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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1997
COMMISSION FILE NO. 21697
ACCESS BEYOND, INC.
A DELAWARE CORPORATION
IRS EMPLOYER IDENTIFICATION NO. 52-1987873
1300 QUINCE ORCHARD BLVD., GAITHERSBURG, MARYLAND 20878
TELEPHONE -- (301) 921-8600
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of October 3, 1997 the aggregate market value of the Company's voting
Common Stock held by non-affiliates of the Company was approximately $76
million.
As of October 3, 1997 there were 12,495,291 shares of the registrant's
Common Stock, $.01 par value outstanding.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT
Access Beyond, Inc. (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 Consolidated Financial
Statements, was spun-off from Penril DataComm Networks, Inc. ("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. 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
Networks, Inc. ("Bay"). For accounting purposes, the disposition of Penril's
modem business, as a result of the merger agreement with Bay 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 Markets.
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
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 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
issued the Paradyne Shares to Paradyne. The Company is required to register the
Paradyne Shares for Paradyne under the Securities Act by December 31, 1997 and
use its best efforts to maintain the effectiveness of the Registration
Statement. See Note 7 to the Consolidated Financial Statements.
Pending Transaction. On July 29, 1997, the Company entered into an
Agreement and Plan of Reorganization (the "Merger Agreement") with Hayes
Microcomputer Products, Inc. ("Hayes"). Under the terms of the Merger Agreement,
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 Merger Agreement is intended to qualify as a purchase for
accounting and financial reporting purposes. The transaction is subject to
regulatory and the Company's stockholders' approval and certain conditions to
closing as set forth in the Merger Agreement. At the time of the consummation of
the Merger, the Company will be responsible for payment of investment
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]
banking fees of approximately $1.0 million and for a change of control payment
of $437,500 to Ronald A. Howard, President of the Company. 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.
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 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(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
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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 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.
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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.
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.
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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.
EMPLOYEES
The Company had 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 experienced no work stoppages and believes
that its employee relations are satisfactory.
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 Consolidated Financial
Statements.
ITEM 2. 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
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.
ITEM 3. 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.
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
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dispute. In October 1996, the Company received from SMC, in settlement of the
litigation, $3.5 million 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 a 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Shareholders of Penril was held on November 15, 1996,
at which time the shareholders elected to approve and adopt (i) the Plan and
Agreement of Merger dated as of June 16, 1996, as amended on August 5, 1996 (the
"Penril/Bay Merger"), among Bay Networks, Inc., and Penril and (ii) the
distribution to the Company of substantially all of Penril's assets not related
to Penril's modem business and Distribution by Penril of all of the outstanding
capital stock of Access Beyond, Inc. to the shareholders of Penril, as a
dividend. The vote was:
<TABLE>
<CAPTION>
ABSTAIN/
IN FAVOR AGAINST NOT VOTED
- --------- ------- ---------
<S> <C> <C>
7,548,199 20,628 18,694
</TABLE>
On March 6, 1997, a Special Meeting of Stockholders of Access Beyond was
held, at which time the stockholders voted to approve and adopt (i) the
Company's Amended and Restated 1996 Long Term Incentive Plan and (ii) the
Company's Amended and Restated 1996 Non-employee Directors' Stock Option Plan.
The vote was:
<TABLE>
<CAPTION>
ABSTAIN/
IN FAVOR AGAINST NOT VOTED
--------- ------- ---------
<S> <C> <C> <C>
1996 Long Term Incentive Plan................................ 7,987,110 80,055 33,064
1996 Non-employee Directors' Stock Option Plan............... 8,149,189 96,848 43,067
</TABLE>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On November 18, 1996, Penril's Common Stock stopped trading
over-the-counter on the NASDAQ National Market System under the symbol PNRL. The
following table sets forth the high and low sales prices for Penril Common Stock
as reported by NASDAQ for the fiscal quarters indicated prior to the last day of
trading.
<TABLE>
<CAPTION>
1997 1996
------------ ------------
QUARTER ENDED HIGH LOW HIGH LOW
------------------------------------------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
October 31....................................... 15 1/2 12 3/8 8 3/8 4 3/8
January 31....................................... 17 13 7/8 11 1/4 5 1/4
April 30......................................... -- -- 9 1/4 5 1/2
July 31.......................................... -- -- 14 1/8 8 3/8
</TABLE>
On November 18, 1996, Access Beyond's Common Stock began trading
over-the-counter on the NASDAQ under the symbol ACCB. The following table sets
forth the high and low sales prices for Access Beyond Common Stock as reported
by NASDAQ for the fiscal quarters indicated.
<TABLE>
<CAPTION>
1997
------------
QUARTER ENDED HIGH LOW
--------------------------------------------------------------- ---- ---
<S> <C> <C>
January 31..................................................... 8 7/8 6
April 30....................................................... 7 1/8 3
July 31........................................................ 6 1/8 3 1/4
</TABLE>
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The current quoted price of the stock is listed daily in the Wall Street
Journal in the NASDAQ National Market System section. The number of holders of
record of the Company's Common Stock as of October 3, 1997 was 803.
ITEM 6. SELECTED FINANCIAL DATA
Data from the Consolidated Statements of Operations included in the
following table pertain to the Company's continuing and discontinued operations
(in thousands except per share amounts). The results include the operations of
Penril through November 18, 1996 when the Company was spun off, and Datability,
Inc. ("Datability") from May 6, 1993, the date of acquisition. The Spin-off and
Penril/Bay Merger transaction is described more fully in Note 1 to the
accompanying Consolidated Financial Statements.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
-------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS DATA:
Net Revenues................................... $ 18,000 $ 39,435 $52,611 $61,838 $44,108
Net Income (Loss)
Continuing operations........................ (13,890) (20,668) (4,614) 2,345 1,027
Discontinued operations...................... -- 404 (1,661) (828) (896)
Loss on disposal of discontinued (3,735) (640) (1,400) -- --
operations................................
Earnings (loss) per share
Continuing operations........................ (1.16) (2.14) (0.61) 0.30 0.15
Discontinued operations...................... -- 0.04 (0.22) (0.11) (0.13)
Loss on disposal of discontinued (0.31) (0.07) (0.19) -- --
operations................................
Cash dividends per share....................... -- -- -- 0.02 --
HISTORICAL BALANCE SHEET DATA:
Total assets................................... $ 13,906 $ 33,780 $44,388 $51,061 $49,178
Long-term debt................................. 743 905 5,681 8,890 10,217
Stockholders' equity........................... 7,311 18,215 21,723 28,580 27,501
</TABLE>
Quarterly Financial Data
A summary of the Company's consolidated results of continuing operations
for each of the fiscal quarters for the years ended July 31, 1997 and 1996 is
shown in the table below. This data includes the revenue, gross profit, and net
loss of Penril for the period August 1, 1995 through November 18, 1996. The net
loss from continuing operations for the fourth quarter of fiscal 1996 includes a
charge of $9.7 million for restructuring charges, which are more fully described
in Note 2 of the Consolidated Financial Statements and $500,000 for costs
incurred related to the Penril/Bay Merger Agreement with Bay. In the first
quarter of fiscal 1997 the Company recorded a one time gain on the settlement of
its lawsuit with SMC of $3.5 million. In the first and second quarters of fiscal
1997, the Company paid one time merger related expenses totaling $4.0 million.
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
FISCAL 1997 QUARTERS ENDED: 1996 1997 1997 1997
- ------------------------------------------------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C>
Revenues......................................... $ 6,915 $ 4,593 $ 3,673 $ 2,819
Gross profit..................................... 2,323 1,279 1,768 631
Net loss......................................... (1,040) (6,232) (1,997) (4,621)
Net loss per share............................... (.12) (.52) (.17) (.35)
</TABLE>
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<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
FISCAL 1996 QUARTERS ENDED: 1995 1996 1996 1996
- ------------------------------------------------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C>
Revenues......................................... $ 9,656 $ 7,691 $ 8,973 $ 13,115
Gross profit..................................... 4,757 2,691 3,304 6,274
Net loss......................................... (1,597) (3,999) (3,168) (11,904)
Net loss per share............................... (0.19) (0.43) (0.31) (1.11)
</TABLE>
ITEM 7. 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, manufactur-
8
<PAGE> 10
ing 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. 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.
9
<PAGE> 11
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>
10
<PAGE> 12
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 short-term 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 31, JULY 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.
11
<PAGE> 13
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>
12
<PAGE> 14
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.
Portions of this report 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 the report 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.
13
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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)
14
<PAGE> 16
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.
15
<PAGE> 17
ACCESS BEYOND, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
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.
16
<PAGE> 18
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.
17
<PAGE> 19
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.
18
<PAGE> 20
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.
19
<PAGE> 21
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>
(IN THOUSANDS OF DOLLARS) 1997 1996
------ ------
<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>
(IN THOUSANDS OF DOLLARS) USEFUL LIVES 1997 1996
------------ -------- --------
<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 remaining business. Due to these events, the Company
determined that the Excess of Costs over Net
20
<PAGE> 22
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
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 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.
21
<PAGE> 23
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
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.
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
22
<PAGE> 24
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
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>
23
<PAGE> 25
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>
24
<PAGE> 26
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>
25
<PAGE> 27
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). 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.
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 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
26
<PAGE> 28
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
27
<PAGE> 29
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>
1986 INCENTIVE PLAN DIRECTORS' PLAN 1995 INCENTIVE PLAN
---------------------- --------------------- --------------------
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF PRICE OF PRICE OF PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER 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>
28
<PAGE> 30
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
29
<PAGE> 31
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
30
<PAGE> 32
ACCESS BEYOND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JULY 31, 1997, 1996 AND 1995
ended July 31, 1997 and Penril's operations on a geographic basis for the years
ended 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.
31
<PAGE> 33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Part III is omitted in its entirety because, not later than November 28,
1997, the Company intends to file a definitive proxy statement with the
Securities and Exchange Commission pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
Included in Part II of this report:
Independent Auditors Report......................................... 14
Consolidated Statements of Operations for each of the years ended
July 31, 1997, 1996 and 1995..................................... 15
Consolidated Balance Sheets as of July 31, 1997 and 1996............ 16
Consolidated Statements of Cash Flows for each of the years ended
July 31, 1997, 1996 and 1995..................................... 17
Consolidated Statements of Stockholders' Equity for the years ended
July 31, 1997, 1996, and 1995.................................... 18
Notes to the Consolidated Financial Statements for the years ended
July 31, 1997, 1996, and 1995.................................... 19
2. Financial Statement Schedules
Included in Part IV of this report:
Independent Auditors' Report on Schedule............................ 36
Schedule II -- Valuation and Qualifying Accounts.................... 37
Other schedules are omitted because of the absence of conditions under
which they are required or because they required information is given in the
Financial Statements or notes thereto.
3. Exhibits
The exhibits are set forth on the attached Exhibit Index which is
incorporated by reference. Exhibits are included only in the copies of this Form
10-K filed with the Securities and Exchange Commission and NASDAQ.
4. Reports on Form 8-K
None
32
<PAGE> 34
INDEX TO EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
2.1 Plan and Agreement of Merger dated as of June 16, 1996 among Penril DataComm
Networks, Inc. ("Penril"), Bay Networks, Inc. ("Bay"), and Beta Acquisition Corp.
("Beta") (filed as Exhibit 2.1 to the registration statement on Form S-1, as
amended (Commission File Number 333-10741)).
2.2 Amended Plan and Agreement of Merger dated August 5, 1996 among Penril, Bay and
Beta (filed as Exhibit 2.2 to the Penril Form 10-K filed October 7, 1996)
2.3 Agreement and Plan of Reorganization between Access Beyond, Inc. (the "Company")
and Hayes Microcomputer Products, Inc. dated July 29, 1997 (filed as Exhibit 10.1
to the Form 8-K filed August 7, 1997).
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the
registration statement on Form S-1, as amended (Commission File Number 333-10741)).
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the registration statement on Form
S-1, as amended (Commission File Number 333-10741)).
10.1 Technology License Agreement dated as of November 16, 1996 between Penril and the
Company (filed as Exhibit 10.1 to the 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 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 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 registration statement on Form S-1, as
amended (Commission File Number 333-10741)).
*10.5 1986 Incentive Plan of Penril, as amended (filed as Exhibit 4.1 to
Penril Form S-8 filed April 29, 1991).
*10.6 1995 Long-Term Incentive Plan of Penril (filed as Exhibit
4.4 to the Penril Form S-8 filed May 31, 1996).
*10.7 1987 Non-Employee Directors' Stock Option Plan of Penril,
as amended (filed as Exhibit 4.1 to Penril Form S-8 filed April 29, 1991).
10.8.1 Lease Agreement between the Company and Real Estate Income Partners dated as of
March 31, 1989, as amended on May 14, 1990 and November 15, 1996.
10.8.2 Assignment and Assumption of Lease between Penril and the Company, dated as of
November 18, 1996.
*10.9 The Company's Amended and Restated 1996 Long-Term Incentive Plan.
*10.10 Form of Option Agreement for the grant of non-qualified options under the Amended
and Restated 1996 Long-Term Incentive Plan.
*10.11 The Company's Amended and Restated 1996 Non-Employee Directors' Stock Option Plan.
*10.12 Form of Option Agreement for the grant of options under the Amended and Restated
1996 Non-Employee Directors' Stock Option Plan.
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
10.13 2290 Remote Access Gateway ("Hawk") Technology Transfer Agreement dated as of May
2, 1997 entered into between the Company and Paradyne Corporation.
10.14 Stock Purchase Agreement dated as of May 2, 1997 between the Company and Paradyne
Corporation, as amended in September 1997.
*10.15 Employment Agreement dated as of November 18, 1996 entered into between the Company
and Ronald A. Howard.
10.16 Manufacturing Agreement dated as of March 1, 1997 between the Company and Hibbing
Electronics Corporation.
10.17 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.
21. List of subsidiaries of the Company.
27. Financial Data Schedule.
</TABLE>
- ---------------
* Management contract, compensation plan or arrangement
(b) Financial Statement Schedules
Independent Auditor's Report on Schedule
Schedule II -- Valuation and Qualifying Accounts
34
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Gaithersburg,
Maryland on October 14, 1997.
Access Beyond, Inc.
By /s/ RONALD A. HOWARD
------------------------------------
Ronald A. Howard
President, Chief Executive Officer,
and Chairman of the Board of
Directors
Date: October 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ BARBARA PERRIER Director October 14, 1997
- ------------------------------------------
Barbara Perrier
/s/ PAUL SCHALLER Director October 14, 1997
- ------------------------------------------
Paul Schaller
/s/ JOHN HOWARD Director October 14, 1997
- ------------------------------------------
John Howard
/s/ ARTHUR SAMBERG Director October 14, 1997
- ------------------------------------------
Arthur Samberg
/s/ RONALD A. HOWARD President, Chief Executive October 14, 1997
- ------------------------------------------ Officer, and Chairman of the
Ronald A. Howard Board of Directors
/s/ MARK R. FIELDS Controller and Acting Chief October 14, 1997
- ------------------------------------------ Financial Officer
Mark R. Fields
</TABLE>
35
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
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 herein. Our audits also included
the financial statement schedule of Access Beyond, Inc. listed in Item 14. 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 reaction 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)
36
<PAGE> 38
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C COLUMN D
COLUMN B ----------------------- ------------- COLUMN E
---------- CHARGES TO RECOVERY WRITE-OFF ----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS BALANCE AT S, G & A OF BAD OF BAD DEBTS, BALANCE AT
APPLICABLE TO ACCOUNTS RECEIVABLE AUGUST 1, EXPENSES DEBTS(A) OTHER(B) JULY 31,
- ------------------------------------- ---------- ---------- -------- ------------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Fiscal 1997.......................... $ 554 $462 $ 91 $ (893) $215
Fiscal 1996.......................... $1,067 $502 $ 20 $(1,035) $554
</TABLE>
- ---------------
(a) Included in the fiscal 1997 recovery of bad debts was and 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 the fiscal 1997 write-off of bad debts was $250,000 of reserves
transferred to Bay Networks, Inc. related to the Spin-off and Merger
transaction with Bay Networks, Inc.
37
<PAGE> 39
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
2.1 Plan and Agreement of Merger dated as of June 16, 1996 among Penril DataComm
Networks, Inc. ("Penril"), Bay Networks, Inc. ("Bay"), and Beta Acquisition Corp.
("Beta") (filed as Exhibit 2.1 to the registration statement on Form S-1, as
amended (Commission File Number 333-10741)).
2.2 Amended Plan and Agreement of Merger dated August 5, 1996 among Penril, Bay and
Beta (filed as Exhibit 2.2 to the Penril Form 10-K filed October 7, 1996)
2.3 Agreement and Plan of Reorganization between Access Beyond, Inc. (the "Company")
and Hayes Microcomputer Products, Inc. dated July 29, 1997 (filed as Exhibit 10.1
to the Form 8-K filed August 7, 1997).
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the
registration statement on Form S-1, as amended (Commission File Number 333-10741)).
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the registration statement on Form
S-1, as amended (Commission File Number 333-10741)).
10.1 Technology License Agreement dated as of November 16, 1996 between Penril and the
Company (filed as Exhibit 10.1 to the 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 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 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 registration statement on Form S-1, as
amended (Commission File Number 333-10741)).
*10.5 1986 Incentive Plan of Penril, as amended (filed as Exhibit 4.1
to Penril Form S-8 filed April 29, 1991).
*10.6 1995 Long-Term Incentive Plan of Penril (filed as Exhibit 4.4
to the Penril Form S-8 filed May 31, 1996).
*10.7 1987 Non-Employee Directors' Stock Option Plan of Penril, as amended
(filed as Exhibit 4.1 to Penril Form S-8 filed April 29, 1991).
10.8.1 Lease Agreement between the Company and Real Estate Income Partners dated as of
March 31, 1989, as amended on May 14, 1990 and November 15, 1996.
10.8.2 Assignment and Assumption of Lease between Penril and the Company, dated as of
November 18, 1996.
*10.9 The Company's Amended and Restated 1996 Long-Term Incentive Plan.
*10.10 Form of Option Agreement for the grant of non-qualified options under the Amended
and Restated 1996 Long-Term Incentive Plan.
*10.11 The Company's Amended and Restated 1996 Non-Employee Directors' Stock Option Plan.
*10.12 Form of Option Agreement for the grant of options under the Amended and Restated
1996 Non-Employee Directors' Stock Option Plan.
10.13 2290 Remote Access Gateway ("Hawk") Technology Transfer Agreement dated as of May
2, 1997 entered into between the Company and Paradyne Corporation.
10.14 Stock Purchase Agreement dated as of May 2, 1997 between the Company and Paradyne
Corporation, as amended in September 1997
*10.15 Employment Agreement dated as of November 18, 1996 entered into between the Company
and Ronald A. Howard.
10.16 Manufacturing Agreement dated as of March 1, 1997 between the Company and Hibbing
Electronics Corporation.
10.17 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.
21. List of subsidiaries of the Company.
27. Financial Data Schedule.
</TABLE>
- ---------------
* Management contract, compensation plan or arrangement
<PAGE> 1
EXHIBIT 10.8.1
NORTHTECH BUSINESS PARK LEASE
Landlord: Real Estate Income Partners, III,
Limited Partnership,
a Delaware limited partnership
Tenant: Penril Corp,.
a Delaware corporation
PROPERTY: 1300 Quince Orchard Blvd.
Gaithersburg, Maryland
DATE: March 31, 1989
<PAGE> 2
NORTHTECH BUSINESS PARK LEASE
THIS LEASE AGREEMENT made this 31st day of March, 1989, by and between
Real Estate Income Partners III, Limited Partnership, a Delaware limited
partnership ("Landlord"), and Penril Corp., a Delaware corporation ("Tenant").
W I T N E S S E T H:
1. LEASE PREMISES
Tenant hereby leases from Landlord for the term, at the rental and upon
the conditions set forth herein, approximately 54,874 square feet of office
space in that building known as 1300 Quince Orchard Boulevard, Gaithersburg,
Maryland, as shown and described on the floor plan attached to this Lease as
Exhibit "A" (the "Premises"), which is a part of NorthTech Business Park, as
more fully shown in the site plan attached to this Lease as Exhibit "B."
2. TERM AND POSSESSION
A. Term
The term of this Lease ("Term" ) shall be one hundred nineteen (119)
months, plus any initial partial month, commencing on the later to occur of
August 1, 1989, or the date Landlord tender possession of the Premises to Tenant
in a condition reasonably satisfactory to Tenant, minor punchlist items
excepted, or would have done so but or Tenant's acts or omission (the
"Commencement Date"), unless terminated sooner pursuant to any provision hereof.
B. Possession
If Landlord should be unable to deliver possession of the remises
to Tenant on January 1, 1990 for any reason, Landlord shall O.T. be subject to
any liability for failure to deliver possession by said due, except as provided
in this Section 2.B. Tenant shall not be obligated to pay rent until the
Commencement Date. Should tender of possession of the Premises be later than
August 1, 1989, then and in that event, the Commencement Date of this Lease
shall be adjusted by letter from Landlord to Tenant, to conform to such date,
such as if the same had been originally named as the Commencement Date, and this
Lease shall run for the full Term; provided that any failure to deliver
possession by August 1, 1989, shall not in any other respect affect the validity
of this Lease or the obligations of Tenant hereunder, except as otherwise stated
herein. If permission is given to Tenant to enter into possession of the
Premises prior to the Commencement Date, Tenant covenants and agrees that such
occupancy shall be under all the terms, covenants and condition of this Lease,
except for payment of Basic monthly rental. Except or minor punchlist items,
Tenant's occupancy shall be deemed acceptance of possession of the Premises and
shall be conclusive evidence that the Premises are in good order and
satisfactory condition at the time of possession. Notwithstanding anything to
the contrary herein, if Landlord is for reasons other than Tenant's acts
1
<PAGE> 3
or omissions to tender possession of the Premises to Tenant in a condition
reasonably satisfactory to Tenant, minor punchlist items excepted, by January 1,
1990, this Lease shall be subject to termination at the sole option and
discretion of Tenant. In that event, Tenant may elect to terminate this Lease by
giving written notice to Landlord within ten (10) days after January 1, 1990. If
Tenant gives such notice, the Lease shall be terminated and neither Landlord nor
Tenant shall have any further obligations to the Other. If Tenant does not give
such notice, Tenant's right to terminate the Lease shall expire and the Lease
Term shall commence in accordance with Section 2.A.
3. RENT
Tenant shall pay to Landlord as rent for the Premises for the Term the sum
of Six Million Thirty-Five Thousand Eight Hundred Sixty-Five and 67/100 Dollars
($6,035,865.67) and any additional initial partial monthly payment of Basic
Monthly Rental as defined below (collectively, the "Base Rent"). The Base Rent
shall be payable in monthly installments (subject to proration for partial
months as hereinafter provided) in advance on the first day of each calendar
month during the term hereof, as follows:
<TABLE>
<CAPTION>
Period Basic Monthly Rental
------ --------------------
<S> <C>
Month 1 through and including
month 12 and any initial
partial month $25,150.58
Month 13 through and including
month 4 34,296.25
Month 25 through and including
month 36 45,728.33
Month 37 through and including
month 48 52,587.58
Month 49 through and including
month 60 54,142.35
Month 61 through and including
month 72 55,788.57
Month 73 through and including
month 84 57,480.52
Month 85 through and including
month 96 59,218.19
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
Month 97 through and including
month 108 61,001.60
Month 109 through and including
month 119 62,830.73
</TABLE>
The first monthly installment shall be payable upon the execution of this
Lease and the remaining installments shall be payable, in advance, without
notice or demand, on the first day of each month during the aforesaid term. Each
monthly installment shall hereinafter be referred to as the "Basic Monthly
Rental." Should the term of this Lease commence on a day other than the first
day of a calendar month, Tenant agrees the Base Rent, Basic Monthly Rental and
any Additional Rent (as defined below) for that month shall be prorated and
adjusted accordingly, and rent for the remaining months shall be due and payable
on the first of the month as provided above. The Basic Monthly Rental and any
Additional Rent or sum due to Landlord shall be paid to Landlord at 27611 La Paz
Road, Laguna Niguel, California 92656, or to such other party or other address
as Landlord may from time to time designate by written notice to Tenant.
4. CONDITION OF PREMISES WHEN POSSESSION IS TENDERED
Landlord shall tender possession of the Premises to Tenant in a condition
reasonably satisfactory to Tenant, minor punchlist terms excepted, and all items
therein to be furnished by Landlord to Tenant are warranted by Landlord to be of
good, workmanlike quality and operating condition. The items to be furnished by
Landlord are described in Exhibit "C, identified as the Outline Specification
which is attached hereto and made a part hereof, and Landlord shall commence to
furnish such items as promptly as reasonably possible after June 30, 1989.
Landlord warrants that it shall comply with all applicable laws and has obtained
all applicable licenses in connection with furnishing such items. Tenant shall
have the right to inspect the Premises and all of the items installed therein or
appertaining thereto prior to taking possession at time agreed to by the
parties, and deliver to Landlord in writing within ten (10) working days
thereafter, a checklist of those items that are not in good, operating or
workmanlike condition. Landlord shall, within fifteen (15) day, commence to
cure, at Landlord's sole expense, any bona fide Defects in the Premises or any
of the items to be provided by Landlord and Landlord shall complete the same as
soon as reasonably practical. It is expressly agreed by Tenant that the
Commencement Date of this Lease shall not be delayed, and rent shall not be
abated, during the period Landlord undertakes to cure any minor punchlist defect
o the Premises or items installed by Landlord. However, if defects are of such a
nature as to render the Premises unusable or Tenant's business purposes as
reasonably determined by Tenant, possession of the Premises will be delayed
until Such defects are remedied and the Commencement Date shall be extended
until the substantial defects are cured; provided that if such substantial
defects are not cured to Tenant's reasonable satisfaction by January 1, 1990,
Tenant shall have the right to terminate this Lease in accordance with Section
2.B. Tenant improvements other than those described in Exhibit "C" shall be
installed at Tenant's sole cost and expense and such installation shall be
subject to the provisions of Article 11. It is understood that Landlord will
provide for the benefit of Tenant up to Ten Dollars ($10.00) per rentable square
foot (approximately $548,740.00)
3
<PAGE> 5
to accomplish the items described in Exhibit "C," and it is agreed that Landlord
will furnish Tenant with bills and invoices which show the total amount Landlord
has expended to accomplish or pay for the items. In the event that the actual
amount expended is less than $48,740.00, then up to the difference between the
actual amount expended and $548,740.00 shall be available to Tenant to use for
the following purposes: Tenant's moving costs, purchase of a telephone system,
or additional improvements to the building which Tenant may desire, provided
Tenant will furnish Landlord with bills and invoices which should the total
amount expended for these purposes.
5. LEASE IS NET NET NET
A. Tenant's Direct Responsibility
Except for those items Landlord is responsible or pursuant to
Section 10.A., Tenant shall provide and pay for the upkeep o the Premise and all
appliances and fixtures installed therein, and all of the mechanical, electrical
and plumbing systems pertaining thereto including, but not limited to, the
following:
(i) Tenant covenants and agrees to pay all charges for gas,
electricity, light, heat, power, telephone and other utilities, water, sewer,
and other energy and/or environmental charges or surcharges, used, rendered or
supplied to or for the Premises and to contract for the same in Tenant's own
name and to make payments for the same directly to the supplier.
(ii) Tenant shall provide and pay for its own housekeeping services;
for keeping its exterior windows clean and for maintaining its entrances free
and clear of dirt and debris.
(iii) Tenant shall provide and pay or the repair and maintenance of
the heating, ventilating and air-conditioning unit(s) and all ducts and vents
related thereto and shall obtain at Tenant's own cost and expense a service
contract with company satisfactory to Landlord, for the maintenance and repair
of heating, ventilating and air-conditioning unit(s) and all ducts and vents and
other electrical and mechanical systems and other systems related thereto (it
shall be Landlord's obligation to ensure that the heating, ventilating and
air-conditioning unit(s) and all ducts and vents and other electrical and
mechanical systems and other systems related thereto are in a condition
reasonably satisfactory for Tenant to obtain such service contracts). A copy of
said service contract shall be furnished to Landlord and the service contracts
shall recite that either Landlord or Tenant may request service pursuant to the
terms of said contract, provided, however, that any requests by Landlord will be
reasonable and Tenant shall be provided with notice of any such requests.
(iv) Tenant shall provide an pay for the repaid and maintenance of
all electrical wires, utility lines, electrical outlets and fixtures installed
in the Premises.
(v) Tenant shall provide and pay for maintenance and repair of all
pipes, sinks, lavatories, toilets, sprinkler systems or other plumbing fixtures
installed in the Premises.
4
<PAGE> 6
(vi) Tenant shall provide and pay for maintenance and repair of all
exterior and interior doors, floors, ceilings, walls and windows at the
Premises.
(vii) Tenant shall provide an pay for the maintenance and repair of
any other mechanical or non-mechanical systems that specifically serve the
Premises.
(viii)Tenant shall provide and pay for any other services or
maintenance or repair which relate specifically to the Premises including, but
not limited to, trash and snow removal, parking areas and walks and landscaped
areas.
To the extent Landlord shall receive guaranties for any of the items
of work pertaining to Tenant's Premises and to the extent such
guaranties are still in force and may be assigned, Landlord shall
assign such guaranties to Tenant, provided, however, the parties
understand that Landlord will have no responsibility for enforcing
such guaranties and that such enforcement shall be solely the
responsibility of Tenant. Landlord's responsibility for the
maintenance or repair of the Premises shall cease upon delivery of
possession to Tenant, except as otherwise herein specified.
B. Operating Charges
In addition to the rent set forth in Article 3 above, Tenant further
covenants and agrees to pay to Landlord as additional rent ("Additional rent"),
payable pursuant to the provisions herein:
(i) All real estate taxes and other taxes, licenses, permits,
assessments made by governmental authorities and any and all other governmental
charges or fees ("Taxes");
(ii) All liability, casualty, extended risk, rental interruption,
and other insurance coverages deemed reasonably necessary by Landlord which
relate to the Premises ("Insurance"); and
(iii) The aggregate of all costs and expenses incurred by Landlord
in connection with the operation and maintenance of the Premises ("Operating
Costs"). Such Operating Costs shall include, but not be limited to, the
following:
(a) Public agency inspection fees or charges;
(b) legal and consulting fees and expenses;
(c) Management fees and compensation (including employment
taxes and fringe benefits) of all employees who perform duties in connection
with the operation, maintenance and repair of the Premises;
5
<PAGE> 7
(d) Any other reasonable costs or expenses incurred by
Landlord for the benefit of Tenant which are not otherwise paid directly by
Tenant.
Tenant shall pay to Landlord, as Additional Rent, commencing
on the Commencement Date, and continuing on the first day of each calendar month
thereafter, an amount equal to one-twelfth (1/12th) of the then estimate Taxes
and Insurance for such year. The Taxes and Insurance are estimated to be Ninety
Six Thousand Nine Hundred Thirty-Seven and No/100 Dollars ($96,937.00) and Five
Thousand Twenty-Four and No/100 Dollars ($5.024.00), respectively, in calendar
1989. Thereafter, Landlord shall deliver to Tenant a written estimate of the
anticipated Taxes and Insurance for that calendar year.
On or before March 1 of each year following the Commencement
Date, Landlord shall furnish to Tenant a statement showing the total actual
Taxes and insurance for the calendar year just ended, including such reasonable
detail as may be requested by Tenant. If the amount of estimated Taxes and
actual Taxes and Insurance for such year, such excess shall be credited against
the next installment of Tenant's Taxes and Insurance due from Tenant to Landlord
hereunder. If the estimated Taxes and Insurance for such year are less than the
actual Taxes and Insurance for such year, Tenant shall pay to Landlord, within
thirty (30) days of Tenant's receipt of Landlord's statement, as Addition rent,
a sum equal to the difference between the actual Taxes and Insurance actually
paid. In the event the Term of this Lease expires, or this Lease is otherwise
terminated, Landlord shall compute the credit or deficiency up to the date the
Lease expired or was terminated, and the appropriate party shall immediately pay
the other party in accordance with such calculations.
In addition, Tenant shall pay to Landlord, as Additional Rent,
commencing on the Commencement Date and continuing on the first day of each
calendar month thereafter, an amount equal to one-twelfth (1/12th) of the
Operating Costs for such year. The Operating Costs are estimated to be
Forty-Four Thousand One and No/100 Dollars ($44,001.00) in calendar 1989.
Thereafter, Landlord shall deliver to Tenant a written statement of the
Operating Costs, due and payable by Tenant to Landlord, for that calendar year.
On or before March 1 of the year immediately following the
Commencement Date, Landlord shall furnish to Tenant a statement showing the
total actual Operating Costs for the calendar year just ended, including such
reasonable detail as may be requested by Tenant. If the amount of estimated
Operating Costs paid by Tenant for such year exceeds the actual Operating Costs
for such year, such excess shall be credited against the next installments of
Tenant's Operating Costs due from Tenant to Landlord hereunder. If the estimated
Operating Costs for such year are less than the actual Operating Costs for such
year, the Tenant shall pay to Landlord, within thirty (30) days of Tenant's
receipt of Landlord's statement, as Additional rent, a sum equal to the
difference between the actual Operating Costs and the estimated Operating Costs
actually paid, provided, however , that the difference due from Tenant and
payable to Landlord shall not exceed Four Thousand Four hundred and No/100
Dollars ($4,400.00). Landlord and Tenant agree that the aggregate Operating
Costs, due and payable by Tenant, will increase three percent (3%) per annum,
6
<PAGE> 8
effective on the first day of January, for each and every calendar year after
the Commencement Date; that is, the aggregate Operating Costs shall be one
hundred three percent (103%) of the total Operating Costs due and payable for
the immediately preceding calendar year. In the event this Lease is terminated,
Landlord shall compute the credit or deficiency up to the date the Lease was
terminated, and the appropriate party shall immediately pay the other party in
accordance with such calculations.
6. LAST MONTH'S RENT
Upon occupancy of the Premises, Tenant shall deposit the sum of
Sixty-Two Thousand Eight Hundred Thirty and 73/100 Dollars ($62,830.73) with
Landlord as Basic monthly rent for the last month of the term. In the event the
Term of this Lease expires, or this Lease is otherwise terminated, Landlord
shall be entitled to retain said Last Month's Rent. In the event this Lease
shall be terminated due to Landlord's breach, or for any reason other than
default or breach by Tenant, then to the extent that the Last Month's rent
exceeds the applicable Basic Monthly Rent for the last valid month of the Lease
prior to such termination, such excess shall be promptly returned by Landlord to
Tenant, otherwise Landlord shall retain said Last Month's rent in addition to
the other remedies provided herein and by law. Upon any sale or transfer of its
interest, Landlord shall transfer the Last Month's rent to its successor in
interest with the specific understanding and acknowledgment of said successor
that Tenant shall be duly credited with such Last Month's Rent, and thereupon,
Landlord shall be released from any liability or obligation with respect
thereto.
7. INSURANCE
A. Tenant
During the term of this Lease, Tenant shall keep the following
insurance in full force and effect:
(i) Comprehensive general liability insurance for the benefit
of Tenant and Landlord, who will be named as an additional insured with Tenant.
The insurance shall cover claims for personal injury, bodily injury, death or
property damage. Said insurance shall protect Landlord against claims by Tenant,
its employees, agents, invitees or contractors, or third parties. The coverage
limits shall not be less than One Million and No/100 Dollars ($1,000,000.00)
combined single limit per occurrence; such insurance may be furnished under a
primary policy and an "umbrella" policy, provided that it is primary insurance
and not excess over or contributor with any insurance in force for Landlord. The
amount and coverage of such insurance shall not relieve or limit Tenant's
liability for any obligation under this Lease;
(ii) A policy of fire, extended coverage, and vandalism and
malicious mischief insurance, insuring the personal property, furniture,
furnishings and fixtures belonging to Tenant located on the Premises for not
less than one hundred percent (100%) of the actual replacement value thereof;
and
7
<PAGE> 9
(iii) Workmen's Compensation insurance covering Tenant's
employees.
The insurance coverages described in subparagraphs (i), (ii)
and (iii) above shall be at Tenant's sole cost and expense and shall contain a
waiver of subrogation against Landlord.
Each insurance policy obtained by Tenant pursuant to this
Lease shall contain a clause that the insurer will provide Landlord with at
least thirty (30) days prior written notice of any material change, non-renewal
or cancellation of the policy and shall be in a form and from an insurance
company satisfactory to Landlord and shall be procured from an insurance company
authorized to do business in the state of Maryland. In addition, any insurance
policies obtained by Tenant shall be written as primary policies,
non-contributing with or in excess of any coverage which Landlord may carry,
with loss payable clauses satisfactory to Landlord and in favor of Landlord and
naming Landlord as an additional insured. The liability limits of the
above-described insurance policies shall in no manner limit the liability of
Tenant under the terms of Article 8 below. Not more frequently than every two
(2) years, if, in the opinion of Landlord, the amount of liability insurance
specified in this Article is not adequate, the above-described limits of
coverage shall be reasonably adjusted by Landlord, by written notification to
Tenant.
If, on account of the failure of Tenant to comply with the
provisions of this Article, Landlord is deemed a co-insurer by its insurance
carrier, then any loss or damage which Landlord shall sustain by reason thereof
shall be borne by Tenant and shall be immediately paid by Tenant upon receipt of
a bill therefore and evidence of such loss.
On or before the Commencement Date and from time to time
thereafter within ten (10) days of Landlord's request therefor, Tenant shall
provide Landlord with a certificate of insurance for each insurance policy
required by this Lease. In the event such certificates of insurance are not
provided to Landlord in a timely manner, Landlord at its sole option, may
declare this Lease in default and exercise any and all of the remedies herein
provided in the event of a default by Tenant, or Landlord may provide in the
event of a default by Tenant, or Landlord may provide the appropriate insurance
coverage set forth hereinabove and charge the cost thereof to the Tenant as
Additional Rent.
B. Landlord
Landlord shall, during the Term hereof, keep in full force and
effect the following insurance:
(i) A policy of fire, extended coverage and vandalism and
malicious mischief insurance insuring the Premises, in an amount at least equal
to the full replacement cost thereof; and
8
<PAGE> 10
(ii) Such other insurance as Landlord deems reasonably
necessary in its sole absolute discretion.
Such insurance policies shall be issued in the names of
Landlord and Landlord's lender if Landlord's lender so requires, as their
interests appear. The insurance policies shall provide that any proceeds shall
be made payable to Landlord, or to the holders of mortgages or deeds of trust
encumbering Landlord's interest in the Premises, as their interests shall
appear. All insurance premiums for Landlord's insurance shall be included in the
Operating Costs. Such insurance policies may provide for reasonable deductibles.
8. INDEMNITY
Tenant shall defend and indemnify Landlord and save it harmless from
and against any and all liability, damages, costs, or expenses, including
attorney's fees, arising from any act, omission or negligence of Tenant or its
officers, contractors, licensees, agents, servants, employees, guests, invitees,
or visitors in or about the Premises, or arising from any breach or default
under this Lease by Tenant or arising from any accident, injury or damage,
howsoever, and by whomsoever caused, to any person or property occurring in or
about the Premises, except for any liability imposed upon Landlord in connection
with pre-material problems not caused by Tenant. All property of Tenant kept or
stored on the Premises shall be so kept or stored at the risk of Tenant only,
and Tenant shall hold Landlord harmless from any claims by Tenant's insurance
carriers, unless such damage shall be caused by the negligence of Landlord. None
of the events or conditions set forth in this paragraph shall be deemed a
constructive or actual eviction or entitle Tenant to any abatement or reduction
or rent.
9. USE OF PREMISES
A. Permitted Uses
Tenant shall use the Premises for general office use,
planning, engineering, design, development and implementation of products and
services (excluding heavy manufacturing), computer operations, software and
hardware development and light assembly and storage reasonably related to such
uses, and for such other lawful purposes as may be incidental thereto, and for
no other use. Notwithstanding the above, Tenant shall not do or permit anything
to be done in or about the Premises which will allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.
B. Compliance With Laws
Tenant shall not use the Premises in any way (or permit or
suffer anything to be done in or about the Premises) which will conflict with
any law, statute, ordinance or governmental rule or regulation, or of any
covenant, condition or restriction (whether or not of public
9
<PAGE> 11
record) affecting the Premises, now in force or which may hereafter be enacted
or promulgated. Except for those items Landlord is responsible for pursuant to
Section 10.A., Tenant shall, at its sole cost and expense, promptly comply with
(i) all laws, statutes, ordinances and governmental rules and regulations, now
in force or which may hereafter be in force, (ii) all requirements, covenants,
conditions and restrictions, now in force or which may hereafter be in force and
(iii) all requirements, now in force or which may hereafter be in force, of any
board of fire underwriters or other similar body now or hereafter constituted
relating to or affecting Tenant's use or occupancy of the Premises. The judgment
of any court of competent jurisdiction or the admission by Tenant in any action
against Tenant, whether Landlord be a party thereto or not, that Tenant has
violated any law, statute, ordinance, governmental rule or regulation or any
requirement, covenant, condition or restriction shall be conclusive of the fact
as between Landlord and Tenant. Tenant agrees to fully indemnify Landlord
against any liability, claims or damages arising as a result of a breach of the
provisions of this Article 9 by Tenant, and against all costs incurred by
Landlord in connection therewith, which indemnity shall survive the expiration
or earlier termination of this Lease.
As used in this Lease, the term "Hazardous Material" means any
flammable items, explosives, radioactive materials, hazardous or toxic
substances, material or waster or related materials, including any substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials" or"toxic substances" now or subsequently
regulated under any applicable federal, state or local laws or regulations,
including without limitation, petroleum-based products, paints solvents, lead,
cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other
chemical products, asbestos, PCBs and similar compounds, and including any
different products and materials which are subsequently found to have adverse
effects on the environment or the health and safety of person. Tenant shall not
cause or permit any Hazardous Material to be generated, produced, brought upon,
used, stored, treated or disposed of in or about the Premises by Tenant, its
agents, employees, contractors, sublessees or invitees without the prior written
consent of Landlord. Landlord shall be entitled to take into account such other
factors or facts as Landlord may reasonably determine to be relevant in
determining whether to grant or withhold consent to Tenant's proposed activity
with respect to Hazardous Material. In no event, however, shall Landlord be
required to consent to the installation or use of any storage tanks on the
Premises. Notwithstanding any other provisions herein to the contrary, it is
understood and agreed that Tenant shall be allowed to use and store the
following substances on the Premises, such substances being required for the
normal business operation of Tenant, so long as there are no laws, rules,
regulations or requirements prohibiting such use or storage, and provided that
Tenant uses, stores and disposes of said substances all in accordance with all
laws, rules, regulations and requirements pertaining to said substances of any
present or future agency or governmental body having jurisdiction over the use,
storage and disposal of said substances:
10
<PAGE> 12
<TABLE>
<S> <C>
1. Ammonium Hydroxide Ozalid machine developer non-
flammable.
2. Phosphoric Acid Ammonia vapor absorber (Ozalid
machine) non-flammable.
3. Blaco-Tron TB+ Tricholorotrifuorenthane ethyl alcohol
mixture (Freon + alcohol) non-
flammable.
4. Alpha #2110 Rosin cleaner (Saponifier) non-
flammable.
5. Hollis 600 Soldering (tinning) fluid non-
flammable.
6. Alpha #K183 Organic-activated flux, alcohol based,
flammable. Stored in approved safety
cabinet. Approved by Federal ,state
and City of Gaithersburg.
7. Flux Thinner Ethyl alcohol, denatured, flammable.
Stored in approved cabinets as above.
8. Alpha #K2165 Scale strip. Acid used to clean PCB
cleaner. Non-flammable.
</TABLE>
C. Landlord's Rules and Regulations
Tenant shall, and Tenant agrees to cause its agents, servants,
employees, invitees, and licensees to observe and comply fully and faithfully
with the rules and regulations (the "Rules") attached hereto as Exhibit "D" or
such rules and regulations which may hereafter be adopted by Landlord for the
care, protection, cleanliness, and operation of the Premises and any
modifications or additions to the Rules adopted by Landlord; provided that,
Landlord shall give written notice thereof to Tenant.
10. MAINTENANCE AND REPAIRS
A. Landlord's Obligations
Landlord shall keep in good condition and repair, at Landlord's cost
and expense, foundations, exterior walls, structural condition of interior
bearing walls, and roof of the Premises; provided, however, Landlord shall not
be required to make any repairs that are th obligation of
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<PAGE> 13
Tenant hereunder, or repairs for damage caused by any negligent or intentional
act or omission of Tenant or any person claiming though or under Tenant or any
of Tenant's employee's suppliers, shippers, customers of invitees, in which
event Tenant shall repair such damage at its sole cost and expense. Tenant shall
promptly give Landlord written notice of defects or needed repairs which are
Landlord's obligations hereunder, and Landlord shall promptly repair or cure
such defect. Landlord shall not be liable for, and there shall be no abatement
of rent with respect to, any injury to or interference with Tenant's business
arising from any repair, maintenance, alteration or improvement in and an to any
injury to or interference with Tenant's business arising from any repair,
maintenance, alteration or improvement in and to any portion of the Premises.
ant hereby waives and releases its right to make repairs at Landlord's expense,
except in the vent of an emergency such as when Tenant's business operations are
threatened with immediate and serious disruption (as reasonably determined by
Tenant) and Landlord has not made the needed repair.
B. Tenant's Obligations
In accordance with and as specified in Article 5 above, Tenant shall
make all repairs and replacements as and when Landlord reasonably deems
necessary to preserve in good working order and condition the Premises and every
part thereof including, without limitation, all plumbing, heating, ventilating
and air-conditioning systems, electrical and lighting facilities and equipment
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, windows, doors, cabinets, draperies, window coverings,
carpeting and other floor coverings, plate glass and skylights located within
the Premises and any other repairs not expressly assumed by Landlord hereunder.
Tenant shall, at its sole cost and expense, make all repairs to the Premises
which are required, in the reasonable opinion of the Landlord, as a result of
any misuse or neglect committed or permitted by Tenant or by any subTenant,
agent, employee, or servant of Tenant. In addition, Tenant shall at its sole
cost and expense, repair any damage to the Premises which is caused by any
invitee of Tenant. Tenant shall be required to maintain the Premises in good and
sanitary order, condition and repair at Tenant's sole cost and expense.
C. Landlord's Right to Make Repairs
In the event that Tenant fails to maintain the Premises in good and
sanitary order, condition and repair as required by this Lease, then, following
written notification to Tenant (except in the case of an emergency, in which
case no prior notification shall be required), Landlord shall have the right,
but not the obligation, to enter the Premises and to do such acts and expend
such funds at the expense of Tenant as are required to place the Premises in
good and sanitary order, condition and repair. Any amount so expended by
Landlord shall be paid by Tenant promptly upon demand. Landlord shall have no
liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, fixtures, equipment, furniture or other property or for any
inconvenience or interference with the use of the Premises by Tenant resulting
from Landlord's performance of such maintenance or repair work. However,
Landlord shall be responsible for correcting any negligent maintenance or repair
work performed by Landlord.
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<PAGE> 14
D. Condition of Premises Upon Surrender
Tenant shall, upon the expiration of earlier termination of the
Term, surrender the Premises to Landlord in the same condition as on the date
Tenant took possession, broom clean, however, reasonable wear and tear excepted.
All appurtenances, trade fixtures, improvements, additions and other property
attached to or installed in the Premises, by or on behalf of Tenant, shall be
removed by Tenant if requested by Landlord pursuant to the terms of this Lease,
or shall remain the property of Landlord, at Landlord's option. Any furnishings,
trade fixtures and Tenant's personal property installed on the Premises by
Tenant at Tenant's sole cost and expense, that are removable without material
damage to the Premises, whether the property of Tenant or leased by Tenant,
shall be and remain the property of Tenant and, at the expiration of the Term
shall be removed by Tenant at Tenant's sole cost and expense. Tenant shall
promptly repair any damage to the Premises resulting from such removal. Any of
Tenant's property not removed from the Premises prior to the expiration of the
Term shall, at Landlord's option, either become the property of Landlord or be
removed by Landlord, and Tenant shall pay to Landlord the cost of such removal
within ten (10) days after delivery of a bill therefore. Any damage to the
Premises, including any structural damage, resulting from Tenant's use or from
the removal of Tenant's fixtures, furnishings and equipment shall be promptly
repaired by Tenant at Tenant's expense.
