc. ("Access Beyond") and the undersigned (the "Voting
Agreement"), and is granted in consideration of Access Beyond entering into the
Agreement and Plan of Reorganization, dated as of the date hereof, between
Access Beyond and Hayes (the "Merger Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings ascribed to such terms in the
Voting Agreement.
The attorney and proxy named above are hereby empowered, and
shall exercise this proxy, to vote the Shares at any time prior to the
Expiration Date at any meeting of the shareholders of Hayes, however called, or
in any written action by consent of shareholders of Hayes:
(i) in favor of the Merger, the execution and delivery by
Hayes of the Merger Agreement and the adoption and approval of the
terms thereof and in favor of each of the other actions contemplated by
the Merger Agreement and any action required in furtherance hereof and
thereof; and
(ii) against any Acquisition Proposal (other than the Merger)
and against any action or agreement that would result in a breach of
any covenant or obligation of Hayes in the Merger Agreement.
The undersigned Shareholder may vote the Shares on all other
matters. This proxy shall be binding upon the heirs, successors and assigns of
the undersigned (including any transferee of any of the Shares).
Dated:_______________, 1997 __________________________________________
Name:
Number of Shares of Hayes
Common Stock owned as of
the date of this Proxy:___________________
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date of this Proxy:_____________
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date of this Proxy:_____________
8
<PAGE> 1
EXHIBIT 4.1.3
VOTING AGREEMENT
This Voting Agreement is entered into as of July 29, 1997, by and
between Access Beyond, Inc., a Delaware corporation ("Access Beyond") and Vulcan
Ventures Incorporated, a Washington corporation ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), have entered into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly-owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Voting Agreement have the meanings ascribed to such terms in the Merger
Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock or the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof and the Access Beyond Securities
(as defined herein) (all such shares, together with any shares of the Common
Stock, the Series A Preferred Stock, the Series B Preferred Stock or other
shares of capital stock of Hayes that may hereafter be acquired by Shareholder,
being referred to herein as the "Subject Shares").
C. As a condition to the willingness of Access Beyond to enter into the
Merger Agreement, Access Beyond has required that Shareholder agree, and in
order to induce Access Beyond to enter into the Merger Agreement Shareholder has
agreed to enter into this Voting Agreement.
NOW, THEREFORE, the parties to this Voting Agreement, intending to be
legally bound, agree as follows:
1. RESTRICTIONS ON TRANSFER
1.1 NO DISPOSITION OF OR ENCUMBRANCES ON SUBJECT SHARES.
(a) Shareholder hereby covenants and agrees that prior to the
Expiration Date (as defined below), Shareholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose of or transfer (or announce any offer,
<PAGE> 2
sale, offer of sale, contract of sale, or grant of any option to purchase or
other disposition or transfer of) any of the Subject Shares to any person or
entity (each, a "Person") other than Access Beyond, (ii) create, or permit to
exist any encumbrances on any of the Subject Shares or (iii) reduce its
beneficial ownership of, interest in, or risk relating to, any of the Subject
Shares.
(b) As used in this Voting Agreement, the term "Expiration
Date" shall mean the earlier of the date upon which the Merger Agreement is
validly terminated or the date upon which the Merger becomes effective.
1.2 TRANSFER OF VOTING RIGHTS. Shareholder covenants and agrees that,
prior to the Expiration Date, Shareholder will not deposit any of the Subject
Shares into a voting trust or grant a proxy or enter into a voting agreement
with respect to any of the Subject Shares.
1.3 POST-EFFECTIVE TIME MARKET STANDOFF.
(a) Shareholder hereby covenants and agrees that in the event
the Merger is consummated, for a period of ninety (90) days after the
Effective Time of the Merger (the "Stand-Off Period"), Shareholder will
not, directly or indirectly, (i) offer, sell, offer to sell, contract
to sell, pledge, grant any option to purchase or otherwise, dispose of
or transfer (or announce any offer, sale, offer of sale, contract of
sale or grant of any option to purchase or other disposition or
transfer of) any of the Access Beyond Securities (as defined below) to
any Person, (ii) create or permit to exist any encumbrances on any of
the Access Beyond Securities or (iii) reduce its beneficial ownership
of, interest in, or risk relating to, any of the Access Beyond
Securities.
(b) As used in this Voting Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond
received by Shareholder in the Merger or otherwise acquired or held by
Shareholder.
2. VOTING AGREEMENTS
2.1 PRE-TERMINATION VOTING AGREEMENT. Shareholder hereby agrees that,
prior to the Expiration Date, at any meeting of the shareholders of Hayes,
however called, and in any written action by consent of shareholders of Hayes,
unless otherwise directed in writing by Access Beyond, Shareholder shall vote
the Subject Shares:
(i) in favor of the Merger, the execution and delivery by
Hayes of the Merger Agreement and the adoption and approval of the
terms thereof and in favor of each of the other actions contemplated by
the Merger Agreement and any action required in furtherance hereof and
thereof;
2
<PAGE> 3
(ii) against any Acquisition Proposal (other than the Merger)
and against any action or agreement that would result in a breach of
any covenant or obligation of Hayes in the Merger Agreement; and
(iii) against any other action which is intended, or could
reasonably be expected to, materially impede, interfere with, delay,
postpone, or adversely affect the Merger or any of the other
transactions contemplated by the Merger Agreement.
Prior to the earlier to occur of the valid termination of the Merger Agreement
or the Effective Time, Shareholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)", or "(iii)" of the preceding sentence.
2.2 PROXY. Contemporaneously with the execution of this Voting
Agreement, Shareholder delivers to Dennis C. Hayes a proxy in the form attached
hereto as Exhibit A (the "Proxy").
3. WAIVER OF APPRAISAL RIGHTS
Shareholder hereby irrevocably waives and agrees not to assert any and
all rights of appraisal or dissenters' rights that Shareholder may have or
hereafter acquire pursuant to Article 13 of the Georgia Business Corporation
Code or any other applicable laws in connection with the Merger.
4. NOTICE OF SHAREHOLDER MEETINGS AND PROPOSED CONSENTS
For the purpose of effectively carrying out and furthering the intent
of this Voting Agreement and allowing Access Beyond to exercise its rights
hereunder, Shareholder agrees to give Access Beyond prompt written notice of any
meeting of the shareholders of Hayes or proposed written consent of the
shareholders of Hayes with respect to the matters covered by the Proxy (which
notice shall, in any event be given in a manner to be received not later than
two (2) days before such meeting or consent action). Access Beyond acknowledges
that the obligations of this Section 4 will be satisfied with respect to a given
meeting or proposed written consent once it has received notice with respect to
such meeting or proposed written consent from any of Shareholder, Hayes or any
other shareholder of Hayes executing a similar voting agreement.
5. MISCELLANEOUS
5.1 INDEMNIFICATION. Shareholder shall hold harmless and indemnify
Access Beyond from and against any and all claims, demands, actions, losses,
costs, damages, liabilities and expenses including, without limitation,
attorney's fees (collectively "Damages") (regardless of whether or not such
Damages relate to a third-party claim) which are incurred by Access Beyond to
the extent that such Damages arise from any breach of any covenant or obligation
of Shareholder contained herein.
3
<PAGE> 4
5.2 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Voting Agreement shall be paid by the party
incurring such costs and expenses; provided, however, that the Shareholders
legal costs and expenses shall be promptly paid by Hayes.
5.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the party to be notified at the address
set forth below or at such other address as such party shall have notified the
other parties hereto, by notice given in conformity with this Section 5.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
At the address set forth below Shareholder's
signature on the signature page hereto
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 5.3.
5.4 SEVERABILITY. Any term or provision of this Voting Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Voting Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Voting
4
<PAGE> 5
Agreement in any other jurisdiction. If any provision of this Voting Agreement
is so broad as to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
5.5 ENTIRE AGREEMENT. This Voting Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto.
5.6 AMENDMENT AND WAIVERS. Any term or provision of this Voting
Agreement may be amended, and the observance of any term of this Voting
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the parties to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
5.7 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Voting Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Voting Agreement shall be binding upon and shall inure
to the benefit of (i) Shareholder and his heirs, successor and assigns and (ii)
Access Beyond and its successors and assigns.
5.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Voting
Agreement was not performed in accordance with its specific terms or are
otherwise breached. It is accordingly agreed that Access Beyond shall be
entitled to an injunction or injunctions to prevent breaches of this Voting
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which Access Beyond is entitled at law
or in equity.
5.9 OTHER AGREEMENTS. Nothing in this Voting Agreement shall limit any
of the rights or remedies of Access Beyond or any of the obligations of
Shareholder under any Affiliate Agreement between Access Beyond and Shareholder
or any other agreement.
5.10 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Voting Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.11 COUNTERPARTS. This Voting Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Voting Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Voting Agreement, or their duly authorized representatives,
shall be legally binding and enforceable. All such facsimile
5
<PAGE> 6
copies are declared as originals and, accordingly, are admissible in any
jurisdiction or tribunal having jurisdiction over any matter relating to this
Voting Agreement.
5.12 CONSTRUCTION. The language hereof will not be construed for or
against either party. A reference to a section or exhibit will mean a section
in, or an exhibit to, this Voting Agreement, unless otherwise explicitly set
forth. The titles and headings in this Voting Agreement are for reference
purposes only and will not in any manner limit the construction of this Voting
Agreement. For the purposes of such construction, this Voting Agreement will be
considered as a whole.
5.13 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by ANY other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under,
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that the Merger Agreement and the
transactions contemplated thereby and by this Voting Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused this
Voting Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC.
By:_______________________________________
RONALD A. HOWARD, President
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
SHAREHOLDER:
VULCAN VENTURES INCORPORATED
By:_______________________________________
WILLIAM SAVOY
110-110th Avenue, N.E., Suite 550
Bellevue, Washington 98004
Facsimile: (206) 453-1985
Address of Shareholder's
counsel, if any, for copy
of Notices under Section
5.3:
Christopher W. Wright, Esq.
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, WA 98101-3299
Facsimile: (206) 749-2037
Shares of Hayes Common Stock owned as of the date hereof: None
Shares of Hayes Series A Preferred Stock owned as of the date hereof: None
Shares of Hayes Series B Preferred Stock owned as of the date hereof: 263,113
7
<PAGE> 8
EXHIBIT A
FORM OF IRREVOCABLE PROXY
The undersigned shareholder of Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes"), hereby irrevocably (to the fullest extent
permitted by law) appoints and constitutes Dennis C. Hayes the attorney and
proxy of the undersigned with full power of substitution and resubstitution, to
the full extent of the undersigned's rights with respect to (i) the shares of
capital stock of Hayes owned by the undersigned as of the date of this proxy,
which shares are specified below, and (ii) any and all other shares of capital
stock of Hayes which the undersigned may acquire after the date hereof. (The
shares of the capital stock of Hayes referred to in clauses (i) and (ii) of the
immediately preceding sentence are collectively referred to as the "Shares").
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and no subsequent proxies will
be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is
granted in connection with the Voting Agreement, dated as of the date hereof,
between Access Beyond and the undersigned (the "Voting Agreement"), and is
granted in consideration of Access beyond entering into the Agreement and Plan
of Reorganization, dated as of the date hereof, between Access Beyond and Hayes
(the "Merger Agreement"). Capitalized terms used but not otherwise defined in
this proxy have the meanings ascribed to such terms in the Voting Agreement.
The attorney and proxy named above are hereby empowered, and
shall exercise this proxy, to vote the Shares at any time prior to the
Expiration Date at any meeting of the shareholders of Hayes, however called, or
in any written action by consent of shareholders of Hayes:
(i) in favor of the Merger, the execution and delivery by
Hayes of the Merger Agreement and the adoption and approval of the
terms thereof and in favor of each of the other actions contemplated by
the Merger Agreement and any action required in furtherance hereof and
thereof; and
(ii) against any Acquisition Proposal (other than the Merger)
and against any action or agreement that would result in a breach of
any covenant or obligation of Hayes in the Merger Agreement. The
undersigned Shareholder may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, successors and
assigns of the undersigned (including any transferee of any of the Shares).
Dated:_______________, 1997 _____________________________________
VULCAN VENTURES INCORPORATED
Number of Shares of Hayes
Common Stock owned as of
the date of this Proxy: None
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date of this Proxy: None
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date of this Proxy: 263,113
8
<PAGE> 1
EXHIBIT 4.2.1
HAYES AFFILIATE AGREEMENT
This Hayes Affiliate Agreement (this "Affiliate Agreement") is made and
entered into as of July 29, 1997 (the "Effective Date") among Access Beyond,
Inc., a Delaware corporation ("Access Beyond"), Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes") and Kaifa Technology (H.K.) Limited
("Shareholder") who is an affiliate of Hayes.
RECITALS
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Reorganization dated as of July 29, 1997 between Access
Beyond and Hayes (as such may be amended the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of a wholly owned
subsidiary of Access Beyond ("Newco") with and into Hayes in a reverse
triangular merger (the "Merger"), with Hayes to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of the Merger Agreement and
the Agreement of Merger to be entered into between Newco and Hayes in the form
attached to the Merger Agreement (the "Agreement of Merger"). The Merger
Agreement and the Agreement of Merger are collectively referred to herein as the
"Merger Agreements." Capitalized terms used but not otherwise defined in this
Affiliate Agreement have the meanings ascribed to such terms in the Merger
Agreement.
B. The Merger Agreements provide that, in the Merger, the shares of
Hayes Common Stock and shares of Hayes Series A Preferred Stock that are issued
and outstanding at the Effective Time of the Merger will be converted into
shares of Access Beyond Common Stock and the shares of Hayes Series B Preferred
Stock that are issued and outstanding at the Effective Time of the Merger will
be converted into shares of Access Beyond Series A Stock, all as more
particularly set forth in the Merger Agreement
C. Shareholder understands that Shareholder is deemed an "affiliate" of
Hayes within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and that any shares of Access Beyond capital stock acquired by the
Shareholder in the Merger may be disposed of only in conformity with the
limitations described herein.
A G R E E M E N T
1. TAX TREATMENT, RELIANCE. Shareholder understands and agrees that it
is intended that the Merger will be treated as a tax-free reorganization for
federal income tax purposes and that such treatment requires that a sufficient
number of former stockholders of Hayes maintain a meaningful continuing equity
ownership interest in Access Beyond after the Merger. Shareholder
<PAGE> 2
understands that the representations, warranties and covenants of Shareholder
set forth herein will be relied upon by Hayes and Access Beyond and their
respective counsel and accounting firms and by Hayes' stockholders. Shareholder
will rely on Shareholder's own tax advisers as to the tax attributes of the
Merger to Shareholder and understands that neither Access Beyond, nor Access
Beyond's counsel, Hayes or Hayes' counsel has guaranteed nor will guarantee to
Shareholder that the Merger will be a tax-free reorganization, nor shall any of
them have any liability to Shareholder as a result of issuing any opinion in
respect thereof that may be required in connection with any registration
statement under the 1933 Act.
2. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SHAREHOLDER.
Shareholder represents, warrants and covenants as follows.
(a) Authority; Affiliate Status. Shareholder has all requisite
right, power, legal capacity and authority to execute, deliver and perform this
Affiliate Agreement and to perform its obligations hereunder. Shareholder
further understands and agrees that Shareholder is deemed to be an "affiliate"
of Hayes within the meaning of the 1933 Act and, in particular, Rule 145
promulgated under the 1933 Act ("Rule 145"),
(b) Hayes Securities Owned. Attachment 1 hereto sets forth all
shares of Hayes capital stock and any other securities of Hayes owned by
Shareholder, including all securities of Hayes as to which Shareholder has sole
or shared voting or investment power, and all rights, options and warrants to
acquire shares of capital stock or other securities of Hayes granted to or held
by Shareholder (such shares of Hayes capital stock, other securities of Hayes
and rights, options and warrants to acquire shares of Hayes capital stock and
other securities of Hayes are hereinafter collectively referred to as "Hayes
Securities"). As used herein, the term "Expiration Date" means the earliest to
occur of (i) the closing, consummation and effectiveness of the Merger, or (ii)
such time as the Merger Agreement may be terminated in accordance with its
terms.
(c) New Hayes Securities. As used herein, the term "New Hayes
Securities" means, collectively, any and all shares of Hayes capital stock,
other securities of Hayes and rights, options and warrants to acquire shares of
Hayes capital stock and other securities of Hayes that Shareholder may purchase
or otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date. All New Hayes Securities will be subject to the terms of this Affiliate
Agreement to the same extent and in the same manner as if they were Hayes
Securities.
(d) Merger Securities. As used herein, the term "Merger
Securities" means, collectively, all shares of Access Beyond Common Stock, and
Access Beyond Series A Stock that are or may be issued by Access Beyond in
connection with the Merger or the transactions contemplated by the Merger
Agreements, or to any former holder of Hayes options, warrants or rights to
acquire shares of Hayes Common Stock, and any securities that may be paid as a
dividend
2
<PAGE> 3
or otherwise distributed thereon or with respect thereto or issued or delivered
in exchange or substitution therefor or upon conversion thereof.
(e) Transfer Restrictions on Merger Securities. Shareholder
has been advised that the issuance of the shares of Access Beyond Common Stock
and Access Beyond Series A Stock in connection with the Merger is expected to be
effectuated pursuant to a Registration Statement on Form S-4 under the 1933 Act,
and that the provisions of Rule 145 will limit Shareholder's resales of such
Merger Securities. Shareholder accordingly agrees not to sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or agreement
relating to, any of the Merger Securities and/or any option, right or other
interest with respect to any Merger Securities that Shareholder may acquire,
unless: (i) such transaction is permitted pursuant to Rules 145(c) and 145(d)
under the 1933 Act; or (ii) legal counsel representing Shareholder, which
counsel is reasonably satisfactory to Access Beyond, shall have advised Access
Beyond in a written opinion letter reasonably satisfactory to Access Beyond and
Access Beyond's legal counsel, and upon which Access Beyond and its legal
counsel may rely, that no registration under the 1933 Act would be required in
connection with the proposed sale, offer, exchange, pledge or other disposition
of Merger Securities by Shareholder, or (iii) a registration statement under the
1933 Act covering the Merger Securities proposed to be sold, transferred,
exchanged, pledged or otherwise dispose of, describing the manner and terms of
the proposed sale, transfer, exchange, pledge or other disposition, and
containing a current prospectus, shall have been filed with the Securities and
Exchange Commission ("SEC") and been declared effective by the SEC under the
1933 Act, or (iv) an authorized representative of the SEC shall have rendered
written advice to Shareholder (sought by Shareholder or counsel to Shareholder,
with a copy thereof and all other related communications delivered to Access
Beyond and its legal counsel) to the effect that the SEC would take no action,
or that the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed disposition of Merger Securities if consummated. Nothing
herein imposes upon Access Beyond any obligation to register any Merger
Securities under the 1933 Act.
(f) Intent. Shareholder does not now have, and as of the
Effective Time of the Merger will not have, any present plan or intention to
engage in a sale, exchange, transfer, distribution, pledge, disposition or any
other transaction which would result in a direct or indirect disposition (a
"Sale") of shares of Access Beyond voting common stock to be issued to Hayes
shareholders in the Merger, which shares would have an aggregate fair market
value, as of the Effective Time of the Merger, in excess of 50% of the aggregate
fair market value, immediately prior to the Merger, of all outstanding shares of
Hayes stock. For purposes of this representation, shares of Hayes stock (or the
portion thereof) (a) with respect to which a Hayes shareholder receives
consideration in the Merger other than Access Beyond voting common stock and/or
(b) with respect to which a Sale by a Hayes shareholder who owns 5% or more of
Hayes stock or is an officer or director of Hayes occurs during the pre-merger
period shall be considered shares of outstanding Hayes stock exchanged for
Access Beyond voting common stock in the Merger and then disposed of pursuant to
a prearranged plan.
3
<PAGE> 4
3. LEGENDS. Shareholder also understands and agrees that stop transfer
instructions will be given to Access Beyond's transfer agent with respect to
certificates evidencing the Merger Securities to enforce Shareholder's
compliance with Shareholder's representations in Sections 2(e) and Shareholder's
compliance with applicable securities laws regarding the Merger Securities, and
that there will be placed on the certificates evidencing such Merger Securities
a legend providing substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE STATE
SECURITIES LAWS, AND THE OTHER CONDITIONS SPECIFIED IN THAT
CERTAIN HAYES AFFILIATE AGREEMENT DATED AS OF JULY 29, 1997
AMONG ACCESS BEYOND, INC. ("ACCESS BEYOND"), HAYES
MICROCOMPUTER PRODUCTS, INC. AND THE HOLDER OF SUCH SHARES, A
COPY OF WHICH MAY BE INSPECTED BY THE HOLDER OF THIS
CERTIFICATE AT THE OFFICES OF THE ISSUER. THE ISSUER WILL
FURNISH WITHOUT CHARGE A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
4. NOTICES. All notices, approvals, consents, requests and
other communications that any party is required or elects to give hereunder
shall be in writing and shall be deemed to have been given (a) upon personal
delivery thereof, including by appropriate international courier service, five
(5) days after delivery to the courier or, if earlier, upon delivery against a
signed receipt therefor or (b) upon transmission by facsimile or telecopier,
which transmission is confirmed, in either case addressed to the party to be
notified at the address set forth below or at such other address as such party
shall have notified the other parties hereto, by notice given in conformity with
this Section 4:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
4
<PAGE> 5
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Hayes:
(If via hand delivery or overnight courier)
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092-3404
Attention: Chairman of the Board and
Contracts Administration
(If via mail)
Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Attention: Chairman of the Board and
Contracts Administration
Facsimile: (770) 840-6830
5
<PAGE> 6
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309-3574
Attention: G. Donald Johnson, Esq.
Facsimile: (404) 888-7490
(c) If to Shareholder:
Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Mills Industrial
Building
31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Attention: Mr. Tam Man Chi, President
Facsimile: 011 (852) 2480-4723
with a copy to:
Vivien Chan & Company
15/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Attention: Mr. George Riberio
Facsimile: 011 (852) 2854-0438
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 4.
5. SURVIVAL; TERMINATION. All representations, warranties and
agreements made by Shareholder in this Affiliate Agreement shall survive the
consummation of the Merger. This Affiliate Agreement shall be terminated and
shall be of no further force and effect upon the earlier to occur of (i) any
termination of the Merger Agreement pursuant to its terms, or (ii) any waiver of
either any closing condition in favor of Hayes or any obligation of Access
Beyond under or any amendment of the Merger Agreement, or the giving of any
required consent of Hayes under Section 4.3 or any other provision of the Merger
Agreement, unless such waiver, amendment or consent is approved either by the
Board of Directors of Hayes or any committee thereof consisting of at least two
(2) members of the Hayes Board authorized to approve any such amendment, waiver
or consent, one of whom approving such amendment, waiver or consent by action of
either the full Hayes Board or such committee is a representative of Rinzai
Limited.
6
<PAGE> 7
6. EXPENSES. All costs and expenses incurred in connection
with the transactions contemplated by this Affiliate Agreement shall be paid by
the party incurring such costs and expenses; provided, however, that the
Shareholder's legal costs and expenses shall be promptly paid by Hayes.
7. COUNTERPARTS. This Affiliate Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Agreement, or their duly authorized representatives, shall
be legally binding and enforceable. All such facsimile copies are declared as
originals and, accordingly admissible in any jurisdiction or tribunal having
jurisdiction over any matter relating to this Agreement.
8. ASSIGNMENT, BINDING EFFECT. Except as provided herein,
neither this Affiliate Agreement nor any of the rights, interests or obligations
hereunder shall be assigned the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Affiliate Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted signs.
9. AMENDMENT AND WAIVERS. Any term or provision of this
Affiliate Agreement may be amended, and the observance of any term of this
Affiliate Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by a writing signed by the
parties to be bound thereby. The waiver by a party of any breach hereof or
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default.
10. ENTIRE AGREEMENT. This Affiliate Agreement and any
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and understandings between the
parties with respect thereto.
11. OTHER AGREEMENTS. Nothing in this Affiliate Agreement
shall limit any of the rights or remedies of Access Beyond or Shareholder or any
of the obligations of either party under any Voting Agreement between Access
Beyond and Shareholder or any other agreement.
12. SEVERABILITY. Any term or provision of this Affiliate
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Affiliate Agreement or affecting the validity or
enforceability of any of the terms and provisions of this Affiliate Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Affiliate Agreement in any other jurisdiction. If any
7
<PAGE> 8
provision of this Affiliate Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
13. GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
14. CONSTRUCTION. The language hereof will not be construed
for or against either party. A reference to a section will mean a section of
this Affiliate Agreement, unless otherwise explicitly set forth. The titles and
headings in this Affiliate Agreement are for reference purposes only and will
not in any manner limit the construction of this Affiliate Agreement. For the
purposes of such construction, this Affiliate Agreement will be considered as a
whole.
15. HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that
the execution hereof by Shareholder and the execution by any other shareholders
of Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that this Affiliate Agreement does
not constitute any liquidation or redemption event applicable to the Merger
Securities under the Articles of Incorporation, Bylaws or other organizational
documents of Hayes, or contracts to which such Shareholder is a party.
IN WITNESS WHEREOF, the parties hereto have caused this
Affiliate Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
By:______________________________ By:________________________________
Name: Name:
Title: Title:
SHAREHOLDER:
KAIFA TECHNOLOGY (H.K.) LIMITED
BY:________________________________
Name:___________________________
Its: ___________________________
8
<PAGE> 9
ATTACHMENT 1
Affiliate's Address for Notice: Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Mills Industrial Building
31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Attention: Mr. Tam Man Chi, President
with a copy to Counsel
for Shareholder Vivien Chan & Company
15/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Attention: Mr. George Riberio
Number of Shares of Hayes
Common Stock owned as of the
date of this Affiliate Agreement: N/A
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date of this Affiliate Agreement: 816,667
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Hayes Options for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
Number of Hayes Warrants for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
9
<PAGE> 1
EXHIBIT 4.2.2
HAYES AFFILIATE AGREEMENT
This Hayes Affiliate Agreement (this "Affiliate Agreement") is made and
entered into as of July 29, 1997 (the "Effective Date") among Access Beyond,
Inc., a Delaware corporation ("Access Beyond"), Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes") and Rinzai Limited ("Shareholder") who is
an affiliate of Hayes.
RECITALS
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Reorganization dated as of July 29, 1997 between Access
Beyond and Hayes (as such may be amended the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of a wholly owned
subsidiary of Access Beyond ("Newco") with and into Hayes in a reverse
triangular merger (the "Merger"), with Hayes to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of the Merger Agreement and
the Agreement of Merger to be entered into between Newco and Hayes in the form
attached to the Merger Agreement (the "Agreement of Merger"). The Merger
Agreement and the Agreement of Merger are collectively referred to herein as the
"Merger Agreements." Capitalized terms used but not otherwise defined in this
Affiliate Agreement have the meanings ascribed to such terms in the Merger
Agreement.
B. The Merger Agreements provide that, in the Merger, the shares of
Hayes Common Stock and shares of Hayes Series A Preferred Stock that are issued
and outstanding at the Effective Time of the Merger will be converted into
shares of Access Beyond Common Stock and the shares of Hayes Series B Preferred
Stock that are issued and outstanding at the Effective Time of the Merger will
be converted into shares of Access Beyond Series A Stock, all as more
particularly set forth in the Merger Agreement
C. Shareholder understands that Shareholder is deemed an "affiliate" of
Hayes within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and that any shares of Access Beyond capital stock acquired by the
Shareholder in the Merger may be disposed of only in conformity with the
limitations described herein.
A G R E E M E N T
1. TAX TREATMENT, RELIANCE. Shareholder understands and agrees that it
is intended that the Merger will be treated as a tax-free reorganization for
federal income tax purposes and that such treatment requires that a sufficient
number of former stockholders of Hayes maintain a meaningful continuing equity
ownership interest in Access Beyond after the Merger. Shareholder understands
that the representations, warranties and covenants of Shareholder set forth
herein will be relied upon by Hayes and Access Beyond and their respective
counsel and accounting firms and
<PAGE> 2
by Hayes' stockholders. Shareholder will rely on Shareholder's own tax advisers
as to the tax attributes of the Merger to Shareholder and understands that
neither Access Beyond, nor Access Beyond's counsel, Hayes or Hayes' counsel has
guaranteed nor will guarantee to Shareholder that the Merger will be a tax-free
reorganization, nor shall any of them have any liability to Shareholder as a
result of issuing any opinion in respect thereof that may be required in
connection with any registration statement under the 1933 Act.
2. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SHAREHOLDER.
Shareholder represents, warrants and covenants as follows.
(a) Authority; Affiliate Status. Shareholder has all requisite
right, power, legal capacity and authority to execute, deliver and perform this
Affiliate Agreement and to perform its obligations hereunder. Shareholder
further understands and agrees that Shareholder is deemed to be an "affiliate"
of Hayes within the meaning of the 1933 Act and, in particular, Rule 145
promulgated under the 1933 Act ("Rule 145"),
(b) Hayes Securities Owned. Attachment 1 hereto sets forth all
shares of Hayes capital stock and any other securities of Hayes owned by
Shareholder, including all securities of Hayes as to which Shareholder has sole
or shared voting or investment power, and all rights, options and warrants to
acquire shares of capital stock or other securities of Hayes granted to or held
by Shareholder (such shares of Hayes capital stock, other securities of Hayes
and rights, options and warrants to acquire shares of Hayes capital stock and
other securities of Hayes are hereinafter collectively referred to as "Hayes
Securities"). As used herein, the term "Expiration Date" means the earliest to
occur of (i) the closing, consummation and effectiveness of the Merger, or (ii)
such time as the Merger Agreement may be terminated in accordance with its
terms.
(c) New Hayes Securities. As used herein, the term "New Hayes
Securities" means, collectively, any and all shares of Hayes capital stock,
other securities of Hayes and rights, options and warrants to acquire shares of
Hayes capital stock and other securities of Hayes that Shareholder may purchase
or otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date. All New Hayes Securities will be subject to the terms of this Affiliate
Agreement to the same extent and in the same manner as if they were Hayes
Securities.
(d) Merger Securities. As used herein, the term "Merger
Securities" means, collectively, all shares of Access Beyond Common Stock, and
Access Beyond Series A Stock that are or may be issued by Access Beyond in
connection with the Merger or the transactions contemplated by the Merger
Agreements, or to any former holder of Hayes options, warrants or rights to
acquire shares of Hayes Common Stock, and any securities that may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor or upon conversion thereof.
2
<PAGE> 3
(e) Transfer Restrictions on Merger Securities. Shareholder
has been advised that the issuance of the shares of Access Beyond Common Stock
and Access Beyond Series A Stock in connection with the Merger is expected to be
effectuated pursuant to a Registration Statement on Form S-4 under the 1933 Act,
and that the provisions of Rule 145 will limit Shareholder's resales of such
Merger Securities. Shareholder accordingly agrees not to sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or agreement
relating to, any of the Merger Securities and/or any option, right or other
interest with respect to any Merger Securities that Shareholder may acquire,
unless: (i) such transaction is permitted pursuant to Rules 145(c) and 145(d)
under the 1933 Act; or (ii) legal counsel representing Shareholder, which
counsel is reasonably satisfactory to Access Beyond, shall have advised Access
Beyond in a written opinion letter reasonably satisfactory to Access Beyond and
Access Beyond's legal counsel, and upon which Access Beyond and its legal
counsel may rely, that no registration under the 1933 Act would be required in
connection with the proposed sale, offer, exchange, pledge or other disposition
of Merger Securities by Shareholder, or (iii) a registration statement under the
1933 Act covering the Merger Securities proposed to be sold, transferred,
exchanged, pledged or otherwise dispose of, describing the manner and terms of
the proposed sale, transfer, exchange, pledge or other disposition, and
containing a current prospectus, shall have been filed with the Securities and
Exchange Commission ("SEC") and been declared effective by the SEC under the
1933 Act, or (iv) an authorized representative of the SEC shall have rendered
written advice to Shareholder (sought by Shareholder or counsel to Shareholder,
with a copy thereof and all other related communications delivered to Access
Beyond and its legal counsel) to the effect that the SEC would take no action,
or that the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed disposition of Merger Securities if consummated. Nothing
herein imposes upon Access Beyond any obligation to register any Merger
Securities under the 1933 Act.
(f) Intent. Shareholder does not now have, and as of the
Effective Time of the Merger will not have, any present plan or intention to
engage in a sale, exchange, transfer, distribution, pledge, disposition or any
other transaction which would result in a direct or indirect disposition (a
"Sale") of shares of Access Beyond voting common stock to be issued to Hayes
shareholders in the Merger, which shares would have an aggregate fair market
value, as of the Effective Time of the Merger, in excess of 50% of the aggregate
fair market value, immediately prior to the Merger, of all outstanding shares of
Hayes stock. For purposes of this representation, shares of Hayes stock (or the
portion thereof) (a) with respect to which a Hayes shareholder receives
consideration in the Merger other than Access Beyond voting common stock and/or
(b) with respect to which a Sale by a Hayes shareholder who owns 5% or more of
Hayes stock or is an officer or director of Hayes occurs during the pre-merger
period shall be considered shares of outstanding Hayes stock exchanged for
Access Beyond voting common stock in the Merger and then disposed of pursuant to
a prearranged plan.
3. LEGENDS. Shareholder also understands and agrees that stop transfer
instructions will be given to Access Beyond's transfer agent with respect to
certificates evidencing the Merger Securities to enforce Shareholder's
compliance with Shareholder's representations in Sections 2(e) and Shareholder's
compliance with applicable securities laws regarding the Merger Securities, and
3
<PAGE> 4
that there will be placed on the certificates evidencing such Merger Securities
a legend providing substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE STATE
SECURITIES LAWS, AND THE OTHER CONDITIONS SPECIFIED IN THAT
CERTAIN HAYES AFFILIATE AGREEMENT DATED AS OF JULY 29, 1997
AMONG ACCESS BEYOND, INC. ("ACCESS BEYOND"), HAYES
MICROCOMPUTER PRODUCTS, INC. AND THE HOLDER OF SUCH SHARES, A
COPY OF WHICH MAY BE INSPECTED BY THE HOLDER OF THIS
CERTIFICATE AT THE OFFICES OF THE ISSUER. THE ISSUER WILL
FURNISH WITHOUT CHARGE A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
4. NOTICES. All notices, approvals, consents, requests and
other communications that any party is required or elects to give hereunder
shall be in writing and shall be deemed to have been given (a) upon personal
delivery thereof, including by appropriate international courier service, five
(5) days after delivery to the courier or, if earlier, upon delivery against a
signed receipt therefor or (b) upon transmission by facsimile or telecopier,
which transmission is confirmed, in either case addressed to the party to be
notified at the address set forth below or at such other address as such party
shall have notified the other parties hereto, by notice given in conformity with
this Section 4:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
4
<PAGE> 5
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Hayes:
(If via hand delivery or overnight courier)
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092-3404
Attention: Chairman of the Board and
Contracts Administration
(If via mail)
Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Attention: Chairman of the Board and
Contracts Administration
Facsimile: (770) 840-6830
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309-3574
Attention: G. Donald Johnson, Esq.
Facsimile: (404) 888-7490
(c) If to Shareholder:
Rinzai Limited
c/o Acma Limited
Jurong Port Road
Singapore 2661
Attention: President
Facsimile: 011 65 264-0125
5
<PAGE> 6
with a copy to:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 4.
5. SURVIVAL; TERMINATION. All representations, warranties and
agreements made by Shareholder in this Affiliate Agreement shall survive the
consummation of the Merger. This Affiliate Agreement shall be terminated and
shall be of no further force and effect upon the earlier to occur of (i) any
termination of the Merger Agreement pursuant to its terms, or (ii) any waiver of
either any closing condition in favor of Hayes or any obligation of Access
Beyond under or any amendment of the Merger Agreement, or the giving of any
required consent of Hayes under Section 4.3 or any other provision of the Merger
Agreement, unless such waiver, amendment or consent is approved either by the
Board of Directors of Hayes or any committee thereof consisting of at least two
(2) members of the Hayes Board authorized to approve any such amendment, waiver
or consent, one of whom approving such amendment, waiver or consent by action of
either the full Hayes Board or such committee is a representative of Rinzai
Limited.
6. EXPENSES. All costs and expenses incurred in connection
with the transactions contemplated by this Affiliate Agreement shall be paid by
the party incurring such costs and expenses; provided, however, that the
Shareholder's legal costs and expenses shall be promptly paid by Hayes.
7. COUNTERPARTS. This Affiliate Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Agreement, or their duly authorized representatives, shall
be legally binding and enforceable. All such facsimile copies are declared as
originals and, accordingly admissible in any jurisdiction or tribunal having
jurisdiction over any matter relating to this Agreement.
8. ASSIGNMENT, BINDING EFFECT. Except as provided herein,
neither this Affiliate Agreement nor any of the rights, interests or obligations
hereunder shall be assigned the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Affiliate Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted signs.
6
<PAGE> 7
9. AMENDMENT AND WAIVERS. Any term or provision of this
Affiliate Agreement may be amended, and the observance of any term of this
Affiliate Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by a writing signed by the
parties to be bound thereby. The waiver by a party of any breach hereof or
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default.
10. ENTIRE AGREEMENT. This Affiliate Agreement and any
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and under standings between the
parties with respect thereto.
11. OTHER AGREEMENTS. Nothing in this Affiliate Agreement
shall limit any of the rights or remedies of Access Beyond or Shareholder or any
of the obligations of either party under any Voting Agreement between Access
Beyond and Shareholder or any other agreement.
12. SEVERABILITY. Any term or provision of this Affiliate
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Affiliate Agreement or affecting the validity or
enforceability of any of the terms and provisions of this Affiliate Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Affiliate Agreement in any other jurisdiction. If any provision of this
Affiliate Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
13. GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
14. CONSTRUCTION. The language hereof will not be construed
for or against either party. A reference to a section will mean a section of
this Affiliate Agreement, unless otherwise explicitly set forth. The titles and
headings in this Affiliate Agreement are for reference purposes only and will
not in any manner limit the construction of this Affiliate Agreement. For the
purposes of such construction, this Affiliate Agreement will be considered as a
whole.
15. HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that
the execution hereof by Shareholder and the execution by any other shareholders
of Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that this Affiliate Agreement does
not constitute any liquidation or redemption event applicable to the Merger
Securities under the Articles of Incorporation, Bylaws or other organizational
documents of Hayes, or contracts to which such Shareholder is a party.
7
<PAGE> 8
[EXECUTION ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this
Affiliate Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
By:______________________________ By:_______________________________________
Name: Name:
Title: Title:
SHAREHOLDER:
RINZAI LIMITED
BY:________________________________
Name:________________________
Its: ________________________
8
<PAGE> 9
ATTACHMENT 1
Affiliate's Address for Notice: Dennis C. Hayes
110 Bellacree Road
Duluth, Georgia
with a copy to counsel Baxter L. Davis, Esq.
for Shareholder Davis, Matthews & Quigkley, P.C.
Fourteenth Floor Lenox Towers II
3400 Peachtree Road, N.E.
Atlanta, Georgia 30326
Number of Shares of Hayes
Common Stock owned as of the
date of this Affiliate Agreement: 543,221
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Hayes Options for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
Number of Hayes Warrants for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
9
<PAGE> 1
EXHIBIT 4.2.3
HAYES AFFILIATE AGREEMENT
This Hayes Affiliate Agreement (this "Affiliate Agreement") is made and
entered into as of July 29, 1997 (the "Effective Date") among Access Beyond,
Inc., a Delaware corporation ("Access Beyond"), Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes") and Chestnut Capital Limited Partnership
("Shareholder") who is an affiliate of Hayes.
RECITALS
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Reorganization dated as of July 29, 1997 between Access
Beyond and Hayes (as such may be amended the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of a wholly owned
subsidiary of Access Beyond ("Newco") with and into Hayes in a reverse
triangular merger (the "Merger"), with Hayes to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of the Merger Agreement and
the Agreement of Merger to be entered into between Newco and Hayes in the form
attached to the Merger Agreement (the "Agreement of Merger"). The Merger
Agreement and the Agreement of Merger are collectively referred to herein as the
"Merger Agreements." Capitalized terms used but not otherwise defined in this
Affiliate Agreement have the meanings ascribed to such terms in the Merger
Agreement.
B. The Merger Agreements provide that, in the Merger, the shares of
Hayes Common Stock and shares of Hayes Series A Preferred Stock that are issued
and outstanding at the Effective Time of the Merger will be converted into
shares of Access Beyond Common Stock and the shares of Hayes Series B Preferred
Stock that are issued and outstanding at the Effective Time of the Merger will
be converted into shares of Access Beyond Series A Stock, all as more
particularly set forth in the Merger Agreement
C. Shareholder understands that Shareholder is deemed an "affiliate" of
Hayes within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and that any shares of Access Beyond capital stock acquired by the
Shareholder in the Merger may be disposed of only in conformity with the
limitations described herein.
A G R E E M E N T
1. TAX TREATMENT, RELIANCE. Shareholder understands and agrees that it
is intended that the Merger will be treated as a tax-free reorganization for
federal income tax purposes and that such treatment requires that a sufficient
number of former stockholders of Hayes maintain a meaningful continuing equity
ownership interest in Access Beyond after the Merger. Shareholder understands
that the representations, warranties and covenants of Shareholder set forth
herein will be relied upon by Hayes and Access Beyond and their respective
counsel and accounting firms and by Hayes' stockholders. Shareholder will rely
on Shareholder's own tax advisers as to the tax
<PAGE> 2
attributes of the Merger to Shareholder and understands that neither Access
Beyond, nor Access Beyond's counsel, Hayes or Hayes' counsel has guaranteed nor
will guarantee to Shareholder that the Merger will be a tax-free reorganization,
nor shall any of them have any liability to Shareholder as a result of issuing
any opinion in respect thereof that may be required in connection with any
registration statement under the 1933 Act.
2. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SHAREHOLDER.
Shareholder represents, warrants and covenants as follows.
(a) Authority; Affiliate Status. Shareholder has all requisite
right, power, legal capacity and authority to execute, deliver and perform this
Affiliate Agreement and to perform its obligations hereunder. Shareholder
further understands and agrees that Shareholder is deemed to be an "affiliate"
of Hayes within the meaning of the 1933 Act and, in particular, Rule 145
promulgated under the 1933 Act ("Rule 145"),
(b) Hayes Securities Owned. Attachment 1 hereto sets forth all
shares of Hayes capital stock and any other securities of Hayes owned by
Shareholder, including all securities of Hayes as to which Shareholder has sole
or shared voting or investment power, and all rights, options and warrants to
acquire shares of capital stock or other securities of Hayes granted to or held
by Shareholder (such shares of Hayes capital stock, other securities of Hayes
and rights, options and warrants to acquire shares of Hayes capital stock and
other securities of Hayes are hereinafter collectively referred to as "Hayes
Securities"). As used herein, the term "Expiration Date" means the earliest to
occur of (i) the closing, consummation and effectiveness of the Merger, or (ii)
such time as the Merger Agreement may be terminated in accordance with its
terms.
(c) New Hayes Securities. As used herein, the term "New Hayes
Securities" means, collectively, any and all shares of Hayes capital stock,
other securities of Hayes and rights, options and warrants to acquire shares of
Hayes capital stock and other securities of Hayes that Shareholder may purchase
or otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date. All New Hayes Securities will be subject to the terms of this Affiliate
Agreement to the same extent and in the same manner as if they were Hayes
Securities.
(d) Merger Securities. As used herein, the term "Merger
Securities" means, collectively, all shares of Access Beyond Common Stock, and
Access Beyond Series A Stock that are or may be issued by Access Beyond in
connection with the Merger or the transactions contemplated by the Merger
Agreements, or to any former holder of Hayes options, warrants or rights to
acquire shares of Hayes Common Stock, and any securities that may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor or upon conversion thereof.
(e) Transfer Restrictions on Merger Securities. Shareholder
has been advised that the issuance of the shares of Access Beyond Common Stock
and Access Beyond Series A
2
<PAGE> 3
Stock in connection with the Merger is expected to be effectuated pursuant to a
Registration Statement on Form S-4 under the 1933 Act, and that the provisions
of Rule 145 will limit Shareholder's resales of such Merger Securities.
Shareholder accordingly agrees not to sell, transfer, exchange, pledge, or
otherwise dispose of, or make any offer or agreement relating to, any of the
Merger Securities and/or any option, right or other interest with respect to any
Merger Securities that Shareholder may acquire, unless: (i) such transaction is
permitted pursuant to Rules 145(c) and 145(d) under the 1933 Act; or (ii) legal
counsel representing Shareholder, which counsel is reasonably satisfactory to
Access Beyond, shall have advised Access Beyond in a written opinion letter
reasonably satisfactory to Access Beyond and Access Beyond's legal counsel, and
upon which Access Beyond and its legal counsel may rely, that no registration
under the 1933 Act would be required in connection with the proposed sale,
offer, exchange, pledge or other disposition of Merger Securities by
Shareholder, or (iii) a registration statement under the 1933 Act covering the
Merger Securities proposed to be sold, transferred, exchanged, pledged or
otherwise dispose of, describing the manner and terms of the proposed sale,
transfer, exchange, pledge or other disposition, and containing a current
prospectus, shall have been filed with the Securities and Exchange Commission
("SEC") and been declared effective by the SEC under the 1933 Act, or (iv) an
authorized representative of the SEC shall have rendered written advice to
Shareholder (sought by Shareholder or counsel to Shareholder, with a copy
thereof and all other related communications delivered to Access Beyond and its
legal counsel) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with respect to
the proposed disposition of Merger Securities if consummated. Nothing herein
imposes upon Access Beyond any obligation to register any Merger Securities
under the 1933 Act.
(f) Intent. Shareholder does not now have, and as of the
Effective Time of the Merger will not have, any present plan or intention to
engage in a sale, exchange, transfer, distribution, pledge, disposition or any
other transaction which would result in a direct or indirect disposition (a
"Sale") of shares of Access Beyond voting common stock to be issued to Hayes
shareholders in the Merger, which shares would have an aggregate fair market
value, as of the Effective Time of the Merger, in excess of 50% of the aggregate
fair market value, immediately prior to the Merger, of all outstanding shares of
Hayes stock. For purposes of this representation, shares of Hayes stock (or the
portion thereof) (a) with respect to which a Hayes shareholder receives
consideration in the Merger other than Access Beyond voting common stock and/or
(b) with respect to which a Sale by a Hayes shareholder who owns 5% or more of
Hayes stock or is an officer or director of Hayes occurs during the pre-merger
period shall be considered shares of outstanding Hayes stock exchanged for
Access Beyond voting common stock in the Merger and then disposed of pursuant to
a prearranged plan.
3. LEGENDS. Shareholder also understands and agrees that stop transfer
instructions will be given to Access Beyond's transfer agent with respect to
certificates evidencing the Merger Securities to enforce Shareholder's
compliance with Shareholder's representations in Sections 2(e) and Shareholder's
compliance with applicable securities laws regarding the Merger Securities, and
that there will be placed on the certificates evidencing such Merger Securities
a legend providing substantially as follows:
3
<PAGE> 4
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE STATE
SECURITIES LAWS, AND THE OTHER CONDITIONS SPECIFIED IN THAT
CERTAIN HAYES AFFILIATE AGREEMENT DATED AS OF JULY 29, 1997
AMONG ACCESS BEYOND, INC. ("ACCESS BEYOND"), HAYES
MICROCOMPUTER PRODUCTS, INC. AND THE HOLDER OF SUCH SHARES, A
COPY OF WHICH MAY BE INSPECTED BY THE HOLDER OF THIS
CERTIFICATE AT THE OFFICES OF THE ISSUER. THE ISSUER WILL
FURNISH WITHOUT CHARGE A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
4. NOTICES. All notices, approvals, consents, requests and
other communications that any party is required or elects to give hereunder
shall be in writing and shall be deemed to have been given (a) upon personal
delivery thereof, including by appropriate international courier service, five
(5) days after delivery to the courier or, if earlier, upon delivery against a
signed receipt therefor or (b) upon transmission by facsimile or telecopier,
which transmission is confirmed, in either case addressed to the party to be
notified at the address set forth below or at such other address as such party
shall have notified the other parties hereto, by notice given in conformity with
this Section 4:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
4
<PAGE> 5
(b) If to Hayes:
(If via hand delivery or overnight courier)
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092-3404
Attention: Chairman of the Board and
Contracts Administration
(If via mail)
Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Attention: Chairman of the Board and
Contracts Administration
Facsimile: (770) 840-6830
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309-3574
Attention: G. Donald Johnson, Esq.
Facsimile: (404) 888-7490
(c) If to Shareholder:
At the address for notice to such
Shareholder set forth on the last page
hereof
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 4.
5. SURVIVAL; TERMINATION. All representations, warranties and
agreements made by Shareholder in this Affiliate Agreement shall survive the
consummation of the Merger. This Affiliate Agreement shall be terminated and
shall be of no further force and effect upon the earlier to occur of (i) any
termination of the Merger Agreement pursuant to its terms, or (ii) any waiver of
either any closing condition in favor of Hayes or any obligation of Access
Beyond under or any amendment of the Merger Agreement, or the giving of any
required consent of Hayes under Section 4.3 or any other provision of the Merger
Agreement, unless such waiver, amendment or consent is approved either by the
Board of Directors of Hayes or any committee thereof consisting
5
<PAGE> 6
of at least two (2) members of the Hayes Board authorized to approve any such
amendment, waiver or consent, one of whom approving such amendment, waiver or
consent by action of either the full Hayes Board or such committee is a
representative of Rinzai Limited.
6. EXPENSES. All costs and expenses incurred in connection
with the transactions contemplated by this Affiliate Agreement shall be paid by
the party incurring such costs and expenses; provided, however, that the
Shareholder's legal costs and expenses shall be promptly paid by Hayes.
7. COUNTERPARTS. This Affiliate Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Agreement, or their duly authorized representatives, shall
be legally binding and enforceable. All such facsimile copies are declared as
originals and, accordingly admissible in any jurisdiction or tribunal having
jurisdiction over any matter relating to this Agreement.
8. ASSIGNMENT, BINDING EFFECT. Except as provided herein,
neither this Affiliate Agreement nor any of the rights, interests or obligations
hereunder shall be assigned the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Affiliate Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted signs.
9. AMENDMENT AND WAIVERS. Any term or provision of this
Affiliate Agreement may be amended, and the observance of any term of this
Affiliate Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by a writing signed by the
parties to be bound thereby. The waiver by a party of any breach hereof or
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default.
10. ENTIRE AGREEMENT. This Affiliate Agreement and any
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and under standings between the
parties with respect thereto.
11. OTHER AGREEMENTS. Nothing in this Affiliate Agreement
shall limit any of the rights or remedies of Access Beyond or Shareholder or any
of the obligations of either party under any Voting Agreement between Access
Beyond and Shareholder or any other agreement.
12. SEVERABILITY. Any term or provision of this Affiliate
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
6
<PAGE> 7
terms and provisions of this Affiliate Agreement or affecting the validity or
enforceability of any of the terms and provisions of this Affiliate Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Affiliate Agreement in any other jurisdiction. If any provision of this
Affiliate Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
13. GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
14. CONSTRUCTION. The language hereof will not be construed
for or against either party. A reference to a section will mean a section of
this Affiliate Agreement, unless otherwise explicitly set forth. The titles and
headings in this Affiliate Agreement are for reference purposes only and will
not in any manner limit the construction of this Affiliate Agreement. For the
purposes of such construction, this Affiliate Agreement will be considered as a
whole.
15. HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that
the execution hereof by Shareholder and the execution by any other shareholders
of Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that this Affiliate Agreement does
not constitute any liquidation or redemption event applicable to the Merger
Securities under the Articles of Incorporation, Bylaws or other organizational
documents of Hayes, or contracts to which such Shareholder is a party.
IN WITNESS WHEREOF, the parties hereto have caused this
Affiliate Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
By:______________________________ By:___________________________________
Name: Name:
Title: Title:
SHAREHOLDER:
CHESTNUT CAPITAL LIMITED PARTNERSHIP
BY:_________________________________
Dennis C. Hayes, General Partner
7
<PAGE> 8
ATTACHMENT 1
Affiliate's Address for Notice: Dennis C. Hayes
110 Bellacree Road
Duluth, Georgia
with a copy to counsel Powell, Goldstein, Frazer & Murphy
for Shareholder 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: James A. Wallker, Jr., Esq.
Number of Shares of Hayes
Common Stock owned as of the
date of this Affiliate Agreement: 4,400,000
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Hayes Options for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
Number of Hayes Warrants for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
8
<PAGE> 1
EXHIBIT 4.2.5
HAYES AFFILIATE AGREEMENT
This Hayes Affiliate Agreement (this "Affiliate Agreement") is made and
entered into as of July 29, 1997 (the "Effective Date") among Access Beyond,
Inc., a Delaware corporation ("Access Beyond"), Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes") and Dennis C. Hayes ("Shareholder") who is
an affiliate of Hayes.