11. ALTERATIONS, ADDITIONS AND TRADE FIXTURES
Tenant shall not make any alterations, modifications or improvements
to the Premises, or nay part thereof, whether structural or non-structural
(hereinafter "Alterations"), without Landlord's prior written consent which will
not be unreasonably withheld. In order to obtain Landlord's consent, Tenant
shall submit such information as Landlord may require including, without
limitation (i) plans and specification, (ii) permits, licenses and bonds and
(iii) evidence of insurance coverage in such types and amounts and from such
insurers as Landlord deems satisfactory. All Alterations shall be done in a good
and workmanlike manner by qualified and licensed contractors or mechanics, as
approved by Landlord. In no event shall alterations affect the structure of the
Premises or its exterior appearance. Tenant shall indemnify, defend against and
keep Landlord free and harmless from all liability , loss, damage, cost or
attorneys' fees and any other expense incurred on account of claims by any
person performing work or furnishing materials or supplies for Tenant or any
person claiming under Tenant. Landlord may require Tenant to provide Landlord,
at Tenant's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half (1-1/2) times the estimated cost of such improvements, to
insure Landlord against any liability for mechanic's liens and to insure
completion of the work. Landlord shall have the right at all times to post on
the Premises, any notices permitted or required by law, or that Landlord shall
deem proper, for the protection of Landlord, the Premises, and any other party
having an interest therein, from mechanics' and materialmen's liens, and Tenant
shall give to Landlord at least thirty (3) business days notice of commencement
of any construction on the Premises.
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<PAGE> 15
Landlord reserves the right to make alterations, improvements,
modifications or additions to the Premises without the consent of Tenant,
provided, however, that Tenant's use, occupancy and quiet enjoyment of the
Premises is not unreasonably disturbed.
12. ROOF
Tenant agrees that it will not and will not permit, nor cause its
agent, employees, or invitees to, place any thing or material on the roof or in
the gutters and downspouts of the Premises, or to cut, drive nails into or
otherwise penetrate or mutilate the roof without Landlord's prior written
consent.
13. MECHANIC'S LIENS
Tenant shall keep the Premises free from any liens arising out of
any work performed, material furnished or obligation incurred by or for Tenant
or any person or entity claiming through or under Tenant. In the event that
Tenant shall not, within ten (10) days following the imposition of any such
lien, cause the same to be released of record by payment or posting of a proper
bond, Landlord shall have, in addition to all other remedies provided herein and
by law, the right, but not the obligation, to cause such lien to be released by
such means as Landlord deems proper, including payment of the claim giving rise
to such lien. Al such sums paid and expenses incurred by Landlord in connection
therewith shall be payable to Landlord by Landlord in connection therewith shall
be payable to Landlord by Tenant with interest at the rate of one and one-half
percent (1-1/2%) per month (but not to exceed the maximum legal rate) from the
date of payment and shall be due and payable to Landlord by Tenant on demand.
14. ENTRY BY LANDLORD
Landlord reserves and shall at any reasonable and all times have the
right to enter the Premises, subject to Tenant's reasonable security policies
and procedures to inspect the same, and to determine whether Tenant is complying
with its obligations hereunder, to supply any other service to be provided by
Landlord to Tenant hereunder, to exhibit the Premises to prospective purchasers,
mortgagees or Tenants, to post notices of non-responsibility, and to alter,
improve, or repair the Premises and any portion thereof, without abatement of
rent, and may for that purpose erect scaffolding and other necessary structures
that are reasonably required by the character of the work to be performed by
Landlord, provided that the business of Tenant shall not be interfered with
unreasonably. Tenant hereby waives any claim for damages for any injury of
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premiss. For each of the aforesaid purposes, Landlord
shall at all times have and retain a key with which to unlock all of the doors
in, upon and about the Premises, excluding Tenant's vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem
proper to open such doors in the event of any emergency. Any entry to the
Premises or portions thereof obtained by Landlord by any of said means, or
otherwise, shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an eviction,
actual or constructive,
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of Tenant from the Premises, or nay portion thereof. Notwithstanding any
language to the contrary contained hereinabove, Landlord agrees that Landlord
will, except in the case of emergency, give Tenant twenty-four (24) hours notice
before entering Tenant's Premises and will abide by all reasonable rules and
regulations of Tenant including, but not limited to, the provision that
Landlord, its agents or employees will be escorted by security officers or other
employees of Tenant, wear badges and otherwise comply with the reasonable
request of Tenant relating to the maintenance of security.
15. DESTRUCTION
A. Minor Insured Damages
In the event the Premises, or any portion thereof, is damaged or
destroyed by any casualty that is covered by the insurance maintained by
Landlord pursuant to Article 7 above, Landlord shall rebuild and restore the
Premises, and repair the damaged portion thereof, provided that: (i) the amount
of insurance proceeds available to Landlord equal or exceeds the cost of such
rebuilding, restoration and repair; (ii) the damage or destruction has occurred
more than twenty-four (24) months before the expiration of the Term; and (iii)
such rebuilding, restoration or repair is then permitted, under applicable
governmental laws, rules and regulations, to be done in such a manner as to
return the Premises to substantially its condition immediately prior to the
damage or destruction including, without limitation, the same net rentable floor
area. To the extent that insurance proceeds must be paid to a mortgagee or
beneficiary under, or must be applied to reduce any indebtedness secured by, a
mortgage or deed of trust encumbering the Premises, such proceeds, for the
purposes of this Section, shall be deemed not available to Landlord unless such
mortgagee beneficiary permits Landlord to use such proceeds for the rebuilding,
restoration and repair of the Premises. Notwithstanding the foregoing, Landlord
shall have no obligation to repair any damage to, or to replace any of,
Tenant's personal property, furnishings, fixtures, equipment or other such
property or effects of Tenant.
B. Major Damage or Uninsured Damage
In the event the Premises, or any portion thereof, is damaged or
destroyed by any casualty and Landlord is not obligated, under Section A, next
above, to rebuild or restore the Premises or to repair the damaged portion
thereof, then Landlord may, at its option, either: (i) rebuild restore the
Premises and repair the damaged portion thereof; or (ii) terminated this Lease
effective as of the date the damage or destruction occurred. if Landlord does
not give Tenant written notice within thirty (30) days after the damage or
destruction occurs of its election to rebuild or restore the Premises, and
repair the damaged portions thereof, Landlord shall be deemed to have elected to
terminate this Lease.
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C. No Abatement of Rent
There shall be no abatement of rent by reason of damage to or
destruction of the Premises, or any portion thereof, and this Lease shall
continue in full force and effect after such damage or destruction, except that,
to the extent that either: (i) Landlord receives insurance proceeds for loss of
rental income attributable to the Premises; or (ii) the floor area of the
Premiss cannot be reasonably used by Tenant for conduct of its business, the
Basic Monthly Rental shall abate proportionately according to (i) or (ii) above
commencing thirty (30) days after the damage to or destruction of the Premises,
and except that, if Landlord elects to terminate this Lease as provided in
Section B, next above, no obligation shall accrue under this Lease after such
termination. Notwithstanding the provisions of this Article if any such damage
is due to the fault or neglect of Tenant, any person claiming through or under
Tenant, or any of their employees, suppliers, shippers, customer or invitees,
then there shall be no abatement for rent by reason of such damage, unless
Landlord is reimbursed for such abatement pursuant to any rental insurance
policy that Landlord may, in its sole discretion, elect to carry.
D. Termination
Notwithstanding the above, in the event the Premises are destroyed
by fire or other casualty so as to be more than thirty (30%) percent untenable
and its shall require more than ninety (90) days for the Landlord to commence
restoration of same, then either party hereto, upon written notice to the other
party, which notice shall be given within thirty (30) days after such
destruction, may terminate this Lease, in which case, the rent shall be
apportioned and paid to the date of said fire or casualty.
16. DEFAULTS AND REMEDIES
Provided, and it is hereby mutually covenanted and agreed, that if
Tenant shall fail to keep and perform each and every covenant, condition and
agreement herein contained including, but not limited to, the timely payment of
rent, or if Tenant shall abandon or evidence any intention to abandon the
Premises, or if the Premises shall become vacant or deserted, or if the estate
created shall be taken on executions or other process of law, or if Tenant shall
petition to be declared or shall be declared bankrupt or insolvent according to
law, or if any assignment shall be made of Tenant's property for the benefit of
creditors, then and in each and every such case, from thenceforth and at all
times thereafter, at the sole option of Landlord, Tenant's right of possession
shall thereupon cease and terminate, and Landlord shall be entitled to
possession of the Premises, to remove all persons and property therefrom, and to
re-enter the same without further demand of rent or demand of possession of said
Premises, subject, however, to due process of law, and in the event of such
re-entry or retaking by Landlord, Tenant shall nevertheless remain in all events
liable and answerable for the full rental to the date of retaking or re-entry,
and Tenant shall also be and remain answerable in damages for any and all loss
or damage and for the deficiency or loss of rent which Landlord may thereby
sustain in respect of the balance of the Term; and in such case, Landlord
reserves full power, which is hereby acceded by Tenant, to let the said Premises
for the benefit of Tenant, to let the said
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Premises for the benefit of Tenant in liquidation and discharge, in whole or in
part, as the case may be, of the liability of Tenant under the terms and
provisions of this Lease; and such damages, at the option of Landlord, may be
recovered by it at the time of the retaking or re-entry, or in separate actions,
from time to time, as Tenant's obligation to pay rent would have accrued if the
Term had continued, or from time to time as said damages shall have been made
more easily ascertainable by relettings of the Premises.
All rents received by Landlord in any reletting shall be applied:
first, to the payment of such expenses as Landlord may have incurred in
recovering possession of the Premises and in reletting the same; second, to the
payment of any costs and expenses incurred by Landlord either for making
necessary repairs to the Premises or in curing any default on the part of the
Tenant in a covenant or condition herein made binding upon Tenant; and, last,
any remaining rent shall be applied toward the payment of rent due from Tenant
under the terms of this Lease, with interest; and Tenant expressly agrees to pay
any deficiency then remaining. Landlord, however, at its option, may refrain
from terminating Tenant's right of possession, and in such case, may enforce
against Tenant the provisions of this Lease for the full Term hereof; and it is
further provided, that if, under the provisions hereof applicable, summary
process shall be served, and a compromise or settlement therefor shall be made,
it shall not be constituted as a waiver of any breach of any covenant, condition
or agreement as a waiver of any breach of any covenant, condition or agreement
herein contained, shall operate as a waiver of the covenant, condition or
agreement itself, or of any subsequent breach thereof.
No provision of this Lease shall be deemed to have been waived by
Landlord or Tenant unless such waiver shall be in writing signed by Landlord or
Tenant. No payment by Tenant or receipt by Landlord of the lesser amount than
the monthly installments of rent herein stipulated shall be deemed to be other
than on account of the earliest stipulated rent nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to rec over the balance of such
rent or pursue any other remedy provided in this Lease.
17. WAIVER OF JURY TRIAL BY TENANT
Tenant and Landlord waive the right to a jury trial in any suit by
Landlord for possession, or in any other suit or action relating to or arising
from this Lease in which Landlord and Tenant are opposing parties.
18. CONDEMNATION
If the whole of the leased Premises shall be acquired or condemned
by eminent domain for any public or quasi-public use or purpose, then the term
of this Lease shall cease and terminate as of the date of title vesting in the
condemning authority and all rentals shall be paid up
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to that date, and Tenant shall have no claim against Landlord nor the condemning
authority for the value of any unexpired term of this Lease.
If any part of the leased Premises shall be acquired or condemned as
aforesaid, and in the event that such partial taking or condemnation shall
render the leased Premises unsuitable of the business of Tenant, then the term
of this Lease shall cease and terminate as of the date of title vesting in such
proceeding. Tenant shall have no claim against Landlord nor the condemning
authority for the value of any unexpired term of this Lease and rent shall be
adjusted to the date of such termination. In the event of a partial taking or
condemnation which is not extensive enough to render the Premises unsuitable for
the business of Tenant, then Landlord shall promptly, at its cost, restore the
Premises to a condition comparable to its condition at the time the Premises
were tendered to Tenant, pursuant to Article 2, less the portion lost in the
taking, except that Landlord shall not be obligated to repair any damage for
which, or restore the Premises to the extent that, Tenant has been reimbursed by
the condemning authority. Thereafter, this Lease shall continue in full force
and effect with rent adjusted pro rata as to the date and portion of the lost
Premises.
In the event of any condemnation or taking as aforesaid, whether
whole or partial, Tenant shall not be entitled to any part of the award paid for
such condemnation and Landlord is to receive the full amount of such award.
Tenant shall have the right to claim and recover from the condemning
authority, but not from Landlord, such compensation as may be separately awarded
or recoverable by Tenant in Tenant's own right on account of any and all damages
to Tenant's business by reason of the condemnation and for or on account of any
cost or loss to which Tenant might be put in removing Tenant's merchandise,
furniture, fixtures, leasehold improvements and equipment.
Landlord may, without any obligation to Tenant, agree to sell and/or
convey to the condemnor the Premises, or any portion thereof, sought by the
condemnor, without first requiring that any action or proceedings be instituted
or, if instituted, pursued to a judgment.
19. HOLDING OVER
Any holding over after the expiration of the Term, with the consent
of the Landlord, shall be construed to be tenancy from month to month at two
hundred percent (200%) of the rent herein specified (prorate on a monthly basis)
unless Landlord shall specify a different lesser rent in its sole discretion,
together with an amount estimated by Landlord for the monthly Operating Costs
payable under this Lease, and shall otherwise be on the terms and conditions
herein specified as far as applicable. Any holding over without Landlord's
consent shall constitute a default by Tenant and shall entitle Landlord to
re-enter the Premises as provided in Article 14 hereof.
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20. ATTORNEYS' FEES
Tenant shall pay to Landlord all amounts for costs including, but
not limited to, attorneys' fees and amounts paid to any collection agency,
incurred by Landlord in connection with any breach or default by Tenant under
this Lease or incurred in order to enforce or interpret the terms or provisions
of this Lease. Such amounts shall be payable upon demand. In addition, if any
action shall be instituted by either Landlord or Tenant for the enforcement or
interpretation of nay of its rights or remedies in or under this Lease, the
prevailing party shall be entitled to recover from the losing party all costs
incurred by the prevailing party in said action and any appeal therefrom,
including reasonable attorneys' fees and court costs to be fixed by the court
therein. In the event Landlord is made a party to any litigation between Tenant
and any third party, then Tenant shall pay all costs and attorneys' fees
incurred by or imposed upon Landlord in connection with such litigation, unless
Landlord is at fault and such costs and attorneys' fees are not covered by
insurance which Tenant should have obtained pursuant to this Lease.
21. ASSIGNMENT AND SUBLETTING
A. Tenant shall not directly or indirectly, voluntarily or by operation of
law, sell, assign, encumber, pledge or otherwise transfer or hypothecate all or
any part of the Premises or Tenants' leasehold estate hereunder (collectively,
"Assignment"), or permit the Premises to be occupied by anyone other than Tenant
or sublet the Premises (collectively, "Sublease") or any portion thereof without
Landlord's prior written consent in each instance, except as provided in Section
B below, however, Landlord shall not unreasonably withhold its consent.
B. Tenant may assign this Lease or sublease the Premises, without
Landlord's consent, to any corporation which controls, is controlled by or is
under common control with Tenant, or to any corporation resulting from the
merger of or consolidation with Tenant ("Tenant's Affiliate"). In such case, any
Tenant's Affiliate shall assume, in writing, all of Tenant's obligations under
this Lease.
C. If Tenant desires to assign the Lease or sublease the Premises, Tenant
shall have the right, but not the obligation, to offer, in writing, to terminate
the Lease as of a date specified in the offer. If Landlord elects in writing to
accept the offer to terminate as to the portion of the Premises that Tenant
proposes to assign or sublease within twenty (2) days after notice of the offer,
the Lease shall terminate as of the date specified and all the terms and
provisions of the Lease governing termination shall apply. If Tenant has not
offered to terminate this Lease or if Landlord does not so elect to terminate,
the Lease shall continue in effect until otherwise terminated and the provisions
of Section D with respect to any proposed assignment or sublease shall continue
to apply.
D. Tenant's request to enter into an Assignment of this Lease or a
Sublease of the Premises or any portion thereof, shall be set forth by written
notice to Landlord, which notice shall contain: (i) the name of the proposes
assignee, subTenant or occupant; (ii) the nature of the proposed assignee's,
subTenant's or occupant's business to be carried on in the Premises; (iii) the
terms and
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provisions of the proposed Assignment or Sublease; and (iv) such financial
information as Landlord may reasonably request concerning the proposed assignee,
subTenant or occupant.
E. At any time within fifteen (15) days after Landlord's receipt of the
notice specified in Section D above, Landlord may by written notice to Tenant
elect to: (i) sublease itself the portion of the Premises specified in Tenant's
notice hereunder, or any portion thereof; (ii) take an assignment of Tenant's
leasehold estate specified in Tenants' notice hereunder, or any portion thereof;
(iii) consent to the Sublease or Assignment; or (iv) disapprove the Sublease or
Assignment, although Landlord will not unreasonably disapprove such Sublease or
Assignment. In the event Landlord elects to sublease or take an assignment from
Tenant as described in subsection (i) and (ii) above, the rent payable by
Landlord shall be ninety-five (95%) percent of the amount Tenant would have
received from a subTenant.
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of assumption shall not release or discharge the assignee from its liability as
set forth above.
I. Notwithstanding Section 21.H., should Tenant's DataComm Division be
purchased by another person or entity which desires to become the assignee of
Tenant under this Lease, and should said purchaser have a financial condition
and creditworthiness equal to or greater than that of Tenant at the Commencement
Date, as determined by Landlord in Landlord's sole discretion, then, and only
then, will this be and Assignment of the Lease in which the assignee assumes all
of the rights and obligations of the Lease and Tenant is concurrently released
of all rights and obligations hereunder, effective as of the date of said
Assignment.
J. Tenant shall pay Landlord's reasonable expenses for each such proposed
transfer to cover the legal review and processing expenses of Landlord, whether
or not Landlord shall grant its consent to such proposed transfers, Assignments
or Sublease.
22. MORTGAGE PROTECTION/SUBORDINATION
A. Subordination or Superiority of Other Loans
As to any loan that may be secured on the subject realty of which
the Tenant's Premises are a part, the rights of Tenant under this Lease are and
shall be, at the option of Landlord, either subordinate or superior to any first
mortgage or first deed of trust (including a consolidated mortgage or deed of
trust) constituting a lien on the Premises or Landlord's interest therein or any
part thereof, whether such mortgage or first deed of trust has hereto fore been,
or may hereafter be, placed upon the Premises by Landlord, and to any ground or
master lease if Landlord's title to the Premises or any part thereof is or shall
become a leasehold interest. To further assure the foregoing subordination ro
superiority, Tenant shall, upon Landlord's request, together with the request of
any first mortgagee under a mortgage or beneficiary under a first deed of trust
or ground or master lessor, execute any instrument that does not materially and
adversely affect Tenant's rights or duties under this Lease, or instruments
intended to subordinate this Lease, or at the option of Landlord, to make
superior to any first mortgage, first deed of trust, or ground or master lease.
B. Attornment
Notwithstanding the provisions of Section A, next above, Tenant
agrees: (i) to attorn to any mortgagee of a mortgage or beneficiary of a deed of
trust encumbering the Premises and to any party acquiring title to the Premises
by judicial foreclosure, trustee's sale, or deed in lieu of foreclosure, and to
any ground or master lessor, as the successor to Landlord hereunder; (ii) to
execute any attornment agreement reasonably requested by a mortgagee,
beneficiary, ground or master lessor, or party so acquiring title to the
Premises; and (iii) that this Lease, shall remain in force notwithstanding any
such judicial foreclosure, trustee's sale, deed in lieu of foreclosure, or
merger of titles.
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23. ESTOPPEL CERTIFICATE/FINANCIAL STATEMENTS/TRANSFER OF
LANDLORD'S INTEREST
A. Estoppel Certificate
Tenant, at any time and from time to time upon not less than ten
(10) days prior written notice from Landlord, agrees to execute and deliver to
Landlord a statement: (i) certifying that this Lease is unmodified and in full
force and effect, or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect and the
date to which the rent and other charges are paid in advance, if any; and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if they are claimed
evidencing the status of this Lease. Tenant's failure to deliver an estoppel
certificate within such time shall be conclusive upon Tenant that: (i) this
Lease is in full force and effect without modification except as may be
represented by Landlord, (ii) to Tenant's knowledge there are not uncured
defaults in Landlord's performance; and (iii) no rent has been paid in advance
except as set forth in this Lease.
B. Furnishing of Financial Statements
Landlord has reviewed financial statements if so requested of Tenant
and has relied upon the truth and accuracy thereof with Tenant's knowledge and
representations of the truth and accuracy of such statements and that said
statements accurately and fairly depict the financial condition of Tenant. Said
financial statements are an inducing factor and consideration for the entering
into of this Lease by Landlord with Tenant. Tenant shall, at any time and from
time to time upon not less than thirty (30) days prior written notice from
Landlord, furnish Landlord with financial statements as are publicly available,
reflecting Tenant's then financial condition.
C. Liability of Transferee
In the event Landlord shall sell or otherwise convey its title to
the Premises, after the effective date of such sale or conveyance Landlord shall
have no further liability under this Lease to Tenant except as matters of
liability which have accrued and are unsatisfied as of the date of sale or
conveyance, and Tenant shall seek performance solely from Landlord's purchaser
or successor in title.
24. PARKING
Tenant agrees to maintain or cause to be maintained the automobile
parking area and to maintain and operate, or cause to be maintained and
operated, said automobile parking area during the Term of this Lease for the
benefit and use of the customers, service suppliers, other invitees and
employees of Tenant. There will be no additional charges for parking. Whenever
the words "automobile" or "parking area" are used in this Lease, it is intended
that the same shall include, whether in a surface parking area or a parking
structure, the automobile parking stalls, driveways,
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entrances and exist and sidewalks, landscaped area, pedestrian passageways in
conjunction therewith and other areas designed for parking. Tenant shall keep
said automobile parking area in a neat, clean and orderly condition, properly
lighted and landscaped, and shall repair any damages to the facilities thereof.
Nothing contained herein shall be deemed to impose liability upon Landlord for
personal injury or theft, for damage to any motor vehicle, which is suffered by
Tenant or any of its employees, customers, service suppliers or other invitees
in connection with their use of said automobile parking area. Landlord shall
also have the right to establish such reasonable rules and regulations as may be
deemed desirable, at Landlord's sole discretion, for the proper and efficient
operation and maintenance of said automobile parking area. Tenant shall comply
with any such rules and regulations established by Landlord in conjunction
therewith, in its use of said automobile parking area and the use of the same by
Tenant's customers, employees, service suppliers and other invitees. Landlord
shall reasonably cooperate with Tenant in enforcing Tenant's parking rights
against any third parties, which enforcement shall be at Tenant's expense.
25. SIGN AND FLAGPOLE
A. Sign
Tenant shall have the right to install a sign on the exterior
and interior of the Premises indicating the name under which Tenant is
conducting business subject to: (i) governmental regulations; (ii) presentation
to Landlord of a structural report verifying the ability of the Premises to
support such equipment; (iii) providing an indemnification to hold Landlord and
Landlord's agents harmless for any damage resulting from the installation, use
or removal of such equipment; (iv) payment of all costs associated with the
installation, use and removal shall be borne solely by Tenant; (v) the
understanding and agreement that Tenant shall remove such equipment and restore
the condition of the Premises upon Landlord's request at the end of the Term,
within ten (10) days after vacating the Premises. Subject to the foregoing,
Landlord approves Tenant's use of signs as of the Commencement Date of this
Lease.
B. Flagpole
Tenant shall have the right to install a flagpole on the
exterior of the Premises subject to: (i) governmental regulations; (ii)
providing an indemnification to hold Landlord and Landlord's agents harmless for
any damage resulting from the installation, use or removal of such equipment;
(iii) payment of all costs associated with the installation, use and removal
shall be borne solely by Tenant; (iv) the understanding and agreement that
Tenant shall remove such equipment and restore the condition of the Premises
upon Landlord's request at the end of the Term, within ten (10) days after
vacating the Premises. Subject to the foregoing, Landlord approves Tenant's
installation of a flagpole as of the Commencement Date of this Lease.
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26. LATE PAYMENTS: INTEREST AND LATE CHARGES
A. Interest
Except as otherwise provided herein, any amount due from
Tenant to Landlord which is not paid when due shall bear interest at the maximum
rate permitted by law from the date such payment is due until paid, except that
amount spent by Landlord on behalf of Tenant shall bear interest at such rate
from the date of disbursement by Landlord.
B. Late Charges
Tenant hereby acknowledges that in addition to lost interest,
the late payment by Tenant to Landlord of rent or any other sums due hereunder
will cause Landlord to incur other costs not contemplated in this Lease, the
exact amount of which will be extremely difficult and impracticable to
ascertain. Such other costs include, but are not limited to, processing,
administrative and accounting costs. Accordingly, if any installment of rent or
any Additional Rent or other sum due from Tenant shall not be received by
Landlord within five (5) days after such amount shall be due, Tenant shall pay
to Landlord a late charge equal to three percent (3%) of such overdue amount,
not to exceed One Thousand and no/100 ($1,000,000). The parties hereby agree
that (i) such late charge represents a fair and reasonable estimate of the costs
Landlord will incur in processing such delinquent payment by Tenant; (ii) such
late charge shall be paid to Landlord as liquidated damages; and (iii) such late
charges and the payment of interest are distinct and separate from one another
in that the payment of interest is to compensate Landlord for the use of
Landlord's money by Tenant, while the payment of late charges is to compensate
Landlord for the additional administrative expense incurred by Landlord in
handling and processing delinquent payments.
C. No Waiver
Neither assessment nor acceptance of interest or late charges
by Landlord shall constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of its other rights or
remedies under this Lease. Nothing contained in this Article shall be deemed to
condone, authorize, sanction or grant to Tenant an option for the late payment
of rent, additional rent or other sums due hereunder and Tenant shall be deemed
in default with regard to any such payments should the same not be made by the
date on which they are due.
27. OPTION TO EXTEND LEASE TERM
A. Provided Tenant is not in default hereunder and has performed all of
its covenants and obligations hereunder, Tenant shall have one (1) option to
extend the Term of this Lease (the "Option") for a period of one hundred
nineteen (119) months upon the same terms and conditions, except for Basic
Monthly Rental.
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The Basic Monthly Rental during the first year of the
extension shall be adjusted on the alter of August 1, 1999 or the first (1st)
day of the one hundred twentieth (120th) month (the "Rental Adjustment Date"),
to the lesser of the following:
(a) Fixed Adjustment -- the Basic Monthly Rental shall be
increased to Eighty-One Thousand Nine Hundred Forty-Five and 17/100 dollars
($81,945.17) or
(b) Fair Market Rental Value Adjustment -- The Basic Monthly
Rental shall be increased to ninety-five percent (95%) of the "fair market
rental value" of the Premises, determined in the following manner:
1. Not later than one hundred (100) days prior to the
applicable Rental Adjustment Date, Landlord and Tenant
shall meet in an effort to negotiate, in good faith, the
fair market rental value of the Premises as of such
Rental Adjustment Date. If Landlord and Tenant have not
agreed upon the fair market rental value of the Premises
at least ninety (90) days prior to the applicable Rental
Adjustment Date, the fair market rental value shall be
determined by appraisal, by one or more brokers (herein
called "broker(s)") as provided below. Said broker(s)
shall have at least five (5) years' experience in the
sales and leasing of commercial real property in the are
in which the Premises is located.
2. If Landlord and Tenant are not able to agree upon the
fair market rental value of the Premises within the
prescribed time period, then Landlord and Tenant shall
attempt to agree in good faith upon a single Broker not
later than seventy-five (75) days prior to the
applicable Rental Adjustment Date. If Landlord and
Tenant are unable to agree upon a single Broker within
such time period, then Landlord and Tenant shall each
appoint one Broker not later than sixty-five (65) days
prior to the Applicable Rental Adjustment Date. Within
ten (10) days thereafter, the two (2) appointed Brokers
shall appoint a third (3rd) Broker. If either Landlord
or Tenant fails to appoint its Broker within the
prescribed time period, the single Broker appointed
shall determine the fair market rental value of the
Premises. If both parties fail to appoint Brokers within
the prescribed time periods, then the first Broker
thereafter selected by a party shall determine the fair
market rental value of the Premises. Each party shall
bear the cost of its own Broker and the parties shall
share equally the cost of its own Broker and the parties
shall share equally the cost of the single or third
Broker, if applicable.
26
<PAGE> 27
3. For the purposes of such appraisal, the term "fair
market rental value" shall mean the price that a ready
and willing Tenant would pay, as of the applicable
Rental adjustment Date, as monthly rent to a ready and
willing Landlord of property comparable to the Premises
if such property were exposed for lease on the open
market for a reasonable period of time and taking into
account all of the purposes for which such property may
be used. If a single Broker is chosen, then such Broker
shall determine the fair market rental value of the
Premises. Otherwise, the fair market rental value of the
Premises shall be the arithmetic average of the two (2)
of the three (3) appraisals which are closest in amount,
and the third (3rd) appraisal shall be disregarded. In
no event, however, shall the Basic Monthly Rental be
reduced by reason of such computation. Landlord and
Tenant shall instruct the Broker(s) to complete the
determination of the fair market rental value not later
than thirty (30) days prior to the applicable Rental
Adjustment Date. If the fair market rental value is not
determined prior to the applicable Rental Adjustment
Date, then Tenant shall pay to Landlord the Basic
Monthly Rental applicable to the Premises immediately
prior to such extension, until the fair market rental
value is determined. When the fair market rental value
of the Premises is determined, Landlord shall deliver
notice thereof to Tenant, and Tenant shall pay to
Landlord, within ten (10) days after receipt of such
notice, the difference between the Basic Monthly Rental
actually paid by Tenant to Landlord and the new Basic
Monthly Rental determined hereunder.
Thereafter, every twelve (12) months after commencement
of the extension, the Basic Monthly Rental shall be increased by three percent
(3%) and shall be payable each and every month until further adjusted.
(i) Tenant shall exercise said Option only by giving written notice
to Landlord not earlier than one hundred eighty (180) days nor later than one
hundred twenty (120) days, prior to the end of the Term.
(ii) It is understood and agreed that this Option is personal to
Penril Corp., or its successors as a result of any sale, transfer,
consolidation, merger or reorganization of a majority of the voting stock of
Tenant, or to an assignee of this Lease that is a successor in interest to
Tenant's DataComm Division in accordance with Section 21.I., and is not
otherwise transferable; in the even of any assignment, except those stated
above, or subleasing of any or all of the Premises said Option shall be null and
void.
27
<PAGE> 28
28. BROKER
Tenant warrants and represents that is has not dealt with any real
estate broker or agent in connection with this Lease or its negotiation except
Shannon & Lochs Realtors and Coldwell Banker Commercial Real Estate Services.
Tenant shall indemnify and hold Landlord harmless from any cost, expense or
liability, including costs of suit and reasonable attorneys' fees for any
compensation, commission or fees claimed by any other real estate broker or
agent in connection with this Lease or its negotiation by reason of any act of
Tenant.
29. RELEASE OF PARTNERS OF LANDLORD
Tenant agrees that in the event Tenant shall have any claim against
Landlord under this Lease arising out of the subject matter of this Lease,
Tenant's sole recourse shall be against the assets of Landlord and Tenant
further hereby waives any and all rights to assert any claim against or obtain
any damages from the partners, officers, agents, employees, affiliates or
successors of Landlord, as the same may be constituted from time to time, for
any reasons whatsoever.
30. NOTICES
Any notice, demand, approval, consent, bill, statement or other
communication required or desired to be given under this Lease in writing shall
be directed to Tenant at Tenant's Address for Notice or to Landlord at
Landlord's Address for Notice and shall be personally served or given by mail
and if mailed, shall be deemed to have been given upon receipt by registered or
certified United States Mail, and postage prepaid. If more than one Tenant is
named under this Lease, service or any notice upon any one of said Tenants shall
be deemed as service upon all such Tenants.
Tenant's address is: Penril Corp.
1300 Quince Orchard Boulevard
Gaithersburg, MD 20877
Landlord's address is: Birtcher
27611 La Paz Road
Laguna Niguel, CA 92677
Attn: Carol H. Kutteh
31. QUIET ENJOYMENT
Upon payment by Tenant of the rents herein provided, and upon the
observance and performance of all the covenants, terms and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the Premises for the term hereby demised without hindrance or
interruption by Landlord or any other person or persons lawfully or equitably
claiming by, through or under Landlord, subject, nevertheless to the terms and
conditions
28
<PAGE> 29
of this Lease, and any mortgage and/or deed of trust to which this Lease is
subordinate. Landlord hereby represents and warrants that it has lawful title to
the Premises and has the power and authority to enter into this Lease with
Tenant. Landlord further represents and warrants that there are no liens,
encumbrances, or other contractual obligations in any way restricting Landlord's
authority and ability to enter this Lease, or which may in any way affect the
validity thereof.
32. GENERAL
A. Paragraph Headings
The paragraph headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or to extend the
meaning of any part of this Lease.
B. Incorporation of Prior Agreements; Amendments
This Lease and that certain Settlement Agreement by and
between Landlord, Tenant and Contel contain all agreements of dealt with herein.
No prior agreement or understanding pertaining to any such matter shall be
binding upon Landlord or be in writing, signed by the parties hereto, and
neither Landlord nor Tenant shall be liable for any oral or implied agreements.
C. Waiver
Waiver by Landlord or Tenant of any breach of any term,
covenant, or condition contained in this Lease shall not be deemed to be a
waiver of such term, covenant, or condition or of any subsequent breach of the
same or of any other terms, covenant, or condition contained in this Lease.
Landlord's or Tenant's consent to, or approval of any act shall not be deemed to
render unnecessary the obtaining of Landlord's or Tenant's consent to, or
approval of, any subsequent act by Tenant or Landlord. The acceptance of rent or
other sums payable hereunder by Landlord shall not be a waiver of any preceding
breach by Tenant of any provision hereof, other than failure of Tenant to pay
the particular rent or other sum so accepted, regardless of Landlord's knowledge
of such preceding breach at the time of acceptance of such rent, or sum
equivalent to rent.
D. Short Form
Tenant agrees at the request of Landlord, to execute, deliver,
and acknowledge a short form of this Lease satisfactory to counsel for Landlord,
and Landlord may in its sole discretion, record such short form in the county
where the Premises are located. Tenant shall not record this Lease, or a short
form of this Lease, without Landlord's prior written consent, and such
recordation shall, at the option of Landlord, constitute a Default of Tenant
hereunder. In the event of recordation by Tenant, Tenant shall pay the cost
thereof.
E. Time of Essence
29
<PAGE> 30
Time is of the essence in the performance of each provision of
this Lease.
F. Examination of Lease
Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for Lease, and it is not
effective as a Lease otherwise until execution by and delivery to both Landlord
and Tenant.
G. Severability
If any term or provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby, and each term or
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
In the event any agreement, covenant or provision made by
Landlord cannot be performed because of governmental restrictions or law, then
that agreement, covenant, or provision shall be severed from this Lease and the
non-performance of such severed agreement, covenant or provision shall not be
deemed a default by Landlord; and all other agreements, provisions and covenants
in this Lease shall remain in full force and effect.
H. Force Majeure
Landlord shall not be responsible for the performance of any
provision of this lease in the event it is prevented from doing so by
earthquake, hurricane or other act of God, war, riot, civil disobedience, labor
disputes, the application of martial law or the like. In the event of Landlord's
non-performance because of such force majeure, the rental herein or the other
financial obligations of Tenant hereunder shall not abate, except as otherwise
provided herein.
I. Corporate Authority
If Tenant is a corporation, each individual executing this
Lease on behalf of Tenant represents and warrants (i) that he is duly authorized
to execute and deliver this Lease on behalf of Tenant in accordance with a duly
adopted resolution of the Board of Directors of Tenant in accordance with the
By-Laws of Tenant and (ii) that this Lease is binding upon and enforceable by
Landlord against Tenant in accordance with its terms. If Tenant is a
corporation, Tenant shall, within Thirty (30) days after execution of this
Lease, deliver to Landlord a certified copy of a resolution of its Board of
Directors authorizing or ratifying the execution of this Lease.
30
<PAGE> 31
33. APPLICABLE LAW AND BINDING NATURE
This Lease shall be construed under the laws of Maryland. This Lease
shall be binding upon the heirs, personal representatives, successors, grantees
and assigns of the respective parties hereto.
34. EXECUTION
This Lease is executed in several duplicate counterparts, each of
which shall be deemed an original of this Lease for all purposes.
Landlord: Tenant:
REAL ESTATE INCOME PARTNERS III, PENRIL CORP.,
Limited Partners, a Delaware Corporation
by Birtcher Properties,
its Managing Agent
By: /s/ M.S. Bazar By: /s/ David Johnson
--------------------------- -----------------------
Its: Senior Vice President Its: Vice President
--------------------------- -----------------------
Date: April 5, 1989 Date: April 4, 1989
--------------------------- -----------------------
31
<PAGE> 32
EXHIBIT A
FLOOR PLAN OF PREMISES
Floor Plan drawings provided by DDSL, Drawing pages T1 through T9,
dated 3/31/89, are hereby incorporated for reference.
32
<PAGE> 33
EXHIBIT B
SITE PLAN
33
<PAGE> 34
EXHIBIT C
OUTLINE SPECIFICATIONS
Outline Specifications provided by DDSL, Drawing Page T9, dated
3/31/89, is hereby incorporated for reference.
34
<PAGE> 35
EXHIBIT D
RULES AND REGULATIONS
The following Rules and Regulations shall be in effect at the Premises.
Landlord reserves the right to adopt reasonable modifications and additions
hereto. In the case of any conflict between these regulations and the Lease, the
Lease shall be controlling.
1. Except with the prior written consent of Landlord, there shall be no
retail sales or any manufacturing of any kind in or from the Premises, or any
business other than that specifically provided for in the Lease.
2. Landlord reserves the right to prohibit personal goods and services
vendors from access to the Premises, except upon such reasonable terms and
conditions including, but not limited to, the provision for insurance coverage,
as are related to the safety, care and cleanliness of the Premises, the
preservation of good order thereon, and the relief of any financial or other
burden on Landlord occasioned by the presence of such vendors or the sale by
them of personal goods or services to Tenant or its employees. If reasonably
necessary for the accomplishment of these purposes, Landlord may exclude a
particular vendor entirely or limit the number of vendors who may be present at
any one time in the Premises. The term "personal goods or services vendors"
means persons who periodically enter the Premises for the purpose of conducting
their business on the Premises. "Personal goods or services" include, but are
not limited to, drinking water and other beverages, food, barbering services,
and shoeshining services.
3. The sidewalks, halls, passages and stairways shall not be obstructed by
Tenant or used by it for any purpose other than for ingress to and egress from
the Premises. The halls, passages, entrances, stairways, balconies and roof are
not for the use of the general public, and Landlord shall in all cases retain
the right to control and prevent access thereto by all persons whose presence in
the judgment of Landlord shall be prejudicial to the safety, character,
reputation and interests of the Premises and Tenant, provided that nothing
herein contained shall be construed to prevent such access to persons with whom
Tenant normally deals only for the purpose of conducting its business on the
Premises (such as clients, customers, office suppliers and equipment vendors,
and the like) unless such persons are engaged in illegal activities. Tenant and
its employees hall not go upon the roof of the Premises without the written
consent of Landlord.
4. The sashes, sash doors, windows, glass, and any lights or skylights
that reflect or admit light into the halls for other places of the Premises,
shall not be covered or obstructed. The toilet rooms, water and wash closets and
other water apparatus shall not be used for any purpose other than that for
which they were constructed, and no foreign substance of any kind whatsoever
shall be thrown therein, and the expense of any breakage, stoppage or damage,
resulting from the violations of this rule shall be borne by Tenant, or its
clerks, agents, employees, or visitors, who shall have caused it.
35
<PAGE> 36
5. No sign, advertisement or notice from the exterior of the Premises
shall be inscribed, painted or affixed by Tenant to any part of the Premises
without the prior written consent of Landlord. If Landlord shall have given such
consent at any time, whether before or after the execution of this Lease, such
consent shall in no way operate as a waiver or release of any of the provisions
hereof or of this Lease, and shall be deemed to relate only to the particular
advertisement or notice so consented to by Landlord and shall not be construed
as dispensing with the necessity of obtaining the specific written consent of
Landlord with respect to each and every sign, advertisement or notice other than
the particular sign, advertisement or notice, as the case may be, so consented
to by Landlord.
6. In order to maintain in the outward professional appearance of the
Premises, all window coverings to be installed at the Premises shall be subject
to Landlord's prior approval. If Landlord, by a notice in writing to Tenant,
shall object to any curtain, blind, shade or screen attached to, or hung in, or
used in connection with, any window or door of the Premises, such use of such
curtain, blind, shade or screen shall be forthwith discontinued by Tenant. No
awnings shall be permitted on any part of the Premises.
7. Tenant shall not do or permit anything to be done in the Premises, or
bring or keep anything therein, which shall in any way increase the rate of fire
insurance on the Premises, or on the property kept therein, or conflict with the
regulations of the Fire Department or the fire laws, or with any insurance
policy upon the Premises, or any part thereof, or with any rules and ordinances
established by the Health Department or other governmental authority.
8. No safe or other objects heavier than the floor load of the Premises
shall be brought into or installed in the Premises. Landlord shall have the
power to prescribe the weight and position of such safes or other objects which
shall, if considered necessary by Landlord, stand on three-inch thick wood
strips to distribute the weight. The moving of safes shall occur only between
such hours as may be designated by, and only upon previous notice to, the
manager of the Premises, and the persons employed to move safes in or out of the
Premises, and the persons employed to move safes in or out of the Premises must
be acceptable to Landlord.
9. Tenant shall not sweep or throw or permit to be swept or thrown from
the Premises any dirt or other substance into any of the corridors or halls, or
out of the doors or windows or stairways of the Premises, and Tenant shall not
us, keep, or permit to be used or kept, any foul or noxious gas or substance in
the Premises, or permit or suffer the Premises to be occupied or used in a
manner offensive or objectionable to Landlord by reason of noise, odors and/or
vibrations.
10. Except for microwave ovens and coffee makes, no cooking shall be done
or permitted by Tenant on the Premises, nor shall offices in the Premises be
used for the storage of merchandise or for lodging.
36
<PAGE> 37
11. Tenant shall not use or keep in the Premises any kerosene, gasoline,
or flammable fluid or any other illuminating material, or use any method of
heating other than that supplied by Landlord, except as otherwise provided
herein.
12. If Tenant desires telephone or telegraph connections, Landlord will
direct electricians as to where and how the wires are to be introduced. No
boring or cutting for wires or otherwise shall be made without directions from
Landlord.
13. Tenant, upon the termination of its tenancy, shall deliver to Landlord
all the keys of offices, rooms and toilet rooms which shall have been furnished
to Tenant or which Tenant shall have made, and in the event of loss of any keys
so furnished, shall pay Landlord therefor.
14. Tenant shall not lay linoleum or other similar floor covering so that
the same shall be affixed to the floor of the Premises in any manner, except by
a paste, or other material which may easily be removed with water. The method of
affixing any such linoleum or other similar floor covering to the floor, as well
as the method of affixing carpets or rugs to the Premises, shall be subject to
approval by Landlord. The expense of repairing any damage resulting from a
violation of these rules by Tenant, its agents, contractors, employees invitees
or visitors shall be borne by Tenant.
15. Landlord shall in no case be liable for damages for the admission to
or exclusion from the Premises of any person whom Landlord has the right to
exclude under Rule 3 above. In case of invasion, mob, riot, public excitement,
or other commotion, Landlord reserves the right but shall not be obligated to
prevent access to the Premises during the continuance of the same by closing the
doors or otherwise, for the safety of Tenant and protection of property in the
Premises.
16. Tenant shall see that the windows and doors of the Premises are closed
and securely locked before leaving the Premises and Tenant shall exercise
extraordinary care and caution before Tenant or Tenant's employees leave the
Premises, and that all electricity, gas or air shall likewise be carefully shut
off, so as to prevent waste or damage, and for any default or carelessness
Tenant shall make good all injuries sustained by the Premises or Landlord.
17. Tenant shall not, except in the case of an emergency, alter any lock
or install a new or additional lock or any bolt on any door of the Premises
without prior written consent of Landlord. If Landlord shall give its consent,
Tenant shall in each case furnish Landlord with a key for any such lock.
18. Tenant shall not install equipment such as, but not limited to,
electronic tabulating or computer equipment, requiring electrical or
air-conditional service in excess of those to be provided by Landlord under the
Lease.
19. No bicycle, or shopping cart, or other vehicle or any animal shall be
brought into the Premises or the halls, corridors or any part of the Premises by
Tenant.
37
<PAGE> 38
20. Landlord shall have the right to prohibit the use of the name of
NorthTech Business Park or any other publicity by Tenant which in Landlord's
opinion tends to impair the reputation of NorthTech Business Park or its
desirability, and upon written notice from Landlord, Tenant will refrain from or
discontinue such publicity.
21. Tenant shall have the right to place additional trash storage
containers (dumpster type) in the parking lot as may be required for the normal
business operations of Tenant, provided, however; that said containers shall be
located upon the Premises and used in compliance with all applicable laws, rules
and regulations.
38
<PAGE> 39
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE ("Amendment") is made as of the 15th
day of November, 1996, by and between Real Estate Income Partners III, Limited
Partnership, a Delaware limited partnership ("Landlord"), and Penril DataComm
Networks, Inc., a Delaware corporation formerly known as Penril Corp.
("Tenant"), with reference and respect to the following facts and circumstances:
RECITALS
A. On or about March 31, 1989, Landlord and Tenant entered
into that certain Lease Agreement for a stated approximately 54,874 square feet
of office space in the building known as 1300 Quince Orchard Boulevard,
Gaithersburg, Maryland which is a part of Northtech Business Park. The Lease
Agreement has been amended by that certain Letter Agreement dated May 14, 1990.
The Lease Agreement, as amended by the Letter Agreement, is hereinafter referred
to as the "Lease."
B. In accordance with Section 11 of the Lease Agreement,
Tenant desires to obtain Landlord's approval of certain alterations to the
Premises.
C. The parties desire to modify and/or confirm the Lease as
otherwise provided herein.
IN CONSIDERATION OF THE FOREGOING PREMISES, the covenants,
conditions, agreements, representations and warranties set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
acknowledged by each of the parties, the parties do hereby agree as follows:
AMENDMENT/AGREEMENT
1. The Recitals set forth in the lettered paragraphs above are
incorporated herein by this reference.
2. Defined terms are indicated by initial capital letters.
Except as otherwise specifically provided herein, defined terms shall have the
same meaning in this Amendment as they do in the Lease.
3. Landlord hereby consents to Tenant performing the
alterations described in Exhibit A attached hereto and incorporated herein by
this reference, subject, however~er to the following: Such alterations shall be
made and performed in strict compliance with Section 11 of the Lease Agreement;
Landlord shall and does hereby require Tenant to provide to Landlord, at
Tenant's sole cost and expense, lien and completion bonds in an amount equal to
one and one-half ( 1.5) times the estimated cost of such improvements (which
estimated cost is One
<PAGE> 40
Hundred Forty-Nine Thousand One Hundred Fourteen Dollars ($149,114.00) and,
therefore, the bonds shall be in the amount of Two Hundred Twenty-Three Thousand
Six Hundred Seventy-One Dollars ($223,671.00)). Such bonds shall be provided by
Tenant to Landlord on or before Friday, November 22. 1996.