RECITALS
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Reorganization dated as of July 29, 1997 between Access
Beyond and Hayes (as such may be amended the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of a wholly owned
subsidiary of Access Beyond ("Newco") with and into Hayes in a reverse
triangular merger (the "Merger"), with Hayes to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of the Merger Agreement and
the Agreement of Merger to be entered into between Newco and Hayes in the form
attached to the Merger Agreement (the "Agreement of Merger"). The Merger
Agreement and the Agreement of Merger are collectively referred to herein as the
"Merger Agreements." Capitalized terms used but not otherwise defined in this
Affiliate Agreement have the meanings ascribed to such terms in the Merger
Agreement.
B. The Merger Agreements provide that, in the Merger, the shares of
Hayes Common Stock and shares of Hayes Series A Preferred Stock that are issued
and outstanding at the Effective Time of the Merger will be converted into
shares of Access Beyond Common Stock and the shares of Hayes Series B Preferred
Stock that are issued and outstanding at the Effective Time of the Merger will
be converted into shares of Access Beyond Series A Stock, all as more
particularly set forth in the Merger Agreement.
C. Shareholder understands that Shareholder is deemed an "affiliate" of
Hayes within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and that any shares of Access Beyond capital stock acquired by the
Shareholder in the Merger may be disposed of only in conformity with the
limitations described herein.
A G R E E M E N T
1. TAX TREATMENT, RELIANCE. Shareholder understands and agrees that it
is intended that the Merger will be treated as a tax-free reorganization for
federal income tax purposes and that such treatment requires that a sufficient
number of former stockholders of Hayes maintain a meaningful continuing equity
ownership interest in Access Beyond after the Merger. Shareholder understands
that the representations, warranties and covenants of Shareholder set forth
herein will be relied upon by Hayes and Access Beyond and their respective
counsel and accounting firms and by Hayes' stockholders. Shareholder will rely
on Shareholder's own tax advisers as to the tax attributes of the Merger to
Shareholder and understands that neither Access Beyond, nor Access Beyond's
counsel, Hayes or Hayes' counsel has guaranteed nor will guarantee to
Shareholder that the Merger will be a tax-free reorganization, nor shall any of
them
<PAGE> 2
have any liability to Shareholder as a result of issuing any opinion in respect
thereof that may be required in connection with any registration statement under
the 1933 Act.
2. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SHAREHOLDER.
Shareholder represents, warrants and covenants as follows.
(a) Authority; Affiliate Status. Shareholder has all requisite
right, power, legal capacity and authority to execute, deliver and perform this
Affiliate Agreement and to perform its obligations hereunder. Shareholder
further understands and agrees that Shareholder is deemed to be an "affiliate"
of Hayes within the meaning of the 1933 Act and, in particular, Rule 145
promulgated under the 1933 Act ("Rule 145").
(b) Hayes Securities Owned. Attachment 1 hereto sets forth all
shares of Hayes capital stock and any other securities of Hayes owned by
Shareholder, including all securities of Hayes as to which Shareholder has sole
or shared voting or investment power, and all rights, options and warrants to
acquire shares of capital stock or other securities of Hayes granted to or held
by Shareholder (such shares of Hayes capital stock, other securities of Hayes
and rights, options and warrants to acquire shares of Hayes capital stock and
other securities of Hayes are hereinafter collectively referred to as "Hayes
Securities"). As used herein, the term "Expiration Date" means the earliest to
occur of (i) the closing, consummation and effectiveness of the Merger, or (ii)
such time as the Merger Agreement may be terminated in accordance with its
terms.
(c) New Hayes Securities. As used herein, the term "New Hayes
Securities" means, collectively, any and all shares of Hayes capital stock,
other securities of Hayes and rights, options and warrants to acquire shares of
Hayes capital stock and other securities of Hayes that Shareholder may purchase
or otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date. All New Hayes Securities will be subject to the terms of this Affiliate
Agreement to the same extent and in the same manner as if they were Hayes
Securities.
(d) Merger Securities. As used herein, the term "Merger
Securities" means, collectively, all shares of Access Beyond Common Stock, and
Access Beyond Series A Stock that are or may be issued by Access Beyond in
connection with the Merger or the transactions contemplated by the Merger
Agreements, or to any former holder of Hayes options, warrants or rights to
acquire shares of Hayes Common Stock, and any securities that may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor or upon conversion thereof.
(e) Transfer Restrictions on Merger Securities. Shareholder
has been advised that the issuance of the shares of Access Beyond Common Stock
and Access Beyond Series A Stock in connection with the Merger is expected to be
effectuated pursuant to a Registration Statement on Form S-4 under the 1933 Act,
and that the provisions of Rule 145 will limit Shareholder's resales of such
Merger Securities. Shareholder accordingly agrees not to sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or agreement
relating to, any of the Merger Securities and/or any option, right or other
interest with respect to any
2
<PAGE> 3
Merger Securities that Shareholder may acquire, unless: (i) such transaction is
permitted pursuant to Rules 145(c) and 145(d) under the 1933 Act; or (ii) legal
counsel representing Shareholder, which counsel is reasonably satisfactory to
Access Beyond, shall have advised Access Beyond in a written opinion letter
reasonably satisfactory to Access Beyond and Access Beyond's legal counsel, and
upon which Access Beyond and its legal counsel may rely, that no registration
under the 1933 Act would be required in connection with the proposed sale,
offer, exchange, pledge or other disposition of Merger Securities by
Shareholder, or (iii) a registration statement under the 1933 Act covering the
Merger Securities proposed to be sold, transferred, exchanged, pledged or
otherwise dispose of, describing the manner and terms of the proposed sale,
transfer, exchange, pledge or other disposition, and containing a current
prospectus, shall have been filed with the Securities and Exchange Commission
("SEC") and been declared effective by the SEC under the 1933 Act, or (iv) an
authorized representative of the SEC shall have rendered written advice to
Shareholder (sought by Shareholder or counsel to Shareholder, with a copy
thereof and all other related communications delivered to Access Beyond and its
legal counsel) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with respect to
the proposed disposition of Merger Securities if consummated. Nothing herein
imposes upon Access Beyond any obligation to register any Merger Securities
under the 1933 Act.
(f) Intent. Shareholder does not now have, and as of the
Effective Time of the Merger will not have, any present plan or intention to
engage in a sale, exchange, transfer, distribution, pledge, disposition or any
other transaction which would result in a direct or indirect disposition (a
"Sale") of shares of Access Beyond voting common stock to be issued to Hayes
shareholders in the Merger, which shares would have an aggregate fair market
value, as of the Effective Time of the Merger, in excess of 50% of the aggregate
fair market value, immediately prior to the Merger, of all outstanding shares of
Hayes stock. For purposes of this representation, shares of Hayes stock (or the
portion thereof) (a) with respect to which a Hayes shareholder receives
consideration in the Merger other than Access Beyond voting common stock and/or
(b) with respect to which a Sale by a Hayes shareholder who owns 5% or more of
Hayes stock or is an officer or director of Hayes occurs during the pre-merger
period shall be considered shares of outstanding Hayes stock exchanged for
Access Beyond voting common stock in the Merger and then disposed of pursuant to
a prearranged plan.
3. LEGENDS. Shareholder also understands and agrees that stop transfer
instructions will be given to Access Beyond's transfer agent with respect to
certificates evidencing the Merger Securities to enforce Shareholder's
compliance with Shareholder's representations in Sections 2(e) and Shareholder's
compliance with applicable securities laws regarding the Merger Securities, and
that there will be placed on the certificates evidencing such Merger Securities
a legend providing substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE
3
<PAGE> 4
SECURITIES ACT OF 1933, AS AMENDED, ANY APPLICABLE STATE
SECURITIES LAWS, AND THE OTHER CONDITIONS SPECIFIED IN THAT
CERTAIN HAYES AFFILIATE AGREEMENT DATED AS OF JULY 29, 1997
AMONG ACCESS BEYOND, INC. ("ACCESS BEYOND"), HAYES
MICROCOMPUTER PRODUCTS, INC. AND THE HOLDER OF SUCH SHARES, A
COPY OF WHICH MAY BE INSPECTED BY THE HOLDER OF THIS
CERTIFICATE AT THE OFFICES OF THE ISSUER. THE ISSUER WILL
FURNISH WITHOUT CHARGE A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
4. NOTICES. All notices, approvals, consents, requests and
other communications that any party is required or elects to give hereunder
shall be in writing and shall be deemed to have been given (a) upon personal
delivery thereof, including by appropriate international courier service, five
(5) days after delivery to the courier or, if earlier, upon delivery against a
signed receipt therefor or (b) upon transmission by facsimile or telecopier,
which transmission is confirmed, in either case addressed to the party to be
notified at the address set forth below or at such other address as such party
shall have notified the other parties hereto, by notice given in conformity with
this Section 4:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
4
<PAGE> 5
(b) If to Hayes:
(If via hand delivery or overnight courier)
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092-3404
Attention: Chairman of the Board and
Contracts Administration
(If via mail)
Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Attention: Chairman of the Board and
Contracts Administration
Facsimile: (770) 840-6830
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309-3574
Attention: G. Donald Johnson, Esq.
Facsimile: (404) 888-7490
(c) If to Shareholder:
At the address for notice to such
Shareholder set forth on the last page
hereof
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 4.
5. SURVIVAL; TERMINATION. All representations, warranties and
agreements made by Shareholder in this Affiliate Agreement shall survive the
consummation of the Merger. This Affiliate Agreement shall be terminated and
shall be of no further force and effect upon the earlier to occur of (i) any
termination of the Merger Agreement pursuant to its terms, or (ii) any waiver of
either any closing condition in favor of Hayes or any obligation of Access
Beyond under or any amendment of the Merger Agreement, or the giving of any
required consent of Hayes under Section 4.3 or any other provision of the Merger
Agreement, unless such waiver, amendment or consent is approved either by the
Board of Directors of Hayes or any committee thereof consisting of at least two
(2) members of the Hayes Board authorized to approve any such amendment, waiver
or consent, one of whom approving such amendment, waiver or
5
<PAGE> 6
consent by action of either the full Hayes Board or such committee is a
representative of Rinzai Limited.
6. EXPENSES. All costs and expenses incurred in connection
with the transactions contemplated by this Affiliate Agreement shall be paid by
the party incurring such costs and expenses; provided, however, that the
Shareholder's legal costs and expenses shall be promptly paid by Hayes.
7. COUNTERPARTS. This Affiliate Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Agreement, or their duly authorized representatives, shall
be legally binding and enforceable. All such facsimile copies are declared as
originals and, accordingly admissible in any jurisdiction or tribunal having
jurisdiction over any matter relating to this Agreement.
8. ASSIGNMENT, BINDING EFFECT. Except as provided herein,
neither this Affiliate Agreement nor any of the rights, interests or obligations
hereunder shall be assigned the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Affiliate Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
9. AMENDMENT AND WAIVERS. Any term or provision of this
Affiliate Agreement may be amended, and the observance of any term of this
Affiliate Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by a writing signed by the
parties to be bound thereby. The waiver by a party of any breach hereof or
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default.
10. ENTIRE AGREEMENT. This Affiliate Agreement and any
documents delivered by the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements and under standings between the
parties with respect thereto.
11. OTHER AGREEMENTS. Nothing in this Affiliate Agreement
shall limit any of the rights or remedies of Access Beyond or Shareholder or any
of the obligations of either party under any Voting Agreement between Access
Beyond and Shareholder or any other agreement.
12. SEVERABILITY. Any term or provision of this Affiliate
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Affiliate Agreement or affecting the validity or
enforceability of any of the terms and provisions of this Affiliate Agreement or
affecting the
6
<PAGE> 7
validity or enforceability of any of the terms or provisions of this Affiliate
Agreement in any other jurisdiction. If any provision of this Affiliate
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
13. GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
14. CONSTRUCTION. The language hereof will not be construed
for or against either party. A reference to a section will mean a section of
this Affiliate Agreement, unless otherwise explicitly set forth. The titles and
headings in this Affiliate Agreement are for reference purposes only and will
not in any manner limit the construction of this Affiliate Agreement. For the
purposes of such construction, this Affiliate Agreement will be considered as a
whole.
15. HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that
the execution hereof by Shareholder and the execution by any other shareholders
of Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that this Affiliate Agreement does
not constitute any liquidation or redemption event applicable to the Merger
Securities under the Articles of Incorporation, Bylaws or other organizational
documents of Hayes, or contracts to which such Shareholder is a party.
IN WITNESS WHEREOF, the parties hereto have caused this
Affiliate Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS,
INC.
By:______________________________ By:__________________________________
Name: Name:
Title: Title:
SHAREHOLDER:
_________________________________
7
<PAGE> 8
ATTACHMENT 1
Affiliate's Address for Notice: Dennis C. Hayes
110 Bellacree Road
Duluth, Georgia
with a copy to counsel Baxter L. Davis, Esq.
for Shareholder Davis, Matthews & Quigkley, P.C.
Fourteenth Floor Lenox Towers II
3400 Peachtree Road, N.E.
Atlanta, Georgia 30326
Number of Shares of Hayes
Common Stock owned as of the
date of this Affiliate Agreement: 543,221
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date of this Affiliate Agreement: N/A
Number of Hayes Options for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
Number of Hayes Warrants for
Common Stock owned as of
the date of this Affiliate Agreement: N/A
8
<PAGE> 1
EXHIBIT 4.3.1
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., a Delaware corporation ("Access
Beyond") and Kaifa Technology (H.K.) Limited ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
<PAGE> 2
1. MARKET STAND-OFF
(a) Shareholder hereby covenants and agrees that, prior to
ninety (90) days after the Effective Time of the Merger (the "Stand-Off
Period"), Shareholder will not, directly or indirectly, (i) offer,
sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale or grant of any option to
purchase or other disposition or transfer of) any of the Access Beyond
Securities (as defined below) to any Person, (ii) create or permit to
exist any encumbrance on any of the Access Beyond Securities or (iii)
reduce its beneficial ownership of, interest in, or risk relating to,
any of the Access Beyond Securities. As used in this Agreement, the
term "Access Beyond Securities" shall mean all shares of capital stock
of Access Beyond received by Shareholder in the Merger or otherwise
acquired or held by Shareholder.
(b) Shareholder hereby covenants and agrees that in the event
the Merger is consummated, for a period of one hundred eighty (180)
days after the Stand-Off Period, Shareholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise, dispose of or transfer (or
announce any offer, sale, offer of sale, contract of sale or grant of
any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities to any Person, (ii) create or permit to exist
any encumbrances on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of
the Access Beyond Securities; provided that paragraph 1(a) and (b)
shall not apply to any of the Subject Shares pledged by Chestnut
Capital, LLC pursuant to a Pledge Agreement of even date securing the
Subordinated Convertible Notes, as amended, described in the Hayes
Disclosure Letter; and, provided further that this paragraph 1(b) shall
not apply to any sale of the Subject Shares by Dennis C. Hayes in an
amount not to exceed $3.0 Million.
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the
2
<PAGE> 3
subject matter hereof and thereof and supersedes all prior agreements and
understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
At the address set forth below Shareholder's
signature on the signature page hereto
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
3
<PAGE> 4
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, bear the signature of all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and
4
<PAGE> 5
agrees that the Merger and the transactions contemplated thereby and by this
Market Stand-Off Agreement do not constitute any liquidation or redemption event
applicable to the Subject Shares under the Articles of Incorporation, Bylaws or
other organizational documents of Hayes, or contracts to which such Shareholder
is a party.
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused this
Market Stand-Off Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
KAIFA TECHNOLOGY (H.K.) LIMITED
FOR AND ON BEHALF OF
KAIFA TECHNOLOGY (H.K.) LTD.
__________________________________________
Name: TAM Man Chi
Authorized Signature
Address of Shareholder's counsel,
if any, for copy of Notices under
Section 2.3:
_________________________________
_________________________________
Facsimile:_______________________
Number of Shares of Hayes
Common Stock owned as of
the date hereof: None
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date hereof: 816,667
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date hereof: None
5
<PAGE> 1
EXHIBIT 4.3.2
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., Inc., a Delaware corporation ("Access
Beyond") and Rinzai Limited ("Shareholder")
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. MARKET STAND-OFF
Shareholder hereby covenants and agrees that, prior to ninety
(90) days after the Effective Time of the Merger (the "Stand-Off Period"),
Shareholder will not, directly or indirectly, (i) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose of
or transfer (or announce any offer, sale, offer of sale, contract of sale or
grant of any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities (as defined below) to any Person, (ii) create or permit
to exist any encumbrance on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of the Access
Beyond Securities. As used in this Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond received by
Shareholder in the Merger or otherwise acquired or held by Shareholder.
<PAGE> 2
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
Rinzai Limited
c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Attention: President
Facsimile: 011 65 264-0125
<PAGE> 3
with a copy to:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, bear the signature of all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Market Stand-Off Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
<PAGE> 4
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused
this Market Stand-Off Agreement to be executed as of the date first written
above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
RINZAI LIMITED
By:_______________________________________
___________________________, President
Address of Shareholder's counsel, if any, for
copy of Notices under Section 2.3:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Number of Shares of Hayes
Common Stock owned as of 2,817,500
the date hereof: ____________________________
Number of Shares of Hayes
Series A Preferred Stock owned None
as of the date hereof:_______________________
Number of Shares of Hayes
Series B Preferred Stock owned None
as of the date hereof:_______________________
<PAGE> 1
EXHIBIT 4.3.3
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., Inc., a Delaware corporation ("Access
Beyond") and S.P. Quek Investments Pte Ltd. ("Shareholder")
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. MARKET STAND-OFF
Shareholder hereby covenants and agrees that, prior to ninety
(90) days after the Effective Time of the Merger (the "Stand-Off Period"),
Shareholder will not, directly or indirectly, (i) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose of
or transfer (or announce any offer, sale, offer of sale, contract of sale or
grant of any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities (as defined below) to any Person, (ii) create or permit
to exist any encumbrance on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of the Access
Beyond Securities. As used in this Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond received by
Shareholder in the Merger or otherwise acquired or held by Shareholder.
<PAGE> 2
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
S.P. Quek Investments Pte Ltd.
c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Attention: President
Facsimile: 011 65 224-9933
<PAGE> 3
with a copy to:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, bear the signature of all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Market Stand-Off Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
<PAGE> 4
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused
this Market Stand-Off Agreement to be executed as of the date first written
above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
S.P. QUEK INVESTMENTS PTE LTD.
By:_______________________________________
___________________________, President
Address of Shareholder's counsel, if any,
for copy of Notices under Section 2.3:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Number of Shares of Hayes
Common Stock owned as of 245,000
the date hereof:____________________________
Number of Shares of Hayes
Series A Preferred Stock owned None
as of the date hereof:______________________
Number of Shares of Hayes
Series B Preferred Stock owned None
as of the date hereof:______________________
<PAGE> 1
EXHIBIT 4.3.4
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., Inc., a Delaware corporation ("Access
Beyond") and Rolling Profit Holdings Limited ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. MARKET STAND-OFF
Shareholder hereby covenants and agrees that, prior to ninety
(90) days after the Effective Time of the Merger (the "Stand-Off Period"),
Shareholder will not, directly or indirectly, (i) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose of
or transfer (or announce any offer, sale, offer of sale, contract of sale or
grant of any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities (as defined below) to any Person, (ii) create or permit
to exist any encumbrance on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of the Access
Beyond Securities. As used in this Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond received by
Shareholder in the Merger or otherwise acquired or held by Shareholder.
<PAGE> 2
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
Rolling Profit Holdings Limited
Arion Commercial Center
Third Floor, Room 304
2-12 Queen's Road West
Hong Kong
Attention: President
Facsimile: 011 (852) 2854-0438
<PAGE> 3
with a copy to:
Farrand, Cooper & Bruiniers
235 Montgomery, Suite 1035
San Francisco, California 94104
Attention: Wayne Cooper, Esq.
Facsimile: (415) 677-2950
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, bear the signature of all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Market Stand-Off Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
<PAGE> 4
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused
this Market Stand-Off Agreement to be executed as of the date first written
above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
ROLLING PROFIT HOLDINGS LIMITED
By:_______________________________________
____________________________, President
Address of Shareholder's counsel, if any,
for copy of Notices under Section 2.3:
Farrand, Cooper & Bruiniers
235 Montgomery, Suite 1035
San Francisco, California 94104
Attention: Wayne Cooper, Esq.
Facsimile: (415) 677-2950
Number of Shares of Hayes
Common Stock owned as of 408,333
the date hereof:____________________________
Number of Shares of Hayes
Series A Preferred Stock owned None
as of the date hereof:______________________
Number of Shares of Hayes
Series B Preferred Stock owned None
as of the date hereof:______________________
<PAGE> 1
EXHIBIT 4.3.5
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., Inc., a Delaware corporation ("Access
Beyond") and Saliendre Pte Ltd.
("Shareholder")
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. MARKET STAND-OFF
Shareholder hereby covenants and agrees that, prior to ninety
(90) days after the Effective Time of the Merger (the "Stand-Off Period"),
Shareholder will not, directly or indirectly, (i) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose of
or transfer (or announce any offer, sale, offer of sale, contract of sale or
grant of any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities (as defined below) to any Person, (ii) create or permit
to exist any encumbrance on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of the Access
Beyond Securities. As used in this Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond received by
Shareholder in the Merger or otherwise acquired or held by Shareholder.
<PAGE> 2
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
Saliendre Pte Ltd.
c/o GK Goh Holdings Limited
50 Raffles Place
#33-00 Shell Tower
Singapore 048623
Attention: Mr. Lee Teong Sang
Facsimile: 011 65 538-6189
<PAGE> 3
with a copy to:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, bear the signature of all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Market Stand-Off Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
<PAGE> 4
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused
this Market Stand-Off Agreement to be executed as of the date first written
above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
SALIENDRE PTE LTD.
By:_______________________________________
Lee Teong Sang
Address of Shareholder's counsel, if any,
for copy of Notices under Section 2.3:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Number of Shares of Hayes
Common Stock owned as of 245,000
the date hereof:____________________________
Number of Shares of Hayes
Series A Preferred Stock owned None
as of the date hereof:______________________
Number of Shares of Hayes
Series B Preferred Stock owned None
as of the date hereof:______________________
<PAGE> 1
EXHIBIT 4.3.6
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., Inc., a Delaware corporation ("Access
Beyond") and Lao Hotel (H.K.)
Limited ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. MARKET STAND-OFF
Shareholder hereby covenants and agrees that, prior to ninety
(90) days after the Effective Time of the Merger (the "Stand-Off Period"),
Shareholder will not, directly or indirectly, (i) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose of
or transfer (or announce any offer, sale, offer of sale, contract of sale or
grant of any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities (as defined below) to any Person, (ii) create or permit
to exist any encumbrance on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of the Access
Beyond Securities. As used in this Agreement, the term "Access Beyond
Securities" shall mean all shares of capital stock of Access Beyond received by
Shareholder in the Merger or otherwise acquired or held by Shareholder.
<PAGE> 2
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
Lao Hotel (H.K.) Limited
c/o Guthrie GTS Limited
115 Amoy Street #02-00
Singapore 059935
Attention: Mr. Arthur Tan
Facsimile: 011 65 224-9211
<PAGE> 3
with a copy to:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, bear the signature of all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Market Stand-Off Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
<PAGE> 4
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused
this Market Stand-Off Agreement to be executed as of the date first written
above.
ACCESS BEYOND, INC.
By:_______________________________________
Name:
Title:
SHAREHOLDER:
LAO HOTEL (H.K.) LIMITED
By:_______________________________________
Arthur Tan
Address of Shareholder's counsel, if any,
for copy of Notices under Section 2.3:
Jackson, Tufts, Cole & Black
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Shane Byrne, Esq.
Facsimile: (408) 998-4889
Number of Shares of Hayes
Common Stock owned as of 367,500
the date hereof:____________________________
Number of Shares of Hayes
Series A Preferred Stock owned None
as of the date hereof:______________________
Number of Shares of Hayes
Series B Preferred Stock owned None
as of the date hereof:______________________
<PAGE> 5
EXHIBIT C-3
FORM OF HAYES AFFILIATE AGREEMENT
This Hayes Affiliate Agreement (this "Affiliate Agreement") is made and
entered into as of __________, 1997 (the "Effective Date") among Access Beyond,
Inc., a Delaware corporation ("Access Beyond"), Hayes Microcomputer Products,
Inc., a Georgia corporation ("Hayes") and ____________________________
("Shareholder") who is an affiliate of Hayes.
RECITALS
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Reorganization dated as of July 29, 1997 between Access
Beyond and Hayes (as such may be amended the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of a wholly owned
subsidiary of Access Beyond ("Newco") with and into Hayes in a reverse
triangular merger (the "Merger"), with Hayes to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of the Merger Agreement and
the Agreement of Merger to be entered into between Newco and Hayes in the form
attached to the Merger Agreement (the "Agreement of Merger"). The Merger
Agreement and the Agreement of Merger are collectively referred to herein as the
"Merger Agreements." Capitalized terms used but not otherwise defined in this
Affiliate Agreement have the meanings ascribed to such terms in the Merger
Agreement.
B. The Merger Agreements provide that, in the Merger, the shares of
Hayes Common Stock and shares of Hayes Series A Preferred Stock that are issued
and outstanding at the Effective Time of the Merger will be converted into
shares of Access Beyond Common Stock and the shares of Hayes Series B Preferred
Stock that are issued and outstanding at the Effective Time of the Merger will
be converted into shares of Access Beyond Series A Stock, all as more
particularly set forth in the Merger Agreement
C. Shareholder understands that Shareholder is deemed an "affiliate" of
Hayes within the meaning of the Securities Act of 1933, as amended (the "1933
Act"), and that any shares of Access Beyond capital stock acquired by the
Shareholder in the Merger may be disposed of only in conformity with the
limitations described herein.