4. Tenant acknowledges and agrees that for all purposes of the
Lease the Premises shall be deemed to consist of approximately 54,874 square
feet of space and that, consistent with Section 3 of the Lease Agreement, Base
Rent owing under the Lease during the term of the Lease is as set forth in
Exhibit B attached hereto and incorporated herein by this reference.
5. For all purposes of the Lease, Tenant is and shall be
estopped from claiming that the Premises consist of other than approximately
54,874 square feet or that Base Rent is other than as set forth in Section 3 of
the Lease Agreement and reiterated in Exhibit B hereto.
6. Section 9.B of the Lease Agreement provides that, except
for those items Landlord is responsible for pursuant to Section 10.A of the
Lease Agreement, Tenant shall, at Tenant's sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules and
regulations, now in force or which may hereinafter be in force. Tenant
acknowledges and agrees that Tenant is responsible and liable for having the
Premises (as well as all parts of the building or Northtech Business Park
effected by Tenant's occupancy, use, operation or maintenance of the Premises or
any part of it) comply with all legal requirements, including without limitation
the Americans with Disabilities Act ("ADA"). Tenant further acknowledges and
agrees that Tenant shall take all actions necessary to bring the Premises and
Tenant's operations therein and Tenant's use thereof (and all other parts of the
building and Northtech Business Center for which Tenant is responsible or which
are affected thereby) into compliance with the ADA as soon as reasonably
possible, but in any event by August 31, 1997. Tenant's responsibilities and
liabilities hereunder shall include, without limitation, the obligation and
liability to bring into ADA compliance and otherwise make the changes,
modifications and/or repairs set forth in Exhibit C attached hereto and
incorporated herein by this reference. On or before September 30, 1997, Tenant
shall provide to Landlord reasonably satisfactory evidence that Tenant has
performed its obligations under this Paragraph 6.
7. Tenant shall and does hereby indemnify, defend and hold
Landlord, including without limitation Landlord s agents, representatives and
employees, free and harmless of, from and against any and all claims, demands,
losses, liabilities, costs and expenses, including without limitation reasonable
attorneys' fees, suffered or incurred by Landlord or the other indemnities as a
result of, in connection with, or in anyway relating to (i) Tenant's breach or
failure to perform under Section 9.B of the Lease Agreement or (ii) the Premises
or any part of the building or Northtech Business Center for which Tenant is
responsible (or which effected by Tenant's occupancy or use of the Premises) not
being in compliance with laws, including without
2
<PAGE> 41
limitation the ADA, at any time, whether occurring before or after the execution
of this Amendment.
8. This Amendment does not and shall not be deemed to waive or
release Tenant from any obligation or liability under the Lease, including
without limitation those set forth in Section 9.B of the Lease Agreement.
9. Except as set forth herein, the Lease is unchanged and
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first written hereinabove.
"LANDLORD"
REAL ESTATE INCOME PARTNERS III,
a Limited Partnership,
a Delaware limited partnership
By: s/Michael s. Bazar
----------------------------
Name:
---------------------------
Title: Senior Vice President
-------------------------
"TENANT"
Penril DataComm Networks, Inc.,
a Delaware corporation
By: s/Barry E. Beswick
----------------------------
Name:
---------------------------
Title: Real Estate Manager
-------------------------
3
<PAGE> 42
EXHIBIT "A"
[attached]
Exhibit "A"
4
<PAGE> 43
EXHIBIT A
The plans issued by Richard A. Donnally Associates, P.A., dated October 30, 1996
for job number SP021-12 drawn by G.A.J. and checked by R.A.J. for Penril
Datability Networks, Inc., for the property located at 1300 Quince Orchard
Boulevard Gaithersburg, Maryland.
5
<PAGE> 44
EXHIBIT "B"
[attached]
Exhibit "B"
6
<PAGE> 45
EXHIBIT B
RENT
Tenant shall pay to Landlord as rent for the Premises for the
Term the sum of Six Million Thirty-Five Thousand Eight Hundred Sixty-Five and
67/100 Dollars ($6,035,865.67) and any additional initial partial monthly
payment of Basic Monthly Rental as defined below (collectively, the "Base
Rent"). The Base Rent shall be payable in monthly installments (subject to
proration for partial months as hereinafter provided) in advance on the first
day of each calendar month during the Term hereof, follows:
<TABLE>
<CAPTION>
Period Basic Monthly Rental
- -------------------------------------------- ------------------------
<S> <C>
Month 1 through and including month 12 $25,150.58
and any initial partial month
Month 13 through and including 34,296.25
month 24
Month 25 through and including 45,728.33
month 36
Month 37 through and including 52,587.58
month 48
Month 49 through and including 54,142.35
month 60
Month 61 through and including 55,788.57
month 72
Month 73 through and including 57,480.52
month 84
Month 85 through and including 59,218.19
month 96
Month 97 through and including 61,001.60
month 108
Month 109 through and including 62,830.73
month 119
</TABLE>
The first monthly installment shall be payable upon the
execution of this Lease and the remaining installments shall be payable, in
advance, without notice or demand, on the first day of each month during the
aforesaid term. Each monthly installment shall hereinafter be referred to as the
"Basic Monthly Rental". Should the term of this Lease commence on a day
7
<PAGE> 46
other than the first day of a calendar month, Tenant agrees the Base Rent, Basic
Monthly Rental and any Additional Rent (as defined below) for that month shall
be prorated and adjusted accordingly, and rent for the remaining months shall be
due and payable on the first of the month as provided above. The Basic Monthly
Rental and any Additional Rent or sum due to Landlord shall be paid to Landlord
at 27611 La Paz Road, Laguna Niguel, California 92656, or to such other party or
other address as Landlord may from time designate by written notice to Tenant.
8
<PAGE> 47
EXHIBIT "C"
[attached]
Exhibit "C"
9
<PAGE> 48
EXHIBIT "C"
NORTHTECH BUSINESS PARK
<TABLE>
<CAPTION>
BARRIER SOLUTION
------- --------
<S> <C>
Accessible parking aisles are too narrow. No Re-stripe. Note that one aisle can be shaved
"van accessible" parking provided by two spaces. Re-stripe to provide one "van
accessible" space.
Accessible parking space aisles and curb Install detectable warning per ADA.
ramps lack detectable warning.
Access to side walks from parking are Level these curbs and elevation changes.
obstructed by excessive curbs.
Accessible ramp exceeds minimum slope of Provide new handrails on inside of curb on
1:12. Ramp handrails do not conform. both sides.
Handrails at stairs do not conform. Relocate outside rails and provide extensions
at top and bottom risers to meet ADA
standards.
Interior and entry areas hardware in stair Replace with lever hardware.
cores providing access to ramps is not
accessible.
Rails at stairs coves not conforming. Providing extensions (12") at bottom and top
risers to meet ADA standards.
Stair rails in stair coves not conforming. Providing extensions to meet ADA standards.
ADA requires that, at a minimum, visual Install visual sign appliances as required by
signal appliances shall be provided in ADA.
buildings and facilities in restrooms, general
usage areas, hallways, lobbies, and other
common use areas.
</TABLE>
10
<PAGE> 49
May 14, 1990
Penril Corporation
Mr. David Johnson, President
1300 Quinne Orchard boulevard
Gaithersburg, MD 20877
Re: Letter Agreement - Amendment to Lease
Dear David:
This letter agreement when countersigned by you on behalf of Penril Corporation
shall constitute an amendment to that certain North Tech Business Park Lease
dated March 31, 1989, (the "Lease") by and between Real Estate Income Partners
III ("Landlord") and Penril Corporation ("Tenant") with respect to the lease of
space in that certain property known as North Tech Business Park, 1300 Quince
Orchard Boulevard, Gaithersburg, MD 20877 (the "Property"). Inasmuch as any and
all amendments or modifications to the Lease are required to be in writing and
signed by the parties, the Landlord and Tenant have entered into and executed
this letter agreement to serve as an amendment and modification to the Lease.
The Lease is hereby amended, modified and supplemented as follows:
1. With reference to the above Lease, Tenant as Payor has
executed and delivered to Landlord as Payee the
Promissory Note ("Note") attached hereto, marked Exhibit
"A" and hereby incorporated by reference.
2. Under the terms of the Note, Tenant/Payor understands
and agrees that a default under the terms of the Note is
deemed to be a default under the terms of the Lease and
a default under the terms of the Lease is deemed to be a
default under the terms of the Note. Tenant/ Payor
further understands and agrees that Landlord/Payee would
not have accepted the Note in payment of certain of
Tenant/ Payor's obligations under the Lease but for
Tenant/Payor's agreement as set forth in the
<PAGE> 50
Penril Corporation
Mr. David Johnson
May 14, 1990
Page Two
Note including, but not limited to, the cross-default
language set forth in the Note.
3. Except as otherwise modified herein, all other terms and
conditions shall remain unchanged and of full force and
effect.
Your signature below, on behalf of Penril Corporation, Tenant constitutes your
understanding, agreement to an acceptance of the terms of this letter agreement
and amendment to the Lease. Please execute and date both duplicate originals of
this letter agreement and retain one for your files and return the other to the
attention of Diane Mellecker in care of Bircher, 3333 North Mayfair Road,
Milwaukee, Wisconsin 53222.
Thank you for your courtesy and cooperation.
Very truly yours,
s/Diane Mellecker
- -----------------
REAP III, Limited Partners
By: Bircher Properties
L.S.: Managing Agent
Diane Mellecker
Property Manager
AGREED, ACCEPTED AND ACKNOWLEDGED THIS 22nd day of May, 1990.
By: s/David Johnson
---------------
Enclosure
2
<PAGE> 1
Exhibit 10.8.2
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS AGREEMENT, made as of the 18th day of November, 1996, by and between
PENRIL DATACOMM NETWORKS, INC., a Delaware corporation ("Assignor"), and ACCESS
BEYOND, INC., a Delaware corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to a certain lease dated March 31, 1989, entered into
between REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP, a Delaware limited
partnership, as landlord ("Landlord"), and Assignor (formerly known as Penril
Corp.), as tenant, as amended by a certain Letter Agreement dated may 14, 1990
and by a certain Amendment to Lease dated as of November 15, 1996, (as amended,
collectively, the "Lease"), a copy of which Lease is attached hereto as Exhibit
"A" and which by reference is made a part hereof, Assignor has leased
approximately 54,874 square feet of office space in the building commonly known
for address purposes as 1300 Quince Orchard Boulevard, Gaithersburg, Montgomery
County, Maryland (the "Premises") for a one hundred nineteen (119) month term
commencing November 1, 1989 and ending September 30, 1999; and
WHEREAS, subject to the written consent of Landlord, Assignee desires to
assume all of Assignor's rights and obligations under the Lease and Assignor
desires to assign to Assignee all of its rights and obligations under the Lease.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Assignor hereby assigns, sets over and transfers unto Assignee to have
and to hold from and after the date hereof all of the right, title and interest
of Assignor in, to and under the Lease, including, without limitation, all of
the right, title and interest of Assignor in and to any security deposits,
prepaid rent or other sums paid by Assignor as the tenant under the Lease, and
Assignee hereby accepts the within assignment and assumes and agrees with
Assignor to perform and comply with and to be bound by, from and after the date
hereof, all the terms, covenants, agreements, provisions and conditions of the
Lease on the part of the tenant thereunder to be performed, in the same manner
and with the same force and effect as if Assignee had originally executed the
Lease as tenant.
2. Assignor hereby unconditionally, absolutely and irrevocably agrees to
indemnify and hold Assignee harmless of, from and against any and all costs,
claims, obligations, damages, penalties, causes of action, losses, injuries,
liabilities and expenses, including, without limitation, reasonable attorneys'
fees, arising or accruing under the Lease before the date hereof.
<PAGE> 2
3. Assignee hereby unconditionally, absolutely and irrevocably agrees to
indemnify and hold Assignor harmless of, from and against any and all costs,
claims, obligations, damages, penalties, causes of action, losses, injuries,
liabilities and expenses, including, without limitation, reasonable attorneys'
fees, arising or accruing under the Lease on and after the date hereof.
4. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, shall not be
modified except by agreement in writing executed by all parties hereto and shall
be governed by the laws of the State in which the property subject to the Lease
is located as such laws are applicable to agreements made and to be performed
entirely within said State.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
PENRIL DATACOMM NETWORKS, INC.
By: s/Barry E. Beswick
-------------------------------------
ACCESS BEYOND, INC.
By: s/Ronald A. Howard
-------------------------------------
2
<PAGE> 1
EXHIBIT 10.9
AMENDED AND RESTATED
1996 LONG-TERM INCENTIVE PLAN
OF
ACCESS BEYOND, INC.
1. PURPOSE OF THE PLAN. This 1996 Long-Term Incentive Plan of Access Beyond,
Inc., adopted as of the 18th day of November, 1996, and as amended and restated
as of the 4th of February , 1997, is intended to enable officers, key employees,
consultants, advisors and other third party providers of services of the Company
and its Subsidiaries to acquire or increase their ownership of common stock of
the Company on reasonable terms. The opportunity so provided is intended to
foster in participants an incentive to put forth maximum effort for the
continued success and growth of the Company and its Subsidiaries, to aid in
retaining individuals who put forth such efforts, and to assist in attracting
the best available individuals to the Company and its Subsidiaries in the
future.
2. DEFINITIONS. When used herein, the following terms shall have the meanings
set forth below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act (as in effect
on the date the Plan is adopted by the Board), whether or not the Company is
then subject to such reporting requirement; provided, that, without limitation,
a Change in Control shall be deemed to have occurred if:
2.2.1 any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities otherwise than through any transaction
or transactions arranged, or consummated with the prior approval of, the Board;
provided, however, that a Change in Control shall not be deemed to occur under
this clause (a) by reason of the acquisition of securities by the Company or an
employee benefit plan (or any trust funding such a plan) maintained by the
Company, or solely by reason of the new issuance of securities directly by the
Company;
2.2.2 during any period of two (2) consecutive years (not
including any period prior to the adoption of this Plan) there shall cease to be
a majority of the Board comprised of Tenured Directors; or
2.2.3 (a) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity)
<PAGE> 2
more than eighty percent (80%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, and upon the consummation of such merger or
consolidation the President of the Company will not be the President, Chairman
or Chief Executive Officer of the Company or the surviving entity, or (b) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
2.3 "Code" means the Internal Revenue Code of 1986, as in effect at the
time of reference, or any successor revenue code which may hereafter be adopted
in lieu thereof, and reference to any specific provisions of the Code shall
refer to the corresponding provisions of the Code as it may hereafter be amended
or replaced.
2.4 "Committee" means the Compensation Committee of the Board or any
other committee appointed by the Board which is invested by the Board with
responsibility for the administration of the Plan.
2.5 "Company" means Access Beyond, Inc., a Delaware corporation.
2.6 "Employee Stockholder" means an Employee who, at the time an
Incentive Stock Option is granted owns, as defined in Section 424 of the Code,
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of: (a) the Company; or (b) if applicable, a Subsidiary
or a Parent.
2.7 "Employees" means officers (including officers who are members of
the Board), other key employees, consultants, advisors and other third party
providers of services of the Company or any of its Subsidiaries.
2.8 "ERISA"means the Employee Retirement Income Security Act of 1974,
as in effect at the time of reference, or any successor law which may hereafter
be adopted in lieu thereof, and any reference to any specific provisions of
ERISA shall refer to the corresponding provisions of ERISA as it may hereafter
be amended or replaced.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as in
effect at the time of reference, or any successor law which may hereafter be
adopted in lieu thereof, and any reference to any specific provisions of the
Exchange Act shall refer to the corresponding provisions of the Exchange Act as
it may hereafter be amended or replaced.
2.10 "Fair Market Value" means, with respect to the Shares, the closing
price of the Shares as reported on the NASDAQ National Market System, on the
last business day prior to the date on which the value is to be determined, as
reported in the Wall Street Journal or such other source of quotations for, or
report of trading of, the Shares as the Committee may reasonably select from
time to time. Notwithstanding the foregoing, with respect to Options granted on
or before the first day that the Shares are traded on the NASDAQ National Market
System other than on an as issued or when issued basis, Fair Market Value means
the average closing price of the Shares as reported on
2
<PAGE> 3
the NASDAQ National Market System for the first ten (10) days that the Shares
are traded thereon other than on an as issued or when issued basis.
2.11 Incentive Stock Option" means an Option meeting the requirements
and containing the limitations and restrictions set forth in Section 422 of the
Code.
2.12 "Non Qualified Stock Option" means an Option other than an
Incentive Stock Option.
2.13 "Option" means the right to purchase the number of Shares
specified by the Committee, at a price and for a term fixed by the Committee, in
accordance with the Plan, and subject to such other limitations and restrictions
as the Plan and the Committee may impose.
2.14 "Option Agreement" means a written agreement in such form as may
be, from time to time, hereafter approved by the Committee, which shall be duly
executed by the Company and the Employee and which shall set forth the terms and
conditions of an Option under the Plan.
2.15 "Parent" means any corporation, other than the employer
corporation, in an unbroken chain of corporations ending with the employer
corporation if, at the time of the granting of the Option, each of the
corporations other than the employer corporation owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
2.16 "Plan" means the 1996 Long-Term Incentive Plan, as amended and
restated.
2.17 "Regulation T" means Part 220, chapter II, title 12 of the Code of
Federal Regulations, issued by the Board of Governors of the Federal Reserve
System pursuant to the Exchange Act, as amended from time to time, or any
successor regulation which may hereafter be adopted in lieu thereof.
2.18 "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
of the Securities and Exchange Commission as in effect at the time of reference,
or any successor rules or regulations which may hereafter be adopted in lieu
thereof, and any reference to any specific provisions of Rule 16b-3 shall refer
to the corresponding provisions of Rule 16b-3 as it may hereafter be amended or
replaced.
2.19 "Shares" means shares of the Company's $.01 par value common stock
or, if by reason of the adjustment provisions contained herein, any rights under
an Option under the Plan pertain to any other security, such other security.
2.20 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the employer corporation in an unbroken chain of
corporations beginning with the employer corporation if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
3
<PAGE> 4
2.21 "Successor" means the legal representative of the estate of a
deceased Employee or the person or persons who shall acquire the right to
exercise or receive an Option by bequest or inheritance or by reason of the
death of the Employee.
2.22 "Tenured Directors" means individuals who at the beginning of any
period of two (2) consecutive years (not including any period prior to the
adoption of this Plan) and any new director(s) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved.
2.23 "Term" means the period during which a particular Option may be
exercised.
3. STOCK SUBJECT TO THE PLAN. There will be reserved for use, upon the exercise
of Options to be granted from time to time under the Plan, an aggregate of
2,000,000 Shares, which Shares may be, in whole or in part, as the Board shall
from time to time determine, authorized but unissued Shares, or issued Shares
which shall have been reacquired by the Company. Any Shares subject to issuance
upon exercise of Options but which are not issued because of a surrender, lapse,
expiration, forfeiture or termination of any such Option prior to issuance of
the Shares shall once again be available for issuance in satisfaction of
Options.
4. ADMINISTRATION OF THE PLAN. The Board shall appoint the Committee, which
shall consist of at least two (2) members of the Board who are neither employees
nor officers of the Company and who are outside directors within the meaning of
Treasury Regulation Section 1.162-27. Subject to the provisions of the Plan, the
Committee shall have full authority, in its discretion, to determine the
Employees to whom Options shall be granted, the number of Shares to be covered
by each of the Options, and the terms of any such Option; to amend or cancel
Options (subject to Section 18 of the Plan), to accelerate the vesting of
Options; to require the cancellation or surrender of any previously granted
Options under this Plan or any other plans of the Company as a condition to the
granting of an Option; to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; and generally to interpret and
determine any and all matters whatsoever relating to the administration of the
Plan and the granting of Options hereunder. The Board may from time to time
appoint members to the Committee in substitution for or in addition to members
previously appointed and may fill vacancies, however caused, in the Committee.
The Committee shall select one of its members as its chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of its
members shall constitute a quorum. Any action of the Committee may be taken by a
written instrument signed by all of the members, and any action so taken shall
be fully as effective as if it had been taken by a vote of a majority of the
members at a meeting duly called and held. The Committee shall make such rules
and regulations for the conduct of its business as it shall deem advisable and
shall appoint a Secretary who shall keep minutes of its meetings and records of
all action taken in writing without a meeting. No member of the Committee shall
be liable, in the absence of bad faith, for any act or omission with respect to
his or her service on the Committee.
4
<PAGE> 5
5. EMPLOYEES TO WHOM OPTIONS MAY BE GRANTED. Options may be granted in each
calendar year or portion thereof while the Plan is in effect to such of the
Employees as the Committee, in its discretion, shall determine. In determining
the Employees to whom Options shall be granted and the number of Shares to be
issued or subject to purchase or issuance under such Options, the Committee
shall take into account the recommendations of the Company's management as to
the duties of the respective Employees, their present and potential
contributions to the success of the Company and its Subsidiaries, and such other
factors as the Committee shall deem relevant in connection with accomplishing
the purposes of the Plan; provided however, no Employee may receive Options to
acquire more than 500,000 Shares in any one calendar year. No Option shall be
granted to any member of the Committee so long as his or her membership on the
Committee continues or to any member of the Board who is not also an Employee of
the Company or any Subsidiary.
6. TYPES AND BASIC TERMS OF OPTIONS.
6.1 Types of Options. Options granted under the Plan may be (i)
Incentive Stock Options, (ii) Non-Qualified Stock Options or (iii) a combination
of the foregoing. The Option Agreement shall designate whether an Option is an
Incentive Stock Option or a Non-Qualified Stock Option and separate Option
Agreements shall be issued for each type of Option when a combination of an
Incentive Stock Option and a Non-Qualified Stock Option are granted on the same
date to the same Employee. Any Option which is designated as a Non-Qualified
Stock Option shall not be treated by the Company or the Employee to whom the
Option is granted as an Incentive Stock Option for federal income tax purposes.
6.2 Option Price. The option price per Share of any Non-Qualified Stock
Option granted under the Plan shall be the Fair Market Value of the Shares
covered by the Option on the date the Option is granted unless the Committee, in
its sole discretion, determines to set the option price at an amount less than
or greater than the Fair Market Value of the Shares on such date. The option
price per Share of any Incentive Stock Option granted under the Plan shall not
be less than the Fair Market Value of the Shares covered by the Option on the
date the Option is granted.
Notwithstanding anything herein to the contrary, the option
price per Share of any Incentive Stock Option granted to an Employee Stockholder
shall not be less than one hundred ten percent (110%) of the Fair Market Value
of the Shares covered by the Option on the date the Option is granted.
6.3 Term of Options. Options granted hereunder shall be exercisable for
a Term of not more than ten (10) years from the date of grant thereof, but shall
be subject to earlier termination as hereinafter provided. Each Option Agreement
issued hereunder shall specify the Term of the Option, which shall be determined
by the Committee in accordance with its discretionary authority hereunder.
Notwithstanding anything herein to the contrary, if an
Incentive Stock Option is granted to an Employee Stockholder, then such
Incentive Stock Option shall not be exercisable more
5
<PAGE> 6
than five (5) years from the date of grant thereof, but shall be subject to
earlier termination as hereinafter provided.
6.4 Vesting of Options. Unless otherwise determined by the Committee,
in its discretion, and set forth in the related Option Agreement, an Option may
be exercised, prior to its expiration or termination, within the following time
limitations:
6.4.1 After one (1) year from the date of grant, it may be
exercised as to not more than thirty percent (30%) of the Shares originally
subject to the Option.
6.4.2 After two (2) years from the date of grant, it may be
exercised as to not more than an aggregate of sixty percent (60%) of the Shares
originally subject to the Option.
6.4.3 After three (3) years from the date of grant, it may be
exercised as to any and all of the Shares subject to the Option.
7. LIMIT ON FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS. No Employee may be
granted an Incentive Stock Option hereunder to the extent that the aggregate
fair market value (such fair market value being determined as of the date of
grant of the option in question) of the stock with respect to which incentive
stock options are first exercisable by such Employee during any calendar year
(under all such plans of the Employee's employer corporation, its Parent, if
any, and its Subsidiaries, if any) exceeds One Hundred Thousand Dollars
($100,000). For purposes of the preceding sentence, options shall be taken into
account in the order in which they were granted. Any Option granted under the
Plan which is intended to be an Incentive Stock Option, but which exceeds the
limitation set forth in this Section 7, shall be a Non-Qualified Stock Option.
8. DATE OF GRANT. The date of grant of an Option granted hereunder shall be the
date on which the Committee acts in granting the Option.
9. EXERCISE OF RIGHTS UNDER OPTIONS.
9.1 Notice of Exercise. An Employee entitled to exercise an Option
shall do so by delivery of a written notice to that effect specifying the number
of Shares with respect to which the Option is being exercised and any other
relevant information the Committee may require. The notice shall be accompanied
by payment in full of the purchase price of any Shares to be purchased, which
payment may be made in cash or, with the Committee's approval (which in the case
of Incentive Stock Options must be given at the time of grant), in Shares valued
at Fair Market Value at the time of exercise or a combination thereof. No Shares
shall be issued upon exercise of an Option until full payment has been made
therefor. All notices or requests provided for herein shall be delivered to the
Company's Secretary, or such other person as the Committee may designate.
9.2 Cashless Exercise Procedures. The Company, in its sole discretion,
may establish procedures whereby an Employee, subject to the requirements of
Rule 16b-3, Regulation T, federal income tax laws, and other federal, state and
local tax and securities laws, can exercise an Option
6
<PAGE> 7
or a portion thereof without making a direct payment of the option price to the
Company; provided, however, that these cashless exercise procedures shall not
apply to Incentive Stock Options which are outstanding on the date the Company
establishes such procedures unless the application of such procedures to such
Options is permitted pursuant to the Code and the regulations thereunder without
affecting the Options' qualification under Code Section 422 as Incentive Stock
Options. If the Company so elects to establish a cashless exercise program, the
Company shall determine, in its sole discretion, and from time to time, such
administrative procedures and policies as it deems appropriate and such
procedures and policies shall be binding on any Employee wishing to utilize the
cashless exercise program.
10. OTHER OPTION TERMS AND CONDITIONS. Each Option or each Option Agreement
setting forth an Option shall contain such other terms and conditions not
inconsistent herewith as shall be approved by the Committee.
11. EXECUTION BY EMPLOYEE OF CERTAIN AGREEMENTS UPON GRANT OF AN OPTION. As a
condition of the grant of an Option, an Employee must enter into the following
agreement with the Company: (a) a Non-Interference Agreement ("Non- Interference
Agreement") and (b) an Assignment of Inventions and Non-Disclosure Agreement
("Non-Disclosure Agreement"; and together with the Non-Interference Agreement,
the ("Company Agreements"). An Employee shall not be permitted to exercise any
Option granted under the Plan unless and until such Employee has executed and
delivered to the Company each of the Company Agreements, including any and all
amendments, modifications or extensions requested by the Company.
12. RIGHTS OF OPTION HOLDER. The holder of an Option shall not have any of the
rights of a stockholder with respect to the Shares subject to purchase or
receipt under the Option, except to the extent that one or more certificates for
such Shares shall be issuable to the holder upon the due exercise of the Option
and the payment in full of the purchase price therefor.
13. NONTRANSFERABILITY OF OPTIONS. An Option shall not be transferable other
than: (a) by will or the laws of descent and distribution, and an Option subject
to exercise may be exercised, during the lifetime of the holder of the Option,
only by the holder or in the event of death, the holder's Successor, or in the
event of disability, the holder's personal representative, or (b) pursuant to a
qualified domestic relations order, as defined in the Code or ERISA or the rules
thereunder; provided, however, that an Incentive Stock Option may not be
transferred pursuant to a qualified domestic relations order unless such
transfer is otherwise permitted pursuant to the Code and the regulations
thereunder without affecting the Option's qualification under Code Section 422
as- an Incentive Stock Option.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in the
outstanding Shares by reason of stock dividends, stock splits,
reclassifications, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations or liquidations, or similar
events, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the Shares, or similar transactions or events, the
number and class of Shares available
7
<PAGE> 8
under the Plan in the aggregate, the number and class of Shares subject to
Options theretofore granted, applicable purchase prices and all other applicable
provisions, shall, subject to the provisions of the Plan, be equitably adjusted
by the Committee (which adjustment may, but need not, include payment to the
holder of an Option, in cash or in shares, in an amount equal to the difference
between the price at which such Option may be exercised and the then current
fair market value of the Shares subject to such Option as equitably determined
by the Committee). The foregoing adjustment and the manner of application of the
foregoing provisions shall be determined by the Committee, in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an Option.
15. CHANGE IN CONTROL. Notwithstanding anything to the contrary in the Plan or
any Option Agreement, in the case of a Change in Control of the Company, each
Option granted under the Plan shall terminate ninety (90) days after the
occurrence of such Change in Control but, in the event of any such termination,
an Option holder shall have the right, commencing at least five (5) days prior
to such Change in Control and subject to any other limitation on the exercise of
such Option in effect on the date of exercise to immediately exercise any Option
in full, without regard to any vesting limitations, to the extent they shall not
have been theretofore exercised. The foregoing provision shall not apply to the
holder of an Option to the extent that the application of such provision would
cause such Option, when aggregated with all other payments in the nature of
compensation due to the holder of the Option, to be treated as an "excess
parachute payment" within the meaning of Section 280G of the Code. If a Change
in Control would be deemed to have occurred under paragraph 2.2.3(a) hereof
except for the fact that the President of the Company is the President, Chairman
or Chief Executive Officer of the Company or the surviving entity, then if the
Employee's relationship with the surviving entity is terminated within nine (9)
months of the merger or consolidation for any reason other than good cause
(which shall not include downsizing or consolidation of resources), as
determined by the surviving entity, then a Change in Control shall be deemed to
have occurred upon such termination with respect to the options of such
terminated employee.
16. FORMS OF OPTIONS. Nothing contained in the Plan nor any resolution adopted
or to be adopted by the Board or by the stockholders of the Company shall
constitute the granting of any Option. An Option shall be granted hereunder only
by action taken by the Committee in granting an Option. Whenever the Committee
shall designate an Employee for the receipt of an Option, the Company's
Secretary, or such other person as the Committee may designate, shall forthwith
send notice thereof to the Employee, in such form as the Committee shall
approve, stating the number of Shares subject to the Option, its Term, and the
other terms and conditions thereof. The notice shall be accompanied by a written
Option Agreement in such form as may from time to time hereafter be approved by
the Committee, which shall have been duly executed by or on behalf of the
Company. If the surrender of previously issued Options is made a condition of
the grant, the notice shall set forth the pertinent details of such condition.
Execution by the Employee to whom such Option is granted of said Option
Agreement in accordance with the provisions set forth in this Plan shall be a
condition precedent to the exercise or receipt of any Option.
8
<PAGE> 9
17. TAXES.
17.1 Right to Withhold Required Taxes. The Company shall have the right
to require a person entitled to receive Shares pursuant to the exercise of an
Option under the Plan to pay the Company the amount of any taxes which the
Company is or will be required to withhold with respect to such Shares before
the certificate for such Shares is delivered pursuant to the Option.
Furthermore, the Company may elect to deduct such taxes from any other amounts
then payable in cash or in shares or from any other amounts payable any time
thereafter to the Employee. If the Employee disposes of Shares acquired pursuant
to an Incentive Stock Option in any transaction considered to be a disqualifying
disposition under Sections 421 and 422 of the Code, the Employee shall notify
the Company of such transfer and the Company shall have the right to deduct any
taxes required by law to be withheld from any amounts otherwise payable then or
at any time thereafter to the Employee.
17.2 Employee Election to Withhold Shares. Subject to specific
Committee approval (which in the case of Incentive Stock Options must be given
at the time of grant), an Employee may elect to satisfy the tax liability with
respect to the exercise of an Option by having the Company withhold Shares
otherwise issuable upon exercise of the Option; provided, however, that if an
Employee is subject to Section 16(b) of the Exchange Act at the time the Option
is exercised, such election must satisfy the requirements of Rule 16b-3.
18. TERMINATION OF THE PLAN. The Plan shall terminate ten (10) years from the
date hereof, and an Option shall not be granted under the Plan after that date
although the terms of any Options may be amended at any date prior to the end of
its Term in accordance with the Plan. Any Options outstanding at the time of
termination of the Plan shall continue in full force and effect according to the
terms and conditions of the Option and this Plan.
19. AMENDMENT OF THE PLAN. The Plan may be amended at any time and from time to
time by the Board, but no amendment without the approval of the stockholders of
the Company shall be made if stockholder approval under Section 422 of the Code
or Rule 16b-3 would be required. Notwithstanding the discretionary authority
granted to the Committee in Section 4 of the Plan, no amendment of the Plan or
any Option granted under the Plan shall impair any of the rights of any holder,
without the holder's consent, under any Option theretofore granted under the
Plan.
20. DELIVERY OF SHARES ON EXERCISE. Delivery of certificates for Shares pursuant
to the grant or exercise of an Option may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with any
applicable requirements of any federal, state or local law or regulation or any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Committee may, in its
sole discretion, require an Employee to furnish the Company with appropriate
representations and a written investment letter prior to the exercise of an
Option or the delivery of any Shares pursuant thereto.
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21. FEES AND COSTS. The Company shall pay all original issue taxes on the
exercise of any Option granted under the Plan and all other fees and expenses
necessarily incurred by the Company in connection therewith.
22. EFFECTIVENESS OF THE PLAN. The Plan shall become effective when approved by
the Board. The Plan shall thereafter be submitted to the Company's stockholders
for approval and unless the Plan is approved by the Company's stockholders at a
meeting duly held in accordance with Delaware law within twelve (12) months
after being approved by the Board, the Plan and all Options made under it shall
be void and of no force and effect. In aid of this provision any Options granted
prior to the approval of the Plan by the Company's stockholders shall be
conditioned upon receipt of such approval.
23. OTHER PROVISIONS. As used in the Plan and in Option Agreements and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in such Options and other documents
prepared in implementation of the Plan are for convenience only and shall not
affect the meaning of any provision hereof or thereof.
24. DELAWARE LAW TO GOVERN. This Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
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EXHIBIT 10.10
AWARD AGREEMENT
(Non-Qualified Stock Option)
This Award Agreement is made this day of __________ 199__, between
Access Beyond, Inc., a Delaware corporation (hereinafter called the "Company')
and ________________________, an employee, consultant, or advisor of, or a third
party provider of services to the Company (hereinafter called the "Optionee").
WHEREAS, the Company has heretofore adopted the 1996 Long-Term
Incentive Plan of Access Beyond, Inc. (the "Plan"); and
WHEREAS, it is a requirement of the Plan that an award agreement be
executed to evidence the Non-Qualified Stock Option granted to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto have agreed, and do hereby agree, as follows:
1. Grant of Award. The Company hereby grants to the Optionee the right
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate _______________ (__________) shares of the Common Stock, $.01 par
value, of the Company ("Shares") (such number being subject to adjustment as set
forth herein and the Plan) on the terms and conditions set forth herein and in
the Plan.
2. Type of Option. The Option granted under this Award Agreement is a
Non-Qualified Stock Option and shall not be treated by the Company or the
Optionee as an Incentive Stock Option for federal income tax purposes.
3. Purchase Price. The option price of the shares covered by the Option
is $_____ per share.
4. Term of Option.
(a) The term of the Option (the "Term") shall be for a period
of ten (10) years from the date of this Award Agreement ("Date of Grant"),
subject to earlier termination as hereinafter provided.
(b) Prior to its expiration or termination the Option may be
exercised within the following time limitations:
(i) After one year from the Date of Grant, it may be
exercised as to not more than thirty percent (30%) of the Shares originally
subject to the Option.
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(ii) After two years from the Date of Grant, it may
be exercised as to not more than sixty percent (60%) of the Shares originally
subject to the Option.
(iii) After three years from the Date of Grant, it
may be exercised as to any part or all of the Shares originally subject to the
Option.
5. Execution of Agreements with Company. The grant of the Option under
the Plan is conditioned upon the Optionee executing and delivering to the
Company (a) the Non-Interference Agreement, attached hereto as ANNEX A (the
"Non-Interference Agreement") and (b) the Assignment of Inventions and
Non-Disclosure Agreement, attached hereto as ANNEX B (the "Confidentiality
Agreement"). In addition, the Optionee shall not be permitted to exercise the
Option unless he or she has executed and delivered the Non-Disclosure Agreement
and the Confidentiality Agreement, including any and all amendments,
modifications or extensions requested by the Company.
6. Exercise of Award.
(a) In order to exercise the Option, the person or persons
entitled to exercise it shall deliver to the Secretary of the Company written
notice of the number of Shares with respect to which the Option is to be
exercised. Unless (i) the Company, in its discretion, establishes "cashless
exercise" procedures pursuant to Section 9.2 of the Plan, and (ii) the Company's
Compensation Committee (the "Committee"), in its discretion, permits the person
or persons entitled to exercise the Option to utilize such "cashless exercise"
procedures, the notice shall be accompanied by payment in full for Shares being
purchased, which payment shall be in cash, or (iii) upon approval of the
Committee, by certificates of Shares held at least 6 months by the Optionee,
duly endorsed in blank, having a fair market value on the date of exercise equal
to the purchase price of the Shares to be purchased, or (iv) upon approval of
the Committee, by a combination of cash and Shares. No fractional Shares shall
be issued.
(b) No shares shall be issued until full payment therefor has
been made, and the Optionee shall have none of the rights of a stockholder in
respect of such Shares until they are so issued.
7. Nontransferability. The Option shall not be transferable other than:
(a) by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Optionee, only by him or her or in the
event of death, by the Optionee's Successor, or in the event of disability, by
the Optionee's personal representatives or (b) pursuant to a qualified domestic
relations order, as defined in the Internal Revenue code of 1986, as amended
(the "Code"), or ERISA, or the rules thereunder.
8. Termination of Employment. In the event that the
employment of or other relationship to the Company of the Optionee is terminated
(otherwise than (a) for cause by the Company or (b) voluntarily by the Optionee
without the written consent of the Company, or (c) upon a breach or threatened
breach of the Non-Interference Agreement or the Confidentiality Agreement),
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<PAGE> 3
then (i) the Option may be exercised by the Optionee, to the extent that he or
she is entitled to do so immediately before such termination, at any time within
three months after such termination, but not beyond the original Term hereof and
(ii) the portion of the Option that has not vested as of the date of such
termination shall automatically terminate. So long as the Optionee shall
continue in the employ of or other relationship to the Company or any of its
Subsidiaries, the Option shall not be affected by an change of duties or
position. Nothing in this Award Agreement shall confer upon the Optionee any
right to continue in the employ of or other relationship to the Company or any
of its Subsidiaries or interfere in any way with the right of the Company or any
such Subsidiary to terminate his or here employment or other relationship with
the Company at any time. In the event of any termination of the Optionee's
employment or other relationship with the Company for cause, or in the event of
any voluntary termination on the part of the Optionee without the written
consent of the Company or upon a breach or threatened breach of the
Non-Interference Agreement or the Confidentiality Agreement, the Option, to the
extent not theretofore exercised by reason of non-vesting or otherwise, shall
forthwith terminate.
9. Death of Optionee. If the Optionee dies while he or she is employed
by or is providing services to the Company or any of its Subsidiaries or within
three months after termination of his or her employment or other relationship
with the Company, provided such termination was not for any reason set forth in
paragraph 8(a)-(c) above, then (i) the Option may be exercised to the extent the
Optionee was entitled to do so immediately before the time of his or her death,
by a legatee or legatees of the Optionee under his or her last will, or by his
or her personal representatives or distributee, at any time within one year
after his or her death, but not beyond the Term hereof and (ii) the portion of
the Option that has not vested as of the date of the Optionee's death shall
automatically terminate.
10. Disability of Optionee. If the employment or other relationship
with the Company of the Optionee terminates on account of his or her having
become "disabled" as defined in Section 22(e)(3) of the Code then (i) the Option
may be exercised to the extent that the Optionee was entitled to do so
immediately before the termination of his or her employment or other
relationship with the Company on account of his or her becoming disabled, at any
time within one year after the date on which his or her employment or other
relationship with the Company terminated, but not beyond the Term hereof and
(ii) the portion of the Option that has not vested as of the date of the
Optionee's disability shall automatically terminate.
11. Retirement of Optionee. If the employment or other relationship
with the Company of the Optionee terminates by reason of retirement entitling
the Optionee to benefits under the provisions of any retirement plan of the
Company or any of its Subsidiaries in which the Optionee participates, then (i)
the Option may be exercised, to the extent that the Optionee was entitled to do
so immediately before the termination of his or her employment on account of his
or her retirement, at any time within one year after the date on which his or
here employment terminated, but not beyond the original Term of the Option and
(ii) the portion of the Option that has not vested as of the date of the
Optionee's retirement shall automatically terminate.
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<PAGE> 4
12. Change in Control. Notwithstanding anything in this Award Agreement
to the contrary, in the case of a Change in Control of the Company as defined in
Section 2.2 of the Plan, and subject to Section 15 of the Plan, the Optionee
shall have the right, commencing at least five (5) days prior to such Change in
Control, to immediately exercise the Option in full, without regard to any
vesting limitations; provided, however, that this Section 12 shall not apply to
the extent that such event would cause this Award, when aggregated with all
other payments in the nature of compensation due the Optionee, to be treated as
an"excess parachute payment" as defined in Section 280G(b) (or its successor) of
the Code. For purposes of determining whether this Award constitutes an "excess
parachute payment," this Award shall be deemed to be considered part of the
"base amount" as defined in Section 280G(b)(3) of the Code and part of the
"reasonable compensation" referred to in Section 280G(b)(4) of the Code only to
the extent any other payments to the Optionee in (the nature of compensation
taken into consideration under Section 280G do not equal or exceed the sum of
(x) such "base amount" and (y) such "reasonable compensation" in excess of such
"base amount" unless the Committee, in its discretion, determines that an
employment agreement or other arrangement with the Optionee requires "excess
parachute payments" to be computed in some other manner, in accordance with
Section 280G of the Code.
13. Taxes. The Company has the right to require a person entitled to
receive Shares pursuant to the exercise of any Option under the Plan to pay the
Company the amount of any taxes which the Company is or will be required to
withhold with respect to such Shares before the certificate of such Shares is
delivered. Furthermore, the Company may elect to deduct such taxes from any
other amounts payable in cash or in shares or from any other amounts payable
anytime thereafter to the Optionee.
14. Adjustments Upon Changes in Capitalization. In the event of changes
in all of the outstanding Shares by reason of stock dividends, stock splits,
reclassifications, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations, liquidations, or similar
events, or in the event of extra ordinary cash or non-cash dividends being
declared with respect to the Shares, or similar transactions or events, the
number and class of Shares subject to the Option hereby granted, the option
price and all other applicable provisions thereof shall, subject to the
provisions of the Plan, be correspondingly equitably adjusted by the Committee
(which adjustment may, but need not, include payment to the holder of the
Option, in cash or in shares, in any amount equal to the difference between the
option price and the then current Fair Market Value of the Shares subject to the
Option as equitably determined by the Committee), as it shall decide in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise be subject to the Option.
15. Delivery of Shares on Exercise. Delivery of certificates for Shares
pursuant to the exercise of the Option may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with any
applicable requirements of any federal, state or local law or regulation of any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Committee may, in its
sole discretion, require the holder of the Option to furnish the Company with
appropriate representations and a written
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<PAGE> 5
investment letter prior to the exercise of the Option or the delivery of any
Shares pursuant to the Option.
16. Incorporation of Provisions of the Plan. All of the provisions of
the Plan pursuant to which this Option is granted are hereby incorporated by
reference and made a part hereof as if specifically set forth herein, and to the
extent there exists any conflict between this Award Agreement and the terms
contained in the aforesaid Plan, the terms of the Plan shall prevail. To the
extent any capitalized terms are not otherwise defined herein, they shall have
the meaning set forth in Section 2 of the Plan. If this Award Agreement is dated
prior to approval of the Plan by the Company's Stockholders, then the Option
granted is conditioned upon receipt of such approval.
17. Waiver and Modification. The provisions of this Award Agreement may
not be waived or modified unless such waiver or modification is done in writing
and acknowledged by all the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to be
duly executed by one of its officers thereunto duly authorized, and the Optionee
has hereunto set his or her hand, all on the day and year first above written.
ACCESS BEYOND, INC.
By:
---------------------------------------
- --------------------------
Optionee
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<PAGE> 1
EXHIBIT 10.11
AMENDED AND RESTATED
1996 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN OF
ACCESS BEYOND, INC.
1. PURPOSE OF THE PLAN. This 1996 Non-Employee Directors' Stock Option Plan of
Access Beyond, Inc., adopted as of the 18th day of November, 1996, and as
amended and restated as of the 4th day of February, 1997, is intended to
encourage directors of the Company who are not officers or key employees of the
Company or any of its Subsidiaries to acquire or increase their ownership of
common stock of the Company. The opportunity so provided is intended to foster
in participants an incentive to put forth maximum effort for the continued
success and growth of the Company and its Subsidiaries.
2. DEFINITIONS. When used herein, the following terms shall have the meanings
set forth below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act (as in effect
on the date the Plan is adopted by the Board), whether or not the Company is
then subject to such reporting requirement; provided, that, without limitation,
such a Change in Control shall be deemed to have occurred if:
2.2.1 any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing twenty-five (25%) or more of the combined voting power of the
Company then outstanding securities otherwise than through any transaction or
transactions arranged, or consummated with the prior approval of, the Board;
provided, however, that a Change in Control shall not be deemed to occur under
this clause (a) by reason of the acquisition of securities by the Company or an
employee benefit plan (or any trust funding such a plan) maintained by the
Company, or solely by reason of the new issuance of securities directly by the
Company; or
2.2.2 during any period of two (2) consecutive years (not
including any period prior to the adoption of this Plan) there shall cease to be
a majority of the Board comprised of Tenured Directors; or
2.2.3 (a) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result
<PAGE> 2
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than eighty percent (80%)
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(ii) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
2.3 "Code" means the Internal Revenue Code of 1986, as in effect at the
time of reference, or any successor revenue code which may hereafter be adopted
in lieu thereof, and any reference to any specific provisions of the Code shall
refer to the corresponding provisions of the Code as it may hereafter be amended
or replaced.
2.4 "Committee" means the Compensation Committee of the Board or any
other committee appointed by the Board which is invested by the Board with
responsibility for the administration of the Plan.
2.5 "Company" means Access Beyond, Inc., a Delaware corporation.
2.6 "Directors" means directors who serve on the Board and who are
neither officers nor key employees of the Company or any of its Subsidiaries.
2.7 "ERISA" means the Employee Retirement Income Security Act of 1974,
as in effect at the time of reference, or any successor law which may hereafter
be adopted in lieu thereof, and any reference to any specific provisions of
ERISA shall refer to the corresponding provisions of ERISA as it may hereafter
be amended or replaced.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as in
effect at the time of reference, or any successor law which may hereafter be
adopted in lieu thereof, and any reference to any specific provisions of the
Exchange Act shall refer to the corresponding provisions of the Exchange Act as
it may be amended or replaced.
2.9 "Fair Market Value" means with respect to the Shares, the closing
price of the Shares as reported on the NASDAQ National Market System, on the
last business day prior to the date on which the value is to be determined, as
reported in the Wall Street Journal or such other source of quotations for, or
report of trading of, the Shares as the Committee may reasonably select from
time to time. Notwithstanding the foregoing, with respect to Options granted on
the effective date of the Plan, Fair Market Value means the average closing
price of the Shares on the NASDAQ National Market System for the ten (10)
trading days immediately following the last business day prior to the effective
day of the Plan.
2.10 "Option" means the right to purchase the number of Shares
specified by the Plan at a price and for a term fixed by the Plan, and subject
to such other limitations and restrictions as the Plan and the Committee
imposes.
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<PAGE> 3
2.11 "Option Agreement" means a written agreement in such form as may
be, from time to time, hereafter approved by the Committee, which shall be duly
executed by the Company and the Director and which shall set forth the terms and
conditions of an Option under the Plan.
2.12 "Plan" means the 1996 Non-Employee directors' Stock Option Plan of
Access Beyond, Inc., as amended and restated.