A G R E E M E N T
1. TAX TREATMENT, RELIANCE. Shareholder understands and agrees that it
is intended that the Merger will be treated as a tax-free reorganization for
federal income tax purposes and that such treatment requires that a sufficient
number of former stockholders of Hayes maintain a meaningful continuing equity
ownership interest in Access Beyond after the Merger. Shareholder understands
that the representations, warranties and covenants of Shareholder set forth
herein will be relied upon by Hayes and Access Beyond and their respective
counsel and accounting firms and by Hayes' stockholders. Shareholder will rely
on Shareholder's own tax advisers as to the tax
<PAGE> 6
attributes of the Merger to Shareholder and understands that neither Access
Beyond, nor Access Beyond's counsel, Hayes or Hayes' counsel has guaranteed nor
will guarantee to Shareholder that the Merger will be a tax-free reorganization,
nor shall any of them have any liability to Shareholder as a result of issuing
any opinion in respect thereof that may be required in connection with any
registration statement under the 1933 Act.
2. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SHAREHOLDER.
Shareholder represents, warrants and covenants as follows.
(a) Authority; Affiliate Status. Shareholder has all requisite
right, power, legal capacity and authority to execute, deliver and perform this
Affiliate Agreement and to perform its obligations hereunder. Shareholder
further understands and agrees that Shareholder is deemed to be an "affiliate"
of Hayes within the meaning of the 1933 Act and, in particular, Rule 145
promulgated under the 1933 Act ("Rule 145"),
(b) Hayes Securities Owned. Attachment 1 hereto sets forth all
shares of Hayes capital stock and any other securities of Hayes owned by
Shareholder, including all securities of Hayes as to which Shareholder has sole
or shared voting or investment power, and all rights, options and warrants to
acquire shares of capital stock or other securities of Hayes granted to or held
by Shareholder (such shares of Hayes capital stock, other securities of Hayes
and rights, options and warrants to acquire shares of Hayes capital stock and
other securities of Hayes are hereinafter collectively referred to as "Hayes
Securities"). As used herein, the term "Expiration Date" means the earliest to
occur of (i) the closing, consummation and effectiveness of the Merger, or (ii)
such time as the Merger Agreement may be terminated in accordance with its
terms.
(c) New Hayes Securities. As used herein, the term "New Hayes
Securities" means, collectively, any and all shares of Hayes capital stock,
other securities of Hayes and rights, options and warrants to acquire shares of
Hayes capital stock and other securities of Hayes that Shareholder may purchase
or otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date. All New Hayes Securities will be subject to the terms of this Affiliate
Agreement to the same extent and in the same manner as if they were Hayes
Securities.
(d) Merger Securities. As used herein, the term "Merger
Securities" means, collectively, all shares of Access Beyond Common Stock, and
Access Beyond Series A Stock that are or may be issued by Access Beyond in
connection with the Merger or the transactions contemplated by the Merger
Agreements, or to any former holder of Hayes options, warrants or rights to
acquire shares of Hayes Common Stock, and any securities that may be paid as a
dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor or upon conversion thereof.
(e) Transfer Restrictions on Merger Securities. Shareholder
has been advised that the issuance of the shares of Access Beyond Common Stock
and Access Beyond Series A
2
<PAGE> 7
Stock in connection with the Merger is expected to be effectuated pursuant to a
Registration Statement on Form S-4 under the 1933 Act, and that the provisions
of Rule 145 will limit Shareholder's resales of such Merger Securities.
Shareholder accordingly agrees not to sell, transfer, exchange, pledge, or
otherwise dispose of, or make any offer or agreement relating to, any of the
Merger Securities and/or any option, right or other interest with respect to any
Merger Securities that Shareholder may acquire, unless: (i) such transaction is
permitted pursuant to Rules 145(c) and 145(d) under the 1933 Act; or (ii) legal
counsel representing Shareholder, which counsel is reasonably satisfactory to
Access Beyond, shall have advised Access Beyond in a written opinion letter
reasonably satisfactory to Access Beyond and Access Beyond's legal counsel, and
upon which Access Beyond and its legal counsel may rely, that no registration
under the 1933 Act would be required in connection with the proposed sale,
offer, exchange, pledge or other disposition of Merger Securities by
Shareholder, or (iii) a registration statement under the 1933 Act covering the
Merger Securities proposed to be sold, transferred, exchanged, pledged or
otherwise dispose of, describing the manner and terms of the proposed sale,
transfer, exchange, pledge or other disposition, and containing a current
prospectus, shall have been filed with the Securities and Exchange Commission
("SEC") and been declared effective by the SEC under the 1933 Act, or (iv) an
authorized representative of the SEC shall have rendered written advice to
Shareholder (sought by Shareholder or counsel to Shareholder, with a copy
thereof and all other related communications delivered to Access Beyond and its
legal counsel) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with respect to
the proposed disposition of Merger Securities if consummated. Nothing herein
imposes upon Access Beyond any obligation to register any Merger Securities
under the 1933 Act.
(f) Intent. Shareholder does not now have, and as of the Effective
Time of the Merger will not have, any present plan or intention to engage in a
sale, exchange, transfer, distribution, pledge, disposition or any other
transaction which would result in a direct or indirect disposition (a "Sale") of
shares of Access Beyond voting common stock to be issued to Hayes shareholders
in the Merger, which shares would have an aggregate fair market value, as of the
Effective Time of the Merger, in excess of 50% of the aggregate fair market
value, immediately prior to the Merger, of all outstanding shares of Hayes
stock. For purposes of this representation, shares of Hayes stock (or the
portion thereof) (a) with respect to which a Hayes shareholder receives
consideration in the Merger other than Access Beyond voting common stock and/or
(b) with respect to which a Sale by a Hayes shareholder who owns 5% or more of
Hayes stock or is an officer or director of Hayes occurs during the pre-merger
period shall be considered shares of outstanding Hayes stock exchanged for
Access Beyond voting common stock in the Merger and then disposed of pursuant to
a prearranged plan.
3. LEGENDS. Shareholder also understands and agrees that stop transfer
instructions will be given to Access Beyond's transfer agent with respect to
certificates evidencing the Merger Securities to enforce Shareholder's
compliance with Shareholder's representations in Sections 2(e) and Shareholder's
compliance with applicable securities laws regarding the Merger Securities, and
that there will be placed on the certificates evidencing such Merger Securities
a legend providing substantially as follows:
3
<PAGE> 8
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, ANY APPLICABLE STATE SECURITIES LAWS, AND THE OTHER CONDITIONS
SPECIFIED IN THAT CERTAIN HAYES AFFILIATE AGREEMENT DATED AS OF JULY
29, 1997 AMONG ACCESS BEYOND, INC. ("ACCESS BEYOND"), HAYES
MICROCOMPUTER PRODUCTS, INC. AND THE HOLDER OF SUCH SHARES, A COPY OF
WHICH MAY BE INSPECTED BY THE HOLDER OF THIS CERTIFICATE AT THE OFFICES
OF THE ISSUER. THE ISSUER WILL FURNISH WITHOUT CHARGE A COPY THEREOF TO
THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
4. NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 4:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
4
<PAGE> 9
(b) If to Hayes:
(If via hand delivery or overnight courier)
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092-3404
Attention: Chairman of the Board and
Contracts Administration
(If via mail)
Hayes Microcomputer Products, Inc.
Post Office Box 105103
Atlanta, Georgia 30348
Attention: Chairman of the Board and
Contracts Administration
Facsimile: (770) 840-6830
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309-3574
Attention: G. Donald Johnson, Esq.
Facsimile: (404) 888-7490
(c) If to Shareholder:
At the address for notice to such
Shareholder set forth on the last page
hereof
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 4.
5. SURVIVAL; TERMINATION. All representations, warranties and
agreements made by Shareholder in this Affiliate Agreement shall survive the
consummation of the Merger. This Affiliate Agreement shall be terminated and
shall be of no further force and effect upon the earlier to occur of (i) any
termination of the Merger Agreement pursuant to its terms, or (ii) any waiver of
either any closing condition in favor of Hayes or any obligation of Access
Beyond under or any amendment of the Merger Agreement, or the giving of any
required consent of Hayes under Section 4.3 or any other provision of the Merger
Agreement, unless such waiver, amendment or consent is approved either by the
Board of Directors of Hayes or any committee thereof consisting
5
<PAGE> 10
of at least two (2) members of the Hayes Board authorized to approve any such
amendment, waiver or consent, one of whom approving such amendment, waiver or
consent by action of either the full Hayes Board or such committee is a
representative of Rinzai Limited.
6. EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Affiliate Agreement shall be paid by the party
incurring such costs and expenses; provided, however, that the Shareholder's
legal costs and expenses shall be promptly paid by Hayes.
7. COUNTERPARTS. This Affiliate Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
agreement. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories. Facsimile copies with signatories of
the parties to this Agreement, or their duly authorized representatives, shall
be legally binding and enforceable. All such facsimile copies are declared as
originals and, accordingly admissible in any jurisdiction or tribunal having
jurisdiction over any matter relating to this Agreement.
8. ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither this
Affiliate Agreement nor any of the rights, interests or obligations hereunder
shall be assigned the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties hereto. Subject to the
preceding sentence, this Affiliate Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted signs.
9. AMENDMENT AND WAIVERS. Any term or provision of this Affiliate
Agreement may be amended, and the observance of any term of this Affiliate
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by a writing signed by the parties to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
10. ENTIRE AGREEMENT. This Affiliate Agreement and any documents
delivered by the parties in connection herewith constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof and
supersedes all prior agreements and under standings between the parties with
respect thereto.
11. OTHER AGREEMENTS. Nothing in this Affiliate Agreement shall limit
any of the rights or remedies of Access Beyond or Shareholder or any of the
obligations of either party under any Voting Agreement between Access Beyond and
Shareholder or any other agreement.
12. SEVERABILITY. Any term or provision of this Affiliate Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
6
<PAGE> 11
terms and provisions of this Affiliate Agreement or affecting the validity or
enforceability of any of the terms and provisions of this Affiliate Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Affiliate Agreement in any other jurisdiction. If any provision of this
Affiliate Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
13. GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
14. CONSTRUCTION. The language hereof will not be construed for or
against either party. A reference to a section will mean a section of this
Affiliate Agreement, unless otherwise explicitly set forth. The titles and
headings in this Affiliate Agreement are for reference purposes only and will
not in any manner limit the construction of this Affiliate Agreement. For the
purposes of such construction, this Affiliate Agreement will be considered as a
whole.
15. HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "Transfer" or "Disposition" under
the Shareholder Agreement among the shareholders of Hayes dated April 16, 1996.
Shareholder further acknowledges and agrees that this Affiliate Agreement does
not constitute any liquidation or redemption event applicable to the Merger
Securities under the Articles of Incorporation, Bylaws or other organizational
documents of Hayes, or contracts to which such Shareholder is a party.
IN WITNESS WHEREOF, the parties hereto have caused this Affiliate
Agreement to be executed as of the date first written above.
ACCESS BEYOND, INC. HAYES MICROCOMPUTER PRODUCTS, INC.
By:______________________________ By:_______________________________________
Name: Name:
Title: Title:
SHAREHOLDER:
_________________________________
7
<PAGE> 12
ATTACHMENT 1
Affiliate's Address for Notice: __________________________
__________________________
__________________________
with a copy to counsel __________________________
for Shareholder __________________________
__________________________
__________________________
__________________________
Number of Shares of Hayes
Common Stock owned as of the
date of this Affiliate Agreement: ____________________________
Number of Shares of Hayes
Series A Preferred Stock owned N/A
as of the date of this Affiliate Agreement: _____________________________
Number of Shares of Hayes
Series B Preferred Stock owned N/A
as of the date of this Affiliate Agreement: _____________________________
Number of Hayes Options for
Common Stock owned as of N/A
the date of this Affiliate Agreement: _____________________________
Number of Hayes Warrants for
Common Stock owned as of N/A
the date of this Affiliate Agreement: _____________________________
8
<PAGE> 1
EXHIBIT 4.3.7
MARKET STAND-OFF AGREEMENT
This Market Stand-Off Agreement (this "Agreement") is entered into as
of July 29, 1997 by Access Beyond, Inc., a Delaware corporation ("Access
Beyond") and Dennis C. Hayes, a Georgia resident ("Shareholder").
RECITALS
A. Access Beyond and Hayes Microcomputer Products, Inc., a Georgia
corporation ("Hayes"), are entering into an Agreement and Plan of Reorganization
of even date herewith (as amended from time to time, the "Merger Agreement"),
which provides (subject to the conditions set forth therein) for the merger of a
wholly owned subsidiary of Access Beyond ("Newco") with and into Hayes in a
reverse triangular merger (the "Merger"), with Hayes to be the surviving
corporation of the Merger. Capitalized terms used but not otherwise defined in
this Agreement have the meanings ascribed to such term in the Merger Agreement.
B. As of the date hereof, Shareholder owns in the aggregate (including
shares held both beneficially and of record and other shares held either
beneficially or of record) the number of shares of the Common Stock, the Series
A Preferred Stock and the Series B Preferred Stock of Hayes set forth below
Shareholder's name on the signature page hereof (all such shares, together with
any shares of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock or other shares of capital stock of Hayes that may hereafter be
acquired by Shareholder, being referred to herein as the "Subject Shares").
C. As a condition to closing the Merger and other transactions
contemplated by the Merger Agreement, Access Beyond has required that
Shareholder agree to enter into this Agreement.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:
1. MARKET STAND-OFF
(a) Shareholder hereby covenants and agrees that, prior to
ninety (90) days after the Effective Time of the Merger (the "Stand-Off
Period"), Shareholder will not, directly or indirectly, (i) offer,
sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise dispose of or transfer (or announce any offer,
sale, offer of sale, contract of sale or grant of any option to
purchase or other disposition or transfer of) any of the Access Beyond
Securities (as defined below) to any Person, (ii) create or permit to
exist any encumbrance on any of the Access Beyond Securities or (iii)
reduce its beneficial ownership of, interest in, or risk relating to,
any of the Access Beyond Securities. As used in this Agreement, the
term "Access Beyond Securities" shall mean all shares of capital stock
of Access Beyond received by Shareholder in the Merger or otherwise
acquired or held by Shareholder.
<PAGE> 2
(b) Shareholder hereby covenants and agrees that in the event
the Merger is consummated, for a period of one hundred eighty (180)
days after the Stand-Off Period, Shareholder will not, directly or
indirectly, (i) offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise, dispose of or transfer (or
announce any offer, sale, offer of sale, contract of sale or grant of
any option to purchase or other disposition or transfer of) any of the
Access Beyond Securities to any Person, (ii) create or permit to exist
any encumbrances on any of the Access Beyond Securities or (iii) reduce
its beneficial ownership of, interest in, or risk relating to, any of
the Access Beyond Securities; provided that paragraph 1(a) and (b)
shall not apply to any of the Subject Shares pledged by Chestnut
Capital, LLC pursuant to a Pledge Agreement of even date securing the
Subordinated Convertible Notes, as amended, described in the Hayes
Disclosure Letter; and, provided further that this paragraph 1(b) shall
not apply to any sale of the Subject Shares by Dennis C. Hayes in an
amount not to exceed $3.0 Million.
2. MISCELLANEOUS
2.1 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
2.2 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior agreements and understandings between the parties with respect thereto.
2.3 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate international courier service, five (5) days
after delivery to the courier or, if earlier, upon delivery against a signed
receipt therefor or (b) upon transmission by facsimile or telecopier, which
transmission is confirmed, in either case addressed to the party to be notified
at the address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 2.3:
(a) If to Access Beyond:
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20878
Attention: President/CEO
Facsimile: (301) 921-9149
2
<PAGE> 3
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Stephen I. Budow, Esq.
Facsimile: (212) 735-8708
(b) If to Shareholder:
At the address set forth below Shareholder's
signature on the signature page hereto
with a copy to:
Counsel for Shareholder, if any, at the
address shown on the signature page hereto
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 2.3.
2.4 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the parties to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
2.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of (i) Shareholder and his heirs, successors and assigns, and (ii)
Access Beyond and its successors and assigns.
2.6 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Access Beyond of any of the obligations of Shareholder
under any Affiliate Agreement between Access Beyond and Shareholder or any other
instrument.
2.7 GOVERNING LAW. The internal laws of the State of Georgia
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
2.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be an original as regards any party whose name appears thereon and
all of which together will constitute one and the same agreement. This Agreement
will become binding when one or
3
<PAGE> 4
more counterparts hereof, individually or taken together, bear the signature of
all parties reflected hereon as signatories.
2.9 HAYES SHAREHOLDER AGREEMENT. Shareholder acknowledges that the
execution hereof by Shareholder and the execution by any other shareholders of
Hayes of similar agreements in connection with the Merger, is not a violation
of, and, in particular, does not constitute a "transfer" under, the Shareholder
Agreement among the shareholders of Hayes dated April 16, 1996. Shareholder
further acknowledges and agrees that the Merger and the transactions
contemplated thereby and by this Market Stand-Off Agreement do not constitute
any liquidation or redemption event applicable to the Subject Shares under the
Articles of Incorporation, Bylaws or other organizational documents of Hayes, or
contracts to which such Shareholder is a party.
IN WITNESS WHEREOF, Access Beyond and Shareholder have caused
this Market Stand-Off Agreement to be executed as of the date first written
above.
ACCESS BEYOND, INC.
By:_______________________________________
RONALD A. HOWARD, President
SHAREHOLDER:
__________________________________________
DENNIS C. HAYES
Address of Shareholder's
counsel, if any, for copy
of Notices under Section
2.3:
Davis, Matthews & Quigley, P.C.
Fourteenth Floor Lenox Towers II
3400 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Baxter L. Davis, Esq.
Facsimile: (404) 261-0159
Number of Shares of Hayes
Common Stock owned as of
the date hereof: 543,221
4
<PAGE> 5
Number of Shares of Hayes
Series A Preferred Stock owned
as of the date hereof: None
Number of Shares of Hayes
Series B Preferred Stock owned
as of the date hereof: None
5
<PAGE> 1
EXHIBIT 8.1
October , 1997
Hayes Microcomputer Products, Inc.
P. O. Box 105203
Atlanta, Georgia 30348
Access Beyond, Inc.
1300 Quince Boulevard
Gaithersburg, Maryland 20828
Re: Material Federal Income Tax Consequences of the
Merger Provided for in the Agreement and Plan of
Reorganization by and among Access Beyond, Inc.
("Access Beyond"), H & A Merger Sub, Inc. (the
"Subsidiary") and Hayes Microcomputer Products, Inc.
("Hayes") dated as of July 29, 1997 (the "Agreement")
Ladies and Gentlemen:
We have acted as counsel to Hayes Microcomputer Products,
Inc., a Georgia corporation, in connection with a proposed transaction (the
"Merger") in which Hayes will become a wholly-owned subsidiary of Access Beyond,
Inc. and the shareholders of Hayes (except for any dissenting Hayes
shareholders) will become shareholders of Access Beyond. The Merger will be
affected pursuant to the Agreement and Plan of Reorganization, dated as of July
29, 1997 by and between Access Beyond, Inc. and Hayes Microcomputer Products,
Inc. In our capacity as counsel to Hayes, our opinion has been requested with
respect to certain material federal income tax consequences of the proposed
Merger. In rendering this opinion, we examined (i) the Internal Revenue Code for
1986, as amended (the "Code") and Treasury regulations, (ii) the legislative
history of applicable sections of the Code, and (iii) appropriate Internal
Revenue Service and court decisional authority. In addition, we relied upon
certain information made known to us as more fully described below. All
capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all section
references herein are to the Code.
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined
such documents as we have deemed appropriate, including:
<PAGE> 2
(1) the Agreement;
(2) the Registration Statement on Form S-4 filed by
Access Beyond under the Securities Act of 1933, on October __, 1997; and
(3) such additional documents as we have considered
relevant.
In our examination of such documents, we have assumed, with
your consent, that all documents submitted to us as photocopies faithfully
reproduce the originals thereof, that such originals are authentic, that all
such documents have been or will be duly executed to the extent required, and
that all statements set forth in such documents are accurate. We have also
obtained such additional information and representations as we have deemed
relevant necessary to consultation with various officers and representatives of
Hayes and Access Beyond and through certificates provided by the management of
Hayes and the management of Access Beyond dated September 30, 1997, updated to
the date of Closing (the "Tax Certificates"). We assume those representations to
be not only statements of the signors best information, but also currently true
statements of fact and statements of fact that will be true as of the Effective
Time, and we rely thereon in rendering this opinion. We also assume that the
Merger will be consummated in accordance with the Agreement.
Pursuant to the terms of the Agreement, Hayes will become a
subsidiary of Access Beyond through the merger of Subsidiary, a Georgia
corporation formed solely for the purposes of effectuating the Merger and a
wholly-owned subsidiary of Access Beyond, Inc., a Delaware corporation, and
Hayes, pursuant to Georgia law with Hayes surviving the Merger. In the Merger,
each outstanding share of Hayes Common Stock is to be converted into a
predetermined number of shares of Access Beyond Common Stock, each outstanding
share of Hayes Series A Stock is to be converted into a predetermined number of
shares of Access Beyond Common Stock, each outstanding share of Hayes Series B
Stock is to be converted into a predetermined number of shares of Access Beyond
Series A Stock, and each outstanding share of Hayes Series C Stock, if any, is
to be converted into a predetermined number of shares of Access Beyond Common
Stock. Hayes shareholders are entitled to dissenters rights with respect to the
Merger.
With your consent, we also assume that the following
statements are true on the day hereof and will be true on the date the proposed
transaction is consummated:
1. At least 90% of the fair market value of its net assets and
at least 70% of the fair market value of the gross assets held by Hayes
immediately before the Merger during the Pre-Merger Period will be held by
Hayes immediately after the Merger. For the purpose of determining the
percentage of the net and gross assets held by Hayes immediately before the
Merger, the following assets will be treated as property held by Hayes
immediately prior but not subsequent to the Merger: (a) assets disposed of by
Hayes prior to the Merger and in contemplation thereof (including without
limitation any asset disposed of by Hayes, other than in the ordinary course of
business, during the period ending on the Effective Time of the Merger and
beginning with the commencement of negotiations (whether formal or informal)
between Hayes and Access Beyond regarding the merger (the "Pre-Merger Period")),
(b) assets used by Hayes to pay expenses or
<PAGE> 3
liabilities incurred in connection with the Merger, and (c) assets used to make
distributions (except for regular and normal dividends), redemption or other
payments in respect of Hayes stock or rights to acquire such stock (including
payments treated as such for tax purposes) that are made in contemplation of the
merger or related thereto.
2. Prior to the Merger, Access Beyond will be in Control of
Subsidiary. As used herein, "Control" shall mean ownership of stock possessing
at least 80% of the total combined voting power of all classes of stock entitled
to vote and at least 80% of the total combined voting power of all classes of
stock entitled to vote and at least 80% of the total number of shares of all
other classes of stock of the corporation. For purposes of determining Control,
a person shall not be considered to own voting stock if rights to vote such
stock (or to restrict or otherwise control the voting of such stock) are held by
a third party (including a voting trust) other than an agent of such person.
3. Access Beyond will acquire Control of Hayes in the
Merger solely in exchange for Access Beyond voting stock.
4. In the Merger, shares of Hayes stock representing Control
of Hayes will be exchanged solely for voting stock of Access Beyond; at the time
of the Merger, there will exist no rights of any kind (including without
limitation, warrants, options, convertible securities, contingent rights,
informal or unwritten rights) to acquire Hayes stock or to vote (or restrict or
otherwise control the vote of) Hayes stock, which, if exercised, could affect
Access Beyond's acquisition and retention of Control of Hayes. For purposes
hereof, shares of Hayes stock exchanged in the Merger for cash and other
property will be treated as Hayes stock outstanding on the date of the Merger
but not exchanged for voting stock of Access Beyond.
5. The Conversion Ratio as defined in paragraph 1.1.5 of the
Agreement is the result of arm's length bargaining. The fair market value of the
Access Beyond voting common stock to be received by shareholders of Hayes will
be approximately equal to the fair market value of the Hayes Common Stock and
Hayes Series A Preferred Stock to be surrendered in exchange therefor. The fair
market value of the Access Beyond Series A Stock to be received by shareholders
of Hayes will be approximately equal to the fair market value of the Hayes
Series B Stock to be surrendered in exchange therefor. The fair market value of
the substituted Access Beyond options to be received by the Hayes option
holders will be approximately equal to the fair market value of the Hayes
options to be assumed in exchange therefor. The fair market value of the
substituted Access Beyond warrants to be received by the Hayes warrant holders
will be approximately equal to the fair market value of the Hayes warrants to be
assumed in exchange therefor.
6. The Access Beyond stock to be exchanged for Hayes Common
Stock in the Merger will be newly issued Access Beyond stock.
7. Neither Access Beyond nor Hayes has a plan or intention to
cause Hayes to issue, after the Merger, additional shares of stock (or rights to
acquire shares of Hayes stock) that would result in Access Beyond losing Control
of Hayes.
<PAGE> 4
8. Neither Access Beyond nor Hayes has a plan or intention to
cause Access Beyond to reacquire any of its voting stock issued in the Merger.
Access Beyond has no plan or intention to make any extraordinary distribution
with respect to its voting stock issued in the Merger.
9. Neither Access Beyond nor Hayes has a plan or intention
to: (a) cause Hayes to sell, transfer or otherwise dispose of any of its assets
or any of the assets acquired from Subsidiary except for dispositions made in
the ordinary course of business or for the payment of expenses incurred by
Hayes in the Merger; (b) liquidate Hayes; (c) merge Hayes with or into another
corporation including Access Beyond or its affiliates; or (d) to sell,
distribute or otherwise dispose of the stock of Hayes.
10. In the Merger, Subsidiary will have no liabilities
assumed by Hayes and will not transfer to Hayes any assets subject to
liabilities.
11. Access Beyond and Hayes intend that, immediately following
the Merger, Hayes will continue its historic business or use a significant
portion of its historic business assets in a business.
12. Neither Access Beyond nor any Access Beyond subsidiary
owns, or has owned during the past five years, directly or indirectly, any
shares of Hayes stock, or the right to acquire or vote any such stock.
13. The transfer of cash, if any, to Hayes shareholders in
lieu of fractional shares of Access Beyond voting stock is solely for the
purpose of avoiding the expense and inconvenience to Access Beyond of accounting
for fractional shares and does not represent separately bargained-for
consideration.
14. Except with respect to payments of cash to Hayes
shareholders in lieu of fractional shares of Access Beyond voting stock and cash
paid for Hayes Dissenting Shares, if any, 100% of the Hayes stock outstanding
immediately prior to the Merger will be exchanged solely for Access Beyond
voting stock. In any event, the total consideration other than Access Beyond
voting stock received by Hayes Shareholders will be less than 20% of the total
fair market value of the Hayes stock outstanding immediately prior to the
Merger. Thus, except as set forth in the preceding sentences, Access Beyond
intends that no consideration other than Access Beyond voting stock be paid or
received (directly or indirectly, actually or constructively) for Hayes stock.
15. No shares of Subsidiary have been or will be used as
consideration or issued to shareholders of Hayes in the Merger.
16. Hayes and Access Beyond will each pay separately its
own expenses in connection with the Merger as contemplated by the Agreement.
17. There is no inter-corporate indebtedness existing between
Access Beyond and Hayes or between Subsidiary and Hayes that was issued,
acquired, or will be settled at a discount, and Access Beyond will assume no
liabilities of Hayes or any Hayes shareholder in connection with the Merger.
<PAGE> 5
18. None of the payments to be received by any shareholder of
Hayes that are designated as compensation are actually separate consideration
for, or allocable to, any of their shares of Hayes stock, and the compensation
to be paid to any shareholder of Hayes will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
19. Neither Access Beyond, Hayes nor Subsidiary are investment
companies as defined in Section 368(1)(2)(F) of the Code, and neither are
under the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
20. The Merger is to be carried out for a substantial business
purpose.
21. Hayes has made no transfer of any of its assets (including
any distribution of assets with respect to, or in redemption of, stock) in
contemplation of the Merger or during the Pre-Merger Period other than (a) in
the ordinary course of business, and (b) payments for expenses incurred in
connection with the Merger.
22. At the Effective Time of the Merger, there will be no
accrued but unpaid dividends on shares of Hayes stock.
23. At the Effective Time of the Merger, the fair market value
of the assets of Hayes will exceed the sum of its liabilities, plus the amount
of liabilities, if any, to which its assets are subject.
24. Hayes has no plan or intention, and is under no
obligation, to discontinue its business, to sell or otherwise dispose of any of
its assets or of any of the assets acquired from Subsidiary in the Merger except
for dispositions made in the ordinary course of business or the payment of
expenses incurred by Hayes pursuant to the Merger.
25. There is no plan or intention on the part of any Hayes
shareholder who owns 1% or more of Hayes stock or is an officer or director of
Hayes, and to the knowledge of the management of Hayes, there is no plan or
intention on the part of the remaining Hayes shareholders to engage in a sale,
exchange, transfer, distribution, pledge, disposition or any other transaction
which would result in a direct or indirect disposition (a "Sale") of shares of
Access Beyond voting stock to be issued to Hayes shareholders in the Merger,
which shares would have an aggregate fair market value, as of the Effective Time
of the Merger, in excess of 50% of the aggregate fair market value, immediately
prior to the Merger, of all outstanding shares of Hayes stock. For purposes
hereof, shares of Hayes stock (or the portion thereof) (a) with respect to which
a Hayes shareholder receives consideration in the Merger other than Access
Beyond voting stock and/or (b) with respect to which a Sale by a Hayes
shareholder who owns 1% or more of Hayes stock or is an officer or director of
Hayes occurs during the Pre-Merger Period and/or (c) issued to CIS during the
Pre-Merger Period, if any, shall be considered shares of outstanding Hayes
stock exchanged for Access Beyond voting stock in the Merger and then disposed
of pursuant to a prearranged plan.
26. There is no indebtedness existing between Hayes and any
Hayes shareholder which will be repaid in connection with or as part of the
Merger, or will be specifically funded with
<PAGE> 6
amounts Access Beyond would contribute to Hayes subsequent to the Merger.
27. At all times within the five year period prior to the
Effective Time, Hayes was not a Real Property Holding Corporation as such terms
are defined in the Code.
OPINIONS
Based solely on the information submitted and the
representations set forth above and assuming that the Merger will take place as
described in the Agreement and that the representations made by Access Beyond
and Hayes (including the representation that Hayes' shareholders will maintain
sufficient equity ownership interest in Access Beyond after the Merger) are true
and correct at the time of the consummation of the Merger, we are of the opinion
that:
1. Provided the Merger qualifies as a statutory merger under
the Delaware General Corporate Laws and the Georgia Business Corporation Code,
the Merger will be a reorganization within the meaning of Section 368(a) of the
Code. Hayes and Access Beyond will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code.
2. The shareholders of Hayes as of the date of the Agreement
owning common stock will recognize no gain or loss upon the exchange of their
Hayes Common Stock solely for shares of Access Beyond Common Stock.
3. The shareholders of Hayes as of the date of the Agreement
owning Series A Stock will recognize no gain or loss upon the exchange of their
Hayes Series A Stock solely for shares of Access Beyond Common Stock.
4. The shareholders of Hayes as of the date of the Agreement
owning Series B Stock will recognize no gain or loss upon the exchange of their
Hayes Series B Stock solely for shares of Access Beyond Series A Stock.
5. The basis of the Access Beyond Common Stock received by the
Hayes Common Stock and the Hayes Series B Stock shareholders in the proposed
transaction will, in each instance, be the same as the basis of the Hayes stock
surrendered in exchange therefore, less the basis of any fractional share of
Access Beyond stock settled by cash payment.
6. The holding period of the Access Beyond Common Stock
received by the Hayes shareholders will, in each instance, include the period
during which the Hayes stock surrendered in exchange therefor was held, provided
that the Hayes stock was held as a capital asset on the date of the exchange.
7. The basis of the Access Beyond Series A Stock received by
the Hayes shareholders in the proposed transaction will, in each instance, be
the same as the basis of the Hayes Series B Stock surrendered in exchange there
for, less the basis of any fractional share of Access Beyond Series A Stock
settled by cash payment.
8. The holding period of the Access Beyond Series A Stock
received
<PAGE> 7
by the Hayes shareholders will, in each instance, include the period during
which the Hayes stock surrendered in exchange therefor was held, provided that
the Hayes stock was held as a capital asset on the date of the exchange.
9. The payment of cash to Hayes shareholders in lieu of
fractional share interest of Access Beyond Common Stock will be treated for
federal income tax purposes as if the fractional shares were distributed as part
of the exchange and then were redeemed by Access Beyond. These cash payments
will be treated as having been received as distributions in full payment in
exchange for the shares redeemed as provided in Section 302(a) of the Code.
Generally any gain or loss recognized upon such exchange will be capital gain or
loss, provided the fractional share would constitute a capital asset in the
hands of the exchanging shareholder.
10. Where solely cash is received by a Hayes shareholder in
exchange for Hayes stock pursuant to the exercise of dissenters rights, such
cash will be treated as having been received in redemption of such holders of
Hayes stock, subject to the provisions and limitations of Section 302 of the
Code.
The opinions expressed herein are based upon existing
statutory, regulatory, and judicial authority, any of which may be changed at
any time with retroactive affect. In addition, our opinions are based solely on
the documents that we have examined, the additional information that we have
obtained, and the statements set out herein, which we have assumed and you have
confirmed to be true on the date hereof and will be true on the date of which
the proposed transaction is consummated. Our opinions cannot be relied upon if
any of the facts contained in such documents or if such additional information
is, or later becomes, inaccurate, or if any of the statements set out herein is,
or later becomes, inaccurate. This opinion is limited to the effect of the
income tax laws of the United States of America and we express no opinion as to
the laws of any jurisdiction other than the United States of America. We express
no opinion as to the United States tax treatment of Hayes shareholders who are
not United States citizens or residents for federal tax purposes.
Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the proposed transaction, including,
for example, any issues related to inter-company transactions, accounting
methods, bad debt reserves, or changes in accounting methods, Code Section 382
change of ownership limitations, or other similar limitations resulting from
the Merger. The shares of Hayes stock and the shareholders referred to herein
do not include any stock rights, warrants or options to acquire Hayes stock or
holders thereof.
The foregoing opinion is furnished to you solely in connection
with the above-described transaction and may not be relied upon by any other
person or entity other than the addressees of this letter or used for any other
purpose. Unless the prior written consent of our firm is obtained, this opinion
is not to be quoted or otherwise referred to in any report, proxy statement, or
registration statement, except as otherwise required by law.
We consent to the use of this opinion and to the references
made to the firm under the caption "THE MERGER - Material Tax Consequences of
the Merger" constituting part of the registration statement on Form S-4 of
Access Beyond.
<PAGE> 8
Sincerely,
WOMBLE CARLYLE SANDRIDGE & RICE
A Professional Limited Liability Company
<PAGE> 1
EXHIBIT 10.17
HAYES MICROCOMPUTER PRODUCTS, INC.
STOCK OPTION PLAN
ADOPTED BY THE BOARD OF DIRECTORS AND SHAREHOLDERS
ON JUNE 4, 1996
1. The Purpose of the Plan. This stock option plan (the "Plan") is
intended to provide an opportunity for officers and other key employees of Hayes
Microcomputer Products, Inc. (the "Corporation") and its present and future
"subsidiary corporations," as "subsidiary corporation" is defined in section 424
of the Internal Revenue Code of 1986, as amended (the "Code") (individually a
"subsidiary" and collectively "subsidiaries"), to acquire shares of the
Corporation's stock. The Plan provides for the grant of "incentive stock
options," as defined in section 422 of the Code or any successor provision
("Incentive Stock Options"), and stock options not qualifying as Incentive Stock
Options ("Non-Qualified Stock Options") providing an equity interest in the
Corporation's business, as an incentive to service or continued service with the
Corporation and to aid the Corporation in obtaining and retaining key personnel
of outstanding ability. As used herein, "Stock Options" refers to Incentive
Stock Options and Non-Qualified Stock Options.
2. Stock Subject to the Plan. The initial maximum amount of the
common capital stock, $0.01 par value, of the Corporation (the "Stock") which
may be issued pursuant to the Options granted under the Plan shall be 600,000
shares of the Stock unless increased by appropriate shareholder action. If an
Option expires or terminates for any reason without being exercised in full, the
unpurchased shares of Stock subject to such Option shall again be available for
purposes of the Plan.
3. Administration of the Plan. This Plan shall be administered by
the Board of Directors or, if Rule 16b-3 or any successor rule of the Securities
and Exchange Commission becomes applicable to the Corporation, or if otherwise
determined by the Board of Director, by a committee (the "Committee") of the
Board of Directors of the Corporation so constituted as to permit the Plan to
comply with Rule 16b-3 or any such successor rule, if Rule 16b-3 or a successor
rule is applicable. The Board or the Committee shall have full authority in its
discretion to determine the officers and key employees of the Corporation and
its subsidiaries to whom Stock Options shall be granted, the number of shares of
Stock covered thereby and the terms and provisions of Stock Options, all subject
to the Plan. In making such determinations, the Board or the Committee may take
into account the nature of the services rendered and to be rendered by the
respective officers and key employees, their present and potential contributions
to the Corporation and its subsidiaries and any other factors which the Board or
the Committee deems relevant. Subject to the provisions of the Plan, the Board
or the Committee shall have full and conclusive authority to interpret the Plan;
to prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Stock Option agreements;
and to make all other determinations necessary to advisable for the proper
administration of the Plan. The Board or the Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, Stock Options under the Plan (whether or
not such persons are similarly situated). The Board or the Committee's decisions
shall be final and binding on all participants in the Plan.
<PAGE> 2
4. Eligibility and Limits. Stock Options may be granted only to
officers and other key employees of the Corporation and its present or future
subsidiary corporations (as defined in section 424 of the Code or any successor
provision). Any Incentive Stock Option granted to any person who, at the time
such Option is granted, owns (as defined in sections 422 and 424 of the Code or
any successor provisions) stock possessing more than ten (10%) percent of the
total combined voting power of all classes of stock of the Corporation or one of
its parent (if any) or subsidiary corporations shall be subject to any
applicable provisions of section 422 of the Code or any successor provision.
5. Incentive Stock Options and Non-Qualified Stock Options. At the
time any Option is granted under the Plan, the Board or the Committee shall
determine whether the Option is to be an Incentive Stock Option or a
Non-Qualified Stock Option, and the Option shall be clearly identified as to its
status as an Incentive Stock Option or a Non-Qualified Stock Option. The number
of shares as to which Incentive Stock Options and Non-Qualified Stock Options
shall be granted shall be determined by the Board or the Committee in its sole
discretion, subject to the provisions of section 2 as to the total number of
shares available for Stock Options granted under the Plan. At the time any
Incentive Stock Option granted under the Plan is exercised, the Corporation
shall be entitled to legend the certificates representing the shares of Stock
purchased pursuant to the Option to clearly identify them as representing shares
purchased upon exercise of an Incentive Stock Option.
6. Terms and Conditions of Options. Subject to the following
provisions, all Options shall be in such form and upon such terms and conditions
as the Board or the Committee in its discretion may from time to time determine.
(a) Option Price. Subject to section 8 and the other
provisions of this section 6(a), the option price per share of Stock purchasable
under any Option granted under the Plan shall be fixed by the Board or the
Committee and set forth in the applicable Stock Option agreement. With respect
to each grant of an Incentive Stock Option, the option price per share shall not
be less than the fair market value of a share of Stock (as determined in good
faith by the Board or the Committee) on the date such Option is granted. Subject
to section 8 and the other provisions of this section 6(a), the option price per
share of Stock purchasable under a Non-Qualified Stock Option granted under the
Plan shall be the price per share as adopted by the Board of Directors of the
Corporation or by the Committee. If the option price is adjusted pursuant to
section 8 and the other applicable provisions herein, and if such adjustments
are applicable at the time of issuance of the Option, then such adjusted option
price shall be set forth in the applicable Stock Option issued pursuant to the
Plan. With respect to each grant of a Non-Qualified Stock Option, if Rule 16b-3
or any successor rule is applicable, the option price per share shall not be
less than fifty (50%) percent of the fair market value of a share of Stock (as
determined in good faith by the Board or the Committee) on the date such Option
is granted. The date an Option is granted shall be the date on which the Board
or the Committee has approved the terms and conditions of a Stock Option
agreement evidencing the Option and has determined the recipient of the Option
and the number of shares covered by the Option and has taken all such other
action as is necessary to complete the grant of the Option. In the event that
the Stock is listed on an established stock exchange, its fair
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<PAGE> 3
market value shall be deemed to be the closing price of the Stock on such
exchange on the date the Option is granted, or, if no sale of Stock shall have
been made on such exchange on such date, its fair market value shall be deemed
to be such price for the next preceding date on which a sale shall have
occurred.
(b) Option Term. An Option shall have such term as the Board
or the Committee shall determine, but no Option shall be exercisable before the
Exercise Date or after the Expiration Date as set forth in the Form Option.
However, no Incentive Stock Option shall be exercisable after the expiration of
ten (10) years from the date such Option is granted.
(c) Payment. Payment for all shares purchased pursuant to
exercise of an Option shall be made in cash or, if the Stock Option agreement so
provides, by delivery of Stock of the Corporation valued at its fair market
value on the date of delivery. Subject to the provisions of section 6(g), such
payment shall be made at the time that the Option or any part thereof is
exercised, and no shares of Stock shall be issued or delivered until full
payment therefor has been made.
(d) Conditions to Exercise of an Option. Each option granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, including, without limitation, the surrender
of another stock option or stock award, and in such amounts, as the Board or the
Committee shall specify in the particular Stock Option agreement; provided,
however, that subsequent to the grant of an Option, the Committee, at any time
before complete termination of such Option, may accelerate the time or times at
which such Option may be exercised in whole or in part.
(e) Nontransferability of Options. An Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the holder's lifetime, only by the
holder.
(f) Termination of Employment or Death.
(i) For Non-Qualified Stock Options, upon any
termination of employment of the holder for any
reason other than for cause, death or disability,
except as otherwise provided in the particular
Stock Option Agreement, any such Option held at
the date of such employment termination may, to
the extent exercisable, be exercised within ninety
(90) days after the date of such employment
termination. Upon any termination of employment of
the holder by reason of disability, except as
otherwise provided in the particular Stock Option
Agreement, any such Option held at the date of
such employment termination may, to the extent
exercisable, be exercised within twelve (12)
months after the date of such employment
termination. If the holder of such an Option dies,
except as
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<PAGE> 4
otherwise provided in the particular Stock Option
Agreement, any such Option held at the date of
death may, to the extent exercisable, be exercised
by a legatee or legatees of the holder under the
holder's last will, or by the holder's personal
representatives or distributees, within twelve
(12) months after the holder's death. This section
6(f) shall not extend the term of the Option
specified pursuant to section 6(b). For purposes
of this section 6(f), employment of a holder shall
not be deemed terminated so long as the holder is
employed by the Corporation, by a subsidiary of
the Corporation or by another corporation (or a
parent or subsidiary corporation of such other
corporation) which has assumed the Option of the
holder. For purposes of this section 6(f), the
extent to which such an Option is exercisable
shall be determined as of the date of termination
of employment.
(ii) For Incentive Stock Options, upon any termination
of employment of the holder for any reason other
than death or disability, except as otherwise
provided in the particular Stock Option agreement,
any such Option held at the date of such
employment termination may, to the extent
exercisable, be exercised within three (3) months
after the date of such employment termination.
Upon any termination of employment of the holder
by reason of disability, within the meaning of
section 22(e)(3) of the Code or any successor
provision, except as otherwise provided in the
particular Stock Option agreement, any such Option
held at the date of such employment termination
may, to the extent exercisable, be exercised
within twelve (12) months after the date of such
employment termination. If the holder of such an
Option dies, except as otherwise provided in the
particular Stock Option agreement, any such Option
held at the date of death may, to the extent
exercisable, be exercised by a legatee or legatees
of the holder under the holder's last will, or by
the holder's personal representatives or
distributees, within twelve (12) months after the
holder's death. This section 6(f) shall not extend
the term of the Option specified pursuant to
section 6(b). For purposes of this section 6(f),
employment of a holder shall not be deemed
terminated so long as the holder is employed by
the Corporation, by a subsidiary of the
Corporation or by another corporation (or a parent
or subsidiary corporation of such other
corporation) which has assumed the Option of the
holder in a transaction to which section 424(a) of
the Code or any successor provision is
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<PAGE> 5
applicable. For purposes of this section 6(f), the
extent to which such an Option is exercisable
shall be determined as of the date of termination
of employment.
(g) Special Procedure for Certain Credit Assisted
Transactions. To the extent not inconsistent with the provisions of section 422
of the Code or any successor provision or the provisions of Rule 16b-3 or any
successor rule, if applicable, any Option holder desiring to obtain credit from
a broker, dealer or other "creditor" as defined in Regulation T issued by the
Board of Governors of the Federal Reserve System to assist in exercising an
Option may deliver to such creditor a written exercise notice executed by such
holder with respect to such Option, together with written instruction to the
Corporation to deliver the Stock issued upon such exercise of the Option to the
creditor for deposit into an account designated by the Option holder; upon
receipt of such exercise notice and instruction in a form acceptable to the
Corporation, the Corporation shall confirm to the creditor that it will deliver
to the creditor on behalf of the Option holder the Stock issued upon such
exercise of the Option and covered by such instructions promptly following
receipt of the exercise price from the creditor. To the extent not inconsistent
with the provisions of section 422 of the Code or any successor provision or the
provisions of Rule 16b-3 or any successor rule, if applicable, upon written
request, the Corporation may in its discretion, but shall not be obligated to,
deliver to the creditor on behalf of the Option holder shares of Stock resulting
from such a credit assisted exercise prior to receipt of the exercise price for
such shares if the creditor has delivered to the Corporation, in addition to the
other documents contemplated by this section 6(g), the creditor's written
agreement to pay the Corporation such exercise price in cash within five (5)
days after delivery of such shares. The credit assistance contemplated by this
section 6(g) may include a margin loan by the creditor secured by the Stock
purchased upon exercise of an Option or, in the case of an Option holder who is
not subject to section 16 of the Securities Exchange Act of 1934, as amended
(the "Act") or any successor provision, an immediate sale of some or all of such
Stock by the creditor to obtain or recover the exercise price which the creditor
has committed to pay to the Corporation on behalf of the Option holder.
(h) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this section 6, any Option issued by
the Corporation pursuant to the Plan in substitution for an option previously
issued by another entity, which substitution occurs in connection with a
transaction to which section 424(a) of the Code or any successor provision is
applicable, may provide for an exercise price computed in accordance with such
Code section and the regulations thereunder and may contain such other terms and
conditions as the Board or the Committee may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
7. Withholding. Whenever the Corporation is required to issue or
transfer shares of Stock under the Plan, the Corporation shall have the right to
require the recipient to remit to the Corporation an amount sufficient to
satisfy any federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. A recipient may
elect with respect to any Option (other than an Incentive Stock Option) to
surrender or authorize the
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<PAGE> 6
Corporation to withhold shares of Stock (valued at their fair market value on
the date of surrender or withholding of such shares) in satisfaction of all such
withholding requirements; provided, however, that if Rule 16b-3 or any successor
rule is applicable, any such stock surrender withholding election shall be
subject to the requirements of Rule 16b-3 or any successor rule.
8. Changes in Capitalization; Merger; Liquidation. For both
Incentive Stock Options and for Non-Qualified Options issued hereunder, the
number of shares of Stock as to which Options may be granted, the number of
shares covered by each outstanding Option, and the price per share of each
outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in shares of Stock to
holders of outstanding shares of Stock or any other increase or decrease in the
number of such shares effected without receipt of consideration by the
Corporation. If the Corporation shall be the surviving corporation in any merger
or consolidation (other than as a subsidiary of another corporation),
recapitalization, reclassification of shares or similar reorganization, the
holder of each outstanding Option shall be entitled to purchase, at the same
times and upon the same terms and conditions as are then provided in the Option,
the number and class of shares of stock or other securities to which a holder of
the number of shares of Stock subject to the Option at the time of such
transaction would have been entitled to receive as a result of such transaction.
In the event of any such changes in capitalization of the Corporation, the Board
or the Committee may make such additional adjustments in the number and class of
shares of Stock or other securities with respect to which outstanding Options
are exercisable and with respect to which future Stock Options may be granted to
prevent dilution or enlargement of rights. Any adjustment pursuant to this
section 8 may provide, in the Board or the Committee's discretion, for the
elimination of any fractional shares that might otherwise become subject to any
Stock Option without payment therefor. In the event of a dissolution or
liquidation of the Corporation, a sale of substantially all of the stock or
substantially all of the assets of the Corporation, a merger or consolidation in
which the Corporation is not the surviving corporation or services only as a
subsidiary of another corporation, or any other transaction having a similar
result or effect, each outstanding Option shall terminate except to the extent
that another corporation assumes such Option or substitutes another option
therefor. In the event of a change of the Corporation's shares of Stock with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the Stock
within the meaning of the Plan. Except as expressly provided in this section 8,
the holder of an Option shall have no rights by reason of any subdivision or
combination of shares of Stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of Stock of any class
or by reason of any dissolution, liquidation, merger or consolidation or
distribution to the Corporation's shareholders of assets or stock of another
corporation. Except as expressly provided herein, any issue by the Corporation
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Stock subject to any
Stock Option. The existence of the Plan and the Stock Options granted pursuant
to the Plan shall not affect in any way the right or power of the Corporation to
make or authorize any adjustment, reclassification, reorganization or other
change in its capital or business structure, any merger or consolidation of the
Corporation, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof,
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<PAGE> 7
the dissolution or liquidation of the Corporation, any sale or transfer of all
or any part of its business or assets, or any other corporate act or proceeding.
9. Compliance with Code; Compliance with Rule 16b-3. All Incentive
Stock Options granted hereunder are intended to comply with section 422 and, to
the extent applicable, section 424 of the Code or any successor provision, and
all provisions of the Plan and all Incentive Stock Options granted hereunder
shall be construed in such manner as to effectuate that intent. If Rule 16b-3 or
any successor rule is applicable, the Plan and all Stock Options granted
hereunder are intended to satisfy the conditions of Rule 16b-3 or any successor
rule, and all provisions of the Plan and all Stock Options granted hereunder
shall be construed in such manner as to effectuate that intent.
10. Right to Terminate Employment; No Rights as Stockholder. Nothing
in the Plan or in any Stock Option granted under the Plan shall confer upon any
holder thereof the right to continue as an employee of the Corporation or any of
its subsidiaries or affect the right of the Corporation or any of its
subsidiaries to terminate the holder's employment at any time. The holder of an
Option shall as such, have none of the rights of a stockholder.
11. Leaves of Absence. Except as otherwise provided by law or
regulation with respect to Incentive Stock Options, the Board or the Committee
may in its discretion determine whether any leave of absence constitutes a
termination of employment for purposes of the Plan and the impact, if any, of
such leave of absence on a Stock Options previously granted to a holder who
takes a leave of absence.
12. Restrictions on Delivery and Sale of Shares. Each Stock Option
granted under the Plan is subject to the consideration that if at any time the
Board or the Committee, in its discretion, shall determine that the listing,
registration or qualification of the shares covered by such Stock Option upon
any securities exchange or under any state or federal law is necessary or
desirable as a condition of or in connection with the granting of such Stock
Option or the purchase or delivery of shares thereunder, the delivery of any or
all shares pursuant to such Stock Option may be withheld unless and until such
listing, registration or qualification shall have been effected. If a
registration statement is not in effect under the Securities Act of 1933 or any
applicable state securities laws with respect to the shares of Stock purchasable
or otherwise deliverable under Stock Options then outstanding, the Board or the
Committee may require, as a condition of exercise of any Option, that the
optionee or other recipient of a Stock Option represent, in writing, that the
shares received pursuant to the Stock Option are being acquired for investment
and not with a view to distribution and agree that the shares will not be
disposed of except pursuant to an effective registration statement, unless the
Corporation shall have received an opinion of counsel that such disposition is
exempt from such requirement under the Securities Act of 1933 and any applicable
state securities laws. The Corporation may endorse on certificates representing
shares delivered pursuant to a Stock Option such legends referring to the
foregoing representation or restrictions or any other applicable restrictions on
resale as the Corporation, in its discretion, shall deem appropriate
-7-
<PAGE> 8
13. Termination and Amendment of Plan. The Plan may be terminated,
modified or amended by the shareholders or the Board of Directors of the
Corporation; provided however, that:
(a) no such termination, modification or amendment without the
consent of the holder of a Stock Option shall adversely affect his rights under
such Stock Option, except the Board or the Committee may terminate a Stock
Option if the employment of the holder of the Stock Option is terminated for
cause; and
(b) any modification or amendment which would require
shareholder approval in order for the Plan to continue to meet the requirements
of Rule 16b-3 or any successor rule, if Rule 16b-3 or any successor rule is
applicable, or any other legal or regulatory requirements, shall be effective
only if it is approved by the shareholders of the Corporation in the manner
required thereby.