2.13 "Regulation T" means Part 220, chapter II, title 12 of the Code of
Federal Regulations, issued by the Board of Governors of the Federal Reserve
System pursuant to the Exchange Act, as amended from time to time.
2.14 "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
of the Securities and Exchange Commission as in effect at the time of reference,
or any successor rules or regulations which may hereafter be adopted in lieu
thereof and any reference to any specific provisions of Rule 16b-3 shall refer
to the corresponding provisions of Rule 16b-3 as it may hereafter be amended or
replaced.
2.15 "Share" means shares of the Company S.01 par value common stock
or, if by reason of the adjustment provisions contained herein, any rights under
an Option under the Plan pertain to any other security, such other security.
2.16 "Subsidiary" or "Subsidiaries" means any corporation or
corporations other than the Company in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2.17 "Successor" means the legal representative of the estate of a
deceased Director or the person or persons who shall acquire the right to
exercise or receive an Option by bequest or inheritance or by reason of the
death of the Director.
2.18 "Tenured Directors" means individuals who at the beginning of any
period of two (2) consecutive years (not including any period prior to the
adoption of this Plan) constitute the Board and any new director(s) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved.
2.19 "Term" means the period during which a particular Option may be
exercised.
3. STOCK SUBJECT TO THE PLAN.. There will be reserved for use, upon the exercise
of Options to be granted from time to time under the Plan, an aggregate of
250,000 Shares, which Shares may be, in whole or in part, as the Board shall
from time to time determine, authorized but unissued Shares,
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<PAGE> 4
or issued Shares which shall have been reacquired by the Company. Any Shares
subject to issuance upon exercise of Options but which are not issued because of
a surrender, lapse, expiration or termination of any such Option prior to
issuance of the Shares shall once again be available for issuance in
satisfaction of Options.
4. ADMINISTRATION OF THE PLAN. The Board shall appoint the Committee, which
shall consist of at least two (2) members of the Board who are neither employees
nor officers of the Company. Subject to the provisions of the Plan, the
Committee shall have full authority, in its discretion, to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to the Plan, and
generally to interpret and determine any and all matters whatsoever relating to
the administration of the Plan and the granting of Options hereunder. The Board
may, from time to time, appoint members to the Committee in substitution for or
in addition to members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such times and places as it shall deem
advisable. A majority of its members shall constitute a quorum. Any action of
the Committee may be taken by a written instrument signed by all of the members,
and any action so taken shall be fully as effective as if it had been taken by a
vote of a majority of the members at a meeting duly called and held. The
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable and shall appoint a Secretary who shall keep minutes
of its meetings and records of all action taken in writing without a meeting. No
member of the Committee shall be liable, in the absence of bad faith, for any
act or omission with respect to his or her service on the Committee.
5. GRANT OF OPTIONS. Each Director who is a Director on the date the Plan
becomes effective shall be granted an Option on such date to purchase 25,000
Shares without further action by the Board or the Committee. Each Director who
joins the Board after the date the Plan becomes effective shall be granted an
Option on the first day of his initial term on the Board to purchase 25,000
Shares without further action by the Board or the Committee. In addition, on the
fifth business day after the Company's Annual Report on Form 10-K is filed with
the Securities and Exchange Commission for each fiscal year during which the
Plan is in effect, each Director who is a Director on such date shall be
automatically granted an additional Option to purchase 5,000 Shares without
further action by the Board or the Committee. If the number of Shares available
under the Plan on a scheduled grant date is insufficient to make all automatic
grants required to be made pursuant to the Plan on such date, then each Eligible
Director shall receive an Option to purchase a pro rata number of the remaining
Shares, if any, under the Plan; provided further, however, that if such
proration results in fractional Shares, then such Option shall be rounded down
to the nearest number of whole Shares. A Director may designate one or more
persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) who are
neither officers nor key employees of the Company or any of its Subsidiaries to
be granted the Options which such Director is entitled to received hereunder, in
which case the Options granted to such designee shall be subject to the
provisions hereof that would have been applicable to such Director, had such
Options been granted to such Director.
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6. BASIC STOCK OPTION PROVISIONS.
6.1 Option Price. The option price per share of any Option granted
under the Plan shall be the Fair Market Value of the Shares covered by the
Option on the date the Option is granted.
6.2 Term of Options. Subject to paragraphs (a) and (b) of this Section
6.2, Options granted hereunder shall be exercisable for a Term of ten (10) years
from the date of grant thereof, but shall be subject to earlier termination as
hereinafter provided.
6.2.1 Except as otherwise provided in the Plan, prior to its
expiration or termination, any Option granted hereunder on the date the Plan
becomes effective or on the first day of a Director's initial term on the Board
(each, an "Initial Option") may be exercised within the following time
limitations:
(a) After one year from the date of grant, an Initial
Option may be exercised as to not more than thirty percent (30%) of the Shares
originally subject to the Initial Option.
(b) After two years from the date of grant, an
Initial Option may be exercised as to not more than sixty percent (60%) of the
Shares originally subject to the Initial Option.
(c) After three years from the date of the grant, an
Initial Option may be exercised as to any part or all of the Shares originally
subject to the Initial Option.
6.2.2 Except as otherwise provided in the Plan, prior to its
expiration or termination, any Option granted hereunder that is not an Initial
Option may be exercised at any time after three years from the date of grant.
6.3 Termination of Directorship. In the event a Director ceases to be a
member of the Board (other than by reason of death or disability), then (a) an
Option may be exercised by the Director (to the extent the Director shall have
been entitled to do so at the time he or she ceased to be a member of the Board)
at any time within seven (7) months after he or she ceases to be a member of the
Board, but not beyond the Term of the Option and (b) the portion of the Option
that has not vested as of the date the Director ceases to be a member of the
Board shall automatically terminate.
6.4 Death or Disability of Director. If a Director dies or becomes
disabled while he or she is a member of the Board, or within seven (7) months
after he or she ceases to be a Member of the Board, an Option may be exercised
(to the extent the Director was entitled to do so at the time of his or her
death or disability) by the Director or the Director's Successor, as the case
may be, at any time within one (1) year after the Director ceases to be a member
of the Board on account of such death or disability, but not beyond the Terms of
the Option.
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<PAGE> 6
7. EXERCISE OF RIGHTS UNDER OPTIONS.
7.1 Notice of Exercise. A Director entitled to exercise an Option may
do so by delivery of a written notice to that effect specifying the number of
Shares with respect to which the Option is being exercised and any other
information the Committee may require. The notice shall be accompanied by
payment in full of the purchase price of any Shares to be purchased, which
payment shall be made in cash or by certificates of Shares held for more than
six (6) months, duly endorsed in blank equal in value to the purchase price of
the Shares to be purchased based on their Fair Market Value at the time of
exercise or a combination thereof. No Shares shall be issued upon exercise of an
Option until full payment has been made therefor. All notices or requests
provided for herein shall be delivered to the Company's Chief Financial Officer,
or such other person as the Committee may designate. No fractional Shares shall
be issued.
7.2 Cashless Exercise Procedures. The Company, in its sole discretion,
may establish procedures whereby a Director, subject to the requirements of Rule
16b-3, Regulation T, federal income tax laws, and other federal, state and local
tax and securities laws, can exercise an Option or a portion thereof without
making a direct payment of the option price to the Company. If the Company so
elects to establish a cashless exercise program, the Company shall determine, in
its sole discretion, and from time to time, such administrative procedures and
policies as it deems appropriate and such procedures and policies shall be
binding on any Director wishing to utilize the cashless exercise program.
8. OTHER OPTION TERMS AND CONDITIONS. Each Option or each Option Agreement
evidencing the grant of an Option shall contain such other terms and conditions
not inconsistent herewith as shall be approved by the Committee.
9. RIGHTS OF OPTION HOLDER. The holder of an Option shall not have any of the
rights of a stockholder with respect to the Shares subject to purchase or
receipt under his or her Option, except to the extent that one or more
certificates for such Shares shall be issuable to the holder upon the due
exercise of the Option and the payment in full of the purchase price therefor.
10. NONTRANSFERABILITY OF OPTIONS. An Option shall not be transferable, other
than: (a) by will or the laws of descent and distribution, and an Option subject
to exercise may be exercised, during the lifetime of the holder of the Option,
only by the holder, or in the event of death, the holder's Successor, or in the
event of disability, the holder's personal representative, or (b) pursuant to a
qualified domestic relations order, as defined in the Code or ERISA or the rules
thereunder.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in the
outstanding Shares by reason of stock dividends, stock splits,
reclassifications, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations or liquidations, or similar
events, or in the event of extraordinary cash or non-cash dividends being
declared with respect to the Shares, or similar transactions or events, the
number and class of Shares available under the Plan in the aggregate, the number
and class of Shares subject to Options theretofore
6
<PAGE> 7
granted, applicable purchase prices and all other applicable provisions, shall,
subject to the provisions of the Plan, be equitably adjusted by the Committee
(which adjustment may, but need not, include payment to the holder of an Option,
in cash or in shares, in an amount equal to the difference between the price at
which such Option may be exercised and the then current fair market value of the
Shares subject to such Option as equitably determined by the Committee). The
foregoing adjustment and the manner of application of the foregoing provisions
shall be determined by the Committee, in its sole discretion. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become subject to an Option.
12. CHANGE IN CONTROL. Notwithstanding anything to the contrary in the Plan or
in any Option Agreement, in the case of a Change in Control of the Company, each
Option granted under the Plan shall terminate on the later of (a) ninety (90)
days after the occurrence of such Change in Control and (b) seven (7) months
following the date of grant of an Option, and an Option holder shall have the
right, commencing at least five (5) days prior to such Change in Control and
subject to any other limitation on the exercise of such Option in effect on the
date of exercise, to immediately exercise any Option in full, without regard to
any vesting limitations, to the extent it shall not have been previously
exercised.
13. FORMS OF OPTIONS. An Option shall be granted hereunder on the date or dates
specified in the Plan. Whenever the Plan provides for the receipt of an Option
by a Director, the Company's Chief Financial Officer or such other person as the
Committee shall appoint, shall send notice thereof to the Director, in such form
as the Committee shall approve, stating the number of Shares subject to the
Option, its Term, and the other terms and conditions thereof The notice shall be
accompanied by a written Option Agreement, in such form as may from time to time
hereafter be approved by the Committee, which shall have been duly executed by
or on behalf of the Company. Execution by the Director to whom such Option is
granted of said Option Agreement in accordance with the provisions set forth in
this Plan shall be a condition precedent to the exercise of any Option.
14. TAXES.
14.1 Right to Withhold Required Taxes. The Company shall have the right
to require a person entitled to receive Shares pursuant to the exercise of an
Option under the Plan to pay the Company the amount of any taxes which the
Company is or will be required to withhold, if any, with respect to such Shares
before the certificate for such Shares is delivered pursuant to the Option.
Furthermore, the Company may elect to deduct such taxes from any other amounts
then payable in cash or in shares or from any other amounts payable any time
thereafter to the Director.
14.2 Director Election to Withhold Shares. A Director may satisfy the
withholding tax liability, if any, with respect to the exercise of an Option, by
having the Company withhold Shares otherwise issuable upon exercise of the
Option if such Director makes an election to do so which satisfies the
requirements of Rule 16b-3.
7
<PAGE> 8
15. TERMINATION OF THE PLAN. The Plan shall terminate ten (10) years from the
date the Plan becomes effective, and an Option shall not be granted under the
Plan after that date although tho terms of any Option may be amended at any date
prior to the end of its Term in accordance with the Plan. Any Option outstanding
at the time of termination of the Plan shall continue in full force and effect
according to the terms and conditions of the Option and this Plan.
16. AMENDMENT OF THE PLAN. The Plan may be amended at any time and from time to
time by the Board. Notwithstanding the discretionary authority granted to the
Committee in Section 4 of the Plan, no amendment of the Plan or any Option
granted under the Plan shall impair any of the rights of any holder, without the
holder's consent, under any Option theretofore granted under the Plan.
17. DELIVERY OF SHARES ON EXERCISE. Delivery of certificates for Shares pursuant
to an Option exercise may be postponed by the Company for such period as may be
required for it with reasonable diligence to comply with any applicable
requirements of any federal, state or local law or regulation or any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Committee may, in its
sole discretion, require a Director to furnish the Company with appropriate
representations and a written investment letter prior to the exercise of an
Option or the delivery of any Shares pursuant thereto.
18. FEES AND COSTS. The Company shall pay all original issue taxes on the
exercise of any Option granted under the Plan and all other fees and expenses
necessarily incurred by the Company in connection therewith.
19. EFFECTIVENESS OF THE PLAN. The Plan shall become effective when approved by
the Board. The Plan shall thereafter be submitted to the Company's stockholders
for approval and unless the Plan is approved by the Company's stockholders at a
meeting duly held in accordance with Delaware law within twelve (12) months
after being approved by the Board, the Plan and all Options made under it shall
be void and of no force and effect. In aid of this provision any Options granted
prior to the approval of the Plan by the Company's stockholders shall be
conditioned upon receipt of such approval.
20. OTHER PROVISIONS. As used in the Plan, and in Option Agreements and other
documents prepared in implementation of the Plan, references to the masculine
pronoun shall be deemed to refer to the feminine or neuter, and references in
the singular or the plural shall refer to the plural or the singular, as the
identity of the person or persons or entity or entities being referred to may
require. The captions used in the Plan and in Option Agreements and other
documents prepared in implementation of the Plan are for convenience only and
shall not affect the meaning of any provision hereof or thereof
21. DELAWARE LAW TO GOVERN. This Plan shall be governed by and construed in
accordance with the laws of the State of Delaware.
8
<PAGE> 1
EXHIBIT 10.12
AWARD AGREEMENT
(Non-Qualified Stock Option)
This Award Agreement is made this day of __________ 199__, between
Access Beyond, Inc., a Delaware corporation (hereinafter called the "Company')
and _______________________, a member of the Board of Directors of the Company,
or a designee of such member (hereinafter called the "Optionee").
WHEREAS, the Company has heretofore adopted the 1996 Non-employee
Directors' Stock Option Plan of Access Beyond, Inc. (the "Plan"); and
WHEREAS, the Optionee is a non-employee director (or designee thereof)
of the Board of Directors of the Company (the "Board"); and
WHEREAS, it is a requirement of the Plan that an award agreement be
executed to evidence the Non-Qualified Stock Option granted to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto have agreed, and do hereby agree, as follows:
1. Grant of Award. The Company hereby grants to the Optionee the right
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate _______________ (__________) shares of the Common Stock, $.01 par
value, of the company ("Shares") (such number being subject to adjustment as set
forth herein and the Plan) on the terms and conditions set forth herein and in
the Plan.
2. Type of Option. The Option granted under this Award Agreement is a
Non-Qualified Stock Option and shall not be treated by the Company or the
Optionee as an Incentive Stock Option for federal income tax purposes.
3. Purchase Price. The option price of the shares covered by the Option
is $_____ per share.
4. Term of Option.
(a) The term of the Option (the "Term") shall be for a period
of ten (10) years from the date of this Award Agreement ("Date of Grant"),
subject to earlier termination as hereinafter provided.
(b) Prior to its expiration or termination the Option may be
exercised within the following time limitations:
<PAGE> 2
(i) After one year from the Date of Grant, it may be
exercised as to not more than thirty percent (30%) of the Shares originally
subject to the Option.
(ii) After two years from the Date of Grant, it may
be exercised as to not more than sixty percent (60%) of the Shares originally
subject to the Option.
(iii) After three years from the Date of Grant, it
may be exercised as to any part or all of the Shares originally subject to the
Option.
5. Exercise of Award.
(a) In order to exercise the Option, the person or persons
entitled to exercise it shall deliver to the Secretary of the Company written
notice of the number of Shares with respect to which the Option is to be
exercised. Unless (i) the Company, in its discretion, establishes "cashless
exercise" procedures pursuant to Section 7.2 of the Plan, and (ii) the Company's
Compensation Committee (the "Committee"), in its discretion, permits the person
or persons entitled to exercise the Option to utilize such "cashless exercise"
procedures, the notice shall be accompanied by payment in full for Shares being
purchased, which payment shall be in cash, or (iii) upon approval of the
Committee, by certificates of Shares held for more than 6 months by the
Optionee, duly endorsed in blank, having a fair market value on the date of
exercise equal to the purchase price of the Shares to be purchased, or (iv) upon
approval of the Committee, by a combination of cash and Shares. No fractional
Shares shall be issued.
(b) No shares shall be issued until full payment therefor has
been made, and the Optionee shall have none of the rights of a stockholder in
respect of such Shares until they are so issued.
6. Nontransferability. The Option shall not be transferable other than:
(a) by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Optionee, only by him or her or in the
event of death, by the Optionee's Successor, or in the event of disability, by
the Optionee's personal representatives or (b) pursuant to a qualified domestic
relations order, as defined in the Internal Revenue code of 1986, as amended
(the "Code"), or ERISA, or the rules thereunder.
7. Termination of Board Membership. In the event that the Optionee
(which, in the case of an Optionee who is a designee of a Board member, shall
mean, for purposes of this paragraph 7, such Board member) ceases to be a member
of the Board (otherwise than by death or disability), then (a) the Option may be
exercised by the Optionee, to the extent that he or she is entitled to do so as
of the date the Optionee ceases to be a member of the Board, at any time within
seven months after such date, but not beyond the Term hereof and (b) the portion
of the Option that has not vested as of the date of the Optionee ceases to be a
member of the Board shall automatically terminate.
2
<PAGE> 3
8. Death of Optionee. If the Optionee (which, in the case of an
Optionee who is a designee of a Board member, shall mean, for purposes of this
paragraph 8, such Board member) dies or becomes disabled while he or she is a
member of the Board, or within seven months after he or she ceases to be a
member of the Board, then (a) the Option may be exercised to the extent the
Optionee was entitled to do so immediately before the time of his or her death
or disability, by the Optionee's Successor, at any time within one year after he
or she ceases to be a member of the Board on account of such death or
disability, but not beyond the Term hereof and (b) the portion of the Option
that has not vested as of the date of the Optionee's death or disability shall
automatically terminate.
9. Change in Control. Notwithstanding anything in this Award Agreement
to the contrary, in the case of a Change in Control of the Company as defined in
Section 2.2 of the Plan, the Optionee shall have the right, commencing at least
five (5) days prior to such Change in Control and subject to any other
limitation on the exercise of such Option in effect on the date of exercise, to
immediately exercise the Option in full, without regard to any vesting
limitations. The Option shall terminate on the later of (a) ninety (90) days
after the occurrence of such Change of Control and (b) seven (7) months
following the Date of Grant.
10. Taxes. The Company has the right to require a person entitled to
receive Shares pursuant to the exercise of any Option under the Plan to pay the
Company the amount of any taxes which the Company is or will be required to
withhold with respect to such Shares before the certificate of such Shares is
delivered. Furthermore, the Company may elect to deduct such taxes from any
other amounts payable in cash or in shares or from any other amounts payable
anytime thereafter to the Optionee.
11. Adjustments Upon Changes in Capitalization. In the event of changes
in all of the outstanding Shares by reason of stock dividends, stock splits,
reclassifications, recapitalizations, mergers, consolidations, combinations, or
exchanges of shares, separations, reorganizations, liquidations, or similar
events, or in the event of extra ordinary cash or non-cash dividends being
declared with respect to the Shares, or similar transactions or events, the
number and class of Shares subject to the Option hereby granted, the option
price and all other applicable provisions thereof shall, subject to the
provisions of the Plan, be correspondingly equitably adjusted by the Committee
(which adjustment may, but need not, include payment to the holder of the
Option, in cash or in shares, in any amount equal to the difference between the
option price and the then current Fair Market Value of the Shares subject to the
Option as equitably determined by the Committee), as it shall decide in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise be subject to the Option.
12. Delivery of Shares on Exercise. Delivery of certificates for Shares
pursuant to the exercise of the Option may be postponed by the Company for such
period as may be required for it with reasonable diligence to comply with any
applicable requirements of any federal, state or local law or regulation of any
administrative or quasi-administrative requirement applicable to the sale,
issuance, distribution or delivery of such Shares. The Committee may, in its
sole discretion, require
3
<PAGE> 4
the holder of the Option to furnish the Company with appropriate representations
and a written investment letter prior to the exercise of the Option or the
delivery of any Shares pursuant to the Option.
13. Incorporation of Provisions of the Plan. All of the provisions of
the Plan pursuant to which this Option is granted are hereby incorporated by
reference and made a part hereof as if specifically set forth herein, and to the
extent there exists any conflict between this Award Agreement and the terms
contained in the aforesaid Plan, the terms of the Plan shall prevail. To the
extent any capitalized terms are not otherwise defined herein, they shall have
the meaning set forth in Section 2 of the Plan. If this Award Agreement is dated
prior to approval of the Plan by the Company's Stockholders, then the Option
granted is conditioned upon receipt of such approval.
14. Waiver and Modification. The provisions of this Award Agreement may
not be waived or modified unless such waiver or modification is done in writing
and acknowledged by all the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to be
duly executed by one of its officers thereunto duly authorized, and the Optionee
has hereunto set his or her hand, all on the day and year first above written.
ACCESS BEYOND, INC.
By:
-----------------------------------
- ------------------------------
Optionee
4
<PAGE> 1
Exhibit 10.13
2290 REMOTE ACCESS GATEWAY
("HAWK")
TECHNOLOGY TRANSFER AGREEMENT
BETWEEN
PARADYNE CORPORATION
AND
ACCESS BEYOND INC.
<PAGE> 2
INDEX
ARTICLE I GENERAL
ARTICLE II PUBLICITY
ARTICLE III CONSIDERATION
ARTICLE IV TECHNOLOGY TRANSFER AND SUPPORT
ARTICLE V INTELLECTUAL PROPERTY
ARTICLE VI TERMINATION
ARTICLE VII MISCELLANEOUS PROVISIONS
DEFINITIONS APPENDIX
ATTACHMENT A DELIVERY OF HAWK TECHNOLOGY
ATTACHMENT B SALE OF HAWK PRODUCT INVENTORY
<PAGE> 3
This Agreement, including all Attachments referred to herein, (the "Agreement")
is entered into as of the _____ day of May, 1997, (the "Effective Date") by and
between
Paradyne Corporation ("Paradyne"), a Delaware corporation, having a
principal office at 8545 126th Avenue North, Largo, Florida 33773, and
Access Beyond Inc. ("ABI") a Delaware corporation, having a principal
office at 1300 Quince Orchard Boulevard, Gaithersburg, Maryland 20878.
WHEREAS, Paradyne has developed the HAWK PRODUCT;
WHEREAS, ABI wishes to acquire the HAWK PRODUCT from Paradyne;
WHEREAS, ABI and Paradyne are each desirous of ABI developing, manufacturing,
selling, and promoting the HAWK PRODUCT and,
WHEREAS, both parties have heretofore disclosed to each other, pursuant to a
Letter of Intent (LOI) of March 19, 1997 and a Mutual Confidentiality Agreement
(MCA) of April 1, 1997 certain specifications, designs, plans, drawings,
software, data, prototypes, or other business and/or technical information
useful for such developing, manufacturing, selling and promoting of the HAWK
PRODUCT, which information is proprietary to the disclosing party or its
affiliated companies, and may wish to disclose additional information to each
other hereafter, for the purpose of ABI developing, manufacturing, selling, and
promoting such HAWK PRODUCT,
NOW THEREFORE, in consideration of the promises and the mutual covenants herein
contained, and intending to be legally bound by the provisions of this
Agreement, ABI and Paradyne agree as follows:
ARTICLE I
GENERAL
1.01 TERM
This Agreement is effective as of the Effective Date specified above and shall
remain in effect until terminated pursuant to the provisions of Article VI.
1.02 STATUS OF THE PARTIES
The relationship of the parties under this Agreement shall be, and at all times
shall remain, one of independent contractors, and ABI is neither an employee nor
an agent of Paradyne.
<PAGE> 4
1.03 TRANSFER OF OWNERSHIP
Effective upon the occurrence of all CLOSING DATE events, Paradyne transfers to
ABI all right, title and interest in the HAWK TECHNOLOGY. Paradyne represents
and warrants that it has the unencumbered legal authority to convey to ABI clear
title to the HAWK TECHNOLOGY and upon the purchase hereunder ABI shall have
acquired title to the HAWK TECHNOLOGY free and clear of any claims or
encumbrances. From and after the effective date of this transfer, Paradyne will
have no further rights in the HAWK TECHNOLOGY as transferred to ABI. Subject to
Section 1.06 below, Paradyne retains all right, title and interest in any
predecessor firmware and documentation utilized by Paradyne in the development
of the HAWK TECHNOLOGY as transferred to ABI, and in the PARADYNE INTELLECTUAL
PROPERTY.
1.04 GRANTS
The following grants shall be effective upon the occurrence of the CLOSING DATE
events:
(a) Subject to the terms and conditions of this Agreement, Paradyne grants to
ABI worldwide, perpetual, exclusive (subject to the provisions of Article VI,
and Sections 5.06 and 5.07), and non-transferable (except as provided for in
Section 7.06) licenses to use the PARADYNE INTELLECTUAL PROPERTY to develop,
make, have made, use, sell or otherwise dispose of, modify, enhance, create
derivatives of, support, and maintain HAWK PRODUCTS, but only to the extent that
PARADYNE INTELLECTUAL PROPERTY is required to do so, and provided that Paradyne
shall have no obligations with respect to support, indemnification, or any other
work related to any modifications and enhancements made by ABI.
(b) Subject to the terms and conditions of this Agreement, Paradyne grants to
ABI under the PARADYNE HAWK PATENTS worldwide, perpetual (subject to the
provisions of Article VI, and Sections 5.06 and 5.07), and non-transferable
(except as provided for in Section 7.06):
(i) immunity to make, have made, use, lease, maintain, modify,
sell and import HAWK PRODUCTS;
(ii) immunity to make, have made, use, lease, sell and import
machines, tools, materials and other instrumentalities,
insofar as such machines tools, materials and other
instrumentalities are involved in or incidental to the
development, manufacture, testing, or repair of HAWK PRODUCTS
which are or have been made, used, leased, owned, maintained,
sold or imported by ABI; and
(iii) the right to convey to any customer of ABI, with respect to
any HAWK PRODUCTS which are sold or leased by ABI to such
customer, immunity to use and resell as sold or leased by ABI
(whether or not as part of a larger combination).
<PAGE> 5
(c) The immunity granted under Section 1.04(b) shall remain in effect and not be
terminated for as long as the licenses granted under Section 1.04(a) remain in
effect.
(d) Subject to the terms and conditions of this Agreement, Paradyne grants to
ABI a worldwide, perpetual (subject to the provisions of Article VI, and
Sections 5.06 and 5.07), and non-transferable (except as provided for in Section
7.06) license to the software module known as SWSP4 (as described in Attachment
A, Section A1) solely for the purpose of reproducing and distributing SWSP4 as
part of the HAWK FIRMWARE embedded and incorporated in a HAWK PRODUCT, provided
that the SWSP4 module is only distributed in an inactive manner and does not
perform any useful QADM function. ABI acknowledges that SWSP4 is part of certain
QADM Technology and that Paradyne retains all rights, title and interests in
such module and such technology, and further that ABI's use of SWSP4 in an
active, useful QADM manner must be specified in, and governed by, a separate
QADM Technology Transfer and AudioSpan(TM) Trademark License Agreement to be
executed by the parties.
(e) ABI agrees that other than the right granted in Section 1.05 (Product Name
License), no right is granted herein to use any identification (such as, but not
limited to trade names, trademarks, trade dress, trade devices, service marks or
symbols, and abbreviations, contractions or simulations thereof) owned by or
used to identify Paradyne or any of its products, services or organizations.
1.05 PRODUCT NAME LICENSE
Paradyne hereby grants to ABI whatever rights Paradyne may have to reproduce and
use the product names "2290 Remote Access Gateway" and "2290 Remote Access
Server" and variations thereof solely in connection with the promotion,
marketing, and sale of HAWK PRODUCTS.
1.06 EXCLUSIVITY
Except as provided for herein, Paradyne agrees that it will not sell or
authorize any other party to sell a product developed by Paradyne, or a product
that embodies or incorporates HAWK TECHNOLOGY, where such product is
substantially functionally equivalent to the HAWK PRODUCT, at any time from the
effective date of this Agreement until the Agreement is terminated, but this
restriction will only apply to HAWK PRODUCTS that accommodate ISDN or V.34/56K
dial access. Paradyne represents that no other party has heretofore been
authorized to sell HAWK PRODUCTS and that no other party has any right, title or
interest in the HAWK TECHNOLOGY as of the effective date of this Agreement. For
the same period of time, ABI will, at Paradyne's option, sell HAWK PRODUCTS to
Paradyne on an OEM Basis on "most favored customer" terms (see below).
<PAGE> 6
"Most favored customer" - Notwithstanding any other provisions of this
Agreement, all of the prices, terms and warranties granted by ABI to Paradyne
hereunder or under any associated OEM Purchase Agreement by ABI shall be as
favorable as any other prices, terms and warranties granted by ABI to any other
customer for similar product. Upon reasonable prior notice Paradyne shall have
the right to audit ABI's books and records to the extent necessary to verify
ABI's compliance with this provision.
Once a year, and each time that Paradyne purchases HAWK PRODUCT from ABI, ABI
shall notify Paradyne of the prices, warranties, and terms that satisfy the
"most favored customer" requirements of the previous paragraph. Regardless of
whether such notice is sent by ABI or received by Paradyne, all purchases of
HAWK PRODUCT by Paradyne shall be deemed to be at the prices, warranties, and
terms to Paradyne that satisfy the "most favored customer" requirements of the
previous paragraph.
ARTICLE II
PUBLICITY
Upon the execution hereof, the parties shall make a joint public announcement
related to the execution of this Agreement and any other agreements executed
coincident with this Agreement. Such announcement shall be subject to the prior
common written approval of both parties. Without obligation to do so, it is
Paradyne's intent to make supportive comments regarding both the HAWK PRODUCT
and ABI's acquisition of same. Paradyne shall not unreasonably or without due
cause make disparaging remarks or comments about ABI or the HAWK PRODUCTS as
manufactured and sold by ABI or the HAWK TECHNOLOGY.
ABI will have the right to reasonably review all public relations material from
Paradyne relative to the HAWK PRODUCT which includes ABI's name.
Paradyne will have the right to reasonably review and approve all public
relations material from ABI relative to the HAWK PRODUCT which includes
Paradyne's name. ABI may, subject to such reasonable review and approval by
Paradyne, use Paradyne's name in public relations materials associated with the
HAWK PRODUCT.
ARTICLE III
CONSIDERATION
3.01 CONSIDERATION
In consideration of the rights and transfers herein granted and conveyed:
<PAGE> 7
(a) ABI shall convey to Paradyne and register 503,704 shares of ABI stock
as provided for in the Stock Purchase Agreement executed by the parties
coincident with this Agreement, and
(b) ABI shall pay twenty-five thousand dollars ($25,000) to Paradyne for
the Engineering Support activities specified in Section 4.02.1, and
(c) ABI shall make each of the payments for the HAWK PRODUCT inventory as
specified in Attachment B.
The payments specified in (b) and (c) above are to be tendered by wire transfer
upon the Effective Date to:
First Union Bank
Jacksonville, Florida
A.B.A. 063000021
Paradyne Account Number 2090002259142
3.02 PAYMENTS
(a) All cash payments specified in this Agreement are to be made in United
States dollars without reduction for withholding taxes or any other amounts or
set-off.
(b) ABI is responsible for any and all applicable state and local taxes in
respect of the transactions contemplated by this Agreement, excluding taxes
based on Paradyne's income.
(c) At Paradyne's option, interest charges may be added to any past due amounts
at the rate of 1-1/2% per month; or if this interest rate exceeds the maximum
allowed by applicable law, then at the maximum lawful rate.
ARTICLE IV
TECHNOLOGY TRANSFER
4.01 TECHNOLOGY DELIVERY
Upon the CLOSING DATE, Paradyne will deliver to ABI the HAWK TECHNOLOGY in the
form of a comprehensive set of specifications and technical information,
hardware and software elements as specified in Attachment A. Fixtures, tools,
test heads and other hardware as described in Attachment A shall be tendered
within fifteen (15) business days of the CLOSING DATE.
<PAGE> 8
Paradyne represents that, to the best of its knowledge, the firmware,
documentation and technical information as delivered to ABI includes all HAWK
TECHNOLOGY developed for the HAWK PRODUCT through the Effective Date of this
Agreement, even if all such developed items are not listed in the Attachments to
this Agreement. Paradyne agrees to promptly deliver to ABI upon discovery any
such developed items not listed in such Attachments.
Within five (5) business days of the execution of this agreement, ABI will
verify, at Paradyne's Largo facility, the inventory of the items set forth in
the Attachments.
In addition, a listing of any fixtures, tools, test heads, etc. applicable to
the HAWK PRODUCT shall be provided on the CLOSING DATE.
Additional terms of delivery for the HAWK TECHNOLOGY are specified in Attachment
A.
4.02 TECHNICAL SUPPORT
Paradyne represents that the levels and types of technical support described
below are adequate, in conjunction with the HAWK TECHNOLOGY as delivered to ABI,
to allow a firm with technical personnel as technically proficient and "skilled
in the art" as Paradyne Corporation to understand, manufacture and further
develop the HAWK PRODUCT.
4.02.1 ENGINEERING SUPPORT
Paradyne will provide the following development engineering support to ABI:
- A one (1) day familiarization seminar in Largo
- For a 2 week period, 2 hours of scheduled phone support per
day
- For a 2 month period, 2 hours of scheduled phone support per
week
4.02.2 MANUFACTURING SUPPORT
Paradyne will provide the following manufacturing support to ABI:
- Two (2) days of on-site support by a Test Engineer
- For a 3 month period, 2 hours of scheduled phone support per
week
- During such 3 month period, Paradyne will exercise
commercially reasonable efforts to provide E-mail and/or
Voice-mail responses within 24 hours of receipt of inquiries
from ABI's staff.
- Paradyne will allow ABI to have access to the Hardware at -
Paradyne's Largo facility and provide reasonable technical
support to assist ABI in becoming familiar with and to test
the Hardware, provided that this access will not exceed 3
consecutive days, will occur no later than 10 days after the
CLOSING DATE, and will be at ABI's expense.
<PAGE> 9
4.02.3 PRODUCT SUPPORT
Paradyne will provide third level support for the first six months after the
CLOSING DATE by ABI of the initial HAWK PRODUCT, at no charge during the first
ninety (90) days and on a preferred customer pricing basis thereafter for the
remainder of the first six (6) months.
For the first 90 days after the CLOSING DATE, Paradyne will provide the
following product support training at no cost to ABI:
Paradyne will provide five (5) days of third level training to up to
four (4) of ABI's technical employees for the purpose of establishing a
core competency within ABI for self-sustaining third level product
support upon product introduction. Certain prerequisites are required
prior to Paradyne scheduling the delivery of this training:
- ABI must set up a facility and equipment at an ABI site;
- Students must be familiar with Microsoft NT, with strong
skills in PC hardware, BIOS and software applications;
- Students must have extensive experience in analog and digital
modem technology, along with strong knowledge of T1 technology
and service.
During that 90 day period, Paradyne will exercise commercially
reasonable efforts to provide E-mail and/or Voice-mail responses within
24 hours of receipt of inquiries from ABI's staff.
During the first 30 days, two separate one hour, pre-scheduled,
conference calls per week will be supported by Paradyne for product
support matters.
For the next 60 days, a one-hour, pre-scheduled, conference call per
week will be supported by Paradyne for product support matters.
For the second 90 days after the CLOSING DATE, Paradyne will offer direct
telephone support at a rate of two hundred dollars ($200) per hour.
4.02.4 ADDITIONAL TECHNICAL SUPPORT
Over the first two (2) years of this Agreement, for technical support beyond
that defined in Section 4.02. Paradyne will provide additional technical support
to ABI on an if, and as available basis, at Paradyne's then current technical
support rate, and ABI shall pay all reasonable travel and lodging expense
associated therewith if such technical support activities occur at other than
Paradyne's Largo facility.
<PAGE> 10
4.03 MARKETING SUPPORT
Paradyne will provide the following marketing support to ABI for the HAWK
PRODUCT:
- Provide a listing of sales channels for distribution of HAWK
PRODUCT
- Assist with introductions to these identified sales channels
ARTICLE V
INTELLECTUAL PROPERTY
5.01 FURNISHING OF PROPRIETARY INFORMATION
(a) All information which Paradyne and ABI may have furnished to each other
under the LOI or MCA, prior to the Effective Date hereof, and which relates to
the design, development and/or manufacture of HAWK PRODUCTS, shall be deemed to
have been furnished hereunder and to be part of Paradyne's TECHNICAL INFORMATION
or ABI's TECHNICAL INFORMATION, as the case may be, based upon which party has
furnished such information to the other.
(b) All information which may be furnished hereunder by Paradyne and ABI to each
other after the Effective Date hereof, and which relates to the design,
development and/or manufacture of HAWK PRODUCTS, shall also constitute part of
Paradyne's TECHNICAL INFORMATION or ABI's TECHNICAL INFORMATION, as the case may
be, based upon which party has furnished such information to the other.
(c) With respect to all TECHNICAL INFORMATION furnished during the term of this
Agreement, the provisions of this Agreement shall supersede the corresponding
provisions of the LOI or MCA.
5.02 MAINTENANCE OF PROPRIETARY INFORMATION
(a) ABI acknowledges that Paradyne has expended considerable time, effort and
funds in developing the HAWK PRODUCT and in developing and generating its
TECHNICAL INFORMATION. Each party agrees to maintain the confidentiality of, and
not to use or disclose, the other's TECHNICAL INFORMATION except for the
purposes permitted by this Agreement. Each party shall take commercially
reasonable steps to cause its employees who have access to the other's TECHNICAL
INFORMATION to comply with the foregoing sentence. The parties agree that the
obligations of this Section 5.02(a) shall survive the completion, interruption
or termination of this Agreement.
Notwithstanding the foregoing, the above confidentiality obligations shall not
apply to TECHNICAL INFORMATION that
<PAGE> 11
(i) is or becomes generally known to the public without the
recipient's breach of its confidentiality obligations
hereunder;
(ii) is disclosed to the recipient by a third party without
imposing confidentiality obligations thereof; or
(iii) is disclosed by the recipient pursuant to an order of
competent jurisdiction or requirement of law, but only after
recipient has taken all reasonable and necessary steps to
insure the confidentiality of such disclosure.
Further, both parties understand and agree that ABI's sales of HAWK PRODUCTS
shall not constitute a breach of ABI's confidentiality obligations hereunder.
(b) ABI will take all reasonable steps, including placing appropriate notices on
all HAWK PRODUCTS and in ABI's HAWK PRODUCT literature to protect PARADYNE
INTELLECTUAL PROPERTY licensed under this Agreement.
5.03 EXPORT COMPLIANCE
(a) The parties acknowledge that PARADYNE INTELLECTUAL PROPERTY, including,
without limitation, any products, software and hardware (including, but not
limited to, services and training) provided under this Agreement (collectively
"Information") are subject to U.S. export laws and regulations and/or certain
resolutions of the Security Council of the United Nations (collectively "Export
Laws") and that any use or transfer of Information must be in accordance with
the Export Laws. ABI agrees that it will not use, distribute, transfer or
transmit Information (even if incorporated into other products) except in
compliance with the Export Laws.
(b) Paradyne shall not be liable for any damages incurred by ABI due to
violations of this Section 5.03.
(c) Each Party agrees that the obligations of this Section shall survive the
term of this Agreement.
5.04 OWNERSHIP
Except for those rights and interests expressly and unambiguously conveyed under
this Agreement, each party shall retain all intellectual property rights,
including patent, copyright, trade secret, know-how and other proprietary rights
in and to any TECHNICAL INFORMATION, hardware, software, and other materials
furnished by that party under this Agreement. With respect to Paradyne, the
foregoing means that Paradyne retains all such rights in and to the PARADYNE
INTELLECTUAL PROPERTY except those rights expressly and
<PAGE> 12
unambiguously granted to ABI under Section 1.04. With respect to ABI, the
foregoing means that ABI receives all such rights and interests in and to the
HAWK TECHNOLOGY that are expressly and unambiguously conveyed by Paradyne under
Section 1.03.
5.05 INVENTION
Any future joint development activities between the parties shall be under
separate agreement. Inventions conceived or made in connection with this
Agreement solely by an employee of one party shall be the sole property of that
party. Inventions conceived of or made jointly by an employee of one party with
an employee of the other party shall be jointly owned by both parties.
5.06 NOTICES REGARDING THIRD PARTY INTELLECTUAL PROPERTY
(a) Paradyne hereby notifies ABI that the HAWK PRODUCT is likely to utilize
intellectual property owned by Lucent Technologies Inc. ("Lucent"). It shall be
ABI's sole responsibility to acquire whatever licenses it deems necessary
directly from Lucent.
(b) Paradyne hereby notifies ABI that the HAWK PRODUCT utilizes software modules
developed and licensed by R. Scott Associates ("RSA"). It shall be ABI's sole
responsibility to acquire whatever licenses it deems necessary directly from
RSA.
(c) Paradyne hereby notifies ABI that the HAWK PRODUCT utilizes software modules
developed by Netaccess Inc., a subsidiary of Xircom Inc. It shall be ABI's sole
responsibility to acquire whatever licenses it deems necessary directly from
Netaccess.
(d) Paradyne hereby notifies ABI that the HAWK PRODUCT incorporates hardware
elements manufactured and sold by Netaccess Inc., a subsidiary of Xircom Inc. It
shall be ABI's sole responsibility to make whatever purchasing arrangements it
deems necessary directly with Netaccess.
(e) Except for the Third Party Intellectual Property identified in this Section,
Paradyne represents that to the best of its knowledge no other software,
licenses or other third party Intellectual Property rights are required to
manufacture and sell HAWK PRODUCTS.
5.07 PRE-EXISTING LICENSES
The patents, technology and know-how licensed under this Agreement are subject
to prior license agreements with Lucent Technologies Inc. and GlobeSpan
Technologies Inc. Paradyne represents that to the best of its knowledge such
license agreements do not conflict with and will not be violated by the
transactions contemplated by this Agreement, and that such license agreements do
not limit or restrict the transfers and grants contemplated by this Agreement.
<PAGE> 13
ARTICLE VI
TERMINATION
6.01 TERMINATION FOR BREACH
In the event of a material breach of a material provision of the Stock Purchase
Agreement or this Agreement by either party, the non-breaching party may, in
addition to any other remedies that it may have, terminate this Agreement
provided that it shall first give to the breaching party thirty (30) days
written notice specifying such breach and the breaching party shall offer a
remedy within said thirty days. If the default is not corrected by the offered
remedy and such continued default is noticed in writing, this Agreement shall
terminate if the default is not corrected within thirty (30) days of notice of
continued default.
6.02 TERMINATION BY CONSENT
This Agreement may be terminated, in whole or in part, by mutual written consent
of both parties.
6.03 EFFECT OF TERMINATION
(a) The respective obligations of ABI and Paradyne under the provisions of
Article V, and Article VII shall remain in force notwithstanding the termination
of this Agreement.
(b) In the event that Paradyne fails to cure a material breach, termination of
this Agreement pursuant to the provisions of this Article VI shall not affect or
alter the transfer of ownership specified in Section 1.03 or the grant of rights
in Section 1.04 or any other rights of ABI under this Agreement.
(c) Paradyne's termination of this Agreement pursuant to Section 6.01 shall not
affect the transfers made to ABI under Section 1.03 or the rights granted to ABI
under Section 1.04 which shall continue not withstanding such termination,
pursuant to the terms and restrictions hereof, unless termination of those
rights is permitted pursuant to Section 6.03 (e) or the equitable relief
obtained under Section 6.03 (g) provides otherwise.
(d) An "Unwind Condition" shall be deemed to exist if Paradyne's termination
pursuant to Section 6.01 occurs: (i) prior to Paradyne's receipt of all payments
due for the transfer of inventory as specified in Attachment B, or (ii) prior to
the date of registration of all shares pursuant to the Stock Purchase Agreement
("Registration Date"), or (iii) after the Registration Date, but prior to three
(3) months after the date of expiration or earlier waiver by ABI of the share
sale restrictions of Section 8.2 of the Stock Purchase Agreement ("Lock Up
Expiration Date"), and the material breach upon which the termination is based
is ABI's failure to use its
<PAGE> 14
best efforts to maintain registration for any shares as provided in Section 7.1
(c) of the Stock Purchase Agreement.
(e) If an Unwind Condition exists, then notwithstanding subsection (c) and in
addition to other remedies, Paradyne may elect to rescind this Agreement with
the following results:
(i) all rights, licenses, and immunities granted under this
Agreement, including, but not limited to, the rights granted
under Section 1.04, shall be terminated, and ABI shall
promptly destroy or deliver to Paradyne, at Paradyne's option,
all materials that embody or incorporate any PARADYNE
INTELLECTUAL PROPERTY then in the possession or control of
ABI; AND,
(ii) ABI shall re-transfer to Paradyne all right, title, and
interest in the HAWK TECHNOLOGY that was transferred under
Section 1.03, and return any inventory purchased under
Attachment B (less any items consumed); AND,
(iii) upon completion to Paradyne's reasonable satisfaction of the
provisions of (i) and (ii) above, Paradyne shall return to ABI
the consideration paid to Paradyne pursuant to Article III,
less the value of any items consumed and less the value (but
not more than $25,000) for any Engineering Support services
rendered under Section 4.02.1, where the calculation of the
value and amounts to be returned shall be subject to the
reasonable agreement of the parties, and if the parties are
unable to agree, then subject to the dispute resolution
procedures of Section 7.17.
(f) If Paradyne's termination pursuant to Section 6.01 occurs after the
Registration Date but prior to the Lock Up Expiration Date and the material
breach upon which the termination is based is not ABI's failure to use its best
efforts to maintain registration for any shares, in addition to such rights as
Paradyne may have under 6.03 (g), ABI shall waive all share sale restrictions of
the Stock Purchase Agreement remaining in effect as of such date, to the fullest
extent permitted by law.
(g) In the event of a material breach of a material provision of this Agreement
by ABI that is not cured within the notice period set forth in Section 6.01, the
parties acknowledge and agree that the remedies and provisions above shall not
be considered exclusive, and that, subject to Section 6.03 (c) Paradyne shall be
free to seek additional remedies and recourse under law or equity, in whatever
forum shall be appropriate. Not withstanding the provisions of 6.03 (c) ABI
acknowledges that the rights granted hereunder, and the nature of the PARADYNE
INTELLECTUAL PROPERTY, are such that Paradyne will suffer irreparable harm from
a material breach of the material provisions of this Agreement regarding
PARADYNE INTELLECTUAL PROPERTY not cured within the notice period set forth in
Section 6.01, and that therefore Paradyne shall be entitled to equitable relief,
including, without limitation, injunction, preliminary injunction, and specific
performance, as appropriate in the circumstances.
<PAGE> 15
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01 INDEMNIFICATION
(a) In the event that the HAWK TECHNOLOGY (excepting its associated hardware
elements) used for its inherent purposes, is held to constitute infringement of
a U.S. Patent, and the use of same is enjoined in the U.S., Paradyne shall, at
its option and its own expense, either (1) procure for ABI the right to continue
using HAWK TECHNOLOGY; or (2) replace the same with substantially functionally
equivalent non-infringing technology; or (3) modify the same so that it becomes
non-infringing.
(b) Paradyne shall have no liability or obligation under Section 7.01 for any
liability, loss, or damage caused by ABI's use of any TECHNICAL INFORMATION as
provided to ABI hereunder.
Paradyne represents that to the best of Paradyne's knowledge, the HAWK
TECHNOLOGY and the rights granted hereunder do not infringe any patents,
trademarks, service marks, trade names, copyrights, or trade secrets or other
proprietary rights of any other person or entity.