14. Effective Date of Plan. The Plan shall become effective on June
4, 1996, the date of its adoption by the Board of Directors.
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<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT TO
HAYES MICROCOMPUTER PRODUCTS, INC.
STOCK OPTION PLAN
1. The purpose of this First Amendment to the Hayes Microcomputer
Products, Inc. Stock Option Plan (the "Plan"), adopted by Hayes Microcomputer
Products, Inc. (the "Corporation") on June 4, 1996, is two-fold: (i) first, to
amend the Plan to provide for 200,000 shares of Common Stock to be allocated to
the original pool of 600,000 shares, bringing the total to 800,000 shares
available to be allocated under the general Plan provisions. The additional
200,000 shares may be allocated to specific grant recipients pursuant to future
awards made by the Board of Directors of the Corporation; and (ii) secondly, to
amend the Plan to provide for an additional 1,000,000 shares of Common Stock to
be allocated to the Plan for "Performance Grant Options," as defined below.
Management, the Directors and the Shareholders of the Corporation desire to
reserve these additional 1,000,000 shares pursuant to a new category of options
under the Plan, which shall be called "Performance Grant Options".
Exercisability of the Performance Grant Options shall be based on the
Corporation attaining certain levels of share value, as more fully described in
the Key Employee Option (Performance Grant) attached as Exhibit A to this
Amendment.
2. By way of formal adoption and approval of the amendments
described above, the following specific amendments to the Plan are hereby made:
(a) Paragraph 2 of the Plan is hereby amended by renumbering
the existing Paragraph 2 to "2(a)" and changing the number "600,000" to
read "800,000".
(b) Paragraph 2 is further amended by adding to said Paragraph
a new subparagraph "(b)," which shall read as follows:
"(b) In addition, the initial maximum amount of the Stock which
may be issued pursuant to certain Performance Grant Options granted
under the Plan shall be 1,000,000 shares of Stock unless increased
by appropriate shareholder action. If a Performance Grant Option
expires or terminates for any reason without being exercised in
full, the unpurchased shares of Stock subject to such Performance
Grant Option shall again be available for purposes of the
Performance Grant provisions of the Plan. The Performance Grant
Options shall in all respects be subject to the provisions of this
Plan, and shall be more specifically and fully set forth in the
individual stock option agreements entitled "Key Employee Option
(Performance Grant)" which shall contain such terms and provisions
as may be determined advisable and appropriate in the case of each
covered employee, as determined by the Board or the Committee."
3. Except as above provided, the Plan shall remain unchanged and
shall remain in full force and effect. This Amendment shall become effective on
October ___, 1996, the date of its approval by the Shareholders of the
Corporation, after having theretofore been approved by the Board of Directors of
the Corporation.
<PAGE> 1
EXHIBIT 10.19
KEY EMPLOYEE OPTION
(PERFORMANCE GRANT)
THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED
BY THIS OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS
HEREOF.
Option No.: ___________________________________
Holder: ___________________________________
NAME
___________________________________
ADDRESS
___________________________________
CITY, STATE & ZIP CODE
Date of
Grant of
this Option: _______________________________________
Number of
Option Shares:_______________________________________
Option
Exercise
Price Per
Share: U.S.$______________________________
HAYES MICROCOMPUTER PRODUCTS, INC.
NONQUALIFIED OPTION TO PURCHASE COMMON STOCK
Hayes Microcomputer Products, Inc., a Georgia corporation (the
"Company"), hereby certifies that the above-named individual designated on the
line entitled "Holder", the registered holder hereof, or its permitted
registered assigns to whom notice has been given by the Company ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Option, at any time or times on or after Vesting hereof
but not after 5:30 P.M., Atlanta, Georgia time, on the Expiration Date (as
defined herein), up to the number of shares set forth above of the Company's
fully paid nonassessable shares, as adjusted pursuant to this Option (the
<PAGE> 2
"Option Shares"), of Common Stock (as defined herein) of the Company as are
Vested at the time of exercise, by payment of the applicable aggregate Option
Exercise Price (as defined herein) in lawful money of the United States.
1. Definitions. The following words and terms as used in this Option
shall have the following meanings:
(a) "Common Stock" means (i) the Company's common stock, (ii)
any capital stock into which such "Common Stock" shall have been changed or any
capital stock resulting from a reclassification of such "Common Stock", and
(iii) the capital stock of any company for which the Company's common stock is
exchangeable in a merger transaction, whether or not the Company is the
surviving corporation, as contemplated in Section 4 hereof.
(b) "Convertible Securities" means any securities issued by
the Company which are convertible into or exchangeable for, directly or
indirectly, shares of Common Stock.
(c) "Date of this Option" means the date set forth above in
the heading of this Option.
(d) "Expiration Date" means the earlier of ten (10) years from
the date of the granting of this Option, or the date of termination of the
Option pursuant to subsections 12(a) and (b) hereof.
(e) "Average Share Price" means the highest average Market
Price per share averaged over any period of twenty (20) consecutive trading days
in any calendar quarter.
(f) "Market Price" means the market value of one share
determined as follows: (i) where there exists a public market for the Company's
Common Stock at the time of such exercise, the market value per share shall be
the average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the last reported sale price of the
Common Stock or the closing price quoted on the NASDAQ National Market System or
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in The Wall Street Journal on any trading day.
(g) "Option Exercise Price" shall initially be the price per
share as set forth on the first page hereof and shall be adjusted and readjusted
from time to time as provided in this Option.
(h) "Public Offering" means (i) the closing of a firm
commitment underwritten Public Offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of the Company's
Common Stock , or (ii) any transaction or series of related transactions in
which all of the outstanding shares of the Company are exchanged for shares or a
combination of cash and shares of another entity whose common shares are
publicly traded on the NASDAQ National Market System, the American Stock
Exchange, or the New York Stock Exchange.
(i) "Securities Act" means the Securities Act of 1933, as
amended.
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<PAGE> 3
(j) "Vesting" or "Vested" shall have the meaning set forth in
Section 2(e) hereof.
(k) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to any person other than the Company, shall be
deemed to include such person's successors and permitted assigns, (B)
to the Company shall be deemed to include the Company's successors and
(C) to any applicable law defined or referred to herein, shall be
deemed references to such applicable law as the same may have been or
may be amended or supplemented from time to time.
(ii) When used in this Option, the words
"herein," "hereof," and "hereunder," and words of similar import, shall
refer to this Option as a whole and not to any provision of this
Option, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Option unless
otherwise specified.
(iii) Whenever the context so requires the neuter
gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
(iv) Any capitalized term not otherwise defined
in this Option shall have the meaning ascribed to such term in that
certain Shareholders' Agreement dated as of April 16, 1996 (the
"Shareholders' Agreement"), by and among the Company, Dennis C. Hayes
and the Shareholders.
(v) The "Plan" shall mean the Hayes
Microcomputer Products, Inc. Stock Option Plan.
2. Exercise of Option.
(a) Subject to the terms and conditions hereof including the
conditions to Vesting, this Option may be exercised in whole or in part, at any
time during normal business hours on or after Vesting to the extent the
conditions for Vesting and the other conditions to exercise set forth in Section
2(e) hereof have been satisfied, and prior to 5:30 p.m., Atlanta, Georgia time,
on the Expiration Date. The rights represented by this Option may be exercised
by the holder hereof then registered on the books of the Company, in whole or
from time to time in part (except that this Option shall not be Vested as to a
fractional share), by (i) delivery of a written notice, in the form of the
Subscription Notice attached as Exhibit A hereto, of such holder's election to
exercise this Option, which notice shall specify the number of Option Shares to
be purchased, (ii) payment to the Company of an amount equal to the Option
Exercise Price multiplied by the number of Option Shares as to which the Option
is being exercised (plus any applicable issue or transfer taxes) in cash, by
wire transfer or by certified or official bank check, for the number of Option
Shares as to which this Option shall have been exercised, and (iii) the
surrender of this Option, properly endorsed, at the principal office of the
Company at the time of such exercise (or at such other agency or office of the
Company as the Company may designate by notice to the Holder). In the event of
any exercise of the rights represented by this Option, a certificate or
certificates for the Option Shares so purchased, registered
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<PAGE> 4
in the name of, or as directed by, the Holder, shall be delivered to, or as
directed by the Holder within a reasonable time, not exceeding 15 days (if the
Company's Common Stock is not then publicly traded) or five (5) business days
(if the Company's Common Stock is then publicly traded), after such rights shall
have been so exercised.
(b) Unless the rights represented by this Option shall have
expired or have been fully exercised, the Company shall issue, within such 15
day or 5 business day period, as applicable, a new Option identical in all
respects to the Option exercised except (x) such new Option shall represent
rights to purchase the number of Option Shares purchasable immediately prior to
such exercise under the Option exercised, less the number of Option Shares with
respect to which such original Option was exercised, and (y) the Option Exercise
Price thereof shall be the Option Exercise Price of the Option exercised. The
person in whose name any certificate for Option Shares is issued upon exercise
of this Option shall for all purposes be deemed to have become the holder of
record of such Option Shares immediately prior to the close of business on the
date on which the Option was surrendered and payment of the amount due in
respect of such exercise and any applicable taxes was made, irrespective of the
date of delivery of such share certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
properly closed, such person shall be deemed to have become the holder of such
Option Shares at the opening of business on the next succeeding date on which
the stock transfer books are open.
(c) In lieu of the Holder exercising this Option (or any
portion hereof) for cash, Holder may, in connection with such exercise, elect to
satisfy the Option Exercise Price by exchanging solely (x) this Option (or such
portion hereof) for (y) that number of Option Shares equal to the product of (i)
the number of shares of Common Stock issuable upon such exercise of the Option
(or, if only a portion of this Option is being exercised, issuable upon the
exercise of such portion) for cash multiplied by (ii) a fraction, (A) the
numerator of which is the Market Price per share of the Common Stock at the time
of such exercise minus the Option Exercise Price per share of the Common Stock
at the time of such exercise, and (B) the denominator of which is the Market
Price per share of the Common Stock at the time of such exercise, such number of
shares so issuable upon such exercise to be rounded up or down to the nearest
whole number of Option Shares.
(d) Notwithstanding anything contained herein, if this Option
constitutes an Incentive Stock Option, then the Option may be exercised by the
original Holder hereof during his or her lifetime only by such original Holder.
(e) The shares of Common Stock covered by this Option shall
become Vested at the earlier to occur of (i) nine (9) years after the Date of
this Option, (ii) any earlier date established by the Board of Directors of the
Company, or (iii) after the Company has completed a Public Offering and only to
the extent Vested (herein called "Vesting" or "Vested") by the attainment of a
certain Average Share Price, which achieves Vesting of the corresponding
percentage Vesting of the Option Shares in accordance with the following Vesting
schedule:
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<PAGE> 5
Vesting Schedule
<TABLE>
<CAPTION>
Percentage of Option Cumulative
Shares Which May Percentage of Option
Average Share Price Be Exercised Shares Vested
------------------- -------------------- --------------------
<S> <C> <C>
Less than $24.19 0.0% 0.0%
$24.19 to $28.21 15.0% 15.0%
$28.22 to $32.25 13.0% 28.0%
$32.26 to $36.28 12.0% 40.0%
$36.29 to $40.31 10.5% 50.5%
$40.32 to $44.34 9.5% 60.0%
$44.35 to $48.38 9.0% 69.0%
$48.39 to $52.41 8.5% 77.5%
$52.42 to $56.44 8.0% 85.5%
$56.45 to $60.47 7.5% 93.0%
Over $60.47 7.0% 100.0%
-----
100.0%
</TABLE>
For each incremental increase in Average Share Price, the
corresponding additional percentage of all Option Shares covered by this Option
shall become Vested and shall thereafter be and remain Vested in accordance
herewith; provided that such Vested Option Shares may be exercised only upon and
after the earlier to occur of (1) the Holder's leaving the employ of the
Company, or (2) the first anniversary of Holder's continuous full-time
employment with the Company. The Average Share Price shall be calculated for
each calendar quarter after a Public Offering and shall be based on the highest
average trading price for twenty (20) consecutive trading days for each quarter.
Once a particular level of Average Share Price is achieved, the percentage of
the Option Shares which are deemed Vested at that level in accordance with the
above Vesting Schedule shall be cumulative of all other percentage shares Vested
at the lower Average Share Price levels as shown on the chart above, and shall
thereafter remain Vested, even if the Average Share Price thereafter falls below
the level previously attained. Such calculation of Average Share Price shall
terminate on the sixth (6th) anniversary of the date of this Option, and the
percentage of Option Shares which have become Vested in accordance with the
foregoing calculations shall be the total number of Vested Option Shares under
this Plan which may be exercised by Holder in accordance with this Agreement.
3. Covenants as to Common Stock.
(a) The Company covenants and agrees that all Option Shares
which may be issued upon the exercise of the rights represented by this Option
will, upon issuance, be validly issued, fully paid and nonassessable. The
Company further covenants and agrees that during the period within which the
rights represented by this Option may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of the rights then represented by this Option and
that the par value of said shares will at all times be less than or equal to the
applicable Option Exercise Price.
-5-
<PAGE> 6
(b) If any shares of Common Stock reserved or to be reserved
to provide for the exercise of the rights then represented by this Option
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued to the Holder,
then the Company covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
4. Changes in Capitalization; Merger; Liquidation. For purposes of this
Option, the number of shares covered by each outstanding Option, and the price
per share of each outstanding Option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend in
shares of Stock to holders of outstanding shares of Stock or any other increase
or decrease in the number of such shares effected without receipt of
consideration by the Company. If the Company shall be the surviving corporation
in any merger or consolidation (other than as a subsidiary of another
corporation), recapitalization, reclassification of shares or similar
reorganization, the holder of each outstanding Option shall be entitled to
purchase, at the same times and upon the same terms and conditions as are
provided in this Option, the number and class of shares of stock or other
securities to which a holder of the number of shares of Stock subject to the
Option at the time of such transaction would have been entitled to receive as a
result of such transaction. In the event of any such changes in capitalization
of the Company, the Board or the Committee will make such adjustments in the
number and class of shares of Stock or other securities and/or the exercise
price with respect to which outstanding Options are Vested to prevent dilution
or enlargement of rights hereunder. Any adjustment pursuant to this Section 4
may provide, in the Board or the Committee's discretion, for the elimination of
any fractional shares that might otherwise become subject to this Stock Option
without payment therefor. In the event of a dissolution or liquidation of the
Company or a sale of substantially all of the stock or substantially all of the
assets of the Company, each outstanding Option shall terminate except to the
extent that another corporation assumes such Option or substitutes another
option therefor. In the event of a merger or consolidation in which the Company
is not the surviving corporation or serves only as a subsidiary of another
corporation, or any other transaction having a similar result or effect, then
the holder of each outstanding Option shall be entitled to purchase, at the same
times and upon the same terms and conditions as are provided in this Option, the
number and class of shares of stock or other securities to which a holder of the
number of shares of Stock subject to the Option at the time of such transaction
would have been entitled to receive as a result of such transaction. In the
event of a change of the Company's shares of Stock with par value into the same
number of shares with a different par value or without par value, the shares
resulting from any such change shall be deemed to be the Stock within the
meaning of this Option. Except as expressly provided in this Section 4, the
holder of an Option shall have no rights by reason of any subdivision or
combination of shares of Stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of Stock of any class
or by reason of any dissolution, liquidation, merger or consolidation or
distribution to the Company's shareholders of assets or stock of another
corporation. Except as expressly provided herein, any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Stock subject to this Stock
Option. The Holder understands and agrees that the existence of the Plan and the
Stock Options granted pursuant to the Plan shall not affect in any way the right
or power of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the
-6-
<PAGE> 7
Company, any issue of debt or equity securities having preferences or priorities
as to the Stock or the rights thereof, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its business or assets, or
any other corporate act or proceeding.
5. Notice of Adjustment of Option Exercise Price. Upon any adjustment
of the Option Exercise Price, then the Company shall give notice thereof to the
Holder of this Option, which notice shall state the Option Exercise Price in
effect after such adjustment and the increase, or decrease, if any, in the
number of Option Shares purchasable at the Option Exercise Price upon the
exercise of this Option, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
6. Computation of Adjustments. Upon each computation of an adjustment
in the Option Exercise Price and the number of shares which may be subscribed
for and purchased upon exercise of this Option, the Option Exercise Price shall
be computed to the nearest cent (i.e. fraction of .5 of a cent, or greater,
shall be rounded to the next highest cent) and the number of shares which may be
subscribed for and purchased upon exercise of this Option shall be calculated to
the nearest whole share (i.e. fractions of less than one half of a share shall
be disregarded and fractions of one half of a share, or greater, shall be
treated as being a whole share). No such adjustment shall be made however, if
the change in the Option Exercise Price would be less than $.001 per share, but
any such lesser adjustment shall be made (i) at the time and together with the
next subsequent adjustment which, together with any adjustments carried forward,
shall amount to $.001 per share or more, or (ii) if earlier, upon the third
anniversary of the event for which such adjustment is required.
7. No Change in Option Terms on Adjustment. Irrespective of any
adjustment in the Option Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Option, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Option Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
8. Taxes. The Company shall not be required to pay any tax or taxes
attributable to the initial issuance of the Option Shares or any transfer
involved in the issue or delivery of any certificates for Option Shares of
Common Stock in a name other than that of the registered holder hereof or upon
any transfer of this Option.
9. Option Holder Not Deemed a Shareholder. No holder, as such, of this
Option shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Option be construed to confer upon the holder hereof, as such, any of the rights
of a shareholder of the Company or any right to vote, give or withhold consent
to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance of record to the holder of this Option of the
Option Shares which he is then entitled to receive upon the due exercise of this
Option.
10. No Limitation on Corporate Action. No provisions of this Option and
no right or option granted or conferred hereunder shall in any way limit, affect
or abridge the exercise by the Company of any of its corporate rights or powers
to recapitalize, amend its Articles of Incorporation,
-7-
<PAGE> 8
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
11. Transfer; Opinions of Counsel; Restrictive Legends. Notwithstanding
anything contained herein, this Option is nontransferable except in the case of
the death of the Holder, in which event the Option may be transferred by the
Last Will and Testament of the deceased Holder or by the laws of descent and
distribution. To the extent applicable, each certificate or other document
evidencing any of the Option Shares shall be endorsed with the legends set forth
below, and Holder covenants that, except to the extent such restrictions are
waived by the Company, Holder shall not transfer the Option Shares without
complying with the restrictions on transfer described in the legends endorsed
thereon;
(a) The following legend, if applicable, under the Securities
Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Option Shares, the legend required by such
state authority.
(c) The Company shall not be required (i) to transfer on its
books any Option Shares which shall have been transferred in violation of any of
the provisions set forth in this Section 11, or (ii) to treat as owner of such
Option Shares or to accord the right to vote as such owner or to pay dividends
to any transferee to whom such Option Shares shall have been so transferred.
(d) Any legend endorsed on a certificate pursuant to
subsection (a) or (b) of this Section 11 shall be removed (i) if the Option
Shares represented by such certificate shall have been effectively registered
under the Securities Act or otherwise lawfully sold in a public transaction, or
(ii) if the holder of such Option Shares shall have provided the Company with an
opinion from counsel, in form and acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that a public sale, transfer or
assignment of the Option or the Option Shares may be made without registration.
(e) Any legend endorsed on a certificate pursuant to
subsection (b) of this Section 11 shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal or if the
holder of the Option or the Option Shares provides the Company with an opinion
of counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that such state legend may be
removed.
-8-
<PAGE> 9
(f) Without in any way limiting the representations set forth
above, Holder further agrees not to make any disposition of all or any portion
of the Option Shares unless:
(i) There is then in effect a registration
statement under the Securities Act covering such proposed disposition
and such disposition is made in accordance with such registration
statement; or
(ii) Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (A) if requested by the Company, Holder shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Option Shares under the Securities Act and (B) if
requested by the Company, the transferee shall have furnished to the
Company its agreement to abide by the restrictions on transfer set
forth herein as if it were a purchaser hereunder.
(g) Except as set forth in this Section 11, neither the Option
nor the Option Shares shall be assignable by the Holder or its assignees.
12. Termination of Employment or Death.
(a) Upon termination of Holder's employment with the Company
for any reason at any time, this Option shall expire and shall be immediately
terminated, canceled and of no further effect as to any Option Shares that have
not Vested as of the date of termination. Upon any termination of employment of
the holder for any reason other than for cause, death or disability, any such
Option held at the date of such employment termination may, to the extent
Vested, be exercised within ninety (90) days after the date of such employment
termination. Upon any termination of employment of the holder by reason of
disability, except as otherwise provided in the particular Stock Option
Agreement, any such Option held at the date of such employment termination may,
to the extent Vested, be exercised within twelve (12) months after the date of
such employment termination. If the holder of such an Option dies, except as
otherwise provided in the particular Stock Option Agreement, any such Option
held at the date of death may, to the extent Vested, be exercised by a legatee
or legatees of the holder under the holder's last will, or by the holder's
personal representatives or distributees, within twelve (12) months after the
holder's death. This Section shall not extend the term of the Option specified
pursuant to Section 1(e). For purposes of this Section, employment of a holder
shall not be deemed terminated so long as the holder is employed by the Company,
by a subsidiary of the Company or by another corporation (or a parent or
subsidiary corporation of such other corporation) which has assumed the Option
of the holder. For purposes of this Section 12, the extent to which such an
Option is Vested shall be determined as of the date of termination of
employment. This Option shall automatically terminate as to any Vested Option
Shares not exercised by the dates set forth above.
(b) This Option shall expire and terminate immediately upon
the original Holder hereof being discharged from the employment of this Company
for cause, and all unexercised Options shall be deemed cancelled, void and of no
further effect, whether or not Vested at the time of
-9-
<PAGE> 10
termination. Cause shall be determined by the Compensation Committee in its sole
discretion exercised in good faith.
13. Lost, Stolen, Mutilated or Destroyed Option. If this Option is
lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (except in the event
of loss, theft, mutilation or destruction while this Option is in possession of
the Company's Escrow Agent, in which events the Company shall be solely
responsible) (which shall, in the case of a mutilated Option, include the
surrender thereof), issue a new Option of like denomination and tenor as the
Option so lost, stolen, mutilated or destroyed. Any such new Option shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Option shall be at any time
enforceable by anyone.
14. Representation of Holder. The Holder, by the acceptance hereof,
represents that it is acquiring this Option for its own account for investment
and not with a view to, or sale in connection with, any distribution hereof or
of any of the shares of Common Stock or other securities issuable upon the
exercise thereof, nor with any present intention of distributing any of the
same. Upon exercise of this Option, the Holder will confirm in writing, in form
reasonably satisfactory to the Company, such Holder's investment intent.
15. Notices. All Notices, requests and other communications that the
Holder or the Company is required or elects to give hereunder shall be in
writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the party to be notified at the address
set forth below or at such other address as such party shall have notified the
other parties hereto, by notice given in conformity with this Section 15.
(a) If to the Company:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: President
Telecopy: (770) 840-6830
(b) If to the Holder, to the address set forth on the
first page hereof as the address for Holder.
16. Miscellaneous. This Option and any term hereof may be changed,
waived, discharged, or terminated except as provided in the Plan only by an
instrument in writing signed by the party or holder hereof against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Option are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof.
17. Date. The date of this Option is the date set forth on the first
page hereof. This Option, in all events, shall be wholly void and of no effect
after 5:30 p.m., Georgia time, on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section
-10-
<PAGE> 11
11 shall continue in full force and effect after such date as to any Option
Shares or other securities issued upon the exercise of this Option.
18. Severability. If any provision of this Option is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Option.
19. Governing Law. This Option shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without reference
to its conflicts of law principles.
20. Confidentiality. Notwithstanding anything contained herein to the
contrary, if at anytime prior to the exercise of the Option granted hereunder
the Holder communicates or discloses in any way or form to any person or entity
that the Holder is the recipient of or the holder of this or any other option
issued by the Company pursuant to the Plan, then this Option shall immediately
terminate and all rights of Holder hereunder shall be null and void, it being
understood and agreed by Holder, as evidenced by the acceptance of this Option
by the Holder, that it is of the utmost importance to the Company to have the
Holder hereof keep the issuance to and the receipt of this Option by the Holder
in strictest confidence.
21. Governance by Plan. Notwithstanding anything contained herein, this
Option shall be governed by the Plan, and any term or provision herein which
conflicts or is inconsistent with the Plan shall be deemed to be in accordance
with the applicable term or provision of the Plan.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:
----------------------------------------
DENNIS C. HAYES, Chairman
-11-
<PAGE> 12
EXHIBIT A TO
OPTION
SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH REGISTERED HOLDER
DESIRES TO EXERCISE THIS OPTION
HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned hereby exercises the right to purchase Option Shares
covered by this Option according to the conditions thereof and herewith [makes
payment of $_______________, the aggregate Option Exercise Price of such Option
Shares in full] [tenders solely this Option, or applicable portion hereof, in
full satisfaction of the Option Exercise Price upon the terms and conditions set
forth herein.]
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
HOLDER NAME:
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
[Net] Number of Option Shares Being
Purchased
------------------------------
Dated: ______________, 19__
-12-
<PAGE> 13
EXHIBIT D
FIRST AMENDMENT TO
HAYES MICROCOMPUTER PRODUCTS, INC.
KEY EMPLOYEE OPTION (PERFORMANCE GRANT)
THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED
BY THIS OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS
HEREOF.
Hayes Microcomputer Products, Inc. (the "Company") has issued to
certain key management employees of the Company certain options to purchase
common stock designated as a Key Employee Option (Performance Grant)
(hereinafter called "Performance Grant Options"). This Amendment hereby amends
each of the outstanding Performance Grant Options as follows:
1. Section 1(h) of each of the Performance Grant Options is hereby
amended as follows: in the first line of Section 1(h) insert "(i)" between the
words "means" and "the," and adding at the end of said Section 1(h) the
following: ", or (ii) any transaction or series of related transactions in which
all of the outstanding shares of the Company are exchanged for shares or a
combination of cash and shares of another entity whose common shares are
publicly traded on the NASDAQ National Market System, the American Stock
Exchange, or the New York Stock Exchange."
2. Section 2(e) of each of the Performance Grant Options is hereby
amended by (A) deleting the word "only" in the second line of said Section 2(e)
and inserting in lieu of said word the following: "at the earlier to occur of
(i) nine (9) years after the Date of this Option, (ii) any earlier date
established by the Board of Directors of the Company, or (iii)...."; and (B)
deleting the words "fifth (5th)" in the fourth line from the end of said Section
2(e) and inserting the words "sixth (6th)."
3. Except as expressly hereby amended, each of the Performance Grant
Options shall remain unchanged and shall remain in full force and effect.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:
----------------------------------------
Dennis C. Hayes
Chairman
<PAGE> 14
EXHIBIT 10.19
KEY EMPLOYEE OPTION
(MANAGEMENT GRANT)
THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS SPECIFIED HEREIN.
NEITHER THE RIGHTS REPRESENTED BY THIS OPTION NOR
THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE LAW. SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR
OFFERED FOR SALE IN WHOLE OR IN PART EXCEPT IN
ACCORDANCE WITH THE PROVISIONS HEREOF.
Option No.:
-----------------------------------
Holder:
-----------------------------------
NAME
-----------------------------------
ADDRESS
-----------------------------------
CITY, STATE & ZIP CODE
Date of
Grant of
this Option:
-----------------------------------
Number of
Option Shares:
-----------------------------------
Option
Exercise
Price Per
Share: U.S.$
------------------------------
HAYES MICROCOMPUTER PRODUCTS, INC.
OPTION TO PURCHASE COMMON STOCK
Hayes Microcomputer Products, Inc., a Georgia corporation (the
"Company"), hereby certifies that the above-named individual designated on the
line entitled "Holder", the registered holder hereof, or its permitted
registered assigns to whom notice has been given by the Company ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Option, at any time or times on or after the Exercise
Date hereof but not after 5:30 P.M., Atlanta, Georgia time, on the Expiration
Date (as defined herein), up to the number of shares set forth above of the
Company's fully paid nonassessable shares, as adjusted pursuant to this
<PAGE> 15
Option (the "Option Shares"), of Common Stock (as defined herein) of
the Company by payment of the applicable aggregate Option Exercise
Price (as defined herein) in lawful money of the United States.
1. Definitions. The following words and terms as used in this Option
shall have the following meanings:
(a) "Common Stock" means (i) the Company's common stock and
(ii) any capital stock into which such "Common Stock" shall have been changed or
any capital stock resulting from a reclassification of such "Common Stock."
(b) "Convertible Securities" means any securities issued by
the Company which are convertible into or exchangeable for, directly or
indirectly, shares of Common Stock.
(c) "Date of this Option" means the date set forth above
in the heading of this Option.
(d) "Exercise Date" or "Exercise Dates" means the earlier to
occur of (i) the date on which the Company files a registration statement on
Form S-1 (or any similar form) with the Securities and Exchange Commission in
connection with a proposed Initial Public Offering, (ii) the date of the closing
of a Significant Transaction, (iii) nine (9) years after the Date of this
Option, or (iv) any earlier date established by the Board of Directors of the
Company.
(e) "Expiration Date" means ten (10) years from the date of
the granting of this Option.
(f) "Initial Public Offering" means the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of the Company's
Common Stock.
(g) "Market Price" means the fair market value of one share
determined as follows: (i) where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share shall
be the average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the last reported sale price of the
Common Stock or the closing price quoted on the NASDAQ National Market System or
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in The Wall Street Journal for the five (5) trading days (or such
fewer number of trading days as the Company's Common Stock may have been
publicly traded) ending on the trading day prior to the date of determination of
fair market value and (ii) if at any time the Common Stock is not listed on any
domestic exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the higher of (A) the book value thereof, as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors, as at the last day as of which such determination shall
have been made, or (B) the fair value thereof determined in good faith by the
Board of Directors as of the date which is within 15 days of the date as of
which the determination is to be made (in determining the fair value thereof,
the Board of Directors shall
-2-
<PAGE> 16
consider stock market valuations and price to earnings ratios of comparable
companies in similar industries). Notwithstanding the foregoing, in the event
the Option is exercised in connection with the Initial Public Offering, the fair
market value per share shall be the per share price at which registered shares
are sold to the public in the Initial Public Offering. If the holder shall
purchase such shares in conjunction with the closing of any Significant
Transaction, then the fair market value per share shall mean the value received
by the holders of the Company's Common Stock pursuant to such Significant
Transaction for each share of Common Stock, subject to the closing of such
Significant Transaction.
(h) "Option Exercise Price" shall initially be the price per
share as set forth on the first page hereof and shall be adjusted and readjusted
from time to time as provided in this Option.
(i) "Securities Act" means the Securities Act of 1933, as
amended.
(j) "Significant Transaction" means the closing of a merger,
consolidation or reorganization of the Company with or into any other
corporation or corporations in which the Company is not the surviving entity
(other than a mere reincorporation transaction), a sale of all or substantially
all of the assets of the Company, a transaction or series of related
transactions in which the Company issues shares representing more than 50% of
the voting power of the Company, immediately after giving effect to such
transaction, to a person or persons who were not Shareholders (as defined in the
Shareholders' Agreement) immediately prior to such transaction, or any
transaction or series of related transactions in which all of the outstanding
shares of the Company are exchanged for shares or a combination of cash and
shares of another entity whose common shares are publicly traded on the NASDAQ
National Market System, the American Stock Exchange, or the New York Stock
Exchange.
(k) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to any person other than the Company, shall be
deemed to include such person's successors and permitted assigns, (B)
to the Company shall be deemed to include the Company's successors and
(C) to any applicable law defined or referred to herein, shall be
deemed references to such applicable law as the same may have been or
may be amended or supplemented from time to time.
(ii) When used in this Option, the words "herein,"
"hereof," and "hereunder," and words of similar import, shall refer to
this Option as a whole and not to any provision of this Option, and the
words "Section," "Schedule," and "Exhibit" shall refer to Sections of,
and Schedules and Exhibits to, this Option unless otherwise specified.
(iii) Whenever the context so requires the neuter
gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
-3-
<PAGE> 17
(iv) Any capitalized term not otherwise defined in
this Option shall have the meaning ascribed to such term in that
certain Shareholders' Agreement dated as of April 16, 1996 (the
"Shareholders' Agreement"), by and among the Company, Dennis C. Hayes
and the Shareholders.
(v) The "Plan" shall mean the Hayes Microcomputer
Products, Inc. Stock Option Plan.
2. Exercise of Option.
(a) Subject to the terms and conditions hereof including the
conditions to exercisability, this Option may be exercised in whole or in part,
at any time during normal business hours on or after the Exercise Date to the
extent the conditions for exercisability set forth in Section 2(e) hereof have
been satisfied, and prior to 5:30 p.m., Atlanta, Georgia time, on the Expiration
Date. The rights represented by this Option may be exercised by the holder
hereof then registered on the books of the Company, in whole or from time to
time in part (except that this Option shall not be exercisable as to a
fractional share), by (i) delivery of a written notice, in the form of the
Subscription Notice attached as Exhibit A hereto, of such holder's election to
exercise this Option, which notice shall specify the number of Option Shares to
be purchased, (ii) payment to the Company of an amount equal to the Option
Exercise Price multiplied by the number of Option Shares as to which the Option
is being exercised (plus any applicable issue or transfer taxes) in cash, by
wire transfer or by certified or official bank check, for the number of Option
Shares as to which this Option shall have been exercised, and (iii) the
surrender of this Option, properly endorsed, at the principal office of the
Company at the time of such exercise (or at such other agency or office of the
Company as the Company may designate by notice to the Holder). In the event of
any exercise of the rights represented by this Option, a certificate or
certificates for the Option Shares so purchased, registered in the name of, or
as directed by, the Holder, shall be delivered to, or as directed by the Holder
within a reasonable time, not exceeding 15 days (if the Company's Common Stock
is not then publicly traded) or five (5) business days (if the Company's Common
Stock is then publicly traded), after such rights shall have been so exercised.
(b) Unless the rights represented by this Option shall have
expired or have been fully exercised, the Company shall issue, within such 15
day or 5 business day period, as applicable, a new Option identical in all
respects to the Option exercised except (x) such new Option shall represent
rights to purchase the number of Option Shares purchasable immediately prior to
such exercise under the Option exercised, less the number of Option Shares with
respect to which such original Option was exercised, and (y) the Option Exercise
Price thereof shall be the Option Exercise Price of the Option exercised. The
person in whose name any certificate for Option Shares is issued upon exercise
of this Option shall for all purposes be deemed to have become the holder of
record of such Option Shares immediately prior to the close of business on the
date on which the Option was surrendered and payment of the amount due in
respect of such exercise and any applicable taxes was made, irrespective of the
date of delivery of such share certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
properly closed, such person shall be deemed to have become the holder of such
Option Shares at the opening of business on the next succeeding date on which
the stock transfer books are open.
-4-
<PAGE> 18
(c) In lieu of the Holder exercising this Option (or any
portion hereof) for cash, Holder may, in connection with such exercise, elect to
satisfy the Option Exercise Price by exchanging solely (x) this Option (or such
portion hereof) for (y) that number of Option Shares equal to the product of (i)
the number of shares of Common Stock issuable upon such exercise of the Option
(or, if only a portion of this Option is being exercised, issuable upon the
exercise of such portion) for cash multiplied by (ii) a fraction, (A) the
numerator of which is the Market Price per share of the Common Stock at the time
of such exercise minus the Option Exercise Price per share of the Common Stock
at the time of such exercise, and (B) the denominator of which is the Market
Price per share of the Common Stock at the time of such exercise, such number of
shares so issuable upon such exercise to be rounded up or down to the nearest
whole number of Option Shares.
(d) Notwithstanding anything contained herein, if this Option
constitutes an Incentive Stock Option, then the Option may be exercised by the
original Holder hereof during his or her lifetime only by such original Holder.
(e) This Option shall become exercisable (herein called
"Vesting") in accordance with the following vesting schedule:
<TABLE>
<CAPTION>
Aggregate
Vesting
---------
<S> <C>
(i) One year after the Date of this Option 20%
(ii) Two years after the date of this Option 40%
(iii) Three years after the date of this Option 60%
(iv) Four years after the date of this Option 80%
(v) Five years after the date of this Option 100%
</TABLE>
3. Covenants as to Common Stock.
(a) The Company covenants and agrees that all Option Shares
which may be issued upon the exercise of the rights represented by this Option
will, upon issuance, be validly issued, fully paid and nonassessable. The
Company further covenants and agrees that during the period within which the
rights represented by this Option may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of the rights then represented by this Option and
that the par value of said shares will at all times be less than or equal to the
applicable Option Exercise Price.
(b) If any shares of Common Stock reserved or to be reserved
to provide for the exercise of the rights then represented by this Option
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued to the Holder,
then the Company covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
-5-
<PAGE> 19
4. Changes in Capitalization; Merger; Liquidation. For purposes of this
Option, the number of shares covered by each outstanding Option, and the price
per share of each outstanding Option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend in
shares of Stock to holders of outstanding shares of Stock or any other increase
or decrease in the number of such shares effected without receipt of
consideration by the Company. If the Company shall be the surviving corporation
in any merger or consolidation (other than as a subsidiary of another
corporation), recapitalization, reclassification of shares or similar
reorganization, the holder of each outstanding Option shall be entitled to
purchase, at the same times and upon the same terms and conditions as are
provided in this Option, the number and class of shares of stock or other
securities to which a holder of the number of shares of Stock subject to the
Option at the time of such transaction would have been entitled to receive as a
result of such transaction. In the event of any such changes in capitalization
of the Company, the Board or the Committee will make such adjustments in the
number and class of shares of Stock or other securities and/or the exercise
price with respect to which outstanding Options are exercisable to prevent
dilution or enlargement of rights hereunder. Any adjustment pursuant to this
section 4 may provide, in the Board or the Committee's discretion, for the
elimination of any fractional shares that might otherwise become subject to this
Stock Option without payment therefor. In the event of a dissolution or
liquidation of the Company, a sale of substantially all of the stock or
substantially all of the assets of the Company, a merger or consolidation in
which the Company is not the surviving corporation or services only as a
subsidiary of another corporation, or any other transaction having a similar
result or effect, each outstanding Option shall terminate except to the extent
that another corporation assumes such Option or substitutes another option
therefor. In the event of a change of the Company's shares of Stock with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the Stock
within the meaning of this Option. Except as expressly provided in this section
4, the holder of an Option shall have no rights by reason of any subdivision or
combination of shares of Stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of Stock of any class
or by reason of any dissolution, liquidation, merger or consolidation or
distribution to the Company's shareholders of assets or stock of another
corporation. Except as expressly provided herein, any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Stock subject to this Stock
Option. The Holder understands and agrees that the existence of the Plan and the
Stock Options granted pursuant to the Plan shall not affect in any way the right
or power of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof, the dissolution
or liquidation of the Company, any sale or transfer of all or any part of its
business or assets, or any other corporate act or proceeding.
5. Notice of Adjustment of Option Exercise Price. Upon any
adjustment of the Option Exercise Price, then the Company shall give notice
thereof to the Holder of this Option, which notice shall state the Option
Exercise Price in effect after such adjustment and the increase, or decrease, if
any, in the number of Option Shares purchasable at the Option Exercise Price
upon the exercise
-6-
<PAGE> 20
of this Option, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
6. Computation of Adjustments. Upon each computation of an
adjustment in the Option Exercise Price and the number of shares which
may be subscribed for and purchased upon exercise of this Option, the
Option Exercise Price shall be computed to the nearest cent (i.e.
fraction of .5 of a cent, or greater, shall be rounded to the next
highest cent) and the number of shares which may be subscribed for and
purchased upon exercise of this Option shall be calculated to the
nearest whole share (i.e. fractions of less than one half of a share
shall be disregarded and fractions of one half of a share, or greater,
shall be treated as being a whole share). No such adjustment shall be
made however, if the change in the Option Exercise Price would be less
than $.001 per share, but any such lesser adjustment shall be made (i)
at the time and together with the next subsequent adjustment which,
together with any adjustments carried forward, shall amount to $.001
per share or more, or (ii) if earlier, upon the third anniversary of
the event for which such adjustment is required.
7. Notice of Certain Events. In case at any time:
(a) the Company shall propose to register any of its Common
Stock under the Securities Act in connection with a public offering of such
Common Stock (other than with respect to a registration statement filed on Form
S-8 or such other similar form then in effect under the Securities Act);
(b) there shall be any capital reorganization, or
reclassification of the capital stock, of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in one or more of said cases,
the Company shall give notice to the Holder of this Option of the date on which
(i) the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall be given not
less than ten (10) days prior to the record date or the date on which the
transfer books of the Company are to be closed in respect thereto in the case of
an action specified in clause (i) and at least ten (10) days prior to the action
in question in the case of an action specified in clause (ii).
8. No Change in Option Terms on Adjustment. Irrespective of any
adjustment in the Option Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Option, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Option Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
9. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Option Shares or any transfer
involved in the issue or delivery of any
-7-
<PAGE> 21
certificates for Option Shares of Common Stock in a name other than that of the
registered holder hereof or upon any transfer of this Option.
10. Option Holder Not Deemed a Shareholder. No holder, as such, of this
Option shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Option be construed to confer upon the holder hereof, as such, any of the rights
of a shareholder of the Company or any right to vote, give or withhold consent
to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance of record to the holder of this Option of the
Option Shares which he is then entitled to receive upon the due exercise of this
Option.
11. No Limitation on Corporate Action. No provisions of this Option and
no right or option granted or conferred hereunder shall in any way limit, affect
or abridge the exercise by the Company of any of its corporate rights or powers
to recapitalize, amend its Articles of Incorporation, reorganize, consolidate or
merge with or into another corporation, or to transfer all or any part of its
property or assets, or the exercise of any other of its corporate rights and
powers.
12. Transfer; Opinions of Counsel; Restrictive Legends. Notwithstanding
anything contained herein, this Option is nontransferable except in the case of
the death of the Holder, in which event the Option may be transferred by the
Last Will and Testament of the deceased Holder or by the laws of descent and
distribution. To the extent applicable, each certificate or other document
evidencing any of the Option Shares shall be endorsed with the legends set forth
below, and Holder covenants that, except to the extent such restrictions are
waived by the Company, Holder shall not transfer the Option Shares without
complying with the restrictions on transfer described in the legends endorsed
thereon;
(a) The following legend, if applicable, under the
Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Option Shares, the legend required by such
state authority.
(c) The Company shall not be required (i) to transfer on its
books any Option Shares which shall have been transferred in violation of any of
the provisions set forth in this Section 12, or (ii) to treat as owner of such
Option Shares or to accord the right to vote as such
-8-
<PAGE> 22
owner or to pay dividends to any transferee to whom such Option Shares
shall have been so transferred.
(d) Any legend endorsed on a certificate pursuant to
subsection (a) or (b) of this section 12 shall be removed (i) if the Option
Shares represented by such certificate shall have been effectively registered
under the Securities Act or otherwise lawfully sold in a public transaction, or
(ii) if the holder of such Option Shares shall have provided the Company with an
opinion from counsel, in form and acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that a public sale, transfer or
assignment of the Option or the Option Shares may be made without registration.
(e) Any legend endorsed on a certificate pursuant to
subsection (b) of this section 12 shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal or if the
holder of the Option or the Option Shares provides the Company with an opinion
of counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that such state legend may be
removed.
(f) Without in any way limiting the representations set forth
above, Holder further agrees not to make any disposition of all or any portion
of the Option Shares unless:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (A) if requested by the Company, Holder shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Option Shares under the Securities Act and (B) if
requested by the Company, the transferee shall have furnished to the
Company its agreement to abide by the restrictions on transfer set
forth herein as if it were a purchaser hereunder.
(g) Except as set forth in this section 12, the Option shall
not be assignable by the Holder and its assignees.
13. Termination of Employment or Death.
(a) For Non-Qualified Stock Options, upon any termination of
employment of the holder for any reason other than for cause, death or
disability, any such Option held at the date of such employment termination may,
to the extent exercisable, be exercised within ninety (90) days after the date
of such employment termination. If Holder's employment with the Company
-9-
<PAGE> 23
terminates for any reason prior to the Exercise Date, this Option shall be
immediately terminated, canceled and of no further effect. Upon any termination
of employment of the holder by reason of disability, except as otherwise
provided in the particular Stock Option Agreement, any such Option held at the
date of such employment termination may, to the extent exercisable, be exercised
within twelve (12) months after the date of such employment termination. If the
holder of such an Option dies, except as otherwise provided in the particular
Stock Option Agreement, any such Option held at the date of death may, to the
extent exercisable, be exercised by a legatee or legatees of the holder under
the holder's last will, or by the holder's personal representatives or
distributees, within twelve (12) months after the holder's death. This section
13 shall not extend the term of the Option specified pursuant to section 1(d).
For purposes of this section 13, employment of a holder shall not be deemed
terminated so long as the holder is employed by the Company, by a subsidiary of
the Company or by another corporation (or a parent or subsidiary corporation of
such other corporation) which has assumed the Option of the holder. For purposes
of this section 13, the extent to which such an Option is exercisable shall be
determined as of the date of termination of employment.
(b) For Incentive Stock Options, upon any termination of
employment of the holder for any reason other than for cause, death or
disability, any such Option held at the date of such employment termination may,
to the extent exercisable, be exercised within three (3) months after the date
of such employment termination. If Holder's employment with the Company
terminates for any reason prior to the Exercise Date, this Option shall be
immediately terminated, cancelled and of no further effect. Upon any termination
of employment of the holder by reason of disability, within the meaning of
section 22(e)(3) of the Code or any successor provision, any such Option held at
the date of such employment termination may, to the extent exercisable, be
exercised within twelve (12) months after the date of such employment
termination. If the holder of such an Option dies, except as otherwise provided
in the particular Stock Option agreement, any such Option held at the date of
death may, to the extent exercisable, be exercised by a legatee or legatees of
the holder under the holder's last will, or by the holder's personal
representatives or distributees, within twelve (12) months after the holder's
death. This section 13 shall not extend the term of the Option specified
pursuant to section 1(d). For purposes of this section 13, employment of a
holder shall not be deemed terminated so long as the holder is employed by the
Company, by a subsidiary of the Company or by another corporation (or a parent
or subsidiary corporation of such other corporation) which has assumed the
Option of the holder in a transaction to which section 424(a) of the Code or any
successor provision is applicable. For purposes of this section 13, the extent
to which such an Option is exercisable shall be determined as of the date of
termination of employment.
(c) (i) If the Holder retires from his or her employment with
the Company with management approval in the sole discretion of the Compensation
Committee of the Company, then the Holder shall remain on the Vesting schedule
and this Option shall be exercisable by such retired Holder at such time(s) as
if the Holder had remained a full-time employee of the Company. Retirement means
permanent cessation of full-time employment. (ii) If a retired Holder resumes
working after retirement, other than on a limited part-time basis, in the sole
discretion of the Compensation Committee, then all unexercised Options shall
immediately terminate. If a retired Holder becomes employed by a competitor of
the Company to any extent and in any capacity after retirement, Holder shall
repay the Company all gain realized directly or indirectly from the exercise
of the Options which became exercisable since the date of retirement, and all
unexercised Options shall be immediately terminated. (iii) If a Holder retires
without management approval in the sole discretion of the Compensation
Committee, then this Option shall immediately terminate in its entirety and be
of no further force and effect.
-10-
<PAGE> 24
(d) This Option shall terminate immediately upon the original
Holder hereof being discharged from the employment of this Company for cause,
and all Options shall be deemed cancelled, void and of no further effect,
whether or not exercisable at the time of termination.
14. Lost, Stolen, Mutilated or Destroyed Option. If this Option is
lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (except in the event
of loss, theft, mutilation or destruction while this Option is in possession of
the Company's Escrow Agent, in which events the Company shall be solely
responsible) (which shall, in the case of a mutilated Option, include the
surrender thereof), issue a new Option of like denomination and tenor as the
Option so lost, stolen, mutilated or destroyed. Any such new Option shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Option shall be at any time
enforceable by anyone.
15. Representation of Holder. The Holder, by the acceptance hereof,
represents that it is acquiring this Option for its own account for investment
and not with a view to, or sale in connection with, any distribution hereof or
of any of the shares of Common Stock or other securities issuable upon the
exercise thereof, nor with any present intention of distributing any of the
same. Upon exercise of this Option, the Holder will confirm in writing, in form
reasonably satisfactory to the Company, such Holder's investment intent.
16. Notices. All Notices, requests and other communications that the
Holder or the Company is required or elects to give hereunder shall be in
writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the party to be notified at the address
set forth below or at such other address as such party shall have notified the
other parties hereto, by notice given in conformity with this section 16.
(a) If to the Company:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: President
Telecopy: (770) 840-6830
(b) If to the Holder, to the address set forth on the
first page hereof as the address for Holder.
17. Miscellaneous. This Option and any term hereof may be changed,
waived, discharged, or terminated except as provided in the Plan only by an
instrument in writing signed by the party or holder hereof against which
enforcement of such change, waiver, discharge or
-11-
<PAGE> 25
termination is sought. The headings in this Option are for purposes of
reference only and shall not limit or otherwise affect the meaning
hereof.
18. Date. The date of this Option is the date set forth on the first
page hereof. This Option, in all events, shall be wholly void and of no effect
after 5:30 p.m., Georgia time, on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 12 shall
continue in full force and effect after such date as to any Option Shares or
other securities issued upon the exercise of this Option.
19. Severability. If any provision of this Option is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Option.
20. Governing Law. This Option shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without
reference to its conflicts of law principles.
21. Confidentiality. Notwithstanding anything contained herein to the
contrary, if at anytime prior to the exercise of the Option granted hereunder
the Holder communicates or discloses in any way or form to any person or entity
that the Holder is the recipient of or the holder of this or any other option
issued by the Company pursuant to the Plan, then this Option shall immediately
terminate and all rights of Holder hereunder shall be null and void, it being
understood and agreed by Holder, as evidenced by the acceptance of this Option
by the Holder, that it is of the utmost importance to the Company to have the
Holder hereof keep the issuance to and the receipt of this Option by the Holder
in strictest confidence.
22. Governance by Plan. Notwithstanding anything contained herein, this
Option shall be governed by the Plan, and any term or provision herein which
conflicts or is inconsistent with the Plan shall be deemed to be in accordance
with the applicable term or provision of the Plan.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:
-------------------------
DENNIS C. HAYES, Chairman
-12-
<PAGE> 26
EXHIBIT A TO
OPTION
SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH REGISTERED HOLDER
DESIRES TO EXERCISE THIS OPTION
HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned hereby exercises the right to purchase Option Shares
covered by this Option according to the conditions thereof and herewith [makes
payment of $_______________, the aggregate Option Exercise Price of such Option
Shares in full] [tenders solely this Option, or applicable portion hereof, in
full satisfaction of the Option Exercise Price upon the terms and conditions set
forth herein.]
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
------------------------------------------------------------------------
HOLDER NAME:
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
[Net] Number of Option Shares Being
Purchased
---------------------------
Dated: ______________, 19__
-13-
<PAGE> 27
EXHIBIT B
FIRST AMENDMENT TO
HAYES MICROCOMPUTER PRODUCTS, INC.
KEY EMPLOYEE OPTION (MANAGEMENT GRANT)
THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED
BY THIS OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS
HEREOF.
Hayes Microcomputer Products, Inc. (the "Company") has issued to
certain key management employees of the Company certain options to purchase
common stock designated as a Key Employee Option (Management Grant) (hereinafter
called "Management Grant Options"). This Amendment hereby amends each of the
outstanding Management Grant Options as follows:
1. Section 1(d) of each of the Management Grant Options is hereby
amended by deleting the word "or" in the third line of Section 1(d) of each of
the Management Grant Options, inserting a "," in lieu thereof, and adding at the
end of said Section 1(d) the following: "(iii) nine (9) years after the Date of
this Option, or (iv) any earlier date established by the Board of Directors of
the Company."
2. Section 1(j) of each of the Management Grant Options is hereby
amended by deleting the word "or" in the fourth line of Section 1(j) of each of
the Management Grant Options, substituting a "," in lieu of the word "or," and
adding at the end of Section 1(j) the following: "or any transaction or series
of related transactions in which all of the outstanding shares of the Company
are exchanged for shares or a combination of cash and shares of another entity
whose common shares are publicly traded on the NASDAQ National Market System,
the American Stock Exchange, or the New York Stock Exchange."
3. Except as expressly hereby amended, each of the Management Grant
Options shall remain unchanged and shall remain in full force and effect.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:
----------------------------------------
Dennis C. Hayes
Chairman
<PAGE> 28
KEY EMPLOYEE OPTION
(EXECUTIVE GRANT)
THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED
BY THIS OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS
HEREOF.