(c) ABI agrees that it will indemnify, defend, and hold harmless Paradyne, its
affiliates and its customers and their officers, directors, employees,
successors, and assigns (all hereinafter referred to in this clause as
"Paradyne") against and from any and all claims, damages, and liability,
including expenses and reasonable attorneys' fees, suffered by Paradyne
resulting from claims of intellectual property infringement, personal injury
and/or tangible property damage to third parties, including without limitation,
Paradyne's employees, caused by (1) ABI's contributions to the HAWK PRODUCT, (2)
the failure of HAWK PRODUCT to conform to HAWK TECHNOLOGY or defects in
materials and workmanship of the HAWK PRODUCT, (3) any failure on the part of
ABI to satisfy all claims for license fees, royalties, labor, equipment,
materials, and other obligations, (4) the negligent acts of ABI, arising out of
the performance under this Agreement, (5) ABI's breach of this Agreement, or (6)
claims for product liability.
Paradyne and ABI agree that if a claim of intellectual property infringement is
based on a combination of Paradyne's and ABI's contributions to the HAWK
PRODUCT, Paradyne shall retain responsibility for the defense and the parties
shall enter into "good faith" discussions as to the appropriate sharing of
liabilities, including the costs of defense and attorney fees. Absent reaching
such an agreement within a reasonable time, this issue may be resolved pursuant
to Section 7.17 (Disputes).
(d) Except as specifically provided in this Agreement, neither party shall have
any liability to the other for any claims, actions, liabilities, losses or
damages arising out of the sale, lease, services, or related activities with
respect to the products of the other party.
<PAGE> 16
7.02 REGULATORY COMPLIANCE
ABI will be responsible for all aspects of regulatory compliance, including, but
not limited to, tests for compliance with electromagnetic radiation standards,
safety standards and other regulatory matters for ABI's HAWK PRODUCTS.
ABI will be provided copies of all homologation testing results (to the extent
that they exist), emissions certifications and all other applicable agency
related certifications which have been completed by Paradyne for the HAWK
PRODUCT.
7.03 ACCURACY
Paradyne believes that Paradyne's TECHNICAL INFORMATION is true and accurate but
Paradyne shall not be held to any liability for errors or omissions therein.
7.04 ADDRESSES AND CONTACTS
(a) Any notice or other communication hereunder shall be sufficiently given when
sent by certified mail addressed to ABI at
Access Beyond Inc.
John Clary, Chief Operating Officer, SVP
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
or addressed to Paradyne at
Paradyne Corporation
Corporate Secretary
8545 126th Avenue North
Largo, Florida 33773.
Changes in such addresses may be specified by written notice.
(b) The parties have assigned the following persons as project managers, for
technical matters relating to this Agreement and also for attempting to resolve
disputes in the first instance with respect to implementation of this Agreement.
In addition, the following named persons shall be the persons authorized for
furnishing and receiving information pursuant to this Agreement. Either party
may, by written notice to the other party, substitute another person for the
person herein named. Each party shall promptly notify the other party in writing
of any successor or designee of its project manager or of any change in the
address of its project manager for notices.
<PAGE> 17
For Paradyne: For ABI:
Virginia Beneke Jon Perkins
Director, Business Development Vice President, Product Management
Paradyne Corporation Access Beyond Inc.
8545 126th Avenue North 1300 Quince Orchard Boulevard
Largo, Florida 33773 Gaithersburg, Maryland 20878
7.05 INTEGRATION
This Agreement sets forth the entire Agreement and understanding between the
parties as to the subject matter hereof and merges all prior discussion between
them. Neither of the parties shall be bound by any warranties, understandings or
representations with respect to such subject matter other than as expressly
provided for herein, or in prior written agreements, or in a writing signed with
or subsequent to the Effective Date hereof by an authorized representative of
the party to be bound thereby.
7.06 ASSIGNMENT
(a) Except as otherwise provided in this Section 7.06, the parties hereto have
entered into this Agreement in contemplation of personal performance by each
other and intend that neither this Agreement nor any of the rights or privileges
hereunder shall be assigned, transferred, shared or divided, by operation of
law, change in control, or otherwise, by either party without the prior written
consent of the other party, whose consent shall not be unreasonably withheld.
Any purported assignment or transfer requiring but not having the written
consent of the other party shall be null and void. However, either party shall
have the right to assign this Agreement at any time to a SUBSIDIARY.
(b) From and after the CLOSING, notwithstanding paragraph (a) above ABI may
sell, transfer or assign the HAWK TECHNOLOGY and this Agreement, including the
rights granted in the PARADYNE INTELLECTUAL PROPERTY under Section 1.04, to any
third party, including without limitation a third party that acquires all or
substantially all of the assets, stock, or business of ABI, provided that with
respect to the rights granted in the PARADYNE INTELLECTUAL PROPERTY (i) such
sale, transfer, or assignment does not violate the export laws of the United
States, (ii) is to an entity domiciled in a jurisdiction wherein the provisions
of this Agreement and related Agreements are reasonably enforceable, and (iii)
such entity is not less capable than ABI, and specifically undertakes in writing
addressed to Paradyne, to assure that it will perform the obligations of ABI
hereunder.
(c) Notwithstanding paragraph (a) above, Paradyne shall have the right to assign
this Agreement and to assign its rights and delegate its duties under this
Agreement either in whole or in part (an "Assignment"), including, but not
limited to, software licenses and other grants of intellectual
<PAGE> 18
property rights, at any time and without ABI's consent, to (i) any present or
future affiliate (including any SUBSIDIARY or affiliated entity thereof) of
Paradyne and/or (ii) any unaffiliated new entities that may be formed by
Paradyne pursuant to a corporate reorganization, including any SUBSIDIARY or
affiliated entity thereof, and/or (iii) any successor in interest or affiliate
thereof to all or part of the business of Paradyne. Such assignment will be made
only to an entity capable of fulfilling Paradyne's support obligations specified
in Section 4.02. Paradyne shall give ABI written notice of any Assignment,
including (i) the effective date of the Assignment ("Assignment Date"), and (ii)
the entity or entities receiving rights and/or assuming obligations thereunder.
Upon the Assignment Date and to the extent of the Assignment, Paradyne shall be
released and discharged from all further duties under this Agreement as to
materials, services, or intellectual property rights transferred to assignee,
ordered from or provided by ABI prior to, on or after the Assignment Date and
ABI shall look only to the assignee for performance of obligations related
thereto. Notwithstanding that an Assignment has been made, Paradyne, at its sole
option, shall continue to have the right to purchase, use, or license HAWK
PRODUCTS under this Agreement or under an associated OEM Purchase Agreement as
if an Assignment had not been made. If there should arise out of this Agreement
or out of an associated OEM Purchase Agreement a commitment to purchase a stated
or determinable quantity of goods, services or rights, or prices that vary based
on quantities purchased, the aggregate of purchases by Paradyne, its affiliates,
and the assignees under this Agreement will be included in the determination of
aggregate purchases.
7.07 CHOICE OF LAW
This Agreement shall in all respects be governed by and interpreted under the
laws of the state of Florida without regard to its conflict of laws provisions.
7.08 WARRANTIES
(a) EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE ATTACHMENTS, PARADYNE
MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AS TO THE DOCUMENTATION, FUNCTION, OR PERFORMANCE,
OF HARDWARE, HAWK TECHNOLOGY, OR PARADYNE INTELLECTUAL PROPERTY.
(b) Paradyne is providing no warranties whatsoever to ABI's customers who have a
HAWK PRODUCT. Except as provided in Section 7.01, neither party shall have any
liability to the other party for claims by third parties arising out the sale of
HAWK PRODUCTS by the other party.
<PAGE> 19
7.09 LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
7.10 COMPLIANCE WITH LAWS
Both parties shall comply with all applicable U.S. laws, rules and regulations.
Neither party shall have any liability to the other for any noncompliance by the
other party.
7.11 SEVERABILITY
In the event any article or portion thereof in this Agreement is finally
determined by a court of competent jurisdiction to be unenforceable or void,
then such article or portion thereof shall be deemed deleted and the balance of
the articles of this Agreement shall remain in full force and effect.
7.12 EXCUSED NON-PERFORMANCE
For the purpose of this Agreement, an event, unforeseen development, or
contingency beyond the control of the party shall include, but shall not be
limited to, the following: war, declared or undeclared, revolution,
insurrection, counter revolution, isolated instances of violence, fire, flood,
storm, tempest, riots, civil commotion, acts of God, including (but not limited
to) lightning, severe weather, earthquakes or other acts of nature, acts of the
public enemy, prohibition of import or export of goods covered hereby,
governmental orders, regulations, restrictions, and all other similar causes.
ABI shall be excused from any failure to perform any obligation hereunder,
except for the payment of money already due and payable, to the extent such
failure is caused by the foregoing events. Any suspension of the performance by
reasons of this provision shall be limited to the period during which the cause
or the related effect of failure exists, and such suspension shall extend the
running of the time under the Agreement for a period equal to the suspension
period.
7.13 CONFLICT IN TERMS
The Agreement shall be deemed to prevail over any conflicting or additional
terms on any forms (for example, purchase order and acknowledgment forms) used
by the parties in carrying out the terms of the Agreement.
<PAGE> 20
7.14 COUNTERPARTS
This Agreement may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.15 HEADINGS
The inserted headings are for convenient reference only and shall not be used to
construe or interpret this Agreement.
7.16 ATTORNEY'S FEES
It is the intention of both Parties to resolve any dispute through negotiations
and arbitration. However, in the event it becomes necessary to appeal any
decision under Section 7.17 or to enforce this Agreement through the use of
legal proceedings, then the prevailing party shall be entitled to all costs and
expenses, including reasonable attorney fees, as well as other remedies provided
for in this Agreement.
7.17 DISPUTES
(a) Procedure. All disputes between the parties arising out of or relating to
this, or the breach or alleged breach hereof, shall be submitted to binding
arbitration. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA").
Each party shall bear its own expenses; the parties will mutually share the AAA
administrative fees and the arbitrators' expenses. A single arbitrator shall be
selected by the parties in accordance with the AAA selection rules. The
arbitrator shall determine issues of arbitrability but may not limit, expand or
otherwise modify the terms of the Agreements. The arbitration shall be conducted
in the state of the party not commencing arbitration. The arbitrator shall have
no authority to modify the consideration set forth in Article III or to grant
injunctive relief. The award of the arbitrator shall be in writing, shall state
the reasons for the award and shall explain the breakout of any damages awarded.
Judgment upon an award may be entered in any court having competent
jurisdiction. The Federal Arbitration Act, 9 U.S.C. Sections 1-14, shall
govern the interpretation and enforcement of this Section. The parties shall be
entitled to conduct reasonable discovery pursuant to the Federal Rules of Civil
Procedure.
(b) Confidentiality. All transcripts, documents, things and other information
produced and the testimony given in or attendant to the arbitration
proceeding(s) shall be used only for purposes of the arbitration proceeding(s).
(c) Return of Materials. Within 30 days after entry of a judgment of
confirmation, or within 120 days after issuance of the arbitrator's award where
judicial confirmation is not sought, each party
<PAGE> 21
and the arbitrator, at the election of the party furnishing the same shall
destroy or return all documents, transcripts or other things, and any copies
thereof as well as all summaries or other materials containing or disclosing
information contained in, or directly related to, such documents, transcripts or
things. Each party and the arbitrator shall so certify. Notwithstanding the
above, each party's attorneys may retain a complete pleading file, subject to
the confidentiality provisions of this Agreement.
(d) Time Extensions. The parties may expend any period of time by mutual
agreement. The arbitrator may extend any period of time for good cause, except
for the issuance of the decision.
(e) Attorneys' Fees. If an arbitration action is commenced for breach of this
Agreement, the prevailing party shall be entitled to its attorneys' fees and
costs as the arbitrator in his or her discretion may award.
7.18 NON-SOLICITATION
Except with the prior written consent of the other party, neither party shall
for a period of three (3) years engage any employee of the other party, whose
work assignments have included the development or production of HAWK PRODUCT, to
work for it on a permanent, temporary or part time basis, nor actively solicit
for employment any such employee of the other party.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representative on the respective
dates entered below.
PARADYNE CORPORATION ACCESS BEYOND INC.
- ------------------------------- -------------------------------
SIGNATURE SIGNATURE
- ------------------------------- -------------------------------
NAME NAME
- ------------------------------- -------------------------------
TITLE TITLE
- ------------------------------- -------------------------------
DATE DATE
THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY IN ANY MANNER UNLESS
DULY EXECUTED BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES
<PAGE> 22
DEFINITIONS APPENDIX
HAWK DOCUMENTATION means all HAWK PRODUCT-specific documentation, the rights to
which are owned by Paradyne as of the effective date of this Agreement,
including, without limitation, the documentation listed on Attachment A (and any
items the parties may add thereto), as well as manufacturing information
necessary to manufacture the Octal Communication Device card, hardware and
software design documentation, product information (such as Customer
Documentation, Product Overview, System Requirements, Sales and Marketing
materials) program source files, schematics, layouts, mechanical and assembly
drawings, photoplots, bills of material, programmable logic source and
programming files, technical documentation/manuals, but does not include any
documentation pertaining to PARADYNE INTELLECTUAL PROPERTY.
HAWK FIRMWARE means all source code developed by or for Paradyne required for
the production and further development of the HAWK PRODUCT, including, without
limitation, the source code summarized on Attachment A (and any items the
parties may add thereto), but does not include any PARADYNE INTELLECTUAL
PROPERTY.
HAWK PRODUCT means the open remote dial access cards presently known as "Hawk"
or as "the 2290 Remote Access Gateway product," developed by Paradyne,
consisting of an Octal Communication Device card, a network interface (T1) card,
NT and Novell drivers and communications software, which provide remote dial
access by accepting dial or ISDN calls from a T1 line or PRI and connecting via
an Ethernet connection to a network, as well as any remote dial access server
which is substantially functionally equivalent to the foregoing, and future
developments and enhancements to any of the foregoing.
HAWK TECHNICAL INFORMATION means all TECHNICAL INFORMATION specific to, or
required for, or used solely in connection with, the manufacture, development,
or marketing of the HAWK PRODUCT, the rights to which are owned by Paradyne as
of the effective date of this Agreement, including, without limitation, the
TECHNICAL INFORMATION of Paradyne summarized on Attachment A (and any items the
parties made add thereto), but does not include any PARADYNE INTELLECTUAL
PROPERTY.
HAWK TECHNOLOGY means the HAWK TECHNICAL INFORMATION, HAWK DOCUMENTATION, HAWK
FIRMWARE and associated hardware elements, as well as the copyrights therein,
but does not include any PARADYNE INTELLECTUAL PROPERTY.
PARADYNE HAWK PATENTS means any patents or patent applications, including any
divisional or continuation of such patents or patent applications, filed or
issued in any country of the world owned by Paradyne Corporation which may be
infringed by the HAWK PRODUCT as of the CLOSING DATE.
PARADYNE INTELLECTUAL PROPERTY means the PARADYNE HAWK PATENTS, Paradyne's
TECHNICAL INFORMATION, and all patent, trade secret and know-how rights in and
to the HAWK TECHNOLOGY. If the parties cannot agree if a particular item or
right is
<PAGE> 23
HAWK TECHNOLOGY or PARADYNE INTELLECTUAL PROPERTY then it shall be PARADYNE
INTELLECTUAL PROPERTY and subject to the licenses granted under Section 1.04.
SUBSIDIARY of a company means a corporation or legal entity (i) the majority of
whose shares or other securities entitled to vote for election of directors (or
other managing authority) is now or hereafter controlled by such company either
directly or indirectly; or (ii) which does not have outstanding shares or
securities but the majority of whose ownership interest representing the right
to manage such corporation or other legal entity is now or hereafter owned and
controlled by such company either directly or indirectly; but any such
corporation or other legal entity shall be deemed to be a SUBSIDIARY of such
company only as long as such control or ownership and control exists.
TECHNICAL INFORMATION means any and all information identified by stamp or
legend to be of a proprietary or confidential nature provided by the furnishing
party during the term of this Agreement.
CLOSING DATE means the tenth (10th) business day after the date this Agreement
and the Stock Purchase Agreement are signed and upon which the following events
(the "Closing") shall occur:
(a) ABI transfers title to the stock certificates to Paradyne as
required under the Stock Purchase Agreement, and
(b) ABI makes wire transfer of twenty-five thousand dollars
($25,000) to Paradyne as consideration for Engineering Support
as described under Section 3.01 of this Agreement, and
(c) Paradyne tenders the HAWK TECHNOLOGY to ABI as described under
Attachment A, Section A1, and
(d) ABI makes wire transfer of the first one-hundred thousand
dollar ($100,000) payment to Paradyne as partial consideration
for the Sale of Hawk Product Inventory, as described under
Attachment B.
<PAGE> 24
ATTACHMENT A
DELIVERY OF HAWK TECHNOLOGY
SECTION A1
HAWK TECHNOLOGY
(TO BE DELIVERED AS SPECIFIED IN SECTION 4.01)
Hawk R1 technology and product deliverables.
Column definitions:
- - DELIVERABLE ITEM ID: A table specific unique ID to be assigned to a
deliverable, for labeling purposes. Ends in an increasing numeric
count, e.g. HW1, HW2, ...
- - QUAN: The anticipated quantity of each deliverable, typically 1.
- - NEED: R => Required = A deliverable required to support and produce the
product. O => Optional = A desirable deliverable, but not required to
support and produce the product. The latter may be withheld depending
on cost to generate and value.
- - PURPOSE: D => Document = A document that defines the technology or
product production processes, e.g. a TDS. P => Product = A direct or
near direct product component, e.g. hardcopy of the User's Guide or a
software file containing a chapter if the User's Guide. T => Tool = A
tool used to develop or test the product, e.g. a compiler or test
fixture.
- - FORMAT: The format of the deliverable. D => Electronic Version =
File(s) sent electronically P => Paper = Hardcopy. H => Hardware =
Electronic or other non-paper physical item. O => Other = none of the
above.
- - VERSION OR DATE: An identifying version number or date stamp.
- - DESCRIPTION: Define the item. File format is useful for diskette
documents. Put comments, assumptions, caveats here.
- - NOTE: Number(s) corresponding to the Note number(s) immediately
following that table for long descriptions, or notes shared in that
table.
Document Revision History
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
VER DATE COMMENTS AUTHOR
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0.1 02/21/97 Create EThoenes
- --------------------------------------------------------------------------------------------------------
0.2 02/25/97 Update with Person Responsible review information. EThoenes
- --------------------------------------------------------------------------------------------------------
0.3 02/27/97 - Sort R/Os. EThoenes
- --------------------------------------------------------------------------------------------------------
1.0 02/27/97 - Per GBe/ET review. Ethoenes
- --------------------------------------------------------------------------------------------------------
1.1 04/07/97 - Additional requests from ABI Visit April 3, 1997 GFinan
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 25
- - Project
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PJ1 1 R D D V1.1 EThoenes
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- ------------------------------------------------------------------------------
<S> <C>
POSR11.DOC: Hawk R1 Product Overview and System Requirements
document, Word V6 format.
- ------------------------------------------------------------------------------
</TABLE>
- - Publications
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PB1 1 R P D -00 BKula
- ------------------------------------------------------------------------------------------------------
PB2 1 R P D -10 "
- ------------------------------------------------------------------------------------------------------
PB3 1 R P D -10 "
- ------------------------------------------------------------------------------------------------------
- - 0 - - - - -
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- --------------------------------------------------------------------------------
<S> <C>
NT User Guide, Interleaf format 1,2
- --------------------------------------------------------------------------------
T1 Card Safety & Regulatory Information Sheet, Interleaf format 1,2
- --------------------------------------------------------------------------------
OCD Card Safety & Regulatory Information Sheet, Interleaf format 1,2
- --------------------------------------------------------------------------------
Novell User Guide (not developed).
- --------------------------------------------------------------------------------
</TABLE>
Notes:
1. Should also provide hard copy examples of all documents.
2. Each document is contained in a discrete file directory. In the file
directory is a readme.txt file describing individual files in the
directory.
- - Hardware (Design Documents; Custom Development tools; Schematics)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HW1 1 R D D 2.d - JBedingfield
2/97
- ---------------------------------------------------------------------------------------------------------
HW2 1 O D O (tape) A3F - "
5/95
- ---------------------------------------------------------------------------------------------------------
HW3 1 O D O (tape) A3F - "
5/95
- ---------------------------------------------------------------------------------------------------------
HW4 2 O T H Latest "
- ---------------------------------------------------------------------------------------------------------
HW5 1 O D D Latest "
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- -----------------------------------------------------------------------------
<S> <C>
OCD Hardware Technical Design Spec, Word V6 format, parent and child
cards
- -----------------------------------------------------------------------------
Mentor hardware design files, Parent (869-2777-5x74) 1
- -----------------------------------------------------------------------------
Mentor hardware design files, Child (869-2786-5x74) 1
- -----------------------------------------------------------------------------
MOC card and card adapter
- -----------------------------------------------------------------------------
MOC schematic, BOM
- -----------------------------------------------------------------------------
</TABLE>
Notes:
1. Only useful on a Mentor platform.
<PAGE> 26
- - Software (Design Documents; Custom Development Tools; Software; source,
product release, release document)
- OCD MCP / SCP
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product Paper /
Component / Hardware /
Tool Other
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SWCP1 1 R D D V1.1 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP2 1 R D D V.1.1 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP3 1 R D D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP4 1 R D D V2.A JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP5 1 R D D V1.1 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP6 1 R D D V1.F JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP7 1 R P D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP8 1 R P D V1.23 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP9 1 R P D V1.21 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP10 1 R P D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP11 1 R P D V1.24 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP12 1 R T D V8.02 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP13 1 R T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP14 1 R T D V4.2 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP15 1 R T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP16 1 R T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP17 1 R T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP18 1 R T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP19 1 R T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP20 1 O T D - JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP21 1 O T D V1.0 JChapman
- ----------------------------------------------------------------------------------------------------------
SWPC22 1 O T H - JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP23 1 O T D - JChapman
- ----------------------------------------------------------------------------------------------------------
SWCP24 1 O T D - JChapman
- ----------------------------------------------------------------------------------------------------------
SWPC25 1 O T P - JChapman
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- -----------------------------------------------------------------------------
<S> <C>
OCD Operational Spec, Word V6 format
- -----------------------------------------------------------------------------
OCD System Architecture Spec, Word V6 format
- -----------------------------------------------------------------------------
OCD System Requirements Spec, Word V6 format
- -----------------------------------------------------------------------------
MCP Boot Strap TDS, Word V6 format
- -----------------------------------------------------------------------------
MCP Firmware TDS, Word V6 format
- -----------------------------------------------------------------------------
SCP & DSP TDS, Word V6 format
- -----------------------------------------------------------------------------
MCP Boot Source, Objects, Executable Code and Build procedures
- -----------------------------------------------------------------------------
MCP Xport Source, Objects, Executable Code and Build procedures
- -----------------------------------------------------------------------------
SCP 1st Stage Boot Source, Objects, Executable Code and Build
procedures
- -----------------------------------------------------------------------------
SCP 2nd Stage Boot Source, Objects, Executable Code and Build
procedures
- -----------------------------------------------------------------------------
SCP Xport Source, Objects, Executable Code and Build procedures
- -----------------------------------------------------------------------------
Intermetrics Compiler, Assembler, Linker, Locator. Will not be
supplied if available from vendor.
- -----------------------------------------------------------------------------
ComApp Test Utility source, object, executable Code and build
procedures for DOS
- -----------------------------------------------------------------------------
Diags Test Utility source, object, executable Code and build
procedures for DOS
- -----------------------------------------------------------------------------
HAWKDLCP Download Utility source, object, executable Code and build
procedures for DOS
- -----------------------------------------------------------------------------
MAKE_OCD Reformatting Utility for DOS
- -----------------------------------------------------------------------------
HAWK_OCD Reformatting Utility for DOS
- -----------------------------------------------------------------------------
HAWK_CXD Reformatting Utility for DOS
- -----------------------------------------------------------------------------
MODCOMPR HX->ASM Reformatting Utility for DOS
- -----------------------------------------------------------------------------
IEEE 695 Formatter from HP 1
- -----------------------------------------------------------------------------
HP Emulator setup scripts 1
- -----------------------------------------------------------------------------
OCD HP ICE 68302 with MCP & SCP ICE dummy microprocessors 1
- -----------------------------------------------------------------------------
MOC Source, Objects, Executable Code, Build procedures
- -----------------------------------------------------------------------------
MOC support utilities i.e. overlay.exe, startup.cmd, rmxdb
- -----------------------------------------------------------------------------
MOC User Guide
- -----------------------------------------------------------------------------
</TABLE>
Notes:
1. Only useful for an HP 64746 ICE environment.
<PAGE> 27
- OCD DSP
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SWSP1 1 R P D RMartinez
- ----------------------------------------------------------------------------------------------
SWSP2 1 R P D "
- ----------------------------------------------------------------------------------------------
SWSP3 1 R P D "
- ----------------------------------------------------------------------------------------------
SWSP4 1 R P D "
- ----------------------------------------------------------------------------------------------
SWSP5 1 R T D "
- ----------------------------------------------------------------------------------------------
SWSP6 1 R T P "
- ----------------------------------------------------------------------------------------------
SWSP7 2 R T H "
- ----------------------------------------------------------------------------------------------
SWSP8 1 R D D "
- ----------------------------------------------------------------------------------------------
SWSP9 1 R D P "
- ----------------------------------------------------------------------------------------------
SWSP10 1 R T H "
- ----------------------------------------------------------------------------------------------
SWSP11 1 R T H "
- ----------------------------------------------------------------------------------------------
SWSP12 1 R T H "
- ----------------------------------------------------------------------------------------------
SWSP13 1 O T H "
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- -------------------------------------------------------------------------------
<S> <C>
OCD DSP16A V.34 Assembler Source Modules
- -------------------------------------------------------------------------------
OCD DSP16A V.32 Assembler Source Modules
- -------------------------------------------------------------------------------
OCD DSP16A ISDN and Echo Canceler Assembler Source Modules (Echo
Canceler feature is prototype)
- -------------------------------------------------------------------------------
OCD DSP16A Voice Span Assembler Source Modules (Voice Span feature
is prototype. Module required for call discrimination.)
- -------------------------------------------------------------------------------
Non-SCCS build procedure (new)
- -------------------------------------------------------------------------------
Definition of DSP16A Assembler Environment
- -------------------------------------------------------------------------------
"TJ Right" DSP16A PC Card
- -------------------------------------------------------------------------------
Host/DSP Interface Spec
- -------------------------------------------------------------------------------
Camil Spec (AT&T Doc)
- -------------------------------------------------------------------------------
Hawk DSP Dev. Target with Emulator Pods for DSP16A
- -------------------------------------------------------------------------------
FMIC Evaluation Board
- -------------------------------------------------------------------------------
Memory Overlay Card (MOC) for constellation display
- -------------------------------------------------------------------------------
Custom Analog Monitoring Box
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
- NT Driver
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SWNT1 1 R D D MDavis
- -----------------------------------------------------------------------------------------------------------
SWNT2 1 R D D "
- -----------------------------------------------------------------------------------------------------------
SWNT3 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT4 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT5 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT6 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT7 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT8 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT9 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT10 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT11 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT12 1 R P D "
- -----------------------------------------------------------------------------------------------------------
SWNT13 1 R T D "
- -----------------------------------------------------------------------------------------------------------
SWNT14 1 R D D "
- -----------------------------------------------------------------------------------------------------------
SWNT15 1 R D D "
- -----------------------------------------------------------------------------------------------------------
SWNT16 1 R D D "
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- ------------------------------------------------------------------------------
<S> <C>
Driver and Application TDS
- ------------------------------------------------------------------------------
Driver and Application Op Spec
- ------------------------------------------------------------------------------
NT WAN Miniport Driver Source Code: C, C++, ASM, Visual C++ Workspace
- ------------------------------------------------------------------------------
NT Protocol Driver Source Code: C, C++, ASM, Visual C++ Workspace
- ------------------------------------------------------------------------------
NT Admin Application Source Code: C, C++, ASM, Visual C++ Workspace
- ------------------------------------------------------------------------------
NT Status Monitor Application Source Code: C, C++, ASM, Visual C++
Workspace
- ------------------------------------------------------------------------------
NT Application DLL(s) Source Code: C, C++, ASM, Visual C++ Workspace
- ------------------------------------------------------------------------------
NT Configuration DLL Source Code: C, C++, ASM, Visual C++ Workspace
- ------------------------------------------------------------------------------
NT Detection DLL Source Code: C, C++, ASM, Visual C++ Workspace
- ------------------------------------------------------------------------------
NT Installation Script(s) Source Code: INF Files
- ------------------------------------------------------------------------------
NT InstallWizard Scripts, packing list and batch build files.
- ------------------------------------------------------------------------------
NT Help Files and Source Code: Assumes Help File generating
application is available to buyer.
- ------------------------------------------------------------------------------
NT RAS Dial Test Program Source Code: C++, Visual C++ Workspace
- ------------------------------------------------------------------------------
Firmware Release Forms: Rel1.0 through Rel1.6
- ------------------------------------------------------------------------------
Readme.txt Files for Rel1.0 through Rel1.6
- ------------------------------------------------------------------------------
NT Development Test Plan, Problem Log and Test Results
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
- Novell Driver
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SWNW1 1 R P D R1.0.0 JLandry/ET
- ----------------------------------------------------------------------------------------------------------
SWNW2 1 R P D R1.0.2 "
- ----------------------------------------------------------------------------------------------------------
SWNW3 1 R P D R1.0.2 "
- ----------------------------------------------------------------------------------------------------------
SWNW4 1 R T D V10.5 "
- ----------------------------------------------------------------------------------------------------------
SWNW5 1 R T D "
- ----------------------------------------------------------------------------------------------------------
SWNW6 1 R T D "
- ----------------------------------------------------------------------------------------------------------
SWNW7 1 R T D "
- ----------------------------------------------------------------------------------------------------------
SWNW8 1 R D D V1.E "
- ----------------------------------------------------------------------------------------------------------
SWNW9 1 R D D V0.1 "
- ----------------------------------------------------------------------------------------------------------
SWNW10 1 R D D V1.0 "
- ----------------------------------------------------------------------------------------------------------
SWNW11 1 R D D "
- ----------------------------------------------------------------------------------------------------------
SWNW12 1 R T D "
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- ------------------------------------------------------------------------------
<S> <C>
REL100/M629/DISK1 - ../DISK5: 5 diskette product component set
(DISK1,DISK2,...,DISK5); upgrade to Novell Net Connect V2.0.29
for Hawk. No source included, from Novell.
- ------------------------------------------------------------------------------
REL102/M637/DISK1 & ../DISK2: 2 diskette product component set 1
(DISK1, DISK2); Novell Netware driver.
- ------------------------------------------------------------------------------
REL102/M637/SOURCE & ./NLM: files used to create the Novell driver 1
component of REL102/M637 on the Paradyne software development
platform. Inclusive of make, batch, source, object, header files.
Note that version control system (VCS) applications and source VCS
files are not included. Make and batch files must be modified to
remove VCS "get" operations that retrieved the files supplied. The
Op Specification defines the diskette file organization.
- ------------------------------------------------------------------------------
Watcom; Compiler, Linker, Make, 32RUN tools. Will not be supplied
if available from vendor.
- ------------------------------------------------------------------------------
Phar Lap 386IASM 4.0; Will not be supplied if available from vendor.
- ------------------------------------------------------------------------------
PolyMake V3.2 make utility, from Sage Software; Will not be supplied
if available from vendor.
- ------------------------------------------------------------------------------
Pkware "attrib.exe" utility. Used to clear file's "Read only"
directory attribute in the make process. Will not be supplied if
available from vendor.
- ------------------------------------------------------------------------------
SOSW-1E.DOC: Software Operational Spec draft, Word 6 format.
- ------------------------------------------------------------------------------
NWDEVTST.DOC: Development Test Plan draft, Word 6 format.
- ------------------------------------------------------------------------------
SSAW10.DOC: Software Architecture Spec, Word 6 format.
- ------------------------------------------------------------------------------
W869M637.DOC: Software Release Form, M637.
- ------------------------------------------------------------------------------
Test Application for Loopbacks.
- ------------------------------------------------------------------------------
</TABLE>
Notes:
1. This software has not been through Paradyne systems test nor Novell
certification.
<PAGE> 30
- - System Test (Design; Custom Test Tools; Software; source, test
executables)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ST1 1 R T D GNovis
- --------------------------------------------------------------------------------------------------------
ST2 1 R T D "
- --------------------------------------------------------------------------------------------------------
ST3 1 R T D "
- --------------------------------------------------------------------------------------------------------
ST4 1 R T D "
- --------------------------------------------------------------------------------------------------------
ST5 1 R T D "
- --------------------------------------------------------------------------------------------------------
ST6 1 R T D "
- --------------------------------------------------------------------------------------------------------
ST7 1 R D D GMorgan
- --------------------------------------------------------------------------------------------------------
ST8 1 R D P GNovis
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- ------------------------------------------------------------------------------
<S> <C>
System Test custom software utilities 1
- ------------------------------------------------------------------------------
System Test procedures 1
- ------------------------------------------------------------------------------
System Test Script 1
- ------------------------------------------------------------------------------
System Test Cases 1
- ------------------------------------------------------------------------------
RAS Test Visual Basic Application: TDS 1
- ------------------------------------------------------------------------------
RAS Test Visual Basic Application: Source Code and Build 1
- ------------------------------------------------------------------------------
System Test Plans 1
- ------------------------------------------------------------------------------
Open Quality Reports 1
- ------------------------------------------------------------------------------
</TABLE>
Notes:
1. Coverage for NT system tests only.
- - Safety / Regulatory (Test Data, Compliance Certification)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SR1 1 R D P JEllis
- -------------------------------------------------------------------------------------------------------------
SR2 1 R D P DBitume
- -------------------------------------------------------------------------------------------------------------
SR3 1 R D P PWalsh
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- --------------------------------------------------------------------------------
<S> <C>
Part 15 EMI Test Data and Compliance Information
- --------------------------------------------------------------------------------
UL/CSA Test Data and Compliance Information
- --------------------------------------------------------------------------------
Part 68 Test Data and Compliance Information
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
- - Production and Test Engineering (Design; Custom Test Tools; Software;
source, production executables)
- Production
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PTPR1 1 R D O (tape) Note 2 BWelch
- ------------------------------------------------------------------------------------------------------------
PTPR2 1 R D O (tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR3 1 R D O (tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR4 1 R D O (tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR5 1 R D P/D Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR6 1 R D P/D Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR7 1 R D D/O(tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR8 1 R D D/O(tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR9 1 R D O (tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR10 1 R D O (tape) Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR11 1 O D P Note 2 "
- ------------------------------------------------------------------------------------------------------------
PTPR12 1 O D P Note 2 "
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- ------------------------------------------------------------------------------
<S> <C>
PWB Design / FAB Package, Parent Card 1
- ------------------------------------------------------------------------------
PWB Design / FAB Package, Child Card 1
- ------------------------------------------------------------------------------
Assembly Drawing, Parent Card (HPGL Plot File) 1
- ------------------------------------------------------------------------------
Assembly Drawing, Child Card (HPGL Plot File) 1
- ------------------------------------------------------------------------------
Bill of Material, Parent Card (From BOM builder w/vendor cross ref)
- ------------------------------------------------------------------------------
Bill of Material, Child Card (From BOM builder w/vendor cross ref)
- ------------------------------------------------------------------------------
Manufacturing Electrical Assy (input to CIMBRIDGE), Parent Card 1
- ------------------------------------------------------------------------------
Manufacturing Electrical Assy (input to CIMBRIDGE), Child Card 1
- ------------------------------------------------------------------------------
Stencil (Gerber File), Parent 1
- ------------------------------------------------------------------------------
Stencil (Gerber File), Child 1
- ------------------------------------------------------------------------------
Artwork check plots, Parent
- ------------------------------------------------------------------------------
Artwork check plots, Child
- ------------------------------------------------------------------------------
</TABLE>
Notes:
1. UNIX TAR format tape
2. Made from A3F 5/95 data.
- Test engineering
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PTTE1 1 R T H 10/9/96 JCBrun
- ------------------------------------------------------------------------------------------------------------
PTTE2 1 R T D & P 10/9/96 "
- ------------------------------------------------------------------------------------------------------------
PTTE3 1 R T D 5/8/96 "
- ------------------------------------------------------------------------------------------------------------
PTTE4 1 R T H 10/9/96 "
- ------------------------------------------------------------------------------------------------------------
PTTE5 1 R T D & P 10/9/96 "
PTTE6 1 R T D 5/8/96 "
- ------------------------------------------------------------------------------------------------------------
PTTE7 1 R T H Rev A "
- ------------------------------------------------------------------------------------------------------------
PTTE8 1 R T D & P Rev A "
- ------------------------------------------------------------------------------------------------------------
PTTE9 1 R T D V1.3.2 "
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- --------------------------------------------------------------------------------
<S> <C>
869-2777-xxxx: In Circuit Test (ICT) fixture, Parent Card 1
- --------------------------------------------------------------------------------
869-2777-xxxx: In Circuit Test (ICT) drawings, Parent Card
- --------------------------------------------------------------------------------
869-2777-xxxx: In Circuit Test (ICT) software, Parent Card
- --------------------------------------------------------------------------------
869-2786-xxxx: In Circuit Test (ICT) fixture, Child Card 1
- --------------------------------------------------------------------------------
869-2786-xxxx: In Circuit Test (ICT) drawings, Child Card
- --------------------------------------------------------------------------------
869-2786-xxxx: In Circuit Test (ICT) software, Child Card
- --------------------------------------------------------------------------------
Diagnostic Functional Test (DFT) fixture 2
- --------------------------------------------------------------------------------
Diagnostic Functional Test (DFT) drawings
- --------------------------------------------------------------------------------
Diagnostic Functional Test (DFT) software
- --------------------------------------------------------------------------------
</TABLE>
Notes:
1. Requires one Model 2283 GenRad for each parent and child card fixture
pair. Not included.
2. Requires one PC with ISA bus for each DFT platform. Fixture consists of
approximately 4 major components. PC not included.
<PAGE> 32
Additional Items per ABI Visit April 3, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DELIVERABLE QUAN NEED: PURPOSE: FORMAT: VERSION PERSON
ITEM ID Required / Document / Diskette / OR DATE RESPONSIBLE
Optional Product / Paper /
Tool Hardware /
Other
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AI1 1 R D P RColbert
- ------------------------------------------------------------------------------------------------------------
AI2 1 R D P RColbert
- ------------------------------------------------------------------------------------------------------------
AI3 1 R T P RColbert
- ------------------------------------------------------------------------------------------------------------
AI4 1 R D P MSalerno
- ------------------------------------------------------------------------------------------------------------
AI5 1 R D P RColbert
- ------------------------------------------------------------------------------------------------------------
AI6 1 R D P RColbert
- ------------------------------------------------------------------------------------------------------------
AI7 1 R D P MBenishek
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION (Include comments, assumptions, and caveats) NOTE
- --------------------------------------------------------------------------------
<S> <C>
Proto and Pilot Reports
- --------------------------------------------------------------------------------
Test results from production run
- --------------------------------------------------------------------------------
Profile for Surface Mount Oven
- --------------------------------------------------------------------------------
OEM Survey
- --------------------------------------------------------------------------------
ATE Package
- --------------------------------------------------------------------------------
Production Routings and Assembly Procedures
- --------------------------------------------------------------------------------
List of Balance of Inventory
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
SECTION A2
TRANSFER OF 2290 TECHNOLOGY HARDWARE
Paradyne and ABI agree that the following terms and conditions shall apply
solely to the transfer of the 2290 Technology Hardware under the 2290 Remote
Access Gateway ("Hawk") Technology Transfer Agreement by and between the parties
to which this Section A2 is attached and made a part thereof:
1. 2290 TECHNOLOGY HARDWARE
2290 Technology Hardware ("Hardware") shall consist of the fixtures, test
equipment, test heads, and other equipment used in the manufacture of the HAWK
PRODUCT which shall be specified in Exhibit 1.
2. COSTS
A. ABI shall pay any taxes which may be levied upon the sale, transfer of
ownership, installation, license to ABI or use by ABI of the Hardware.
Excluded are taxes on Paradyne Corporation's net income.
B. All shipping, special packaging and other destination charges will be
invoiced by Paradyne Corporation and paid by ABI.
3. LEGAL AUTHORITY TO CONVEY TITLE
Paradyne represents and warrants that it has the unencumbered legal authority to
convey to ABI clear title to the Hardware, and upon the purchase hereunder ABI
shall have acquired clear title to the hardware free and clear of any claims or
encumbrances
4. WARRANTY
The Hardware is sold as is, where is, and without warranty of any kind except as
herein set forth. Paradyne represents that to the best of its knowledge and as
of the CLOSING DATE, the Hardware is in good working order and appropriate for
its intended use provided that the technical personnel using such Hardware are
as technically proficient and as "skilled in the art" as technical personnel at
Paradyne.
5. WARRANTY EXCLUSIONS
PARADYNE CORPORATION, ITS PARENT, SUBSIDIARIES AND THEIR AFFILIATES,
SUBCONTRACTORS AND SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AND
SPECIFICALLY DISCLAIM ANY WARRANTY OF INFRINGEMENT, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
6. TITLE AND RISK OF LOSS
The shipping terms shall be FOB point of origin, freight prepaid and billed
back. Title to Hardware shall pass to ABI upon receipt at ABI's premises in
Gaithersburg, Maryland. Risk of loss shall pass to ABI at the FOB point
7. EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY
A. FOR PURPOSES OF THE EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY SET
FORTH IN THIS SECTION 7, "PARADYNE CORPORATION" SHALL BE DEEMED TO
INCLUDE PARADYNE CORPORATION, ITS PARENT,
<PAGE> 34
SUBSIDIARIES AND THEIR AFFILIATES, AND THE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, REPRESENTATIVES, SUBCONTRACTORS AND SUPPLIERS OF ALL
OF THEM, AND "DAMAGES" SHALL BE DEEMED TO REFER COLLECTIVELY TO ALL
INJURY, DAMAGE, LOSS OR EXPENSE INCURRED.
B. PARADYNE CORPORATION'S ENTIRE LIABILITY AND ABI'S EXCLUSIVE REMEDIES
AGAINST PARADYNE CORPORATION FOR ANY DAMAGES CAUSED BY ANY HARDWARE
DEFECT OR FAILURE, OR ARISING FROM THE PERFORMANCE OR NON-PERFORMANCE
OF ANY WORK, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT,
TORT INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, SHALL BE AS
FOLLOWS:
(1) FOR BREACH OF WARRANTY UNDER SECTION 4, SUCH REMEDIES AS MAY
BE AFFORDED BY LAW.
(2) FOR DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY OR FOR
BODILY INJURY OR DEATH TO ANY PERSON NEGLIGENTLY CAUSED BY
PARADYNE CORPORATION, ABI'S RIGHT TO PROVEN DAMAGES TO
PROPERTY OR PERSON.
(3) FOR CLAIMS OTHER THAN SET FORTH ABOVE, PARADYNE CORPORATION'S
LIABILITY SHALL BE LIMITED TO DIRECT DAMAGES WHICH ARE PROVEN
IN AN AMOUNT NOT TO EXCEED $100,000.
C. EXCEPT TO THE EXTENT PROVIDED IN SUBSECTION 7.B.2. ABOVE, PARADYNE
CORPORATION SHALL NOT BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES, OR FOR LOST PROFITS, SAVINGS OR
REVENUES OF ANY KIND, WHETHER OR NOT PARADYNE CORPORATION HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. FORCE MAJEURE
Paradyne shall have no liability for Paradyne's delay or failure in performance
or for damages due to fire, explosion, lighting, pest damage, power surges or
failures, strikes or labor disputes, water, acts of God, the elements, war,
civil disturbances, acts of civil or military authorities or the public enemy,
inability to secure raw materials, transportation facilities, fuel or energy
shortages, acts or omissions of communications carriers, or other causes beyond
Paradyne's control whether or not similar to the foregoing. Nothing herein shall
obligate Paradyne to settle any strike or labor dispute.
9. GENERAL
A. Any legal action brought by ABI against Paradyne Corporation with
respect to this Section A2 must be filed within two (2) years after the
cause of action arises.
B. ABI shall not directly or indirectly export the Hardware or any
technical data relating thereto without first complying with , and
obtaining any licenses and/or other approvals required by, the United
States Export Administration Act and Export Administration Regulations
or any other applicable laws and regulations of the United States.
<PAGE> 35
ATTACHMENT B
SALE OF HAWK PRODUCT INVENTORY
Paradyne and ABI agree that the following terms and conditions shall apply to
the materials purchased under the 2290 Remote Access Gateway ("Hawk") Technology
Transfer Agreement by and between the parties to which this Attachment B is
attached and made a part thereof:
1. MATERIALS
The materials ("Materials") shall consist of the components, printed circuit
boards and assemblies in quantities as listed in the Materials List, which shall
be attached hereto and made a part of this Attachment as Exhibit 2.
2. QUANTITIES
The quantities, prices and extended amounts due from ABI shall be as described
in Exhibit 2 to this Attachment. ABI and Paradyne shall conduct a joint
inventory and inspection of the Materials immediately prior to shipment to ABI
after which the shipping containers shall be sealed and shipped. Any
discrepancies noted and agreed upon during the joint inventory shall be
reflected in a new Exhibit 2, in which event the extended prices for such
materials shall be adjusted accordingly. Any subsequent variances in the
quantities of the Materials shall be ABI's sole responsibility and risk.
3. PRICING AND PAYMENT TERMS
A. The price of the Material shall be four hundred thousand dollars
($400,000) payable in four one hundred thousand dollar installments.
The initial one hundred thousand dollar ($100,000) shall be sent by
bank wire transfer as described in Section 3.01 of the Agreement, upon
the CLOSING DATE. The remaining three (3) one hundred thousand dollar
($100,000) shall be made as follows: One hundred thousand dollars
($100,000) thirty (30) days after the CLOSING DATE, one hundred
thousand dollars ($100,000) sixty (60) days after the CLOSING DATE, and
one hundred thousand dollars ($100,000) ninety (90) days after the
CLOSING DATE.
4. OTHER COSTS
A. ABI shall pay any taxes which may be levied upon the sale, transfer of
ownership, installation, license or use of the products or services,
unless a valid tax exemption certificate is provided by ABI. Excluded
are taxes on Paradyne Corporation's net income.
B. All shipping, special packaging and other destination charges will be
invoiced by Paradyne Corporation and paid by ABI.
5. LEGAL AUTHORITY TO CONVEY TITLE
Paradyne represents and warrants that it has the unencumbered legal authority to
convey to ABI clear title to the Materials and upon the purchase hereunder ABI
shall have acquired title to the Materials free and clear of any claims or
encumbrances. Paradyne represents that transfer of title of the Materials does
not violate any contract or agreement pursuant to which such materials were
acquired by Paradyne and does not void any manufacturer warranties, nor shall
ABI have any lesser rights in the materials than the rights of Paradyne therein
prior to such transfer.
<PAGE> 36
Notwithstanding the passage of title and risk of loss, Paradyne shall retain a
security interest in the Materials until full payment shall have been made by
ABI to Paradyne. ABI shall execute and deliver all documents requested by
Paradyne to protect and maintain Paradyne's security interest.
6. WARRANTY
The Materials are sold as is, where is. Paradyne will pass through to ABI the
manufacturer's warranty or, if that warranty has expired, or cannot be passed
through to ABI, or has less than 75 days remaining, then Paradyne will warrant
for 75 days the Materials on the same terms and conditions as the applicable
manufacturer's warranty.
7. WARRANTY EXCLUSIONS
PARADYNE CORPORATION, ITS PARENT, SUBSIDIARIES AND THEIR AFFILIATES,
SUBCONTRACTORS AND SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AND
SPECIFICALLY DISCLAIM ANY WARRANTY OF INFRINGEMENT, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
8. TITLE AND RISK OF LOSS
The shipping terms shall be FOB point of origin, freight prepaid and billed
back. Title to Materials provided under this Agreement shall pass to ABI upon
receipt at ABI's premises in Gaithersburg, Maryland. at the FOB point. Risk of
loss to Materials provided under this Agreement shall pass to ABI at the FOB
point.
9. EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY
A. FOR PURPOSES OF THE EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY SET
FORTH IN THIS SECTION 9., "PARADYNE CORPORATION" SHALL BE DEEMED TO
INCLUDE PARADYNE CORPORATION, ITS PARENT, SUBSIDIARIES AND THEIR
AFFILIATES, AND THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
REPRESENTATIVES, SUBCONTRACTORS AND SUPPLIERS OF ALL OF THEM, AND
"DAMAGES" SHALL BE DEEMED TO REFER COLLECTIVELY TO ALL INJURY, DAMAGE,
LOSS OR EXPENSE INCURRED.
B. PARADYNE CORPORATION'S ENTIRE LIABILITY AND ABI'S EXCLUSIVE REMEDIES
AGAINST PARADYNE CORPORATION FOR ANY DAMAGES CAUSED BY ANY MATERIALS
DEFECT OR FAILURE, OR ARISING FROM THE PERFORMANCE OR NON-PERFORMANCE
OF ANY WORK, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT,
TORT INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, SHALL BE AS
FOLLOWS:
(1) FOR BREACH OF WARRANTY UNDER SECTION 6, SUCH REMEDIES AS ARE
AFFORDED BY THE APPLICABLE WARRANTY PROVIDED THEREUNDER.
(2) FOR DAMAGES TO REAL OR TANGIBLE PERSONAL PROPERTY OR FOR
BODILY INJURY OR DEATH TO ANY PERSON NEGLIGENTLY CAUSED BY
PARADYNE CORPORATION, ABI'S RIGHT TO PROVEN DAMAGES TO
PROPERTY OR PERSON.
(3) FOR CLAIMS OTHER THAN SET FORTH ABOVE, PARADYNE CORPORATION'S
LIABILITY SHALL BE LIMITED TO DIRECT DAMAGES WHICH ARE PROVEN
IN AN AMOUNT NOT TO EXCEED $100,000.
<PAGE> 37
C. EXCEPT TO THE EXTENT PROVIDED IN SUBSECTION 9.B.2. ABOVE, PARADYNE
CORPORATION SHALL NOT BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES, OR FOR LOST PROFITS, SAVINGS OR
REVENUES OF ANY KIND, WHETHER OR NOT PARADYNE CORPORATION HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. FORCE MAJEURE
Paradyne shall have no liability for Paradyne's delay or failure in performance
or for damages due to fire, explosion, lighting, pest damage, power surges or
failures, strikes or labor disputes, water, acts of God, the elements, war,
civil disturbances, acts of civil or military authorities or the public enemy,
inability to secure raw materials, transportation facilities, fuel or energy
shortages, acts or omissions of communications carriers, or other causes beyond
Paradyne Corporation's control whether or not similar to the foregoing. Nothing
herein shall obligate Paradyne Corporation to settle any strike or labor
dispute.
11. GENERAL
A. Any legal action brought by ABI against Paradyne Corporation with
respect to this Attachment B must be filed within two (2) years after
the cause of action arises.
B. ABI shall not directly or indirectly export the products acquired
hereunder or any technical data relating thereto without first
complying with, and obtaining any licenses and/or other approvals
required by, the United States Export Administration Act and Export
Administration Regulations or any other applicable laws and regulations
of the United States.
<PAGE> 38
ATTACHMENT A
2290 HARDWARE TECHNOLOGY
SECTION A2 - EXHIBIT 1
BELOW IS A SUBSET OF ATTACHMENT. (TO BE DELIVERED AS SPECIFIED IN 4.01)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUANTITY ITEM
- --------------------------------------------------------------------------------
<S> <C>
1 869-2777-xxxx In Circuit Test (ICT) fixture for parent board
- --------------------------------------------------------------------------------
1 869-2777-xxxx In Circuit Test (ICT) fixture for child card
- --------------------------------------------------------------------------------
1 Final assembly fixture
- --------------------------------------------------------------------------------
2 System test stations
- --------------------------------------------------------------------------------
</TABLE>
ATTACHMENT B
EXHIBIT 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PART DESCRIPTION QTY/SHIP
- --------------------------------------------------------------------------
PART DESCRIPTION EST. QTY.
<S> <C> <C>
870-2786-8000 CHILD CARD 98
870-2770-8100 PARENT CARD 32
102-0158-0031 PRI-ISA T1/ISDN CONTROLER 163
053-0031-0031S 10UF 20% 25V TANT 4168
064-0040-0131S .33UF 50V X7R DIELECTRIC 298
064-0066-0031S 1000PF 10% 50V, NPO 5066
064-0089-0031S .1UF 10% 25V X7R 0805 71814
064-0094-0031S 15PF CAP 5% 100V 1192
120-0476-3031s CONNECTOR, 50/50, RECEPT 2476
132-0144-0031S 16.384 MHZ.PARALLEL RESON 298
132-0159-0031S 38.000 MHZ, OSCLLTR.SURFC 298
132-0163-0031S 29.4912MHZ,50PPM,SMT OSC. 298
132-0169-0031S 25.8048 MHZ.CRYSTAL,13 PF 298
151-0049-0031S HP HSMG-C670,GREEN,0805 596
202-0210-1031S HEADER, 10 X 2, RT ANGLE 596
202-0208-3031s HEADER, 50/50 SHROUDED 1784
223-0370-0031S IC, 74ACT138 16PIN, SOIC 1490
223-0390-0031S 74HC11 14 PIN 596
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C>
223-0422-0031S 74HCT30 8-INPUT NAND GATE 596
223-0502-0031S 74ACT74 DUAL D-TYPE 14P 3980
223-0508-0031S 74HCT273 OCTAL D-FF W/CLR 1192
223-0515-0031S 74HCT377D OCTAL D-TYPE 4800
223-0536-0031S IC 74ABT244D 894
223-0537-0031S IC 74ABT245 596
223-0604-0031S 74ACT174 HEX D FLIP-FLOP 2366
223-0607-0031S 74ACT244 OCTAL BUFFER 12202
223-0609-0031S 74ACT521 8-BIT COMPARATOR 2477
223-0610-0031S 74ACT00 QUAD 2-INPUT NAND 1295
223-0611-0031S 74ACT04 HEX INVERTER 1788
223-0612-0031S 74ACT08 QUAD AND GATE 894
223-0614-0031S 74ACT32 QUAD 2-INPUT OR 894
223-0615-0031S 74ACT125 QUAD BUFFER 1490
223-0617-0031S 74ACT151 8-INPUT MUX 299
224-0450-0131S 32KX8 SRAM 15NS SOJ32 1192
224-0502-0231S DSP16A 1X CLK, 3K RAM 2380
224-0522-0031S SRAM 32K X 8, 70NS SOP28 596
224-0527-0031S MC68302-25 PQFP132 2678
224-0569-0031S FMIC 565
224-0571-0031S 128K X 8 SRAM SOP32 7144
224-0572-0031S 16K X 16 DUAL PORT RAM 541
224-0578-0031S 4MEG BOOT BLK FLASH 1380
224-0652-0031S 22V10 ZERO-STANBY POWER 2110
224-0652-0131S PAL,PREPROGRAMMED,22V10H 1784
224-0653-0031S 22V10,GLUE1_5.JED,84C1 1390
224-0654-0031S 22V10,GLUE2_2.JET, A165 706
224-8754-0311S CAMIL 4, PQFP84 2380
239-0026-0031 LABEL, 1" X .5" 1190
420-0000-1108S 0 OHMS 1% 1/1OW 0805 15472
420-1000-1108S 100 OHM 1% 1/10W, 0805 298
420-1002-1108S 10K 1% 1/10W, 0805 14280
420-1004-1108S 1 MEG 1% 1/10W, 0805 298
420-1009-1108S 10 OHM-1%-1/10W RES 0805 298
420-1109-1108S 11 OHM,1%,1/10W, 0805 13762
420-1871-1108S 1.87K 1% 1/10W, 0805 10712
420-2211-1128S 2.21K 1% 1/8W 1206 298
420-3929-1108S 39.2 OHM,1%,1/10W, 0805 298
420-4640-1108S 464 OHM 1% 1/10W, 0805 5066
420-4751-1108S 4.75K OHM 1% 1/10W 0805 2976
420-5119-1108S 51.1 OHMS 1% 1/10W 0805 20852
420-6813-1108S 681K 1% 1/10W, 0805 596
420-9310-1108S 931 0HM 1% 1/10W 0805 5356
440-1002-0031S RNET 10K 2% .08W SOL16 8630
440-2202-1516S 22K RES.NETWORK 16PN 8928
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C>
508-0001-0632 SCREW,HEX-HEAD,6-32X1/4 3971
508-0002-0440 SCREW,HEX-HEAD, 4-40X1/4" 709
598-0103-0031 STANDF,13/32L,F/F,632X3/8 2000
628-0048-0231S SWITCH-PIANO,2POS,SPST,SM 364
628-0049-0631S SWITCH-PIANO,6POS.SPST,SM 1077
628-0050-0531S SWITCH-PIANO,5POS.SPST,SM 421
717-0010-0031 BRACKET, LAN CARD SUPPORT 454
869-2786-5274 PWB HAWK CHILD CARD 907
035-0308-0031 DAISY-CHAIN CABLE 7 CONN. 169
035-0307-0031 DAISY-CHAIN CABLE 4 CONN. 169
869-2777-5574 PWB HAWK OMU PARENT 443
</TABLE>
<PAGE> 1
Exhibit 10.14
ACCESS BEYOND, INC.
STOCK PURCHASE AGREEMENT
MAY 2, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale ................................................... 1
2. Closing ............................................................. 1
3. Company Representations and Warranties .............................. 1
3.1 Organization and Standing .................................... 1
3.2 Corporate Power; Authorization ............................... 1
3.3 Purchased Shares ............................................. 2
3.4 Capitalization ............................................... 2
3.5 SEC Documents ................................................ 2
3.6 Absence of Changes ........................................... 3
3.7 Registration Rights .......................................... 4
4. Investor Representations and Warranties ............................. 4
4.1 Organization and Standing .................................... 4
4.2 Corporate Power; Authorization ............................... 5
4.3 Investment Experience ........................................ 5
4.4 Investment Intent ............................................ 5
4.5 Registration or Exemption Requirements ....................... 5
5. Conditions of Investor's Obligations at Closing ..................... 6
5.1 Representations and Warranties ............................... 6
5.2 Performance .................................................. 6
5.3 Compliance Certificate ....................................... 6
5.4 Qualifications ............................................... 6
5.5 Proceedings and Documents .................................... 6
5.6 Execution of Technology Agreements ........................... 6
5.7 Payment ...................................................... 6
5.8 Certificate of Transfer Agent ................................ 7
6. Conditions of the Company's Obligations at Closing .................. 7
6.1 Representations and Warranties ............................... 7
6.2 Performance .................................................. 7
6.3 Compliance Certificate ....................................... 7
6.5 Qualifications ............................................... 7
6.6 Execution of Technology Agreements ........................... 7
7. Covenants of the Company ............................................ 7
7.1 Shelf Registration ........................................... 7
7.2 Piggyback Registration ....................................... 9
7.3 Indemnification .............................................. 10
7.4 Right of First Offer ......................................... 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
8. Covenants of Investor ............................................... 13
8.1 Company Purchase Right ....................................... 13
8.2 Limitation on Sale ........................................... 13
9. Miscellaneous ....................................................... 13
9.1 Survival of Warranties ....................................... 13
9.2 Successors and Assigns ....................................... 14
9.3 Governing Law ................................................ 14
9.4 Counterparts ................................................. 14
9.5 Titles and Subtitles ......................................... 14
9.6 Notices ...................................................... 14
9.7 Finder's Fee ................................................. 14
9.8 Expenses ..................................................... 15
9.9 Amendments and Waivers ....................................... 15
9.10 Severability ................................................. 15
9.11 Aggregation of Stock ......................................... 15
9.12 Entire Agreement ............................................. 15
9.13 Option to License QADM Technology ............................ 15
9.14 Arbitration .................................................. 16
</TABLE>
EXHIBIT A 2290 Remote Access Gateway Technology Transfer Agreement
EXHIBIT B QADM Technology Transfer and AudioSpan(TM) Trademark License
Agreement
ii
<PAGE> 4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the ____ day of May, 1997, by
and among Access Beyond, Inc., a Delaware corporation (the "the Company" or
"ABI"), and Paradyne Corporation, a Delaware corporation ("Investor" or
"Paradyne").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale Subject to the terms and conditions of this
Agreement, Investor agrees to purchase at the Closing and the Company agrees to
sell and issue to Investor at the Closing, five hundred three thousand seven
hundred four (503,704) shares of the Company's Common Stock (the "Purchased
Shares").
2. Closing. The purchase and sale of the Purchased Shares (the "Closing")
shall take place at the offices of Paradyne, 8545 126th Avenue North, Largo,
Florida 33773, contemporaneously with the closing of the transactions set forth
in the Hawk Agreement (defined below) or at such other time and place as the
Company and Investor mutually agree upon orally or in writing (the "Closing
Date"). At the Closing, the Company shall deliver to Investor a certificate
representing the Purchased Shares Investor is purchasing against delivery by
Investor (including, but not limited to, the granting of the rights on the terms
and conditions as provided therein) of that certain 2290 Remote Access Gateway
("Hawk") Technology Transfer Agreement, including the attachments and exhibits
thereto, between Paradyne and ABI attached hereto as Exhibit A (the "Hawk
Agreement") (the "Related Agreements").
3. Company Representations and Warranties. The Company hereby represents
and warrants to Investor as of the Closing Date as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state and is qualified as a foreign corporation in all other jurisdictions
in which such qualification is required; provided, however, that the Company
need not be qualified in a jurisdiction in which its failure to qualify would
not have a material adverse effect on the business, properties, prospects or
financial condition of the Company.
3.2 Corporate Power; Authorization. The Company has all requisite
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement and the Related Agreements, to sell and issue
the Purchased Shares and to carry out and perform all of its obligations under
this Agreement and the Related Agreements. This Agreement and the Related
Agreements constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except (A) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (B) as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies,
<PAGE> 5
and (C) to the extent the indemnification provisions contained herein may be
limited by applicable federal or state securities laws. The execution and
delivery of this Agreement and the Related Agreements does not, and the
performance of this Agreement and the Related Agreements and the compliance with
the provisions hereof and thereof and the issuance, sale and delivery of the
Purchased Shares by the Company will not materially conflict with, or result in
a breach or violation of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any lien pursuant to
the terms of, the Certificate of Incorporation or Bylaws of the Company. The
execution and delivery of this Agreement does not, and the performance of this
Agreement and the compliance with the provisions hereof and the issuance, sale
and delivery of the Purchased Shares by the Company will not materially conflict
with, or result in a breach or violation of the terms, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
any lien pursuant to the terms of, any statute, law, rule or regulation or any
state or federal order, judgment or decree or any indenture, mortgage, lease or
other agreement or instrument to which the Company, or any of its properties, is
subject.
3.3 Purchased Shares. The Purchased Shares when issued in compliance
with the provisions of this Agreement will be duly and validly authorized,
issued, fully paid and nonassessable. Based on the representations and
warranties of Investor contained herein, the Purchased Shares when issued in
compliance with the provisions of this Agreement, will be issued in compliance
with federal and state securities laws. The issuance and delivery of the
Purchased Shares is not subject to preemptive or any other similar rights of the
stockholders of the Company or any liens or encumbrances.
3.4 Capitalization. The authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, $0.01 par value, of which at
January 31, 1997, 11,989,587 shares were issued and outstanding and 3,000,000
shares of Preferred Stock, $0.01 par value, of which at July 31, 1997, no shares
were issued and outstanding. All such issued and outstanding shares have been
duly authorized and validly issued and are fully paid and nonassessable. In
addition to the foregoing, the Company has reserved and outstanding the
following warrants, options and convertible securities: (i) 2,250,000 shares
reserved for issuance pursuant to the Company's stock option plans, of which, at
January 31, 1997, no options to purchase had been exercised, options to purchase
1,105,000 shares were outstanding and 1,145,000 shares remained available for
future grant. Except for securities issued in the ordinary course of business
under the Company's stock plans, no additional securities of the Company will be
issued and outstanding as of the Closing Date. Except as described in this
Section 3.4 and except for Investor's right to purchase such amount of newly
issued securities of the Company in order to maintain its respective percentage
ownership, there are no other options, warrants, conversion privileges or other
contractual rights currently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the Company's capital stock or other
securities.
3.5 SEC Documents. The Company has furnished the following
information to Investor: (A) the Registration Statement on Form S-1 of Access
Beyond, Inc. which became effective October 17, 1996; (B) the Report on Form
10-K of Penril DataComm
2
<PAGE> 6
Networks, Inc. and its wholly-owned subsidiaries for the year ended July 31,
1996; (C) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended January 31, 1997; and (D) all other documents that the Company was
required to file, which it represents and warrants it did timely file with the
SEC under Section 13 or 14(a) of the Securities Act of 1934, as amended
("Exchange Act"), since October 17, 1996 (collectively, the "SEC Documents"). As
of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act of
1933, as amended ("Securities Act"), as applicable. The SEC Documents as of
their respective dates did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the SEC Documents ("Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto. Except as may be indicated in
the notes to the Financial Statements or, in the case of unaudited statements,
as permitted by Form 10-Q, the Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of the Company and any
subsidiaries at the dates thereof and the consolidated results of their
operations and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal, recurring adjustments). The SEC
Documents, this Agreement, the exhibits and schedules hereto, and any
certificates or documents to be delivered to Investor pursuant to this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which statements were made, not misleading.
3.6 Absence of Changes. Except as otherwise disclosed herein or in
the SEC Documents and the Financial Statements, since October 17, 1996, there
has not been:
(a) any changes in the assets, liabilities, financial
condition or operations of the Company from that reflected in the Financial
Statements except changes in the ordinary course of business which have not
been, either in any individual case or in the aggregate, materially adverse;
(b) any material change, except in the ordinary course of
business, in the aggregate contingent obligations of the Company, whether by way
of guarantee, endorsement, indemnity, warranty or otherwise;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(d) any declaration or payment of any dividend or other
distribution of the assets of the Company, or any stock split, stock dividend,
reclassification, reorganization, combination or the like;
(e) any labor organization activity;
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(f) any transfer or grant of a right other than in the
ordinary course of business or any material change in the patents, patent
applications, copyrights, trade secrets, trademarks, proprietary information,
proprietary rights, and processes necessary for the Company's business as
currently conducted without any conflict with or infringement of the rights of
others;
(g) any notification or communication received by the Company
alleging that the Company, by conducting its business as currently conducted,
would violate any of the patents, trademarks, service marks, trade names,
copyrights, or trade secrets or other proprietary rights of any other person or
entity (except for a claim by Harris & Jeffries, Inc. (the "H&J Claim") with
respect to certain software which will not have a material adverse effect on the
Company's assets, financial condition or business);
(h) any notification or communication received by the Company
that any of its employees or consultants is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that is violated by or would materially interfere with
the current or prospective services provided to the Company by the employee or
consultant or the use of his best efforts to promote the interests of the
Company or that would materially conflict with the Company's business as
currently conducted and proposed to be conducted;
(i) any claim or legal action or other proceeding threatened
or brought before any court, any arbitrator of any kind or any administrative
agency, or any governmental investigation, which could have a material adverse
effect on the Company's business, financial condition or results of operations;
or
(j) any other event or condition of any character which has
materially and adversely affected the Company's assets, liabilities, financial
condition or operations or prospects.
3.7 Registration Rights. Except as provided for in Section 7 hereof,
the Company has not granted or agreed to grant any registration rights,
including piggyback rights, to any person or entity.
4. Investor Representations and Warranties. Investor hereby represents and
warrants to the Company as of the Closing Date as follows:
4.1 Organization and Standing. Paradyne is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state and is qualified as a foreign corporation in all other jurisdictions
in which such qualification is required; provided, however, that Paradyne need
not be qualified in a jurisdiction in which its failure to qualify would not
have a material adverse effect on the business, properties, prospects or
financial condition of Paradyne.
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4.2 Corporate Power; Authorization. Paradyne has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver the Agreement and the Related Agreements. This Agreement and the Related
Agreements constitute the legal, valid and binding obligations of Paradyne,
enforceable against Paradyne in accordance with their respective terms, except
(A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, (B) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (C) to the
extent the indemnification provisions contained herein may be limited by
applicable federal or state securities laws. The execution and delivery of this
Agreement and the Related Agreements does not, and the performance of this
Agreement and the Related Agreements and the compliance with the provisions
hereof will not materially conflict with, or result in a breach or violation of
the terms, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of any lien pursuant to the terms of, the
Certificate of Incorporation or Bylaws of Paradyne. The execution and delivery
of this Agreement does not, and the performance of this Agreement and the
compliance with the provisions hereof will not materially conflict with, or
result in a breach or violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any lien
pursuant to the terms of, or any statute, law, rule or regulation or any state
or federal order, judgment or decree or any indenture, mortgage, lease or other
agreement or instrument to which Paradyne, or any of its properties, is subject.
4.3 Investment Experience. Investor is an "accredited investor" as
defined in Rule 501 (a) under the Securities Act. Investor is generally aware of
the Company's business affairs and financial condition and has had access to and
has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Purchased Shares. Investor has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Purchased
Shares. Notwithstanding the foregoing, Investor shall be entitled to rely on the
representations and warranties of the Company in Section 3.
4.4 Investment Intent. Investor is purchasing the Purchased Shares
for investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act. Investor understands that the Purchased Shares have not been registered
under the Securities Act or registered or qualified under any state securities
law in reliance on specific exemptions therefrom, which exemptions may depend
upon, among other things, the bona fide nature of Investor's investment intent
as expressed herein.
4.5 Registration or Exemption Requirements. Investor further
acknowledges and understands that the Purchased Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Investor understands that the
certificate(s) evidencing the Purchased Shares will be imprinted with a legend
that prohibits the transfer of the Shares unless (i) they are registered or such
registration is not required, and (ii) if the transfer is pursuant to an
exemption from
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registration other than Rule 144 under the Securities Act, and, if the Company
shall so request in writing, an opinion of counsel satisfactory to the Company
is obtained to the effect that the transaction is so exempt. In addition,
Investor will refrain from selling, transferring or otherwise disposing of any
Purchased Shares, or any interest therein, in such manner as to cause the
Company to be in violation of the registration requirements of the Securities
Act or applicable state securities or blue sky laws. Investor further
acknowledges that the Purchased Shares will be imprinted with a legend stating
that: "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
5. Conditions of Investor's Obligations at Closing. The obligations of
Investor under this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 and in the Related Agreements
shall be true and correct on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the date
of such Closing.
5.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement and the
Related Agreements that are required to be performed or complied with by it on
or before the Closing.
5.3 Compliance Certificate. The President of the Company shall
deliver to Investor at the Closing a certificate stating that the conditions
specified in Sections 5.1 and 5.2 have been fulfilled and stating that there
shall have been no material adverse change in the business, affairs, operations,
properties, assets or condition of the Company since October 17, 1996.
5.4 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
5.5 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to special counsel to Investor, and such special counsel shall have
received all such counterpart original and certified or other copies of such
documents as they may reasonably request.
5.6 Execution of Technology Agreements. The Company shall have duly
executed and delivered the Related Agreements.
5.7 Payment. Investor shall have received at the Closing $25,000 per
Section 3.01(b) of the Hawk Technology Transfer Agreement between Paradyne and
ABI.
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5.8 Certificate of Transfer Agent. Investor shall have received a
certificate of the Company's transfer agent in a form reasonably satisfactory to
Investor, which certificate shall state that the Company has 30,000,000 shares
of Common Stock, $0.01 par value, and 3,000,000 shares of Preferred Stock, $0.01
par value authorized, and which shall state the outstanding capital stock of the
Company. The number of shares of Common Stock stated as issued and outstanding
in such certificate shall be approximately 11,989,587 shares, plus the Purchased
Shares and no shares of Preferred stock shall be stated as issued and
outstanding.
6. Conditions of the Company's Obligations at Closing. The obligations of
the Company to Investor under this Agreement are subject to the fulfillment on
or before the Closing of each of the following conditions by Investor:
6.1 Representations and Warranties. The representations and
warranties of Investor contained in Section 4 and in the Related Agreements
shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement and the
Related Agreements that are required to be performed or complied with by it on
or before the Closing.
6.3 Compliance Certificate. An officer of Paradyne shall deliver to
the Company at the Closing a certificate stating that the conditions specified
in Sections 6.1 and 6.2 have been fulfilled.
6.4 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6.5 Execution of Technology Agreements. Investor shall have duly
executed and delivered the Related Agreements.
7. Covenants of the Company
7.1 Shelf Registration.
(a) As soon as reasonably practicable after the Closing, the
Company shall prepare and file a registration statement with the SEC under the
Securities Act to register the resale of the Purchased Shares ("Registrable
Securities") and thereafter shall use its best efforts to secure the
effectiveness of such registration statement as soon as reasonably practicable
within one hundred twenty (120) days after the Closing. Notwithstanding the
foregoing, if ABI shall provide a certificate of its President or other
corporate officer to Paradyne (i) stating that ABI is continuing to diligently
attempt to secure the effectiveness of such registration statement as soon as
reasonably practicable and (ii) explaining the reasons why ABI cannot secure the
effectiveness of such registration statement within one hundred twenty (120)
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days after the Closing, then ABI's covenant to secure the effectiveness of such
registration statement as provided in this Section 7.1 shall be extended to not
more than one hundred eighty (180) days after the Closing so long as ABI
continues to diligently use its best efforts to secure the effectiveness of such
registration statement as soon as reasonably practicable.
(b) The Company shall pay all Registration Expenses (as
defined below) in connection with any such registration or any other
registration, qualification or compliance hereunder, and each holder of
Registrable Securities ("Holder") shall pay all Selling Expenses (as defined
below) and other expenses that are not Registration Expenses relating to the
Registrable Securities resold by such Holder. "Registration Expenses" shall mean
all expenses, except for Selling Expenses, incurred by the Company in complying
with the registration provisions herein described, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses and the expense of any special audits incident to or required by
any such registration. "Selling Expenses" shall mean all selling commissions,
underwriting fees and stock transfer taxes applicable to the Registrable
Securities and all fees and disbursements of counsel for any Holder.
(c) In the case of any registration effected by the Company
pursuant to these registration provisions, (x) the Company will use its best
efforts to: (i) keep such registration effective until the later of (A) twelve
(12) months after the Closing Date or (B) such date as the Company shall be
satisfied that the then-current Holders may sell all of the Registrable
Securities then held by each such Holder within a single three (3) month period;
(ii) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement; (iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request; (iv) use its
best efforts to register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders (up to 5 such jurisdictions),
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions; (v) cause all such
Registrable Securities registered as described herein to be listed on each
securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; (vi) provide a
transfer agent and registrar for all Registrable Securities registered pursuant
to such registration statement and a CUSIP number for all Registrable
Securities; and (vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and (y) the Holders, severally,
shall promptly provide to the Company (and in any event within 10 days of
receipt of the written request therefor) all written information regarding the
Holders and the Registrable Securities as the Company shall reasonably request
and as is required to be included in the Registration Statement with respect to
the Holders.
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(d) The right to sell Registrable Securities pursuant to the
registration statement described herein will automatically be assigned to each
transferee of Registrable Securities (subject to Section 9.2 hereof). In the
event that it is necessary, in order to permit a Holder to sell Registrable
Securities pursuant to the Company's registration statement, to amend the
registration statement to name such Holder, such Holder shall, upon written
notice to the Company, be entitled to have the Company make such amendment as
soon as reasonably practicable. Notwithstanding the above provisions relating to
Registration Expenses, in the event that such an amendment is requested the
Holder shall, at the request of the Company, be obligated to reimburse the
Company for reasonable Registration Expenses incurred by it in connection with
such amendment.
(e) With a view to making available to the holders the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell Registrable
Securities to the public without registration or pursuant to a registration on
Form S-3, the Company hereby covenants and agrees to use its best efforts to:
(i) make and keep public information available, as those terms are understood
and defined in Rule 144, at all times after the closing; (ii) file with the SEC
in a timely manner all reports and other documents required of the Company under
the Securities Act and Exchange Act; and (iii) furnish to any Holder, as long as
the Holder owns any Registrable Securities forthwith upon request, (A) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (B) a copy of the most recent
annual or quarterly report of the Company, and (C) such other information as may
be reasonably requested in order to avail any Holder of any rule or regulation
of the SEC that permits the selling of any such Registrable Securities without
registration or pursuant to such Form S-3.
7.2 Piggyback Registration. For the period from the Closing until
the registration statement provided for in Section 7.1(a) hereof shall become
effective, and thereafter during any period that ABI is required to keep such
registration statement effective and such registration statement is not
effective, if (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for
stockholders other than Investor) any of its stock or other securities under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, a registration on any form which is not
available for the resale of the Registrable Securities, a registration statement
on Form S-4 or any successor form, or a registration in which the only Common
Stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at such time,
promptly give each Holder written notice of such registration. Upon the written
request of any Holder given within ten (10) days after mailing of such notice by
the Company, the Company shall cause to be registered under the Securities Act
all of the Registrable Securities that each such Holder has requested to be
registered. In connection with any such registration which involves the
underwritten offering of the Company's securities, the Company shall not be
required to include any Holder's securities under such registration statement
unless such Holder agrees to enter into an underwriting agreement in the form
agreed upon between the Company and the underwriters selected by it (or
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by other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders).
7.3 Indemnification.
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder, its officers, directors, shareholders or partners and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (A) any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (B) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (C) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will pay to each
such Holder (limited to Paradyne), underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 7.3(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
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persons may become subject, under the Securities Act, the Exchange Act or over
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Section 7.3(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 7.3(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this Section 7.3(b) exceed
the net proceeds from the offering received by such Holder, expect in the case
of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 7.3(c) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 7.3(c), deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 7.3(c), but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 7.3(c).
(d) If the indemnification provided for in this Section 7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided, that, in no event shall any contribution by a Holder
under this Section 7.3(d) exceed the net proceeds from the offering received by
such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among over things, whether the untrue or alleged
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<PAGE> 15
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this
Section 7 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 7, and otherwise.
7.4 Participation Right. Subject to the terms and conditions
specified in this Section 7.4, the Company hereby grants to Investor a right to
participate with respect to future sales by the Company of its Shares (as
hereinafter defined); provided that such sale is: (i) at a per share price at or
below $3.375 (as adjusted for any stock splits, dividends, combinations,
reclassifications or the like) and (ii) not a public sale effected through an
underwriter, broker or dealer in a market transaction. Subject to the foregoing,
each time during the thirty (30) month period beginning on the Closing Date that
the Company proposes to offer any shares of, or securities convertible into or
exercisable for, any shares of any class of its capital stock ("Shares"), the
Company shall first make an offering of such Shares to Investor in accordance
with the following provisions:
(a) the Company shall deliver a notice by certified mail
("Notice") to Investor stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, (iii) the price and terms, if any,
upon which it proposes to offer such Shares and (iv) the number of Shares that
Investor has the right to purchase under this Section 7.4.
(b) By written notification received by the Company, within 5
business days after giving of the Notice, Investor may elect to purchase or
obtain, at the price and on the terms specified in the Notice, up to that
portion of such Shares that equals the proportion that the number of shares of
Common Stock issued and held by Investor bears to the total number of shares of
Common Stock of the Company then outstanding (assuming full conversion and
exercise of all convertible or exercisable securities). Any such election shall
be irrevocable written notice with respect to such offer only and failure to
give such notice within such time period shall be an irrevocable waiver of such
election right with respect to such offer only.
(c) If all Shares which Investor is entitled to obtain
pursuant to Section 7.4 are not elected to be obtained, then the Company may,
during the 90-day period following the expiration of the period provided in
Section 7.4(b) hereof, offer the remaining unsubscribed portion of such Shares
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Shares within such period, or if
such agreement is not consummated within 90 days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such Shares shall not
be offered unless first reoffered to Investor in accordance herewith.
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(d) The participation right in this Section 7.4 shall not be
applicable (i) to the issuance or sale of shares of common stock (or options
therefor) to employees, consultants or directors of the Company for the primary
purpose of soliciting or retaining their employment or services and (ii) to the
issuance of securities pursuant to the conversion or exercise of convertible or
exercisable securities, provided the convertible or exercisable securities (if
issued after the date hereof) were subject to or exempt from the right of
participation set forth herein.
8. Covenants of Investor
8.1 Company Purchase Right. For the twenty four (24) month period
beginning on the Closing Date, (i) if the Company's Common Stock shall continue
to be designated for listing on the Nasdaq National Market and (ii) if Holder
shall propose to sell Registrable Securities in a public market transaction
effected through a market maker in such stock on the Nasdaq National Market (not
including any managed or otherwise negotiated sale), then Holder shall notify
the Company by telephone or facsimile (addressed to the Chief Financial Officer
of the Company, which notice shall be deemed to be effective upon transmission
thereof) of its intent to do so at least two (2) full trading days prior to such
sale. Within such two (2) day period, the Company or such party as the company
may designate, subject to Investor's approval which shall not be unreasonably
withheld, shall have the right to purchase such Registrable Securities (by
irrevocable delivery of the purchase price therefor) at a purchase price equal
to the highest reported sale price for the Company's Common Stock on the Nasdaq
National Market during such two (2) day period.
8.2 Limitation on Sale. Unless waived by the Company, Investor
hereby agrees that it shall not, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to
transferees and donees who agree to be similarly bound as provided in Section
9.2 hereof) to any purchaser in a public sale effected through an underwriter,
broker or dealer in a market transaction ("Public Sale") any securities of the
Company held by it except as follows: (A) on or prior to the first anniversary
of the Closing Date, up to fifty percent (50%) of the Purchased Shares, (B)
after the second anniversary of the Closing Date, any Purchased Shares not sold
pursuant to clause (A) and up to an additional twenty five percent (25%) of the
Purchased Shares, and (C) after the third anniversary of the Closing Date, any
Purchased Shares not sold pursuant to clauses (A) and (B) and up to an
additional twenty five percent (25%) of the Purchased Shares. A "Public Sale"
shall not include any sale and purchase of Purchased Shares in a private
transaction so long as such purchaser agrees to be bound by the terms and
conditions of this Agreement.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be
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affected by any investigation of the subject matter thereof made by or on behalf
of Investor or the Company.
9.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Purchased Shares); provided, however, that this agreement
shall not be binding upon nor inure to the benefit of any purchaser of the
Purchased Shares pursuant to a Public Sale. Further (subject to compliance with
applicable federal and state securities laws), Paradyne shall have the right to
transfer all or part of the Purchased Shares and to assign this Agreement and to
assign its rights and delegate its duties under this Agreement to (i) any
present or future affiliate (including any subsidiary or affiliated entity
thereof) of Paradyne and/or (ii) any unaffiliated new entities that may be
formed by Paradyne pursuant to a corporate reorganization, including any
subsidiary or affiliated entity thereof, and/or (iii) any successor in interest
or affiliate thereof to all or part of the business or assets of Paradyne and/or
(iv) any other party with the consent of ABI, which consent shall not
unreasonably be withheld (any of the foregoing, an "Assignment"). Upon the date
of any Assignment and to the extent of the Assignment, Paradyne shall be
released and discharged from all further duties under this Agreement. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware, without
reference to Delaware conflict of laws provisions.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
9.7 Finders' Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against
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such liability or asserted liability) for which such Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless Investor from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
9.8 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. Irrespective
of whether the Closing is effected, the Investor shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or the Related Agreements, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
9.9 Amendments and Waivers. Any term 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 with the written consent of the Company and Investor. Any
amendment or waiver effected in accordance with this Section 9.9 shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
9.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9.11 Aggregation of Stock. All shares of the Purchased Shares held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
9.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
9.13 Option to License QADM Technology. At the election of the
Company at the Closing, or at any time thereafter until the first anniversary of
the Closing upon ten (10) business days prior written notice to Investor,
Investor and the Company shall execute that certain QADM Technology Transfer and
AudioSpan Trademark License Agreement in substantially the form attached hereto
as Exhibit C (the "QADM Agreement") whereby, inter alia, Investor shall grant to
the Company the license set forth in Article I thereof, subject to the terms,
conditions and obligations of the parties therein. Upon execution and delivery
of the QADM Agreement, the Company shall deliver to Investor four hundred
thousand dollars ($400,000) payable in cash. If the Hawk Agreement shall
terminate for any reason prior to the
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exercise of the option granted in this Section 9.13, pursuant to Article VI of
the Hawk Agreement or otherwise, then the option granted in this Section 9.13
shall terminate on the date of such termination and shall be of no further force
of effect. If the Company shall sell, transfer or assign its rights under the
Hawk Agreement in accordance with the provisions thereof, then the option
granted in this Section 9.13 shall be assigned to and may be exercised by such
purchaser, transferee or assignee. Except as expressly provided in this Section
9.13, the rights and obligations of the Company and Investor with respect to the
subject matter of the QADM Agreement shall be governed by the QADM Agreement.
9.14 Arbitration. Any dispute arising hereunder shall be resolved
according to the provisions of Article 7.17 of the Hawk Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ACCESS BEYOND, INC.
By: ____________________________________
Address: 1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
PARADYNE CORPORATION
By: ____________________________________
Address: 8545 126th Avenue North
Largo, Florida 33773
<PAGE> 21
AMENDMENT NO. 1 TO
ACCESS BEYOND, INC.
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of September ___, 1997, by and
among Access Beyond, Inc., a Delaware corporation (the "the Company" or "ABI"),
and Paradyne Corporation, a Delaware corporation ("Investor" or "Paradyne").
Capitalized terms not otherwise defined herein shall have the meaning assigned
to them in that certain Access Beyond, Inc. Stock Purchase Agreement between the
Company and the Investor dated as of May 2, 1997 (the "Stock Purchase
Agreement").
RECITALS
WHEREAS, the Company and the Investor wish to amend certain provisions of
the Stock Purchase Agreement with respect to: (i) the Company's obligation to
file a registration statement covering Investor's shares of the Company's Common
Stock; (ii) the Company's right of first offer; and (iii) the lock-up
restrictions on Investor's shares of the Company's Common Stock.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Amendment of Shelf Registration Provisions.
1.1. Section 7.1(a). Section 7.1(a) of the Stock Purchase Agreement
shall be amended and restated in its entirety to read as follows:
"(a) As soon as reasonably practicable after the date hereof,
but in any event no later than November 7, 1997, the Company shall prepare and
file a registration statement with the SEC under the Securities Act to register
the resale of the Purchased Shares ("Registrable Securities") and thereafter
shall use its best efforts to secure the effectiveness of such registration
statement as soon as reasonably practicable but in any event no later than
December 31, 1997."
1.2. Section 7.1(c). Section 7.1(c) shall be amended and restated in
its entirely to read as follows:
"(c) In the case of any registration effected by the Company
pursuant to these registration provisions, (x) the Company will use its best
efforts to: (i) keep such registration effective until the later of (A) eight
(8) months after the date such registration statement is declared effective or
(B) such date as the Company shall be satisfied that the then current Holders
may sell all of the Registrable Securities then held by each such Holder within
a single three (3) month period; (ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
<PAGE> 22
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement; (iii)
furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Holder from
time to time may reasonably request; (iv) use its best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders (up to 5 such jurisdictions), provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions; (v) cause all such Registrable Securities
registered as described herein to be listed on each securities exchange and
quoted on each quotation service on which similar securities issued by the
Company are then listed or quoted; (vi) provide a transfer agent and registrar
for all Registrable Securities registered pursuant to such registration
statement and a CUSIP number for all Registrable Securities; and (vii) otherwise
use its best efforts to comply with all applicable rules and regulations of the
SEC and (y) the Holders, severally, shall promptly provide to the Company (and
in any event within 10 days of receipt of the written request therefor) all
written information regarding the Holders and the Registrable Securities as the
Company shall reasonably request and as is required to be included in the
Registration Statement with respect to the Holders."
2. Amendment of Covenants of Investor.
2.1. Section 8.1. Section 8.1 of the Stock Purchase Agreement shall
be amended and restated in its entirety to read as follows:
"8.1 Notice of Sale. For the twenty four (24) month period
beginning on the Closing Date, (i) if the Company's Common Stock shall continue
to be designated for listing on the Nasdaq National Market and (ii) if Holder
shall propose to sell Registrable Securities in a public market transaction
effected through a market maker in such stock on the Nasdaq National Market (not
including any managed or otherwise negotiated sale), then Holder shall notify
the Company by telephone or facsimile (addressed to the Chief Financial Officer
of the Company, which notice shall be deemed to be effective upon transmission
thereof) of its intent to do so at least two (2) full trading days prior to such
sale."
2.2. Section 8.2. Section 8.2 of the Stock Purchase Agreement shall
be amended and restated in its entirety to read as follows:
"8.2 Limitation on Sale. Unless waived by the Company,
Investor hereby agrees that it shall not, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of (other than to
transferees and donees who agree to be similarly bound as provided in Section
9.2 of the Purchase Agreement) to any purchaser in a public sale effected
through an underwriter, broker or dealer in a market transaction ("Public Sale")
any securities of the Company held by it except as follows: (A) on or prior to
the first anniversary of the Closing Date, up to fifty percent (50%) of the
Purchased Shares, and (B) after the first anniversary of the Closing Date, any
of the Purchased
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<PAGE> 23
Shares. A "Public Sale" shall not include any sale and purchase of Purchased
Shares in a private transaction so long as such purchaser agrees to be bound by
the terms and conditions of this Agreement."
3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ACCESS BEYOND, INC.
By: /s/Ronald Howard
----------------------------------------
Address:1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
PARADYNE CORPORATION
By: /s/James Slattery
----------------------------------------
Address: 8545 126th Avenue North
Largo, Florida 323773
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<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 18th day of
November, 1996, between Access Beyond, Inc., a Delaware corporation
("Employer"), and Ronald A. Howard ("Employee").
WITNESSETH:
WHEREAS, Employer and Employee desire to enter into this Employment
Agreement to insure Employer of the services of Employee and to set forth the
rights and duties of the parties hereto.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Employment and Duties.
(a) Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions hereinafter set
forth. Employee shall serve as Chairman of the Board, President and
Chief Executive Officer of Employer, and in such substitute or further
offices or positions with Employer or any subsidiary of Employer as
shall, from time to time, be assigned by the Board of Directors of
Employer (the "Board"), without, however, any change in Employee's
compensation hereunder (but such office or positions shall be consistent
with such office or position hereinbefore named). To the extent that the
Board shall request, during the term of this Agreement, Employee shall
serve as a member of the Board or as a member of the board of directors
of any subsidiary of Employer.
(b) During the term of this Employment Agreement, Employee
will devote substantially all of his working time and best efforts to
his employment and perform diligently such duties as are or may be from
time to time required by the Board, which duties shall be
<PAGE> 2
consistent with his position as set forth above. Employee shall not, without
the prior written consent of Employer, directly or indirectly, during the term
of this Employment Agreement, (i) other than in the performance of duties
naturally inherent in the businesses of Employer or any subsidiary of Employer
and in furtherance thereof, render services of a business, professional or
commercial nature to any other person or firm, whether for compensation or
otherwise; provided, however, that this shall not be construed as preventing
Employee from (1) investing his assets in such form or manner as will not
require the rendering of any services on his part to the companies in which
such investments are made and which are not in violation of Subsection (ii)
below, or (2) engaging in charitable activities or rendering services to any
business entity of a business, professional or commercial nature, as a
consultant, independent contractor or otherwise, so long as such activities do
not materially interfere with the performance of Employee's duties hereunder
and are not in violation of Subsection (ii) below; (ii) engage in any activity
competitive with or adverse to Employer's business or welfare, whether alone,
as a partner, or as an officer, director, employee or shareholder of any other
corporation, or otherwise, directly or indirectly, except that the ownership of
not more than one percent (1%) of the stock of any publicly traded corporation
shall not be deemed violative of this Subsection (ii); and (iii) be engaged by
any entity which conducts business with or acts as consultant or advisor to
Employer, whether alone, as a partner, or as an officer, director, employee or
shareholder, or otherwise, directly or indirectly, except that the ownership of
not more than one percent (1%) of the stock of any publicly traded corporation
shall not be deemed violative of this Subsection (iii). For purposes of this
Employment Agreement, all references herein to subsidiaries of Employer shall
be deemed to include references to subsidiaries now or hereafter existing.
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<PAGE> 3
2. Term. Subject to the provisions for termination as hereinafter
provided, the term of this Employment Agreement shall be deemed to begin on the
date hereof, and shall continue for a term of two (2) years from such date to
and including November 17, 1998.
3. Compensation.
(a) For all services he may render to Employer (and any
subsidiary of Employer) during the term of this Employment Agreement,
Employee shall receive from Employer an aggregate base salary while he
is employed hereunder at the rate of One Hundred Seventy-Five Thousand
Dollars ($175,000) per year, payable in accordance with the executive
payroll schedule in effect at Employer from time to time.
(b) In addition to the base salary compensation as above
stated, Employee shall be named a participant in, and shall be entitled
to be eligible to receive amounts awarded him under any formal or
informal bonus plan adopted by Employer for Employee or for its
executives generally during the term of this Employment Agreement, which
shall be determined and paid in a manner consistent with the terms of
such plan, provided that the same may include individual goals
commensurate with Employee's duties and responsibilities, as determined
by the Board, or a committee designated thereby. Each such payment shall
be conditioned on Employee being employed by Employer at the end of the
period for calculating such bonus; provided that in the event that
Employee's employment by Employer is terminated by reason of his death
or permanent disability or by Employer other than for "cause", such
bonus payment shall be made to Employee or his estate, as the case may
be, on a pro rata basis, determined by reference to the number of days
from the beginning of the period for calculating such bonus to the date
of such termination as compared to the total number of days in such
year.
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<PAGE> 4
4. Life Insurance and Other Benefits.
(a) Employees shall use all reasonable efforts to obtain within
ninety (90) business days from the date of this Employment Agreement, and
thereafter maintain in full force and effect during the term of this Employment
Agreement, a policy of life insurance insuring Employee's life, with the net
amount of such life insurance payable at death to the beneficiary or
beneficiaries designated by Employee being in the amount of not less than Five
Million Dollars ($5,000,000).
(b) During the term of this Employment Agreement, Employee
shall be entitled to such vacation privileges, medical reimbursement and
hospitalization benefits, automobile and mobile telephone allowance and such
other similar employment benefits as are afforded other company senior
executives, from time to time. If not otherwise within such benefits, Employer
will provide Employee with benefits, pursuant to a plan or otherwise, which
pays, or reimburses Employee for, all out-of-pocket and other medical expenses
of Employee and his dependents.
5. New Option. Effective immediately upon entering into this Employment
Agreement, Employer shall cause Employee to be granted the option to purchase
up to 300,000 shares of Employer's common stock. Such option shall be granted
under Employer's 1996 Long-Term Incentive Plan, shall be subject to the terms
and conditions set forth in such Plan and the Award Agreement entered into
pursuant thereto, and shall be subject to stockholder approval of such Plan.
6. Termination.
(a) Death. Employee's employment hereunder shall terminate upon
his death.
(b) Disability. Employer reserves the right to terminate this
Employment Agreement and Employee's employment with Employer on immediate
written notice in the
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<PAGE> 5
event of Employee's absence due to incapacity or otherwise for a period or
periods aggregating ninety (90) working days (whether continuous or in the
aggregate) during any consecutive twelve (12) month period.
(c) Cause. Employer reserves the right to terminate this Employment
Agreement and Employee's employment with Employer for cause on immediate notice
in writing upon the occurrence of any of the following events:
(i) Employee's conviction in a court of law of any crime or offense
involving money or other property of Employer or any of its affiliates or
of any other crime (whether or not involving Employer or any of its
affiliates) that constitutes a felony or that constitutes a misdemeanor
involving moral turpitude in the jurisdiction involved;
(ii) Employee's willful misconduct or gross negligence which has
resulted or is likely to result in material damage to Employer or any of
its affiliates;
(iii) Employee's breach of any of the material provisions or
covenants of this Employment Agreement, which is not cured within ten (10)
days of notice to Employee; provided, however, that this cure provision
shall not apply to any breach of the covenants set forth in Section
11(a)(iv) hereof; or
(iv) Substance abuse by Employee, as evidenced by medical testing
or criminal conviction.
7. Compensation Upon Termination or During Incapacity.
(a) If Employee's employment is terminated by reason of his death,
Employer shall pay to his estate the compensation payable to Employee to the
date of his death.
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<PAGE> 6
(b) If Employee's employment is terminated pursuant to subsection 6(c),
Employer shall pay him his base salary to the actual date of termination.
(c) If Employer shall terminate Employee's employment for reason other
than pursuant to Section 6, then, in lieu of any other payment, obligation or
liability hereunder except pursuant to Section 8 hereof, Employer shall continue
to pay Employee his base salary and any bonus which otherwise would be paid
pursuant hereto (assuming for purposes hereof that if the individual goals, if
any, to be achieved prior to such termination have been achieved, then such
goals to be achieved after such termination shall be deemed to be achieved) for
the remaining term of this Employment Agreement.
(d) During absence from work by reason of incapacity through ill health or
injury, Employee will be entitled to be paid a normal salary rate for each day
of absence for up to 90 working days (whether continuous or in the aggregate)
during any consecutive period of 12 months. Thereafter, Employee will be
compensated pursuant to such disability insurance plan as Employer may then have
in effect and applicable law.
8. Change of Control
(a) In the event that there is a "Change in Control" of Employer, Employee
shall be paid in lump sum two and one-half times an amount equal to Employee's
previous full year compensation, including bonus, if any.
A "Change in Control" shall mean a change in control of Employer of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934 (as in effect on the date of this Employment Agreement, the "Exchange
Act"), whether or not Employer is then subject to such reporting requirement;
provided that, without limitation, such a Change in Control shall
6
<PAGE> 7
be deemed to have occurred if after the distribution of Employer's common stock
by Penril DataComm Networks, Inc. ("Penril") to the stockholders of Penril:
(i) any "person" (as defined in subsections 13(d) and 14(d)
of the Exchange Act), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Employer representing thirty percent (30%) or more of the
combined voting power of Employer's then outstanding securities;
(ii) during any period of two (2) consecutive years or less
there shall cease to be a majority of the Board comprised of Continuing
Directors (as defined below); or
(iii) the stockholders of Employer approve (1) a merger or
consolidation of Employer with any other corporation, other than a
merger or consolidation that would result in the voting securities of
Employer outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined voting
power of the voting securities of Employer or such surviving entity
outstanding immediately after such merger or consolidation, or (2) a
plan of complete liquidation of Employer or an agreement for the sale or
disposition by Employer of all or substantially all of its assets.
The term "Continuing Directors" shall mean individuals who constitute
the Board as of the date of this Employment Agreement and any new director(s)
whose election by such Board or nomination for election by Employer's
stockholders was approved by a vote of at least two-thirds of the directors
then in office who either were directors as of the date of this
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<PAGE> 8
Employment Agreement or whose election or nomination for election was
previously so approved.
(b) If the firm of independent outside auditors used by Employer
(the "Auditors") determine that any payment or distribution by Employer to or
for the benefit of Employee, whether paid or payable (or distributed or
distributable) pursuant to the terms of this Section 8 or otherwise, would be
subject to tax as a golden parachute payment for federal income tax purposes
pursuant to the provisions of section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then the aggregate present value of the amounts
payable or distributable to or for the benefit of Employee pursuant to this
Agreement shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Section 8, the "Reduced Amount" shall be an amount expressed
in present value that maximizes the aggregate present value of payments that
can be made to Employee without causing any payment to be subject to tax
pursuant to section 4999 of the Code.
(c) If the Auditors determine that any payment would be subject to
tax under section 4999 of the Code, then Employer shall promptly give Employee
notice to that effect and a copy of the detailed calculation thereof. Employee
may then elect, in his sole discretion, which and how much of the payment shall
be eliminated or reduced (as long as after such election the aggregate present
value of the payments equals the Reduced Amount) and shall advise Employer in
writing of his election within twenty (20) days of his receipt of notice. If no
such election is made by Employee within such twenty (20) day period, then
Employer may elect which and how much of the payments shall be eliminated or
reduced (as long as after such election the aggregate present value of the
payments equals the Reduced Amount) and shall notify Employee promptly of such
election. For purposes of this Section 8, present
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<PAGE> 9
value shall be determined in accordance with section 280G(d)(4) of the
Code (or any successor provision). All determinations made by the
Auditors shall be subject to arbitration under this Agreement and shall
be made within 60 days of Employee's termination of employment. As
promptly as practicable following such determination and the elections
hereunder, Employer shall pay to or distribute to Employee the amounts
required to be paid to him.
9. Reimbursement. Employer shall reimburse Employee during the
term of this Employment Agreement for travel, entertainment and other expenses
reasonably and necessarily incurred by Employee in the promotion of Employer's
business and the performance of Employee's duties hereunder, all in accordance
with Employer's then current policy. Employee shall submit to Employer
appropriate written periodic statements of all expenses so incurred, together
with such other substantiation as Employer may reasonably request.
10. Intellectual Property. Employee acknowledges and agrees that
Employer shall be and remain the sole owner of all the fruits and proceeds of
Employee's services hereunder, including, but not limited to, all ideas,
inventions, concepts, developments, discoveries, whether or not protectable,
and other properties which Employee may create or conceive in connection with,
and during the term of, Employee's employment hereunder, free and clear of any
claims by Employee (or any successor or assignee of Employee) of any kind or
character whatsoever other than Employee's right to compensation hereunder.
Employee agrees that he shall, at the request of the Board, execute such
assignments, certificates or other instruments as the Board may from time to
time deem necessary or desirable to evidence, establish, maintain, perfect,
protect, enforce or defend the Employer's right, title and interest in or to
any such properties.
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<PAGE> 10
11. Covenants and Confidential Information.
(a) Employee agrees that during the term of this Employment Agreement and
(1) for a period of two (2) years thereafter if Employee's employment is
terminated for cause, and (2) as to clause (iv) of this Subsection (a), at any
time after the term of this Employment Agreement, he will not, directly or
indirectly, do or suffer any of the following:
(i) Own, manage, control or participate in the ownership, management,
or control of, or be employed or engaged by or otherwise affiliated or
associated as a consultant, independent contractor or otherwise with, any
other corporation, partnership, proprietorship, firm, association, or other
business entity, or otherwise engage in any business, which competes with
the business of Employer or any of Employer's affiliated or subsidiary
corporations (as conducted on the date Employee ceases to be employed by
Employer in any capacity, including as a consultant); provided, however,
that the ownership of not more than one percent (1%) of the stock of any
publicly traded corporation shall not be deemed a violation of this
covenant; and, provided further, that employment by a division of a
corporation which corporation competes with the business of Employer shall
not be deemed to be a violation of this covenant as long as such division
does not compete with the business of Employer or any of Employer's
affiliated or subsidiary corporations and as long as Employee does not
render services or assistance to such corporation or to divisions or
affiliated or subsidiary corporations of such corporation which services or
assistance is involved in or facilitates such business which competes with
the business of Employer or any of Employer's affiliated or subsidiary
corporations.
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<PAGE> 11
(ii) Employ, assist in employing, or otherwise associate in
business with any present or former or future employee or officer of
Employer or any of Employer's affiliated or subsidiary corporations.
(iii) Induce any person who is an employee or officer of
Employer or any of Employer's affiliated or subsidiary corporations to
terminate said relationship.
(iv) Disclose, divulge, discuss, copy or otherwise use in any
manner, in competition with, or contrary to the interests of, Employer
or any of Employer's affiliated or subsidiary corporations, the customer
lists, manufacturing methods, product research or engineering data or
other trade secrets of Employer or any of Employer's affiliated or
subsidiary corporations, it being acknowledged by Employee that all such
information regarding the business of Employer and Employer's affiliated
or subsidiary corporations compiled or obtained by, or furnished to,
Employee while Employee shall have been employed by or associated with
Employer is confidential information and Employer's exclusive property.
(b) Employee expressly agrees and understands that the remedy at law
for any breach by him of this Section 11 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that upon adequate proof of
Employee's violation of any legally enforceable provision of this Section 11,
Employer shall be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Section 11 shall be deemed to limit Employer's remedies at law or in equity for
any breach by Employee of any of the provisions of this Section 11 which may be
pursued or availed of by Employer.
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<PAGE> 12
(c) In the event Employee shall violate any legally enforceable
provision of this Section 11 as to which there is a specific time period
during which he is prohibited from taking certain actions or from engaging
in certain activities, as set forth in such provision, then, in such event,
such violation shall toll the running of such time period from the date of
such violation until such violation shall cease.
(d) Employee has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon Employer
under this Section 11, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to Employer, do not stifle the inherent
skill and experience of Employee, would not operate as a bar to Employee's
sole means of support, are fully required to protect the legitimate
interests of Employer and do not confer a benefit upon Employer
disproportionate to the detriment to Employee. The provisions of this
Section 11 shall survive the termination of this Employment Agreement.
12. Severable Provisions. The provisions of this Employment Agreement are
severable and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision to the extent enforceable in any jurisdiction
shall, nevertheless, be binding and enforceable.
13. Binding Agreement. The rights and obligations of Employer under this
Employment Agreement shall inure to the benefit of, and shall be binding upon,
Employer and its successors and assigns, and the rights and obligations of
Employee under this Employment Agreement shall inure to the benefit of, and
shall be binding upon, Employee and his heirs, personal representatives and
estate.
14. Notices. Any notice to be given under this Employment Agreement shall
be personally delivered in writing or shall have been deemed duly given when
received after it is posted in the
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United States mail, postage prepaid, registered or certified, return receipt
requested, and if mailed to Employer, shall be addressed to its principal place
of business, attention: Secretary, and if mailed to Employee, shall be
addressed to him at his home address last known on the records of Employer, or
at such other address or addresses as either Employer or Employee may hereafter
designate in writing to the other.
15. Waiver. The failure of either party to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
nor prevent that party thereafter from enforcing each and every other
provision of this Employment Agreement. The rights granted the parties herein
are cumulative and the waiver of any single remedy shall not constitute a waiver
of such party's right to assert all other legal remedies available to it under
the circumstances.
16. Governing Law. This Employment Agreement shall be governed by and
construed according to the laws of the State of Maryland.
17. Captions and Section Headings. Captions and Section headings used
herein are for convenience and are not a part of this Employment Agreement and
shall not be used in construing it.
18. Miscellaneous. This Employment Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof and may not be modified or terminated orally. No modification,
termination or attempted waiver shall be valid unless in writing and signed by
the party against whom the same it is sought to be enforced. Where necessary or
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appropriate to the meaning hereof, the singular and plural shall be deemed to
include each other, and the masculine, feminine and neuter shall be deemed to
include each other.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement on
the day and year first set forth above.
ATTEST: ACCESS BEYOND, INC.
/s/ Deborah Weisman By: /s/ R. Rose
- ----------------------- -------------------
/s/ Deborah Weisman /s/ Ronald A. Howard
- ----------------------- -----------------------
Ronald A. Howard
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Exhibit 10.16
MANUFACTURING AGREEMENT
This Agreement, effective as of the 1st day of March, 1997, by and
between Access Beyond, Inc., a Delaware corporation having its principal place
of business at 1300 Quince Orchard Boulevard, Gaithersburg, Maryland 20878-4106
(hereinafter "AB"), and Hibbing Electronics Corporation, a Minnesota corporation
having its principal place of business at 3125 East 14th Street, Hibbing,
Minnesota 55746 (hereinafter "Hibbing").
WITNESSETH:
WHEREAS, Hibbing is in the business of manufacturing and selling
printed circuit card products; and
WHEREAS, AB desires to purchase certain such products from Hibbing; and
WHEREAS, AB and Hibbing desire to enter into an agreement whereby
Hibbing agrees to manufacture for and sell to AB, and AB agrees to purchase from
Hibbing, certain products and whereby the parties undertake certain related
transactions on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
For the purpose of this Agreement, the terms set forth below shall have
the following meanings:
1.1 "Affiliate" of a specific person means a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the person specified. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.
1.2 "AB Inventory" means the raw material inventory in AB's possession
on the date hereof used in the manufacture of printed circuit cards, all of
which is listed in Schedule 1.2.
1.3 "AB Technology" means all proprietary technology and inventions
possessed by AB and incorporated in the Products.
1.4 "Products" means the printed circuit cards and related products
described on Schedule 1.4 annexed hereto, to be manufactured by Hibbing in
accordance with the Standards and Specifications.
1.5 "Standards and Specifications" means the written specifications
for the Products set forth in Schedule 1.5 annexed hereto.
<PAGE> 2
1.6 "Trademark" means any trademark(s) and related logo(s) that AB
selects and identifies for use on the Products.
ARTICLE
2
PURCHASE - SALE - CERTAIN LIMITATIONS
2.1 Hibbing Manufacture. Subject to the terms and conditions of this
Agreement, Hibbing agrees to manufacture and sell to AB, and AB agrees to buy
from Hibbing, all Products ordered by AB during the term of this Agreement. The
Products shall be manufactured solely by Hibbing. Hibbing may not subcontract or
sublicense the manufacture of the Products without the prior written consent of
AB.
2.2 Trademark. Hibbing shall manufacture the Products under the
Trademark, which shall be the only identifying mark on the Products, provided
that Hibbing shall also manufacture Products under such third party trademarks
as AB may from time to time designate. Hibbing recognizes that AB is the sole
and rightful owner of the Trademark. AB hereby grants to Hibbing the fully paid
up, nonexclusive, nontransferable right to use the Trademark solely in
connection with the manufacture of the Products for AB hereunder. This right and
license shall be strictly coterminous with this Agreement and incidental
thereto.
2.3 Special Limitations.
(a) Hibbing agrees that it shall not, during the term of this
Agreement or thereafter, market, sell or distribute the Products or any other
goods utilizing any of the AB Technology to any other person, corporation or
entity without the prior written consent of AB. Hibbing shall not sublicense any
of the rights or licenses herein granted.
(b) Hibbing recognizes and agrees that AB is the sole and
rightful owner of the AB Technology. Hibbing shall not claim any title to the AB
Technology or the Trademark or the right to use such except pursuant to this
Agreement. All intellectual property rights with respect to the AB Technology
shall be the sole property of AB, and Hibbing (at the expense of AB), during the
term hereof and at any time thereafter, agrees to execute all documents and to
perform all acts as may be reasonably required to effectuate the provisions of
this subsection 2.3(b). Hibbing agrees that it will not during the term of this
Agreement develop improvements or inventions applicable to the Products.
ARTICLE
3
PURCHASE ORDER AGREEMENTS
3.1 Purchase Orders. Orders for Products covered by this Agreement
shall be placed on AB's purchase order form (a copy of which is annexed hereto
as Schedule 3.1 and incorporated herein by reference), or by facsimile followed
by such purchase order form confirming the order. For the purposes of
calculating lead time, Hibbing shall be deemed to have received an order on the
date of the facsimile order, provided that a written confirming order is placed
within five (5) calendar days. The terms and conditions of this Agreement
replace and supersede (i) the terms and conditions on AB's purchase order form
which are stricken on Schedule 3.1, and (ii) any terms and conditions preprinted
on Hibbing's acknowledgment or invoice forms.
3.2 Purchase Order Information. Purchase orders shall contain the
following minimum information:
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(a) Products being purchased;
(b) Quantity requested;
(c) Unit price and purchase order total price;
(d) Shipping instructions, including carrier, ship to and bill
to addresses and requested shipping dates;
(e) reference to this Agreement.
3.3 Order Acceptance. Hibbing shall provide delivery commitments to
purchase order delivery request dates within seven (7) calendar days of receipt
of purchase order or facsimile request to place an order. Hibbing shall provide
a written acknowledgment of a purchase order within seven (7) calendar days
after Hibbing's receipt of a purchase order and, with such acknowledgment, shall
identify any limitations, corrections or conditions related to its acceptance of
the order provided they do not conflict with this Agreement, whereupon such
purchase order shall be accepted.
ARTICLE
4
FORECASTS, SCHEDULES AND CANCELLATION.
4.1 Firm Orders; Forecasts. AB will provide to Hibbing firm purchase
orders for a minimum of three (3) months in advance of delivery. Further, AB
will submit a rolling six (6) month non-binding forecast to be updated monthly.
This release and forecast will identify quantity, part numbers, and expected
delivery dates for Products AB expects to order during the forecast period in
order that Hibbing may plan production and procure components for purchase
orders and the forecast period. Long lead items or allocated components, beyond
the three (3) month firm purchase order period or beyond the six (6) month
forecast, are to be covered by a separate written authorization from AB.
4.2 Rescheduling. AB may reschedule Product delivery dates on orders
that are due more than sixty (60) calendar days from the date such change notice
is provided to Hibbing. Additional rescheduling of Products may only be made
with the mutual agreement of the parties. AB agrees to pay reasonable carrying
charges agreed to by it in the event of any such additional reschedulings.
4.3 Material List. Hibbing will provide a list of materials with
lead-time greater than four (4) weeks that will be ordered to support AB's three
(3) month purchase order release window and the six (6) month forecast period.
AB will have liability for all material procured to support these firm purchase
orders and all material procured pursuant to the separate written authorizations
from AB contemplated by Section 4.1., in the event of cancellation, schedule
changes, or termination. However, Hibbing will use reasonable commercial efforts
to mitigate such liability.
4.4 Cancellation. AB may, for reasonable cause, reduce or cancel
quantities of Products. AB agrees to pay reasonable cancellation and carrying
charges. These charges may include the purchase price of all undelivered
finished goods, costs of work in process, components and materials on hand and
nonreturnable or noncancelable from suppliers, and any amortized start-up, test
or tooling costs.
ARTICLE
5
SHIPMENT
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5.1 Full Shipments. Hibbing will ship complete order releases only,
unless prior approval of a short or partial shipment is obtained from AB, within
a window of five (5) calendar days early and three (3) calendar days late.
Hibbing will direct ship to AB's customers if so instructed by AB.
5.2 Transportation. Shipment shall be F.O.B. origin. Hibbing shall
select the mode of transportation at its discretion unless otherwise instructed
in writing by AB. AB shall pay all shipping and transportation charges directly
to the carrier or freight forwarder, or to Hibbing as invoiced.
5.3 Packaging. Hibbing shall, in its discretion, package Products in a
manner adequate to ensure the probable safe delivery of products via common
carriers, unless instructed as to a specific packaging method by AB in writing.
ARTICLE
6
TITLE AND RISK OF LOSS
Title and risk of loss shall pass to AB upon delivery of the Products
to the carrier or its agent at Hibbing's designated shipping point, USA. With
respect to any Products that Hibbing hand delivers, title and risk of loss will
pass to AB upon written acknowledgment of receipt by AB. All claims for shipping
damage will be resolved between AB, carriers or freight forwarders handling the
Products and the insurance companies and agents responsible for adjusting such
claims, and Hibbing will have no responsibility with respect thereto.
ARTICLE
7
INSPECTION
7.1 Inspection. All Products may be inspected and tested by AB and its
customers at all reasonable times and places on a noninterference basis. If such
inspection or testing is made on Hibbing's premises, including without
limitation the premises described in Article 16 hereof, Hibbing shall provide
(at AB's expense) all reasonable facilities and assistance for such inspections
and tests. In its internal inspection and testing of the Products, Hibbing shall
use an inspection system mutually agreed upon by the parties in writing. All
inspection records relating to the Products shall be available to AB during the
performance of this Agreement upon reasonable request.
7.2 Final Inspection. Final inspection and acceptance by AB shall be
at destination unless otherwise specified in a particular order. Such inspection
shall be in accordance with AB's customary inspection procedures at the location
where the Products are received.
7.3 Effect of Inspection. No inspection (including source inspection)
tests, approval (including design approval), or acceptance of the Products shall
relieve Hibbing from responsibility for Hibbing's warranty obligations under
Article 10 of this Agreement.
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ARTICLE
8
PRICE - PAYMENT
8.1 Price.
(a) In each three (3) calendar month period during the term of
this Agreement, Hibbing shall sell the first $2.8 million of Products delivered
to AB (the "Cost Products") at a price determined under Hibbing's pricing model
for the Products taking into account materials, direct labor, manufacturing
overhead, selling, general and administrative costs, and interest in accordance
with Hibbing's customary internal cost allocation procedures, exclusive of a
profit margin component. The initial Cost Products price list is set forth in
Schedule 8.1(a)-I attached hereto and made part hereof. Hibbing reserves the
right to change the price of Cost Products at any time, but only to reflect
changes in the costs of the elements of its pricing model or in the prices or
amounts of the underlying inputs for the Products. Hibbing's pricing model is
attached as Schedule 8.1(a)-II. Hibbing shall give notice to AB of any price
change for Cost Products at least thirty (30) calendar days prior the effective
date of such change and such price change shall apply only to orders placed
after the effective date thereof; provided, however, the amount and timing of
any price changes with respect to market fluctuations in the costs of materials
attributable to allocation, availability or obsolescence must be mutually agreed
upon by the parties. Such notice shall provide sufficient detail to permit audit
by AB of the identifiable costs of manufacture of the Products. If in the first
three (3) calendar month period during the term of this Agreement, AB orders
less than $2.8 million in Cost Products, the difference shall be equally divided
among the five (5) succeeding three (3) calendar month periods during the term
of this Agreement and the resulting amount shall increase the amount of Cost
Products available for purchase by AB during each such period.
(b) Products sold by Hibbing to AB in any three (3) calendar
month period during the term of this Agreement (the first such period to
commence on the effective date of this Agreement) in excess of the Cost Products
shall be sold at the prices listed on Schedule 8.1(b) annexed hereto and made
part hereof. The price to be paid for all Products delivered hereunder in excess
of the Cost Products will be the price of the Cost Products plus Hibbing's
eleven and 36/100 percent (11.36%) profit margin component. Hibbing reserves the
right to change such price list at any time, provided, however, that Hibbing
shall give notice of any price change to AB at least thirty (30) calendar days
prior to the effective date of such change, and such price change shall apply
only to orders placed after the effective date hereof; provided, however, that
the amount and timing of any price changes with respect to market fluctuations
in the costs of materials attributable to allocation, availability or
obsolescence must be mutually agreed upon by the parties.
(c) It is AB's intention during the term of this Agreement to
procure its printed circuit board requirement from Hibbing. However, AB reserves
the right to purchase products, comparable to the Products, from alternate
suppliers in the event that there exists a strategic benefit for AB to do so
(including, without limitation, Hibbing's decision to change its price model as
permitted under subsection 16.13(d)) or in the event that AB is required by a
customer to utilize an alternate supplier. AB also reserves the right to
purchase products from an alternate supplier in the event that Hibbing's supply
of Products or Product quality fail to meet AB's standards and requirements.
(d) If Hibbing realizes a reduction in total material cost of
a Product (other than with respect to the costs of materials purchased under
Hayes contracts), fifty percent (50%) of such reduction shall be passed on to AB
in the form of a cost reduction on future orders of that same Product.
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8.2 Payment. AB shall pay to Hibbing any and all amounts due for the
purchase of Products within thirty (30) calendar days of the date of Hibbing's
invoice, which shall be dated no earlier than the date upon which the Product so
involves is first provided (if such Product consists of services) or is
delivered to a common carrier by Hibbing pursuant to this Agreement or hand
delivered, provided that in no event shall payment be due prior to receipt of
the Product.
8.3 Records: Audit Rights.
(a) Hibbing shall maintain for three (3) years following the
close of each calendar year accurate books and records which disclose all
pricing model information with respect to the Products.
(b) AB, at its expense, shall have the right at any time
during regular business hours, upon thirty (30) days' prior notice to Hibbing,
to examine or audit the books and accounts and records of Hibbing which pertain
to the manufacture of Products. Such books of account and records shall be made
available to AB and its accountants at the location where such books and records
are regularly maintained by Hibbing. If the examination or audit reveals an
apparent overcharge, and the parties cannot agree to a satisfactory resolution,
then the matter will be submitted to binding arbitration by a single arbitrator
experienced in financial accounting matters in Gaithersburg, Maryland
administered by the American Arbitration Association under its Commercial
Arbitration Rules then in effect, and judgment on the award rendered by the
arbitrator may be entered in any court having competent jurisdiction. The
arbitrator may award fees and expenses as part of the decision.
ARTICLE
9
TERM-REMEDIES
9.1 Term. The term of this Agreement, unless sooner terminated as
hereafter provided, shall be for an initial period of eighteen (18) months
commencing on the date hereof and continuing until August 31, 1998.
9.2 Early Termination.
(a) Either party shall have the right to terminate this
Agreement with immediate effect if:
(i) The other party fails to cure to such party's
reasonable satisfaction any material breach or violation of this Agreement
within sixty (60) calendar days after such party has given written notice
thereof; or
(ii) The other party makes an assignment for the
benefit of creditors, files a petition in bankruptcy, is adjudicated bankrupt or
insolvent, petitions or applies for a receiver or a trustee, or has any
proceedings commenced against it under any statute or regulation providing
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation and which remain undischarged for a period of sixty (60) calendar
days.
(b) AB shall have the right to terminate this Agreement if any
amount payable by Hibbing pursuant to Article 16 is not paid within thirty (30)
calendar days of the date when due.
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(c) The exercise of any right of termination under this
Article 9 shall not affect any rights which have accrued prior to termination
and shall be without prejudice to any other legal or equitable remedies to which
a party may be entitled by reason of such rights (including, without limitation,
Hibbing's rights to be paid for rescheduling and cancellation charges pursuant
to Sections 4.2 and 4.4, Hibbing's rights to be paid for Products purchased
pursuant to Section 8.2, Hibbing's rights to indemnification pursuant to Article
12 and the other indemnification provisions of this Agreement, and the
confidentiality of Hibbing's and AB's information pursuant to Article 13).
9.3 Effects of Termination. Upon termination or expiration of this
Agreement, all obligations of the parties hereunder shall terminate, except
those which expressly survive the termination or expiration of this Agreement.
9.4 Remedies. In the event of a breach of this Agreement, the
nonbreaching party may exercise any remedy allowed by law or equity; provided,
however, AB will not have the right to effect cover or the right of setoff. AB's
remedies shall be cumulative and except as provided herein, remedies herein
specified do not exclude any other remedies allowed by law or equity.
ARTICLE
10
LIMITED WARRANTIES
10.1 Limited Warranty. Hibbing warrants that all Products will upon
delivery to Hibbing's designated shipping point, USA, or upon hand delivery and
for a period of fifteen (15) calendar months thereafter: (i) be free from
defects in materials and workmanship; (ii) materially conform to the design,
specifications and drawings provided by AB; and (iii) conform to IPC 610 class
2. These warranties shall survive any inspection, delivery, acceptance and
payment.
10.2 Liability. Hibbing's liability under this warranty provision is
limited to (i) repair or replacement at Hibbing's option without cost to AB of
the defective Product or (ii) delivery of retrofit kits with installation
instructions (at no charge to AB) as necessary to make the Product conform to
AB's specifications; in each case, solely during the fifteen (15) calendar month
period following delivery of the Product to Hibbing's designated shipping point,
USA or hand delivery. Labor to remove defective parts and install replacement
parts under this limited warranty must be mutually agreed upon by Hibbing and
AB. If the parties are unable to reach agreement regarding the amount of cost of
labor described in the preceding sentence, then the matter will be submitted to
binding arbitration by a single arbitrator experienced in financial accounting
matters in Gaithersburg, Maryland administered by the American Arbitration
Association under its Commercial Arbitration Rules then in effect, and judgment
on the award rendered by the arbitrator may be entered in any court having
competent jurisdiction. The arbitrator may award fees and expenses as part of
the decision.
10.3 Warranty Claims. All warranty claims shall be made by AB,
regardless of any transfer of title or possession of the Product by AB to
customers or other parties, and AB must notify Hibbing in writing of any such
claim promptly following AB learning of any alleged breach of warranty.
10.4 Returned Products. Returned Products will be tested by Hibbing
promptly following receipt. Compliant Products will be shipped back to AB at
AB's expense and risk of loss or damage. AB will be invoiced for such testing,
on a time and material basis, for all returned products which are in compliance.
Hibbing will remain responsible for any Products returned to Hibbing for which
AB can demonstrate breach of Hibbing's limited warranty. This warranty shall not
apply to failures of any unit caused by:
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(a) Physical abuse or use not consistent with operating
instructions as provided by Hibbing or Product specification as provided by AB
or Hibbing.
(b) Modifications by other than Hibbing's personnel or agent
in any way other than approved by Hibbing, provided the warranty shall not be
voided by repair or replacement of parts or the attachment of items in the
manner described in maintenance or installation instructions provided by
Hibbing.
(c) Repair by someone other than Hibbing's personnel or agent
or in a manner contrary to the maintenance instructions provided by Hibbing.
(d) Physical abuse due to improper packaging of returns.
(e) Failed components not covered by the original
manufacturer.
(f) Design related defects.
10.5 Agencies. Hibbing makes no general warranty of compliance to any
agency such as UL, TUV, CSA, or FDA, relating to facility, processes,
workmanship, and material acquisitions in connection with the Products.
10.6 Limitations. THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT
ARE IN LIEU OF ANY OTHER WARRANTIES, EXPRESS, IMPLIED AND STATUTORY, INCLUDING,
WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, AND ANY AND ALL SUCH OTHER WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED
AND EXCLUDED. HIBBING IS NOT RESPONSIBLE FOR DESIGN-RELATED DEFECTS OR ANY
DAMAGE TO THE PRODUCT CAUSED BY NATURAL DISASTER OR ACT OF GOD, OR BY ACTIONS OF
PARTIES OTHER THAN HIBBING. IN NO EVENT WILL HIBBING BE LIABLE FOR MORE THAN THE
DOLLAR AMOUNT OF THE PRODUCTS ORDERED UNDER THIS AGREEMENT, INCLUSIVE OF ANY
PUNITIVE, CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES WHICH ARISE IN CONNECTION
WITH THE FAILURE OF OR DEFECTIVE PERFORMANCE OF ANY PRODUCT COVERED BY HIBBING'S
LIMITED WARRANTY OR THE BREACH OF WARRANTY BY HIBBING, EVEN IF HIBBING HAD
NOTICE OF THE POSSIBILITY THEREOF.
ARTICLE
11
GOVERNMENTAL REGULATIONS
11.1 (a) Hibbing shall comply with the requirements of all applicable
laws, rules, regulations and orders of governmental or regulatory authorities
applicable to its manufacture of Products hereunder.
(b) Hibbing assumes all responsibility and the cost and
expense for all licensing, registrations, permits, and such other certificates
as may be required for its lawful manufacture of the Products hereunder.
(c) Hibbing shall observe all safety rules and other
requirements of regulatory bodies having jurisdiction over its manufacture of
the Products, and shall pay all fines and similar
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charges that may be duly and lawfully imposed or assessed by reason of Hibbing's
failure to comply with the rules, regulations, and orders of regulatory bodies
having such jurisdiction.
ARTICLE
12
INDEMNIFICATION
12.1 Hibbing Indemnity; Insurance.
(a) Hibbing will defend, indemnify and hold harmless AB, its
successors and assigns (each an "Indemnified Person") from and against any and
all actual or threatened manner of action and actions, cause and causes of
action, suits, proceedings, liabilities, losses, damages, judgments, claims,
demands, costs and expenses, including, without limitation, attorneys' fees and
expenses and court costs, regardless of whether litigation has commenced
(collectively, an "Indemnified Claim"), which any Indemnified Person may
hereafter incur, suffer or be required to pay by reason of any actual or
threatened action, claim, suit or proceeding brought by any party against any
Indemnified Person arising out of or in connection with the performance or
nonperformance by Hibbing of its obligations under this Agreement.
(b) Hibbing shall secure before commencing and shall maintain
during the performance (and after performance, as hereinafter provided) of this
Agreement, Comprehensive General Liability and Property Damage Insurance,
including Products Liability provisions with minimum Bodily Injury Liability and
Property Damage limits of $1,000,000 each occurrence, naming AB as an additional
insured. Hibbing shall furnish to AB evidence of such insurance coverage in the
form of certificates of insurance. All certificates of insurance shall stipulate
that AB will be given thirty (30) calendar days written notice prior to any
change, substitution, or cancellation. The coverage afforded by each of the
aforesaid policies of insurance to be furnished by Hibbing shall continue in
full force and effect as to all losses, claims, damages or liabilities in any
way arising out of the performance or nonperformance of this Agreement,
including those arising during the warranty period.
12.2 AB Indemnity. AB will indemnify and hold harmless Hibbing, its
successors and assigns (each an "Indemnified Person") from and against any and
all actual or threatened manner of action and actions, cause and causes of
action, suits, proceedings, liabilities, losses, damages, judgments, claims,
demands, costs and expenses, including, without limitation, attorneys' fees and
expenses and court costs, regardless of whether litigation has commenced
(collectively, an "Indemnified Claim"), which any Indemnified Person may
hereafter incur, suffer or be required to pay by reason of any actual or
threatened action, claim, suit or proceeding brought by or on behalf of AB's
customers or others against any Indemnified Person: (a) involving use of
proprietary information, infringement of patents, trademarks, copyrights or
other intellectual property rights (including, without limitation, the
Trademark), use of trade secrets, or the breach of confidentiality agreements,
to the extent that any of the foregoing is included in the AB Technology or the
Standards and Specifications or relates to the design of the Products; (b)
arising out of or in connection with any actions taken or not taken, as the case
may be, at the direction of AB (including, for example, acts taken under
subsection 2.3(b), subsections 14.3(b) and (c), and Section 15.13); (c) arising
out of or in connection with the performance or nonperformance by AB of its
obligations under this Agreement; or (d) arising out of or in connection with
the conduct by AB of its business activities on or before the effective date of
this Agreement including, without limitation, AB's performance or nonperformance
of its obligations under the Leases (as defined in Section 15.14) or the
Building Lease (as defined in Section 16.13). None of the terms in this
paragraph will be deemed to reduce Hibbing's obligations to AB pursuant to
Hibbing's limited warranty or Hibbing's performance or nonperformance of other
provisions of this Agreement.
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12.3 Liability Limitation. IN NO EVENT SHALL EITHER PARTY'S LIABILITY
UNDER THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION, INCLUDE ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR CLAIMS FOR LOSS OF BUSINESS OR
LOSS OF PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
POTENTIAL LOSS OR DAMAGE. THE LIABILITY OF HIBBING ARISING OUT OF THE SUPPLYING
OF ANY PRODUCT OR ITS USE, WHETHER BASED UPON WARRANTY, CONTRACT, NEGLIGENCE OR
OTHERWISE, SHALL NOT IN ANY CASE EXCEED THE ORIGINAL COST TO AB OF SUCH PRODUCT.
12.4 Control of Action. With respect to control over the negotiation
and defense of any actual or threatened action, claim, suit or proceeding,
including, without limitation, control as to the selection of counsel and as to
whether and on what terms to settle or otherwise resolve the same (referred to
in this Agreement as "Control of the Action") which may give rise to a right of
Indemnification under Article 12 hereof, the party entitled to indemnification
(the "Indemnitee"), at its option, may either retain Control of the Action or
relinquish Control of the Action to the other party (the "Indemnitor"). In any
case, if the Indemnitee relinquishes control to Indemnitor, Indemnitor will be
obligated to indemnify as set forth in this Agreement. Notwithstanding the fact
that Control of the Action may be relinquished to Indemnitor, Indemnitor may not
settle or compromise any Indemnified Claim (even if such settlement or
compromise only requires the payment of money, as opposed to other forms of
nonmonetary consideration) without the prior written consent of Indemnitee,
which consent may be withheld with or without reason unless such settlement or
compromise only requires the payment of money and Indemnitor offers evidence to
Indemnitee, satisfactory to Indemnitor, that Indemnitor is able to make such
payment. The Indemnitee may not settle or compromise an Indemnified Claim
without the prior written consent of the Indemnitor (which consent may not be
unreasonably withheld or delayed). In the event that Indemnitee has relinquished
Control of the Action to Indemnitor, Indemnitor will fully and promptly inform
Indemnitee of all developments in, and allow Indemnitee to participate (provided
that all costs incurred by Indemnitee in such participation will be paid by
Indemnitee) in the handling of, any such actions so relinquished, and
Indemnitee, at is option may at any time upon prior written notice resume
immediate Control of the Action previously relinquished to Indemnitee (in which
case Indemnitee will not be responsible for any costs or expenses incurred).
ARTICLE
13
CONFIDENTIALITY
13.1 Confidentiality.
(a) The parties agree that the AB Technology and other
information disclosed to Hibbing or learned by Hibbing as a consequence of or
through this Agreement, as well as financial information and manufacturing
information of Hibbing disclosed to AB or learned by AB as a consequence of or
through this Agreement, includes trade secrets, know-how and other information,
data and material of great economic and commercial value which are confidential
and proprietary and the development of which represent a substantial investment
(collectively "Confidential Information"). The parties shall cause their
respective affiliates, directors, officers and employees to: (i) hold all
Confidential Information in the strictest confidence; (ii) not use or exploit
Confidential Information except in accordance with and as contemplated by this
Agreement nor disclose it to anyone other than authorized personnel of the other
party as required for such party's performance of this Agreement; (iii) take all
precautions necessary to safeguard the confidential nature of such Confidential
Information; (iv) keep a record of employees having access to any Confidential
Information and to have all of these employees sign a non-disclosure agreement
for the direct benefit of the other party in a form acceptable
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<PAGE> 11
to the other party; and (v) not sell or transfer to any person or entity any
Product or any equipment or tooling embodying the Confidential Information nor
to allow any person or entity to use it, or otherwise view or examine it, except
as otherwise provided in this Agreement.
(b) Upon termination of this Agreement, each Party shall,
without prior demand or request of the other party, promptly return any and all
Confidential Information in any media and all copies thereof in such party's
possession or control; provided, however, that if Hibbing exercises its option
to purchase the Equipment pursuant to Section 15.6, then Hibbing will also
thereby acquire rights to use the software used for testing purposes.
(c) The restrictions set forth in subsections 13.1(a) and (b)
hereof shall not apply to information that: (i) is publicly available on the
date hereof or becomes generally available other than as a result of disclosure
by such party or its employees or representatives; (ii) becomes available from a
source other than such party or its employees or representatives, provided that
source is not bound by confidentiality restrictions (and such party has made
reasonable inquiry with respect thereto); (iii) was in the possession of such
party prior to its disclosure by the other party; or (iv) is approved in writing
for public disclosure by such party.
(d) The parties' obligations under this Article 13 shall
survive termination of this Agreement. The parties agree that breach of this
Article 13 shall cause irreparable harm and shall entitle the other party, in
addition to any other remedies it may have, to obtain injunctive relief and/or
specific performance.
ARTICLE
14
AB INVENTORY
14.1 Availability. AB shall make available to Hibbing during the term
of this Agreement and on the terms and conditions set forth herein, the AB
Inventory. All AB Inventory shall remain the sole and exclusive property of AB.
Hibbing agrees that it will not use AB Inventory other than in Products sold to
AB.
14.2 No Warranty. Hibbing's limited warranty under Section 10.1 of
this Agreement will not apply to the AB Inventory or to any claims directly or
indirectly caused by, attributable to or relating to Hibbing's incorporation of
the AB Inventory into Products.
14.3 Care of AB Inventory.
(a) The AB Inventory shall be maintained by Hibbing at AB's
premises at 1300 Quince Orchard Blvd., Gaithersburg, MD or any of Hibbing's
other locations. The AB Inventory in all cases shall be carefully segregated
from other goods either of the same or different character belonging either to
Hibbing or to any third party, shall be marked as AB's property, and shall be
stored in an area separate and not commingled with goods of Hibbing or of any
third party.
(b) Hibbing shall (at AB's expense) comply with all reasonable
requests and directions from AB to comply with all laws which might in any way
affect AB's ownership of AB Inventory, and shall indemnify and save harmless AB
from and against loss, damage, and expense from any levy, attachment lien, or
process involving such material arising out of Hibbing's failure to comply with
such reasonable requests and directions. Hibbing confirms that all of the AB
Inventory is, on the date hereof, present at AB's premises. Hibbing shall be
responsible for any loss or shrinkage in the
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<PAGE> 12
quantity of AB Inventory whether such loss or shrinkage be through theft,
pilferage, deterioration, or otherwise, unless such loss or shrinkage is as a
result of Hibbing's compliance with the directions or requests received from AB.
(c) Hibbing shall keep at all times a complete and accurate
list of the AB Inventory, copies of which list shall be furnished AB upon
reasonable request. AB's representatives shall have access to the AB Inventory
on a noninterference basis during usual business hours and with reasonable
advance notice for the purpose of verifying such inventory or inspecting the
condition of such AB Inventory.
(d) All public charges, whether in the nature of sales,
occupational, or other taxes or assessments or license fees, which shall be
levied or assessed against such AB Inventory, or against Hibbing or AB by reason
thereof, by any federal, state, or municipal authority, shall be paid by AB.
(e) To record ownership of AB Inventory, AB may from time to
time file such U.C.C. financing statements covering AB Inventory as it
determines are necessary or desirable. For such purpose, Hibbing shall (at AB's
expense) execute and deliver to AB all such U.C.C. financing statements as AB
shall from time to time request, provided that the form and content of any such
U.C.C. financing statements are reasonably acceptable to Hibbing.
14.4 Purchase of AB Inventory.
(a) From time to time, Hibbing may (but is not obligated to)
purchase AB Inventory by withdrawing the AB Inventory from its segregated
storage area. Hibbing shall immediately notify AB by issuance of a purchase
order of each such withdrawal, specifying the items purchased. Upon each such
withdrawal and purchase by Hibbing and payment therefor pursuant to this Article
14, title to the AB Inventory so withdrawn shall pass to Hibbing.
(b) A description of and the prices for AB Inventory purchased
by Hibbing are specified in Schedule 1.2 attached hereto and made part hereof.
(c) Payment for AB Inventory purchased by Hibbing shall be
made in full within thirty (30) calendar days after the date of invoice.
(d) AB covenants to and with Hibbing that AB will be the
lawful owner at the time of sale to Hibbing of the AB Inventory, and such AB
Inventory will at such time be free from all encumbrances.
14.5 Effects of Termination.
(a) Without limiting the provisions of Article 9, upon
termination of this Agreement for any reason, if Hibbing has relocated the AB
Inventory, then Hibbing, at the request of AB, shall permit all remaining AB
Inventory at the effective date of such termination to remain in storage at
Hibbing's premises for such period as AB shall require to dispose of the same,
not exceeding thirty (30) calendar days thereafter. Hibbing shall, upon the
request and at the expense of AB, at any time or from time to time during such
thirty (30) calendar-day period, load or cause the same to be loaded on cars and
shipped from Hibbing's premises in accordance with AB's instructions. During
such thirty (30) calendar-day period, AB's representatives shall have the right
to enter Hibbing's premises during all usual business hours on a noninterference
basis and with reasonable advance notice for the purpose of dealing with the
disposition of the AB Inventory.
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(b) Upon termination of this Agreement, Hibbing's right to
withdraw and purchase AB Inventory shall immediately cease and terminate.
ARTICLE
15
CERTAIN EQUIPMENT
15.1 Right to Use Equipment. AB hereby agrees to permit Hibbing to use
the personal property described on Schedule 15 and Schedule 15.14 attached
hereto and made part hereof (hereinafter, with all attachments, replacement
parts, substitutions, additions, repairs and accessories incorporated therein
and/or affixed thereto, and proceeds, referred to as "Equipment") during the
term of this Agreement. AB shall retain the right to inspect and use the
Equipment subject to the following conditions: (i) such inspection and use may
only be during usual business hours and on a noninterference basis; (ii) Hibbing
must receive reasonable advance notice (in no event less than seventy-two (72)
hours) of such inspection or use; (iii) a Hibbing employee or representative
must be present at all times during such inspection and use; and (iv) all
provisions of this Agreement applicable to Hibbing's use of the Equipment will
apply to AB's use of the Equipment (including, without limitation, an obligation
by AB to indemnify Hibbing under Section 15.15 and to maintain the Equipment
under Section 15.3).
15.2 Use, Nature and Location of Equipment. Hibbing represents,
warrants and agrees that the Equipment will be used solely for commercial
manufacture and assembly of printed circuit cards and related activities.
Hibbing and AB agree that regardless of the manner of affixation, the Equipment
shall remain personal property and not become part of the real estate. Hibbing
and AB agree to keep the Equipment at 1300 Quince Orchard Blvd., Gaithersburg,
MD 20878-4106. Hibbing shall have no right to, and shall not, remove any of the
Equipment from such location, except as Hibbing and AB may hereafter mutually
agree in writing.
15.3 Repairs. AB shall not be obligated to install, erect, test,
adjust, service or make any repairs or replacements. Hibbing shall effect and
bear the expense of all necessary repairs, maintenance, operation and
replacements required to be made to maintain the Equipment in good condition,
normal wear and tear excepted.
15.4 Operation. Hibbing shall cause the Equipment to be operated by
trained employees only, and shall pay all expenses of operation.
15.5 Indemnity. Hibbing shall indemnify and save AB harmless from any
and all injury to or loss of the Equipment from whatever cause, and from
liability or expenses (including attorneys' fees) arising out of the use or
maintenance thereof, but shall be credited with any amounts received by AB from
insurance procured by Hibbing. Damage for any loss or injury shall be based on
the then net book value of the Equipment, except as otherwise denoted on
Schedule 15.
15.6 Purchase Option. At the expiration of the original term hereof or
at earlier termination if such termination was as a result of mutual agreement
or a right by Hibbing to terminate pursuant to subsection 9.2(a), if Hibbing is
not then in default hereunder, Hibbing shall have the option to purchase all but
not less than all the items of Equipment (other than items of Equipment which
are then still subject to the Leases described in Section 15.14) upon giving
written notice to AB not less than thirty (30) calendar days prior to the
expiration of the original term hereof (or shorter period, but as soon as
reasonably practical, in the case of such early termination). The purchase price
shall be One Dollar ($1.00). Upon Hibbing's exercise of the option, AB will
deliver title to such of the Equipment free and clear of all encumbrances.
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<PAGE> 14
15.7 Insurance.
(a) All risk of loss, damage to or destruction of the
Equipment shall at all times be on Hibbing. Hibbing will procure forthwith and
maintain at Hibbing's expense insurance against all risks of loss or physical
damage to the Equipment for the lesser of the net book value or the full
insurable value thereof for the life of this Agreement and such other insurance
thereon in commercially reasonable amounts and against commercially reasonable
risks as AB may specify, and shall promptly deliver each policy to AB with an
endorsement attached thereto showing loss payable to AB and providing AB with
not less than thirty (30) calendar days written notice of cancellation. Each
such policy shall be in commercially reasonable form, terms and amount and with
insurance carriers reasonably satisfactory to AB. As to AB's interest in such
policy, no act or omission of Hibbing or any of its officers, agents, employees
or representatives shall affect the obligations of the insurer to pay the full
amount of any loss.
(b) Should Hibbing fail to furnish such insurance policy to
AB, or to maintain such policy in full force, or to pay any premium in whole or
in part relating thereto, then AB, without waiving or releasing any default or
obligation by Hibbing, may (but shall be under no obligation to) obtain and
maintain insurance and pay the premium therefor on behalf of Hibbing and charge
the premium to Hibbing under this Agreement. The full amount of any such premium
paid by AB shall be payable by Hibbing within thirty (30) calendar days of
notice thereof, and failure to pay same shall constitute an event of default
under this Agreement.
(c) In the event that monies become payable under any such
policy of insurance with respect to an item of Equipment, then Hibbing will, at
its option, either (i) pay over to AB such monies up to the then net depreciated
book value thereof on AB's books of account of such item or (ii) repair or
replace such item.
15.8 Taxes. Hibbing shall comply in all material respects with all
laws, ordinances and regulations relating to Hibbing's possession, use or
maintenance of the Equipment, and save AB harmless against actual or asserted
violations, and pay all costs and expenses of every character occasioned by or
arising out of such use. Hibbing agrees that, during the term of this Agreement,
in addition to all other amounts provided herein to be paid, it will promptly
pay all taxes, assessments and other governmental charges (including penalties
and interest, if any, and fees for titling or registration, if required) levied
or assessed upon the interest of Hibbing in the Equipment or upon Hibbing's use
or operation thereof or on Hibbing's earnings arising therefrom.