Option No.: ___________________________________
Holder: ___________________________________
NAME
___________________________________
ADDRESS
___________________________________
CITY, STATE & ZIP CODE
Date of
Grant of
this Option: _______________________________________
Number of
Option Shares:_______________________________________
Option
Exercise
Price Per
Share: U.S.$______________________________
HAYES MICROCOMPUTER PRODUCTS, INC.
OPTION TO PURCHASE COMMON STOCK
Hayes Microcomputer Products, Inc., a Georgia corporation (the
"Company"), hereby certifies that the above-named individual designated on the
line entitled "Holder", the registered holder hereof, or its permitted
registered assigns to whom notice has been given by the Company ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Option, at any time or times on or after the Exercise
Date hereof but not after 5:30 P.M., Atlanta, Georgia time, on the Expiration
Date (as defined herein), up to the number of
<PAGE> 29
shares set forth above of the Company's fully paid nonassessable shares, as
adjusted pursuant to this Option (the "Option Shares"), of Common Stock (as
defined herein) of the Company by payment of the applicable aggregate Option
Exercise Price (as defined herein) in lawful money of the United States.
1. Definitions. The following words and terms as used in this Option
shall have the following meanings:
(a) "Common Stock" means (i) the Company's common stock and
(ii) any capital stock into which such "Common Stock" shall have been changed or
any capital stock resulting from a reclassification of such "Common Stock."
(b) "Convertible Securities" means any securities issued by
the Company which are convertible into or exchangeable for, directly or
indirectly, shares of Common Stock.
(c) "Exercise Date" means the earlier to occur of (i) the date
on which the Company files a registration statement on Form S-1 (or any similar
form) with the Securities and Exchange Commission in connection with a proposed
Initial Public Offering, (ii) the date of the closing of a Significant
Transaction, (iii) if this Option is intended to constitute an Incentive Stock
Option, if the original Holder hereof owned more than ten (10%) percent of the
combined voting power of all classes of Stock of the Company on the date of the
grant hereof, then the exercise date shall be no sooner than five (5) years from
the date of the grant of this Option, (iv) nine (9) years after the date of
grant of this Option, or (v) any earlier date established by the Board of
Directors of the Company.
(d) "Expiration Date" means: the date five (5) years after the
Exercise Date; however, if this Option constitutes an Incentive Stock Option
under applicable provisions of the Internal Revenue Code, as amended (the
"Code"), then notwithstanding the foregoing, the Expiration Date shall be the
earlier of the date described in (i) above or ten (10) years from the date of
the granting of this Option, provided, that if the Exercise Date is the date set
forth in Section 1(c)(iv), then the Expiration Date shall be one (1) year after
such Exercise Date.
(e) "Initial Public Offering" means the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of the Company's
Common Stock.
(f) "Market Price" means the fair market value of one share
determined as follows: (i) where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share shall
be the average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the last reported sale price of the
Common Stock or the closing price quoted on the NASDAQ National Market System or
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in The Wall Street Journal for the five (5) trading days (or such
fewer number of trading days as the Company's Common Stock may have been
publicly traded) ending on the trading day prior to the
-2-
<PAGE> 30
date of determination of fair market value and (ii) if at any time the Common
Stock is not listed on any domestic exchange or quoted in the NASDAQ System or
the domestic over-the-counter market, the higher of (A) the book value thereof,
as determined by any firm of independent public accountants of recognized
standing selected by the Board of Directors, as at the last day as of which such
determination shall have been made, or (B) the fair value thereof determined in
good faith by the Board of Directors as of the date which is within 15 days of
the date as of which the determination is to be made (in determining the fair
value thereof, the Board of Directors shall consider stock market valuations and
price to earnings ratios of comparable companies in similar industries).
Notwithstanding the foregoing, in the event the Option is exercised in
connection with the Initial Public Offering, the fair market value per share
shall be the per share price at which registered shares are sold to the public
in the Initial Public Offering. If the holder shall purchase such shares in
conjunction with the closing of any Significant Transaction, then the fair
market value per share shall mean the value received by the holders of the
Company's Common Stock pursuant to such Significant Transaction for each share
of Common Stock, subject to the closing of such Significant Transaction.
(g) "Option Exercise Price" shall initially be the price per
share as set forth on the first page hereof and shall be adjusted and readjusted
from time to time as provided in this Option.
(h) "Securities Act" means the Securities Act of 1933, as
amended.
(i) "Significant Transaction" means the closing of a merger,
consolidation or reorganization of the Company with or into any other
corporation or corporations in which the Company is not the surviving entity
(other than a mere reincorporation transaction), a sale of all or substantially
all of the assets of the Company, a transaction or series of related
transactions in which the Company issues shares representing more than 50% of
the voting power of the Company, immediately after giving effect to such
transaction, to a person or persons who were not Shareholders (as defined in the
Shareholders' Agreement) immediately prior to such transaction, or any
transaction or series of related transactions in which all of the outstanding
shares of the Company are exchanged for shares or a combination of cash and
shares of another entity whose common shares are publicly traded on the NASDAQ
National Market System, the American Stock Exchange, or the New York Stock
Exchange.
(j) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to any person other than the Company, shall be
deemed to include such person's successors and permitted assigns, (B)
to the Company shall be deemed to include the Company's successors and
(C) to any applicable law defined or referred to herein, shall be
deemed references to such applicable law as the same may have been or
may be amended or supplemented from time to time.
-3-
<PAGE> 31
(ii) When used in this Option, the words
"herein," "hereof," and "hereunder," and words of similar import, shall
refer to this Option as a whole and not to any provision of this
Option, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Option unless
otherwise specified.
(iii) Whenever the context so requires the neuter
gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
(iv) Any capitalized term not otherwise defined
in this Option shall have the meaning ascribed to such term in that
certain Shareholders' Agreement dated as of April 16, 1996, (the
"Shareholders' Agreement"), by and among the Company, Dennis C. Hayes
and the Shareholders.
(v) The "Plan" shall mean the Hayes
Microcomputer Products, Inc. Stock Option Plan.
2. Exercise of Option.
(a) Subject to the terms and conditions hereof, this Option
may be exercised in whole or in part, at any time during normal business hours
on or after the Exercise Date and prior to 5:30 p.m., Atlanta, Georgia time, on
the Expiration Date. The rights represented by this Option may be exercised by
the holder hereof then registered on the books of the Company, in whole or from
time to time in part (except that this Option shall not be exercisable as to a
fractional share), by (i) delivery of a written notice, in the form of the
Subscription Notice attached as Exhibit A hereto, of such holder's election to
exercise this Option, which notice shall specify the number of Option Shares to
be purchased, (ii) payment to the Company of an amount equal to the Option
Exercise Price multiplied by the number of Option Shares as to which the Option
is being exercised (plus any applicable issue or transfer taxes) in cash, by
wire transfer or by certified or official bank check, for the number of Option
Shares as to which this Option shall have been exercised, and (iii) the
surrender of this Option, properly endorsed, at the principal office of the
Company at the time of such exercise (or at such other agency or office of the
Company as the Company may designate by notice to the Holder). In the event of
any exercise of the rights represented by this Option, a certificate or
certificates for the Option Shares so purchased, registered in the name of, or
as directed by, the Holder, shall be delivered to, or as directed by the Holder
within a reasonable time, not exceeding 15 days (if the Company's Common Stock
is not then publicly traded) or five (5) business days (if the Company's Common
Stock is then publicly traded), after such rights shall have been so exercised.
(b) Unless the rights represented by this Option shall have
expired or have been fully exercised, the Company shall issue, within such 15
day or 5 business day period, as applicable, a new Option identical in all
respects to the Option exercised except (x) such new Option shall represent
rights to purchase the number of Option Shares purchasable immediately prior to
such exercise under the Option exercised, less the number of Option Shares with
respect to which such original Option was exercised, and (y) the Option Exercise
Price thereof shall be the Option Exercise
-4-
<PAGE> 32
Price of the Option exercised. The person in whose name any certificate for
Option Shares is issued upon exercise of this Option shall for all purposes be
deemed to have become the holder of record of such Option Shares immediately
prior to the close of business on the date on which the Option was surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes was made, irrespective of the date of delivery of such share certificate,
except that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are properly closed, such person shall be deemed
to have become the holder of such Option Shares at the opening of business on
the next succeeding date on which the stock transfer books are open.
(c) In lieu of the Holder exercising this Option (or any
portion hereof) for cash, Holder may, in connection with such exercise, elect to
satisfy the Option Exercise Price by exchanging solely (x) this Option (or such
portion hereof) for (y) that number of Option Shares equal to the product of (i)
the number of shares of Common Stock issuable upon such exercise of the Option
(or, if only a portion of this Option is being exercised, issuable upon the
exercise of such portion) for cash multiplied by (ii) a fraction, (A) the
numerator of which is the Market Price per share of the Common Stock at the time
of such exercise minus the Option Exercise Price per share of the Common Stock
at the time of such exercise, and (B) the denominator of which is the Market
Price per share of the Common Stock at the time of such exercise, such number of
shares so issuable upon such exercise to be rounded up or down to the nearest
whole number of Option Shares.
(d) Notwithstanding anything contained herein, if this Option
constitutes an Incentive Stock Option, then the Option may be exercised by the
original Holder hereof during his or her lifetime only by such original Holder.
3. Covenants as to Common Stock.
(a) The Company covenants and agrees that all Option Shares
which may be issued upon the exercise of the rights represented by this Option
will, upon issuance, be validly issued, fully paid and nonassessable. The
Company further covenants and agrees that during the period within which the
rights represented by this Option may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of the rights then represented by this Option and
that the par value of said shares will at all times be less than or equal to the
applicable Option Exercise Price.
(b) If any shares of Common Stock reserved or to be reserved
to provide for the exercise of the rights then represented by this Option
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued to the Holder,
then the Company covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
4. Changes in Capitalization; Merger; Liquidation. For purposes of this
Option, the number of shares covered by each outstanding Option, and the price
per share of each outstanding Option shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend
-5-
<PAGE> 33
in shares of Stock to holders of outstanding shares of Stock or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Company. If the Company shall be the surviving corporation
in any merger or consolidation (other than as a subsidiary of another
corporation), recapitalization, reclassification of shares or similar
reorganization, the holder of each outstanding Option shall be entitled to
purchase, at the same times and upon the same terms and conditions as are
provided in this Option, the number and class of shares of stock or other
securities to which a holder of the number of shares of Stock subject to the
Option at the time of such transaction would have been entitled to receive as a
result of such transaction. In the event of any such changes in capitalization
of the Company, the Board or the Committee will make such adjustments in the
number and class of shares of Stock or other securities and/or the exercise
price with respect to which outstanding Options are exercisable to prevent
dilution or enlargement of rights hereunder. Any adjustment pursuant to this
section 4 may provide, in the Board or the Committee's discretion, for the
elimination of any fractional shares that might otherwise become subject to this
Stock Option without payment therefor. In the event of a dissolution or
liquidation of the Company, a sale of substantially all of the stock or
substantially all of the assets of the Company, a merger or consolidation in
which the Company is not the surviving corporation or services only as a
subsidiary of another corporation, or any other transaction having a similar
result or effect, each outstanding Option shall terminate except to the extent
that another corporation assumes such Option or substitutes another option
therefor. In the event of a change of the Company's shares of Stock with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the Stock
within the meaning of this Option. Except as expressly provided in this section
4, the holder of an Option shall have no rights by reason of any subdivision or
combination of shares of Stock of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of Stock of any class
or by reason of any dissolution, liquidation, merger or consolidation or
distribution to the Company's shareholders of assets or stock of another
corporation. Except as expressly provided herein, any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Stock subject to this Stock
Option. The Holder understands and agrees that the existence of the Plan and the
Stock Options granted pursuant to the Plan shall not affect in any way the right
or power of the Company to make or authorize any adjustment, reclassification,
reorganization or other change in its capital or business structure, any merger
or consolidation of the Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof, the dissolution
or liquidation of the Company, any sale or transfer of all or any part of its
business or assets, or any other corporate act or proceeding.
5. Notice of Adjustment of Option Exercise Price. Upon any adjustment
of the Option Exercise Price, then the Company shall give notice thereof to the
Holder of this Option, which notice shall state the Option Exercise Price in
effect after such adjustment and the increase, or decrease, if any, in the
number of Option Shares purchasable at the Option Exercise Price upon the
exercise of this Option, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
-6-
<PAGE> 34
6. Computation of Adjustments. Upon each computation of an adjustment
in the Option Exercise Price and the number of shares which may be subscribed
for and purchased upon exercise of this Option, the Option Exercise Price shall
be computed to the nearest cent (i.e. fraction of .5 of a cent, or greater,
shall be rounded to the next highest cent) and the number of shares which may be
subscribed for and purchased upon exercise of this Option shall be calculated to
the nearest whole share (i.e. fractions of less than one half of a share shall
be disregarded and fractions of one half of a share, or greater, shall be
treated as being a whole share). No such adjustment shall be made however, if
the change in the Option Exercise Price would be less than $.001 per share, but
any such lesser adjustment shall be made (i) at the time and together with the
next subsequent adjustment which, together with any adjustments carried forward,
shall amount to $.001 per share or more, or (ii) if earlier, upon the third
anniversary of the event for which such adjustment is required.
7. Notice of Certain Events. In case at any time:
(a) the Company shall propose to register any of its Common
Stock under the Securities Act in connection with a public offering of such
Common Stock (other than with respect to a registration statement filed on Form
S-8 or such other similar form then in effect under the Securities Act);
(b) there shall be any capital reorganization, or
reclassification of the capital stock, of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in one or more of said cases,
the Company shall give notice to the Holder of this Option of the date on which
(i) the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall be given not
less than ten (10) days prior to the record date or the date on which the
transfer books of the Company are to be closed in respect thereto in the case of
an action specified in clause (i) and at least ten (10) days prior to the action
in question in the case of an action specified in clause (ii).
8. No Change in Option Terms on Adjustment. Irrespective of any
adjustment in the Option Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Option, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Option Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
9. Taxes. The Company shall not be required to pay any tax or taxes
attributable to the initial issuance of the Option Shares or any transfer
involved in the issue or delivery of any certificates for Option Shares of
Common Stock in a name other than that of the registered holder hereof or upon
any transfer of this Option.
-7-
<PAGE> 35
10. Option Holder Not Deemed a Shareholder. No holder, as such, of this
Option shall be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained in this
Option be construed to confer upon the holder hereof, as such, any of the rights
of a shareholder of the Company or any right to vote, give or withhold consent
to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance of record to the holder of this Option of the
Option Shares which he is then entitled to receive upon the due exercise of this
Option.
11. No Limitation on Corporate Action. No provisions of this Option and
no right or option granted or conferred hereunder shall in any way limit, affect
or abridge the exercise by the Company of any of its corporate rights or powers
to recapitalize, amend its Articles of Incorporation, reorganize, consolidate or
merge with or into another corporation, or to transfer all or any part of its
property or assets, or the exercise of any other of its corporate rights and
powers.
12. Transfer; Opinions of Counsel; Restrictive Legends. Notwithstanding
anything contained herein, this Option is nontransferable except in the case of
the death of the Holder, in which event the Option may be transferred by the
Last Will and Testament of the deceased Holder or by the laws of descent and
distribution. To the extent applicable, each certificate or other document
evidencing any of the Option Shares shall be endorsed with the legends set forth
below, and Holder covenants that, except to the extent such restrictions are
waived by the Company, Holder shall not transfer the Option Shares without
complying with the restrictions on transfer described in the legends endorsed
thereon;
(a) The following legend, if applicable, under the Securities
Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Option Shares, the legend required by such
state authority.
(c) The Company shall not be required (i) to transfer on its
books any Option Shares which shall have been transferred in violation of any of
the provisions set forth in this Section 12, or (ii) to treat as owner of such
Option Shares or to accord the right to vote as such owner or to pay dividends
to any transferee to whom such Option Shares shall have been so transferred.
-8-
<PAGE> 36
(d) Any legend endorsed on a certificate pursuant to
subsection (a) or (b) of this section 12 shall be removed (i) if the Option
Shares represented by such certificate shall have been effectively registered
under the Securities Act or otherwise lawfully sold in a public transaction, or
(ii) if the holder of such Option Shares shall have provided the Company with an
opinion from counsel, in form and acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that a public sale, transfer or
assignment of the Option or the Option Shares may be made without registration.
(e) Any legend endorsed on a certificate pursuant to
subsection (b) of this section 12 shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal or if the
holder of the Option or the Option Shares provides the Company with an opinion
of counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that such state legend may be
removed.
(f) Without in any way limiting the representations set forth
above, Holder further agrees not to make any disposition of all or any portion
of the Option Shares unless:
(i) There is then in effect a registration
statement under the Securities Act covering such proposed disposition
and such disposition is made in accordance with such registration
statement; or
(ii) Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (A) if requested by the Company, Holder shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Option Shares under the Securities Act and (B) if
requested by the Company, the transferee shall have furnished to the
Company its agreement to abide by the restrictions on transfer set
forth herein as if it were a purchaser hereunder.
(g) Except as set forth in this section 12, the Option shall
not be assignable by the Holder and its assignees.
13. Termination of Employment or Death.
(a) For Non-Qualified Stock Options, upon any termination of
employment of the holder for any reason other than for cause, death or
disability, any such Option held at the date of such employment termination may,
to the extent exercisable, be exercised within ninety (90) days after the date
of such employment termination. Upon any termination of employment of the holder
by reason of disability, except as otherwise provided in the particular Stock
Option Agreement, any such Option held at the date of such employment
termination may, to the extent exercisable, be exercised within twelve (12)
months after the date of such employment termination. If the holder of such an
Option dies, except as otherwise provided in the particular Stock Option
Agreement, any such Option held at the date of death may, to the extent
exercisable, be exercised by a legatee or
-9-
<PAGE> 37
legatees of the holder under the holder's last will, or by the holder's personal
representatives or distributees, within twelve (12) months after the holder's
death. This section 13 shall not extend the term of the Option specified
pursuant to section 1(d). For purposes of this section 13, employment of a
holder shall not be deemed terminated so long as the holder is employed by the
Company, by a subsidiary of the Company or by another corporation (or a parent
or subsidiary corporation of such other corporation) which has assumed the
Option of the holder. For purposes of this section 13, the extent to which such
an Option is exercisable shall be determined as of the date of termination of
employment.
(b) For Incentive Stock Options, upon any termination of
employment of the holder for any reason other than for cause, death or
disability, any such Option held at the date of such employment termination may,
to the extent exercisable, be exercised within three (3) months after the date
of such employment termination. Upon any termination of employment of the holder
by reason of disability, within the meaning of section 22(e)(3) of the Code or
any successor provision, any such Option held at the date of such employment
termination may, to the extent exercisable, be exercised within twelve (12)
months after the date of such employment termination. If the holder of such an
Option dies, except as otherwise provided in the particular Stock Option
agreement, any such Option held at the date of death may, to the extent
exercisable, be exercised by a legatee or legatees of the holder under the
holder's last will, or by the holder's personal representatives or distributees,
within twelve (12) months after the holder's death. This section 13 shall not
extend the term of the Option specified pursuant to section 1(d). For purposes
of this section 13, employment of a holder shall not be deemed terminated so
long as the holder is employed by the Company, by a subsidiary of the Company or
by another corporation (or a parent or subsidiary corporation of such other
corporation) which has assumed the Option of the holder in a transaction to
which section 424(a) of the Code or any successor provision is applicable. For
purposes of this section 13, the extent to which such an Option is exercisable
shall be determined as of the date of termination of employment.
(c) This Option shall terminate immediately upon the original
Holder hereof being discharged from the employment of the Company for cause.
14. Lost, Stolen, Mutilated or Destroyed Option. If this Option is
lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (except in the event
of loss, theft, mutilation or destruction while this Option is in possession of
the Company's Escrow Agent, in which events the Company shall be solely
responsible) (which shall, in the case of a mutilated Option, include the
surrender thereof), issue a new Option of like denomination and tenor as the
Option so lost, stolen, mutilated or destroyed. Any such new Option shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Option shall be at any time
enforceable by anyone.
15. Representation of Holder. The Holder, by the acceptance hereof,
represents that it is acquiring this Option for its own account for investment
and not with a view to, or sale in connection with, any distribution hereof or
of any of the shares of Common Stock or other securities
-10-
<PAGE> 38
issuable upon the exercise thereof, nor with any present intention of
distributing any of the same. Upon exercise of this Option, the Holder will
confirm in writing, in form reasonably satisfactory to the Company, such
Holder's investment intent.
16. Notices. All Notices, requests and other communications that the
Holder or the Company is required or elects to give hereunder shall be in
writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the party to be notified at the address
set forth below or at such other address as such party shall have notified the
other parties hereto, by notice given in conformity with this section 16.
(a) If to the Company:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: President
Telecopy: (770) 840-6830
(b) If to the Holder, to the address set forth on the
first page hereof as the address for Holder.
17. Miscellaneous. This Option and any term hereof may be changed,
waived, discharged, or terminated except as provided in the Plan only by an
instrument in writing signed by the party or holder hereof against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Option are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof.
18. Date. The date of this Option is the date set forth on the first
page hereof. This Option, in all events, shall be wholly void and of no effect
after 5:30 p.m., Georgia time, on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 12 shall
continue in full force and effect after such date as to any Option Shares or
other securities issued upon the exercise of this Option.
19. Severability. If any provision of this Option is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way and shall be construed in accordance with the
purposes and tenor and effect of this Option.
20. Governing Law. This Option shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without reference
to its conflicts of law principles.
-11-
<PAGE> 39
21. Confidentiality. Notwithstanding anything contained herein to the
contrary, if at anytime prior to the exercise of the Option granted hereunder
the Holder communicates or discloses in any way or form to any person or entity
that the Holder is the recipient of or the holder of this or any other option
issued by the Company pursuant to the Plan, then this Option shall immediately
terminate and all rights of Holder hereunder shall be null and void, it being
understood and agreed by Holder, as evidenced by the acceptance of this Option
by the Holder, that it is of the utmost importance to the Company to have the
Holder hereof keep the issuance to and the receipt of this Option by the Holder
in strictest confidence.
22. Governance by Plan. Notwithstanding anything contained herein, this
Option shall be governed by the Plan, and any term or provision herein which
conflicts or is inconsistent with the Plan shall be deemed to be in accordance
with the applicable term or provision of the Plan.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:
----------------------------------------
DENNIS C. HAYES, Chairman
-12-
<PAGE> 40
EXHIBIT A TO
OPTION
SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH REGISTERED HOLDER
DESIRES TO EXERCISE THIS OPTION
HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned hereby exercises the right to purchase Option Shares
covered by this Option according to the conditions thereof and herewith [makes
payment of $_______________, the aggregate Option Exercise Price of such Option
Shares in full] [tenders solely this Option, or applicable portion hereof, in
full satisfaction of the Option Exercise Price upon the terms and conditions set
forth herein.]
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________________________________________
(Please typewrite or print in block letters)
Address ________________________________________________________________________
HOLDER NAME:
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
[Net] Number of Option Shares Being
Purchased
------------------------------
Dated: ______________, 19__
-13-
<PAGE> 41
EXHIBIT C
FIRST AMENDMENT TO
HAYES MICROCOMPUTER PRODUCTS, INC.
KEY EMPLOYEE OPTION (EXECUTIVE GRANT)
THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED
BY THIS OPTION NOR THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS
HEREOF.
Hayes Microcomputer Products, Inc. (the "Company") has heretofore
issued to certain key executives of the Company certain Key Employee Options
(Executive Grants) (hereinafter called "Executive Grant Options"). This First
Amendment hereby amends each outstanding Executive Grant Option as follows:
1. Section 1(c) of each Executive Grant Option is hereby amended by
deleting the word "or" in the third line of Section 1(c), by deleting the word
"or" in the fourth line of Section 1(c), and substituting in lieu thereof
"(iii)" and by adding at the end of Section 1(c) the following: ", (iv) nine (9)
years after the date of grant of this Option, or (v) any earlier date
established by the Board of Directors of the Company."
2. Section 1(d) of each of the Executive Grant Options is hereby
amended by adding at the end of said Section 1(d) the following: "provided, that
if the Exercise Date is the date set forth in Section 1(c)(iv), then the
Expiration Date shall be one (1) year after such Exercise Date."
3. Section 1(i) of each of the Executive Grant Options is hereby
amended by deleting the word "or" in the fourth line of said Section 1(i) of
each Executive Grant Option, inserting a "," in lieu thereof, and adding at the
end of said Section 1(i) the following: "or any transaction or series of related
transactions in which all of the outstanding shares of the Company are exchanged
for shares or a combination of cash and shares of another entity whose common
shares are publicly traded on the NASDAQ National Market System, the American
Stock Exchange, or the New York Stock Exchange."
4. Except as expressly hereby amended, each of the Executive Grant
Options shall remain unchanged and shall remain in full force and effect.
HAYES MICROCOMPUTER PRODUCTS, INC.
By:
----------------------------------------
Dennis C. Hayes
Chairman
<PAGE> 1
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF REGISTRANT
Active subsidiaries of Access Beyond, Inc. as of July 31, 1997, are listed
below. The names of certain subsidiaries, which are considered in the aggregate
would not constitute a significant subsidiary, have been omitted.
<TABLE>
<CAPTION>
STATE OR
COUNTRY
NAME OF ORGANIZATION
----------------------------------------------------------- ---------------
<S> <C>
Access Beyond, Ltd......................................... United Kingdom
Penril Technologies, Inc................................... Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 578
<SECURITIES> 0
<RECEIVABLES> 3,050
<ALLOWANCES> 215
<INVENTORY> 5,678
<CURRENT-ASSETS> 9,473
<PP&E> 3,484
<DEPRECIATION> 11,394
<TOTAL-ASSETS> 13,906
<CURRENT-LIABILITIES> 5,842
<BONDS> 0
0
0
<COMMON> 125
<OTHER-SE> 7,186
<TOTAL-LIABILITY-AND-EQUITY> 13,906
<SALES> 18,000
<TOTAL-REVENUES> 18,000
<CGS> 11,999
<TOTAL-COSTS> 11,999
<OTHER-EXPENSES> 12,231
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (13,890)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,890)
<DISCONTINUED> (3,735)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,625)
<EPS-PRIMARY> (1.47)
<EPS-DILUTED> (1.47)
</TABLE>