15.9 Title. All Equipment shall remain personal property, and title
thereto (or, in the case of the Equipment subject to the Leases described in
Schedule 15.14, a valid leasehold interest therein) shall remain in AB
exclusively. Hibbing shall keep the Equipment free from any and all liens and
claims, and shall not do or permit any actor thing to be done whereby AB's title
or rights may be encumbered or impaired. Hibbing will not change or remove any
insignia or lettering on the Equipment, which shall conspicuously identify each
item of the Equipment by suitable lettering thereon to indicate AB's ownership.
Hibbing shall give AB immediate notice of any attachment or other judicial
process affecting the Equipment, and indemnify and save AB harmless from any
loss or damage caused thereby.
15.10 No Warranty. Hibbing acknowledges that is has inspected and is
fully familiar with the Equipment and agrees that it has bargained for a right
to use the Equipment without warranty by AB. Hibbing acknowledges that AB is not
the manufacturer or supplier of, nor a dealer in, the Equipment. AB represents
that the Equipment is in good working order and that no material maintenance has
been neglected. EXCEPT FOR THE FOREGOING, AND EXCEPT FOR THE WARRANTY OF TITLE
UNDER SECTION 15.9 AND THE WARRANTY OF TITLE TO BE GIVEN UPON EXERCISE OF THE
PURCHASE OPTION UNDER SECTION 15.6, AB MAKES NO
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WARRANTY OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO THE FITNESS,
QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY, MERCHANTABILITY OR
PERFORMANCE OF THE EQUIPMENT OR OF THE MATERIAL OR WORKMANSHIP THEREOF, IT BEING
AGREED THAT THE EQUIPMENT IS PROVIDED "AS IS", "WHERE IS" AND "WITH ALL FAULTS"
AND THAT ALL SUCH RISKS, AS BETWEEN AB AND HIBBING, ARE TO BE BORNE BY HIBBING
AT ITS SOLE RISK AND EXPENSE. Hibbing accordingly agrees not to assert any claim
whatsoever against AB based thereon. Hibbing further agrees, regardless of
cause, not to assert any claim whatsoever against AB for loss of anticipatory
profits, consequential, special, incidental or punitive damages. No oral
agreement, guaranty, promise, condition, representation or warranty shall be
binding,; all prior conversations, agreements or representations related hereto
and/or to said Equipment are integrated herein. AB, however, will give Hibbing
the benefit of all warranties, if any, made by manufacturers or suppliers of the
Equipment to AB. Claim by Hibbing against any manufacturer or supplier of
Equipment shall not effect Hibbing's obligations under this Agreement.
15.11 Possession. AB covenants to and with Hibbing that AB is the
lawful owner (or, with respect to the Equipment subject to the Leases described
in Schedule 15.14, is the valid lessee) of said Equipment and that such
Equipment is and during the term of this Agreement will be free from all
encumbrances other than security interests held by or hereafter granted to its
lending institutions and that, subject thereto and to Hibbing's performing the
conditions hereof, Hibbing shall, subject to Section 15.1 hereof, peaceably and
quietly use the Equipment during said term without hindrance.
15.12 Performance of Obligations of Hibbing by AB. In the event that
Hibbing shall fail duly and promptly to perform any of its obligations under the
provisions of this Article 15, AB may, at its option, perform the same for the
account of Hibbing without thereby waiving such default, and any amount paid or
expense (including reasonable attorneys' fees), penalty or other liability
incurred by AB in such performance, shall be payable by Hibbing upon demand.
15.13 Further Assurances. Hibbing shall execute and deliver to AB,
upon AB's reasonable request and at AB's expense, such instruments and
assurances as AB deems necessary or advisable for the confirmation or perfection
of this Agreement and AB's rights hereunder, including, without limitation,
U.C.C. financing statements.
15.14 Certain Equipment Leases.
(a) AB is the lessee under the equipment leases described in
Schedule 15.14 attached hereto and made part hereof (collectively the "Leases").
AB hereby grants to Hibbing the right to use the equipment leased under the
Leases during the Term hereof and Hibbing shall pay to AB all current
installments of regularly scheduled amounts required to be paid by AB
thereunder, when and as due. AB represents and warrants to Hibbing that, to
date, AB has performed and paid all obligations of AB under the Leases and no
event of default has occurred and is continuing under any of the Leases. During
the term of this Agreement: (i) AB will not terminate, modify or amend the
Leases without Hibbing's prior written consent (which may not be unreasonably
withheld or delayed); and (ii) AB will pay and perform all of its obligations
under the Leases. AB has provided Hibbing with true, correct and complete copies
of the Leases.
(b) Hibbing shall indemnify and hold AB harmless from any
liability or expense, including attorneys' fees, arising out of claims made,
suits or proceedings brought against AB by any party relating to Hibbing's use
or possession of the Equipment covered by the Leases other than on account of
the failure to obtain consents contemplated by this Section 15.14.
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(c) AB will (at its expense) use its best good faith efforts
to promptly obtain the consents of the lessors and any third-parties necessary
to permit the consummation of the transactions contemplated by this Article 15
(including, without limitation, the assignments contemplated by subsection
15.14(d) below). If AB is unable to obtain such consent with respect to one or
more items of said Equipment and if, as a result thereof, Hibbing's use of said
Equipment during the term of this Agreement is prevented by a proceeding or
action taken by such lessor or third party, then the provisions of this Article
15 will terminate with respect to such item or items of Equipment, and AB will
hold Hibbing harmless from any and all claims and damages (including attorneys'
fees) arising out of the failure to obtain such consents. The provisions of
Article 12 will apply to this indemnity. Without limiting the foregoing, if the
parties have complied with their respective obligations to pay and perform the
Leases, and yet a lessor or third party prevents AB or Hibbing from exercising a
purchase option contained in a Lease (a "Non-Exercisable Lease") because of the
failure to obtain a required consent, then AB agrees to promptly pay or
reimburse Hibbing for commercially reasonable amounts payable or paid by Hibbing
to acquire such Equipment that are in excess of the amounts contemplated by the
terms of the Non-Exercisable Leases.
(d) At the termination or expiration of this Agreement,
provided Hibbing is not in default hereunder, AB will assign all of its right,
title and interest in and to the Leases and the Equipment in consideration for
Hibbing's agreement to pay and perform the lessee's prospective obligations
under the Leases.
15.15 Computer.
(a) AB agrees that, for a period of nine (9) months from the
date hereof, it shall permit Hibbing to use the Hewlett-Packard computer
hardware and Growth Power software currently used by AB with the Equipment, but
no other hardware or software possessed by AB. AB agrees to maintain such
hardware and software in good working order during such nine (9) month period,
reasonable downtime for system maintenance and upgrades excepted. AB represents
that it is and will be during such nine (9) month period the lawful owner of
said hardware and licensee of said software, free of all encumbrances and with
authority to license the same to Hibbing hereunder.
(b) Hibbing may, at Hibbing's own expense, increase the disk
capacity of the computer hardware by 2Gb, but shall not make any other changes
to the hardware without the prior written consent of AB. Hibbing may not load
and run additional software on the hardware without AB's prior written consent.
If such consent is given, then, notwithstanding such consent, Hibbing shall be
responsible for any damage to AB's hardware or software. All provisions of this
Agreement relating to the care and maintenance of the Equipment shall apply
equally to AB's computer hardware and software. AB agrees that it will take
commercially reasonable steps to make at least daily archival backups of its
software and Hibbing's data) and that it will take commercially reasonable steps
to protect such backups from harm or damage. AB will make the backups available
at the end of normal business hours each day and Hibbing will be responsible for
the physical possession of backups after normal business hours.
(c) All of such computer hardware and software as well as all
of AB's data stored in such computers shall remain the sole property of AB.
Hibbing's data shall remain the sole property of Hibbing, and will be returned
promptly to Hibbing upon termination or expiration of this Section 15.15.
(d) The parties shall mutually agree on a schedule whereby
Hibbing shall cease to use AB's computer hardware and software in favor of
hardware and software to be acquired by Hibbing at its own expense. AB shall
provide reasonable assistance to Hibbing in connection with migration from AB's
system to Hibbing's. Nothing in this subsection (d) shall be deemed to extend
the twelve (12)-
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month term of this Section 15.15. At the expiration of such term, AB may remove
all of its computer hardware and Hibbing shall reasonably cooperate with and
assist AB in the removal.
(e) Any Confidential Information obtained by Hibbing pursuant
to the operation of this Section 15.15 shall be subject to the provisions of
Article 13 hereof.
ARTICLE
16
USE OF PREMISES
16.1 Premises. AB hereby licenses to Hibbing the right to use those
premises shown on the attached Schedule 16 (the "Premises"), located at 1300
Quince Orchard Boulevard, Gaithersburg, Montgomery County, Maryland during the
term of this Agreement. Hibbing shall also have the right to use the front
entrance to the building in which the Premises are located (the "Building") for
access and egress from the Premises, as well as the loading dock on the side of
the Building, at all times.
16.2 Use Fees. Hibbing shall pay in advance on or before the first day
of each and every month during the term of this Article 16 (prorated for any
partial month's usage) an amount equal to 50% of the regularly scheduled monthly
rent (as the same may be reduced (but not increased) in contemplated
negotiations with the landlord) then payable by AB pursuant to the Lease (as
hereinafter defined).
16.3 Additional Fees. Hibbing shall also pay to AB as additional fees
the specified percentage of the total amount AB is charged for the entire
Building for each of the following:
<TABLE>
<CAPTION>
Item Percentage
<S> <C>
(a) Real Estate Taxes (not including 50%
special assessment)
(b) Electric and Water Utilities 50%
(c) Trash/Waste Removal 50%
(d) Grounds Maintenance/ Landscaping 50%
(e) Other Utilities and Operating 50%
Expenses (as may be agreed to in
writing)
</TABLE>
AB shall render statements to Hibbing including copies of the bills payable by
AB, and Hibbing shall pay the required amount to AB within thirty (30) calendar
days of receipt of each statement.
16.4 Use of Premises. Hibbing shall use and occupy the Premises solely
for the manufacture and assembly of printed circuit cards and related
activities.
16.5 Care and Conditions of Premises; Signs.
(a) During the term of this Article 16, except as otherwise
provided herein, Hibbing, at its own cost and expense, shall maintain the
Premises in good order and condition including: (i) providing interior
janitorial services for the Premises; (ii) storing all garbage, trash and other
refuse in
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approved containers away from public view and removing such items on a regular
basis during the times and in a manner designated from time to time by AB; (iii)
maintaining the Premises in a clean and sanitary condition and free of insects,
rodents, vermin and other pests; (iv) performing normal and routine maintenance
and repair of all mechanical, electrical and plumbing systems, facilities and
equipment exclusively serving the Premises and all non-structural improvements
within the Premises; (v) replacing all cracked or broken glass; and (vi)
repainting and redecorating at reasonable intervals as needed. Except as
provided in the immediately preceding sentence, AB shall be responsible, at its
own expense, for maintenance of all structural and exterior portions of the
Premises. AB shall further be responsible for all maintenance and repairs to the
heating, ventilation, cooling, plumbing and electrical systems of the Premises.
AB shall not unreasonably interfere with Hibbing's business operations in
performing any repairs required under this Section 16.5. AB makes no
representations or warranties as to the condition of the Premises. Hibbing has
thoroughly examined the Premises and Hibbing does hereby accept the Premises "as
is" in its present condition.
(b) Except to the extent that AB has agreed to pay 50% of the
additional fees under Section 16.3, Hibbing covenants and agrees to keep the
Premises clean at its own expense.
(c) Hibbing shall make no changes or alterations to the
Premises without the prior written consent of AB, which shall not be
unreasonably withheld, and the prior written consent of any other party whose
consent is required for the making of changes or alterations by AB.
(d) Upon expiration or termination of this Agreement, Hibbing
shall surrender the Premises in good order and condition, ordinary wear and tear
excepted.
(e) The parties hereby agree that signs identifying Hibbing
may be installed in locations mutually agreed by the parties. Upon expiration or
termination of this Agreement, Hibbing shall remove such signs.
16.6 Liability and Property Damage Insurance; Worker's Compensation
Insurance; Damage to Premises.
(a) Hibbing shall be responsible for insuring any improvements
Hibbing makes to the Premises and all personal property maintained at the
Premises and shall maintain public liability insurance covering the Premises,
which shall name AB as an additional insured, for an aggregate amount of at
least One Million Dollars ($1,000,000.00) per occurrence. Hibbing shall also
maintain workers' compensation insurance, as required by law. Hibbing shall
provide AB with certificates or other evidence of such insurance as AB
reasonably requests.
(b) In the event the Premises are so damaged or destroyed by
fire or other casualty that they become wholly unfit for Hibbing' use thereof,
AB may, at its option, rebuild the same, or may terminate this Article 16. AB
shall have no duty to rebuild or replace any fixtures or improvements made or
installed by Hibbing.
16.7 Waiver of Subrogation. Notwithstanding the provisions of Section
16.10 hereof, in the event of loss or damage to the building, the Premises
and/or contents, each party shall look first to any first-party insurance
coverage prior to making any claim against the other party. Further, each party
shall waive subrogation over and against the other party or its insurance to the
extent permissible and to a degree that would not violate any provision of an
applicable policy of insurance purchased by the claimant party.
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<PAGE> 19
16.8 Entry on Premises. Hibbing agrees that AB, its employees, agents
and other representatives shall have the right to enter into and upon said
Premises, or any part thereof, during usual business hours on a noninterference
basis and with reasonable advance notice for any purpose incident to AB's status
as tenant of the Premises under the Lease, provided that entry outside of normal
business hours will be permitted in the event of an emergency subject to prior
notice thereof to Hibbing.
16.9 Assignment and Sublease, etc. Neither Hibbing nor AB shall have
the right to assign, mortgage or encumber this Agreement or the whole or any
part of the Premises or permit the Premises or any part thereof to be used or
occupied by others without the prior written consent of Hibbing or AB, as the
case may be.
16.10 AB and Hibbing Liability. AB is exempt from any and all
liability for any damage or injury to person or property caused by or resulting
from steam, electricity, gas, water, rain, ice or snow, or any leak or flow
from, or from any other cause or happening whatsoever, except if caused solely
by AB's negligence or misconduct or breach of this Agreement or noncompliance
with the Lease. Except as provided in Section 16.7 hereof, Hibbing agrees to
indemnify and save harmless AB, its successors, assigns and agents, against and
from any and all claims by or on behalf of any person or persons, firm or firms,
corporation or corporations arising from the conduct or management of, and from
any work and thing whatsoever done by or on behalf of Hibbing or its agents,
employees, contractors or invitees in or about, the Premises. The provisions of
Article 12 will apply to the enforcement of this indemnity.
16.11 Compliance with Laws. Hibbing shall comply in all material
respects with all laws, orders, and regulations of federal, state, county and
municipal authorities, and with any direction of any public officer and
officers, pursuant to law, or any insurance company carrying any insurance on
the Premises, and any insurance inspection or rating bureau, which shall impose
any duty upon Hibbing with respect to any of its obligations hereunder relating
to the Premises or its use or occupation thereof.
16.12 Effects of Termination.
(a) Upon any termination or expiration of this Agreement or of
this Article 16, AB or its representative may re-enter the Premises by force,
summary proceedings or otherwise, and remove all persons therefrom, without
being liable to prosecution therefor; provided, however, that AB will use its
best good faith efforts to provide Hibbing with at least thirty (30) calendar
day's prior notice (other than with respect to the end of the original term
hereof) Hibbing shall pay, at the same time as the fees becomes payable under
the terms hereof, a sum equivalent to the fees under Section 16.2 and additional
fees under Section 16.3.
(b) In the event that the relation of AB and Hibbing may cease
or terminate by reason of the re-entry of AB under the terms and covenants
contained in this Agreement or by the rejectment of Hibbing by summary
proceedings or otherwise, it is hereby agreed that Hibbing shall remain liable
and shall pay in monthly payments the fees under Section 16.2 which accrue
subsequent to the re-entry by AB and Hibbing expressly agrees to pay as damages
for the breach of the covenants herein contained, the difference between the
fees under Section 16.2 and additional fees under Section 16.3 and the rent
collected and received, if any, by AB during the remainder of the unexpired
term, such difference or deficiency between the fees and additional fees herein
reserved and the fees and additional fees collected, if any, shall become due
and payable in monthly payments during the remainder of the unexpired term, as
the amounts of such difference or deficiency shall from time to time be
ascertained. Hibbing waives all rights to redeem under any law of the State of
Maryland.
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16.13 Building Lease.
(a) This Article 16 is subject to the Lease dated March 31,
1989 between Penril Corp., as Tenant, and Real Estate Income Partners III,
Limited Partnership, as Landlord (the "Landlord"), and to the Sublease dated as
of November ___, 1996 between Penril DataComm Networks, Inc., as Sublessor (the
"Sublessor") and AB as Sublessee, copies of which have been delivered to AB
(collectively, the "Building Lease"). Hibbing agrees that it will use its best
efforts to cause its employees, agents, contractors and invitees not to violate
the Building Lease.
(b) Upon termination of the Building Lease for any reason,
this Article 16 shall thereupon automatically terminate. In such event neither
party shall have any further obligation or liability to the other pursuant to
this Article 16, except that if the Building Lease is terminated directly or
indirectly as a result of an act or omission of Hibbing or AB, the other party
will be entitled to whatever rights and remedies it may under this Agreement by
law or equity, and except Hibbing shall pay, at the same time as the fees
payable under the terms hereof, a sum equivalent to the fees under Section 16.2
and the additional fees under Section 16.3 for all periods (pro rated for
partial periods) during which Hibbing remains in possession of the Premises. AB
will use its best good faith efforts to provide Hibbing with sixty (60) calendar
days' prior notice of the termination or expiration of the Building Lease.
(c) The Building Lease describes the Landlord's and
Sublessor's duties. AB is not obligated to perform the Landlord's or Sublessor's
duties. If the Landlord or Sublessor fails to perform, Hibbing shall send AB a
notice. Upon receipt of the notice, AB shall then promptly notify the Landlord
and the Sublessor and demand that the Building Lease agreements be carried out.
(d) If AB terminates the Building Lease or if the Landlord's
or Sublessor's consent to this Article 16 is required but is not obtained and,
in either such case as a result thereof, Hibbing's use of the Premises during
the first twelve (12) calendar months of the term of this Agreement is prevented
by a proceeding or action taken by the Landlord or Sublessor, then: (i) AB will
hold Hibbing harmless from any and all claims and damages (including attorneys'
fees) arising out of or in connection with such proceeding or action and for
costs and expenses incurred by Hibbing to relocate its operations from the
Premises under expedited circumstances earlier than at the scheduled expiration
of this Agreement (the provisions of Article 12 will apply to this indemnity);
and (ii) at Hibbing's option, Hibbing may upon written notice to AB either (A)
terminate this Agreement with immediate effect (but otherwise in accordance with
the provisions of Article 9) or (B) adjust Hibbing's price model under
subsection 8.1(a) to include an eleven and 36/100 percent (11.36%) profit margin
applicable to purchase orders received on and after such notice.
(e) The provisions of the Building Lease are part of this
Agreement. During the term of this Agreement: (i) AB may, without the consent of
Hibbing, modify or amend the Building Lease in any manner that does not
adversely affect Hibbing; and (ii) AB agrees to pay and perform all of its
obligations under the Building Lease. AB represents and warrants to Hibbing
that, to date, AB has performed and paid all obligations of AB under the
Building Lease and has not received a notice, and has no knowledge, that an
event of default has occurred and is continuing under the Building Lease. AB has
provided Hibbing a true, correct and complete copy of the Building Lease.
(f) Hibbing shall have no authority to contact or make any
agreement with the Landlord or the Sublessor about the Premises or the Building
Lease. Hibbing shall not pay fees, additional fees or other charges to the
Landlord or the Sublessor, but only to AB.
20
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16.14 Early Termination. Any provision of this Agreement to the
contrary notwithstanding, AB may terminate this Article 16 upon one hundred
twenty (120) calendar days prior written notice to Hibbing. In such event,
Hibbing shall vacate the Premises within such one hundred twenty (120)
calendar-day period and this Article 16 shall terminate on the date Hibbing
vacates, but the remainder of this Agreement shall remain in full force and
effect.
16.15 Eminent Domain. If the whole or a material part of the Premises
shall be acquired or condemned by eminent domain for any public or quasi-public
use or purpose, then and in that event, AB shall notify Hibbing thereof,
whereupon the term of this Article 16 shall cease and terminate from the date of
title vesting in such proceeding, and Hibbing shall have no claim for the value
of any unexpired term of this Article 16. In such event, the remainder of this
Agreement shall remain in full force and effect.
16.16 Abatement of Fees. No diminution, abatement reduction or set off
of fees or additional fees shall be claimed or allowed except in the event the
Premises become untenantable without the fault of Hibbing.
16.17 Subordination. Hibbing agrees that this Agreement shall be
subordinate to the Lease and to any mortgages, ground lease or other instruments
which may now or hereafter affect the Premises or any part thereof. Although no
additional instrument or act on the part of Hibbing shall be necessary to effect
such subordination, Hibbing shall execute and deliver such instruments of
subordination of this Agreement as may reasonably be requested by the Landlord
or Sublessor or by holders of said mortgages, leases or other instruments.
16.18 Hibbing's Breach. If Hibbing breaches any covenant or condition
of this Article 16, AB may, on thirty (30) calendar days' notice to Hibbing (and
after Hibbing's failure to cure said breach within such notice period), cure
such breach at the expense of Hibbing and the reasonable amount of all expenses,
including reasonable attorney's fees, incurred by AB in so doing, shall be
deemed additional fees payable on demand.
16.19 Mechanic's Liens. Each of AB and Hibbing shall, within thirty
(30) calendar days after notice from the other, remove or satisfy any mechanic's
lien for materials or labor claimed to have been furnished to the Premises on
behalf of the notified party, unless being contested in good faith.
16.20 Possession. AB covenants to and with Hibbing that AB is the
lawful lessee under said Lease and that, subject to Hibbing's performing the
conditions hereof, Hibbing shall peaceably and quietly enjoy the Premises during
said term without hindrance.
ARTICLE
17
FORCE MAJEURE
If any performance by either party shall be prevented, hindered or
delayed by reason of any cause beyond the reasonable control of such party
including, without limitation, acts of God, riots, fires, floods, unusually
severe weather, curtailment or termination of sources or supplies of energy or
power, inability to obtain or delay in obtaining materials or supplies, strikes
or other disputes involving such party or its subcontractors or suppliers, or
any other cause beyond the reasonable control of such party, whether similar or
dissimilar to those expressed hereinabove, such party shall be excused from
performance to the extent that its performance shall extend so long as the event
continues to prevent, hinder or delay the performance by such party. The party
whose performance is affected shall give the other party notice
21
<PAGE> 22
within fifteen (15) calendar days of the occurrence specifying the occurrence,
the performance affected and the anticipated date, if any, on which performance
can be made. However, should performance be prevented for more than ninety (90)
consecutive calendar days, either party shall be entitled at its sole option to
terminate this agreement on fifteen (15) calendar days' prior written notice to
the other party. The provisions of Sections 9.3 and 9.4 will apply to any such
termination.
ARTICLE
18
MISCELLANEOUS
18.1 Notices. Any notice required to be given under this Agreement
shall in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail with postage prepaid or delivered
by express delivery or facsimile transmission to the respective parties at their
address set forth hereinabove or at such other address as may be hereafter
designated in writing to the other party.
18.2 Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of such provision in any other
jurisdiction or its application to other parties or circumstances. In addition,
if any one or more of the provisions contained in this Agreement shall for any
reason in any jurisdiction be held to be excessively broad as to time, duration,
geographical scope, activity or subject, it shall be construed by limited and
reducing it, so as to be enforceable to the extent compatible with the
application law of such jurisdiction as it shall then appear.
18.3 No Waiver. The failure or omission of either party to insist, in
any instance, upon strict performance by the other party of any term or
condition of this Agreement or to exercise any of its rights hereunder shall not
be deemed to be a modification of any term hereof or a waiver or relinquishment
of the future performance of any such term or condition by such party, nor shall
such failure or omissions constitute a waiver of the right of such party to
insist upon future performance by the other party of any such term or condition.
18.4 Assignability. This Agreement shall be binding upon and shall
inure to the benefit of the respective successors and assigns of the parties
hereto, provided, however, that neither AB nor Hibbing shall assign, transfer,
pledge or mortgage this Agreement to any person or party whatsoever (although
Hibbing may assign this Agreement in whole or in part to an Affiliate without
consent (but Hibbing may not be released from its obligations hereunder as a
result of such assignment without the consent of AB)).
18.5 Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof, and all other prior or
contemporaneous agreements of the parties with respect to said subject matter
are hereby merged into and superseded by this Agreement. This Agreement may not
be changed, modified or amended other than by a further written agreement signed
by both parties hereto.
18.6 Governing Law; Etc. This Agreement shall be governed by, and
shall be construed and interpreted in accordance with, the law of the State of
Maryland, including without limitation the Maryland Uniform Commercial Code.
22
<PAGE> 23
18.7 Mutual Agreement. This Agreement embodies the arms-length
negotiation and mutual agreement between the parties hereto and shall not be
construed against either party as having been drafted by it.
18.8 Headings and Counterparts. Headings are inserted for reference
purposes only and shall not affect the interpretation or meaning of this
Agreement. This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which, together, will constitute
one and the same instrument.
18.9 Disclaimer of Association. This Agreement shall not be construed
as creating a partnership, joint venture, agency or any other association which
would impose upon one party liability for the acts or omissions of the other.
18.10 Commissions and Finders' Fees. Each of the parties represents
that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on directly by AB with Hibbing and in such
manner as not to give rise to any claims against any of the parties hereto for a
brokerage commission, finders' fee or other like payment. Insofar as any such
claims are made which are alleged to be based on an agreement or arrangements
made by, or on behalf of, a party, such party agrees to indemnify and hold the
other parties harmless from and against all liability, loss, cost, charge or
expense, including reasonable counsel fees, arising therefrom.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above-written by their duly authorized officers.
ACCESS BEYOND, INC.
By:_____________________________________
Title:
HIBBING ELECTRONICS CORPORATION
By:_____________________________________
Title:
23
<PAGE> 24
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
Schedule 1.2 AB Inventory
Schedule 1.4 Products
Schedule 1.5 Standards and Specifications
Schedule 3.1 AB Form of Purchase Order
Schedule 8.1(a)-I Pricing Model
Schedule 8.1(a)-II Cost Products List
Schedule 8.1(b) Prices for Non-Cost Products
Schedule 15 Equipment
Schedule 15.14 Leases
Schedule 16 Premises
</TABLE>
24
<PAGE> 1
Exhibit 10.17
ASSET PURCHASE AGREEMENT
DATED
NOVEMBER 13, 1996
AMONG
EMI HOLDING CORP.
ELECTRO-METRICS, INC.
AND
PENRIL DATACOMM NETWORKS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.01 "Acquired Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.02 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.03 "Assumed Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.04 "Excluded Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.05 "Material Adverse Change" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.06 "Retained Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.07 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.01 Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.02 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III
THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.01 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.02 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.03 Deliveries by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.04 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV
RELATED AGREEMENTS AND TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.01 Hold Harmless . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.02 Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.03 Mail Received After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.04 Seller's Records; Access by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.05 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.06 Allocation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.07 Covenant of Non-competition: No Poaching of Employees . . . . . . . . . . . . . . . . . . . . . . . .
4.08 Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.09 Lease Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.10 Payment to Bach; Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.11 Agreement Non-exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
ii
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<TABLE>
<CAPTION>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.01 Corporate Organization; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.02 Consents and Approvals of Governmental Authorities . . . . . . . . . . . . . . . . . . . . . . . . .
5.03 Creditor's Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.04 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.05 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.06 Title to Assets; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.07 Penril's Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.08 No Other Representations or Warranties; Disclaimers . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.01 Corporate Organization: Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.02 Consents and Approvals of Governmental Authorities . . . . . . . . . . . . . . . . . . . . . . . . .
6.03 Creditor's Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.04 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.01 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.02 Indemnification by Seller and Penril . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.03 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.04 Limitations on Indemnification; Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.05 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII
CONDUCT OF BUSINESS PENDING THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX
OBLIGATIONS PENDING THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.01 Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.02 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.03 No Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE X
CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.01 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
iii
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
10.03 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.04 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.05 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF SELLER AND PENRIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.01 Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.03 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE XII
TERMINATION AND REMEDIES
12.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE XIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.01 Commissions and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.02 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.04 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.06 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.09 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.11 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.12 Mutual Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
iv
<PAGE> 5
EXHIBITS AND SCHEDULES
Exhibit A Instrument of Assumption of Liabilities
Exhibit B Indenture and Bill of Sale
Schedule 5.02 Governmental Approvals
Schedule 5.05 Consents
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated November 13, 1996 among EMI Holding
Corp., a Delaware corporation ("Purchaser"), Electro-Metrics, Inc., a Delaware
corporation ("Seller"), and Penril DataComm Networks, Inc., a Delaware
corporation and the parent entity of Seller ("Penril").
This Agreement sets forth the terms and conditions upon which Seller
will sell to Purchaser, and Purchaser will purchase from Seller, substantially
all of the assets of Seller.
In consideration of the mutual agreements contained herein, intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement each of the following terms shall have the
following meaning:
1.01 "Acquired Assets" shall mean all of Seller's right, title and
interest in all of the following assets, but expressly excluding the "Excluded
Assets" (as hereinafter defined):
(a) all machinery, equipment and other items of tangible
personal property owned by Seller and all leasehold interests in tangible
personal property held by Seller;
(b) all inventories of raw materials, work-in-process,
finished products, supplies, spare parts and packaging materials owned by
Seller;
(c) all cash, cash equivalents, accounts and notes
receivable of Seller;
(d) all rights and interests of Seller in, to and under
all contracts, leases, commitments, licenses and agreements;
(e) all rights and interest of Seller in, to and under
all patents, trademarks, patent and trademark applications, trade names,
licenses, copyrights and inventions, including the trade name and trademark
"Electro-Metrics";
(f) all of the books and records of Seller, including
those which pertain to the purchase of materials, supplies or services,
production and sale of products, personnel, customers, customer credit,
collections, or maintenance, including all computerized books and records;
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(g) all Federal, state and local governmental licenses,
permits, approvals and authorizations held by Seller, to the extent
transferable;
(h) all intangible assets of Seller used in the Business,
including customer lists, telephone numbers, trade secrets, drawings, designs,
specifications, test procedures, and similar information generally described as
know-how, research, marketing and other data, contract rights, manuals, rights
as an unpaid vendor, inventions, royalties, causes of action, rights of set off
and credit balances, and the good will of Seller as a going concern;
(i) employee receivables and temporary or permanent
travel advances to employees; and
(j) all computer software, databases and other
information stored in electronic or other form, including mechanical and CAD
drawings and designs.
1.02 "Affiliate" shall mean a corporation or other legal or natural
person controlling, controlled by or under common control with another
corporation or other legal or natural person. "Control" means possessing the
ability to influence the management or policies of a corporation or other legal
or natural person.
1.03 "Assumed Liabilities" shall mean all of the following
obligations of Seller, but expressly excluding the Retained Liabilities:
(a) all liabilities and obligations of Seller for
accounts payable existing on the Closing Date;
(b) all obligations of Seller to be performed or
satisfied after the Closing under all contracts, leases, commitments, licenses,
product warranties and agreements of Seller;
(c) all liabilities and obligations of Seller
attributable to the operation or ownership of the Acquired Assets by Purchaser
after the Closing; and
(d) all liabilities and obligations being assumed by
Purchaser pursuant to Section 4.05 hereof.
1.04 "Excluded Assets" shall mean the following assets, which will
not be transferred to Purchaser at the Closing pursuant to this Agreement:
(a) all corporate records of Seller, including all minute
books, stock books and stock ledgers; and
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(b) all rights of Seller and Penril under this Agreement
or any related agreements or instruments.
1.05 "Material Adverse Change" shall mean and be strictly limited
to any Penril corporate action or change (as opposed to any operational action
or condition of Seller) which materially adversely affects the financial
condition of Seller.
1.06 "Retained Liabilities" shall mean all liabilities and
obligations of, or claims against, Seller of whatever nature, whether accrued,
absolute, contingent or otherwise, other than the Assumed Liabilities,
including, without limitation, the following:
(a) all liabilities and obligations of Seller to pay
Federal, state, local or foreign income taxes (and any deficiencies, penalties
or interest which may be assessed thereon);
(b) any liabilities or obligations of Seller incurred as
a result of Penril corporate action which did not directly benefit Seller; and
(c) all liabilities to Penril or any Affiliate of Penril.
1.07 Accounting Term. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles and practices.
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
2.01 Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties and covenants set forth herein, at the Closing, Seller shall sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser shall
purchase, acquire from Seller and accept the Acquired Assets.
2.02 Consideration. In consideration of the sale, assignment,
transfer and delivery of the Acquired Assets, Purchaser shall:
(a) pay to Seller in cash at the Closing, by certified or
official bank check or wire transfer of funds to an account designated by
Seller, an amount equal to the sum of (i) $3,500,000 plus (ii) and amount equal
to all cash advances made to Seller by Penril after October 30, 1996 with
interest from the date of the advance at a rate equal to Penril's cost of
funds; and
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(b) assume the Assumed Liabilities and deliver to Seller
at the Closing an Instrument of Assumption in the form of Exhibit A hereto.
ARTICLE III
THE CLOSING
3.01 Time and Place. The Closing of the transactions contemplated
by this Agreement will take place at the offices of Penril, 1300 Quince Orchard
Blvd., Gaithersburg, Maryland, at 10:00 A.M. local time on the Closing Date (as
hereinafter defined). Subject to Section 12.01 hereof, the Closing shall occur
as soon as practicable after the conditions set forth in Article X and XI have
been satisfied or waived, on a date specified in a written notice from
Purchaser to Seller and Penril, given at least two business days prior to such
date. The date upon which the Closing occurs is sometimes herein referred to
as the "Closing Date".
3.02 Deliveries by Seller. As a condition to the obligations of
Purchaser hereunder, Seller shall deliver to Purchaser at the Closing the
following:
(a) a Bill of Sale in the form of Exhibit B hereto;
(b) Seller's and Penril's release of Bach referred to in
Section 4.10; and
(c) all other previously undelivered documents required
to be delivered by Seller or Penril at or prior to the Closing in connection
with the transactions contemplated by this Agreement.
3.03 Deliveries by Purchaser. As a condition to the obligations of
Seller hereunder, Purchaser shall deliver to Seller at the Closing the
following:
(a) the consideration set forth in subsections 2.02(a)
and (b);
(b) the resignation of Kenneth W. Bach ("Bach") as
President and an employee of Seller;
(c) the Bach's release of Seller and Penril referred to
in Section 4.10;
(d) documents terminating the Lease (as hereinafter
defined) referred to in Section 4.09; and
(e) all other previously undelivered documents required
to be delivered by Purchaser at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
3.04 Further Assurances. After the Closing, Purchaser and Seller
shall from time to time, at the request of the other and without further
consideration (but at the expense of the requesting
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party), execute and deliver such other documents and instruments and take such
other actions as the other party may reasonably request in order to more
effectively consummate the transactions contemplated hereby.
ARTICLE IV
RELATED AGREEMENTS AND TRANSACTIONS
4.01 Hold Harmless
(a) Subject to the provision of Article VII hereof,
Seller and Penril, jointly and severally, covenant and agree to hold Purchaser
and its Affiliates harmless from any liability and out-of-pocket expenses,
including attorneys' fees and disbursements, arising out of successful claims
made, or suits or proceedings brought, against Purchaser or its Affiliates by
any party relating to the Retained Liabilities.
(b) Subject to the provision of Article VII hereof,
Purchaser covenants and agrees to hold Seller, Penril and their Affiliates
harmless from any liability and out-of-pocket expenses, including attorneys'
fees and disbursements, arising out of successful claims made, or suits or
proceedings brought, against Seller, Penril or their Affiliates by any party
relating to the Assumed Liabilities or Purchaser's acts or omissions arising or
accruing after the Closing.
4.02 Bulk Sales Laws. Subject to the provisions of Article VII
hereof, Seller and Penril, jointly and severally, covenant and agree to
indemnify Purchaser from any and all successful claims made by creditors of
Seller (other than creditors with respect to the Assumed Liabilities) relating
to provisions of the "bulk sales laws" of the State of New York which may be
applicable to the transactions contemplated hereby and from all reasonable
out-of-pocket costs (including reasonable attorneys' fees) incurred in the
defense of any such claims made under such laws.
4.03 Mail Received After Closing. Following the Closing, Purchaser
may receive and open all mail addressed to Seller and deal with the contents
thereof in its discretion to the extent that such mail and the contents thereof
relate to the Acquired Assets or the Assumed Liabilities. Purchaser agrees to
deliver or cause to be delivered to Seller all other mail received addressed to
Seller which does not relate to the Acquired Assets or the Assumed Liabilities;
and Seller agrees to deliver or cause to be delivered to Purchaser all mail
received by Seller or Penril relating to the Acquired Assets or the Assumed
Liabilities.
4.04 Seller's Records; Access by Seller. After the Closing,
Purchaser shall afford Seller, Penril, their counsel, accountants and other
representatives access to and assistance with such
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books and records acquired by Purchaser pursuant hereto as may be reasonably
necessary in order for Seller and Penril to prepare tax reports and returns
required to be filed by it, to respond to inquiries by governmental
authorities, to deal with Retained Liabilities or for other appropriate
reasons. Purchaser shall not dispose of any such books or records of Seller
until it has given reasonable notice to Penril of its intention to do so and
given Penril a reasonable opportunity to take possession of such books and
records to be disposed of.
4.05 Employee Matters.
(a) Effective as of the Closing, Purchaser shall offer
employment to all persons employed by Seller listed on Schedule 4.05 hereto
(the "Covered Employees") at substantially the same wages, salary, benefits,
hours and conditions of employment as in effect immediately prior to the
Closing.
(b) Purchaser shall be responsible for and cause to be
paid in the normal course of business the vacation and holiday pay for Covered
Employees reflected on Schedule 4.05 hereof.
(c) Purchaser shall be responsible and liable for any
payment in the nature of severance pay due to any Covered Employee by reason of
any action taken by Purchaser after the Closing.
(d) Seller shall be responsible for payment of all claims
made by Covered Employees and their covered dependents under Seller's group
health and dental benefit plans prior to the Closing Date. Purchaser shall
provide group health and dental benefit plans for the Covered Employers and
their covered dependents from and after the Closing Date. Purchaser's group
health and dental plans shall take into account in the plan year in which the
Closing occurs any expenses incurred by such Employees and their covered
dependents during such plan year but prior to the change-over to Purchaser's
plans for the purpose of satisfying deductible or coinsurance requirements to
the same extent as if such expenses had been incurred after such change-over.
(e) As soon as is practicable after the Closing Date,
Purchaser shall establish a defined contribution savings plan intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), in which the Covered Employees shall be eligible to participate
as of the Closing Date (the "Purchaser's Successor Plan"). Purchaser shall, as
soon as practicable after the Closing Date provide Seller with a copy of
Purchaser's Successor Plan. Within 60 days following Seller's receipt thereof,
Seller shall cause the trustee of Seller's 401(k) plan in which the Covered
Employees participate prior to the Closing to transfer assets equal to the
account values of all such Covered Employees on a fully vested basis to the
trustee of Purchaser's Successor Plan. Purchaser's Successor Plan shall
recognize service with Seller and participation in Seller's plan for purposes
of determining vesting, eligibility to receive benefits and other
service-related rights in Purchaser's Successor Plan, and in no event shall any
Employee's vested interest in his
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account (including in respect of future accruals or allocations) under
Purchaser's Successor Plan be less than his vested interest in his account in
Seller's plan.
(f) Purchaser shall be responsible and liable for any
claim in respect of the Covered Employee arising under any state worker's
compensation or similar law which is based on any occurrence on or after the
Closing Date.
(g) Purchaser agrees that for a period of 60 days
following the Closing Date, Purchaser shall not undertake a "plant closing" or
a "mass layoff" (as such terms are defined in the Worker Adjustment and
Retraining Notification Act ["WARN"]) or undertake any other actions requiring
notification pursuant to any similar state or local law or regulation to any
person or entity. Purchaser further agrees and acknowledges that on and after
the Closing Date, Purchaser shall be solely responsible for compliance with any
federal, state, or local laws and regulations relating to plant closing or a
substantial layoff of personnel.
(h) Notwithstanding anything to the contrary contained
herein, Purchaser agrees that it shall, effective as of the Closing Date, put
in place medical and health care benefit programs covering the Covered
Employees so that no such Covered Employee will suffer a break in coverage
under such types of programs and so that Seller shall have no responsibility or
liability in respect of such Covered Employees under the "continuation
coverage" provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), or Part 6 of Title I of ERISA or Section 4980B of
the Code.
4.06 Allocation Agreement. At the Closing, Purchaser and Seller
are entering into an allocation agreement satisfying the requirements of
Section 1060 of the Code and the regulations promulgated pursuant thereto.
Neither Purchaser nor Seller shall take a reporting position contrary to the
allocation agreement.
4.07 Covenant of Non-competition; No Poaching of Employees.
(a) Seller and Penril hereby acknowledge the competitive
nature of Seller's business and, in consideration of the purchase by Purchaser
of the Acquired Assets, Seller and Penril therefore, jointly and severally,
agree that for a period of three (3) years after the Closing Date, neither
Seller, Penril or any Affiliate thereof shall, for itself, or as an agent of,
or on behalf of, or in conjunction with, any person, firm or corporation, or as
a partner of any partnership, or as a shareholder of any corporation (excluding
the ownership of fewer than 5% of the outstanding voting shares of any publicly
traded corporation), own, manage, acquire, operate, control or participate in
the ownership, management, operation or control of, any business which competes
with Seller's business, as constituted immediately prior to the Closing.
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(b) Purchaser agrees that for a period of three (3) years
after the Closing neither Purchaser nor any Affiliate thereof shall solicit for
employment, offer employment to, or employ any employee of Seller or Penril
other than the Covered Employees. Seller and Penril jointly and severally
agree that for a period of three (3) years after the Closing neither Seller,
Penril nor any Affiliate thereof shall solicit for employment, offer employment
to or employ any employee of Purchaser.
(c) In addition to any other remedy or relief available
for any breach or threatened breach of any of the provisions of this Section
4.07, the non-breaching party shall be entitled to seek injunctive relief for
any such breach, and the breaching party waives the making of a bond in
connection therewith.
4.08 Change of Name. Promptly following the Closing, Seller shall
amend its Certificate of Incorporation so as to change its name to a name not
including "Electro-Metrics" or any derivative thereof. Thereafter neither
Seller nor any Affiliate thereof shall use the name "Electro-Metrics" or any
derivative thereof. Purchaser shall have no right to, and shall not, use the
name "Penril" or any deviation thereof.
4.09 Lease Termination or Assignment. Seller currently leases real
property in Johnstown, New York pursuant to a sublease dated as of March 1,
1995 (the "Lease") between Crossroads Incubator Corp. and Seller. At the
Closing, the parties will take all necessary action to either (a) terminate the
Lease, effective upon the Closing, without payment by Seller of any additional
consideration, or (b) cause the Lease to be assigned to and assumed by
Purchaser and Seller to be released from further liability with respect to the
Lease.
4.10 Payment to Bach; Releases. At the Closing, Penril shall pay
to Bach a bonus of $90,000. Except for such payment and payment of Bach's
regular salary through the Closing Date, neither Seller nor Penril shall have
any further liability or obligation to Bach. Bach shall upon the Closing
execute and deliver a release to Penril and Seller in the form of Exhibit C
hereto, and Penril and Seller shall upon the Closing execute and deliver to
Bach a release in the form of Exhibit D hereto.
4.11 Agreement Non-exclusive. (a) Purchaser expressly agrees that
notwithstanding this Agreement or any provision hereof, Seller and Penril shall
have the right until the Closing to solicit or entertain offers from, enter
into negotiations with and furnish information to other parties with respect to
a merger, sale of stock or assets or other business combination or disposition
transaction involving Seller (collectively "Transactions" or individually a
"Transaction"); provided that until the earlier of (i) the Closing or (ii)
December 18, 1996, Seller and Penril shall refrain from entering into
negotiations for any Transaction in which any person who on November 1, 1996
was an officer, director or employee of Penril or Access Beyond, Inc. would act
as a principal.
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(b) Bach shall conduct tours and discussions concerning
business of Seller for prospective third party purchasers of Seller and shall
disclose to such third parties the same forecasts and projections which
Purchaser discloses or has disclosed to parties from which it is seeking
financing.
(c) If Penril and Seller determine to pursue a
Transaction with another party, Penril and Seller may terminate this Agreement
upon written notice to Purchaser, whereupon this Agreement shall immediately
terminate and no party shall have any further obligation or liability with
respect thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER AND PENRIL
Seller and Penril jointly and severally represent and warrant to
Purchaser as follows:
5.01 Corporate Organization; Etc. Each of Seller and Penril is a
corporation duly organized, validly existing and in good standing under the
laws of its State of incorporation and has full corporate power and authority
to carry on its business as it is now being conducted and to own the properties
and assets it now owns. Each of Seller and Penril has full corporate power and
authority to execute, deliver and carry out the terms of this Agreement and any
and all related documents and instruments and has taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and any and all related documents or instruments to be executed and delivered
by Seller and/or Penril pursuant hereto. This Agreement and any and all
related documents or instruments to be executed and delivered by Seller and/or
Penril have been duly and validly authorized, and this Agreement constitutes a
valid and binding agreement of Seller and Penril, and any and all such related
documents or instruments, when executed and delivered by Seller and/or Penril,
will constitute valid and binding obligations thereof, enforceable in
accordance with their terms.
5.02 Consents and Approvals of Governmental Authorities. Except as
set forth on Schedule 5.02, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required on the part of Seller or Penril in connection with the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby.
5.03 Creditor's Arrangement. Neither Seller nor Penril has made an
assignment for the benefit of creditors, nor does Seller or Penril presently
have any plans or intentions to do so, nor has any involuntary or voluntary
petition in bankruptcy been filed by or against Seller or Penril.
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5.04 No Subsidiaries. Seller has no subsidiaries, and Seller does
not own, directly or indirectly, any capital stock or other equity securities
of any corporation or have direct or indirect equity or ownership interest in
any other business.
5.05 No Violation. Except as set forth on Schedule 5.05, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any provision of the Certificate
of Incorporation or By-Laws of Seller or Penril, or violate, or be in conflict
with, or constitute a default under, or cause the acceleration of the maturity
of any debt or obligation pursuant to, or result in the creation or imposition
of any security interest, lien, charge or other encumbrance upon any of the
Acquired Assets, under any agreement or commitment to which Seller or Penril is
a party or by which Seller or Penril is bound, or to which the property of
Seller or Penril is subject, or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental authority
applicable to Seller or Penril.
5.06 Title to Assets; Liens. Seller has good and valid title to the
Acquired Assets. None of the Acquired Assets are subject to any mortgage,
pledge, lien, security interest, encumbrance or charge (collectively "liens")
of any kind except (a) liens imposed by law, such as carriers', warehousemen's,
mechanics', material men's and vendors' liens, incurred in the ordinary course
of business; (b) purchase money liens arising or created in the ordinary course
of business; (c) liens in favor of lessors of personal property; (d) minor
imperfections of title, if any, none of which are substantial in amount,
materially detract from the value or impair the use of the property subject
thereto, or impair the operation of Seller; and (e) liens for taxes not yet
due.
5.07 Penril's Actions. Except for liabilities incurred pursuant to
this Agreement, Penril has not, in its capacity as sole stockholder of Seller,
directly incurred any liabilities on behalf of Seller, which did not directly
benefit Seller.
5.08 No Other Representations or Warranties; Disclaimer. Except
for the representations and warranties contained in this Article V, neither
Seller, Penril nor any other person acting on behalf thereof (including any of
their respective officers, directors, employees, agents or representatives)
makes any other representation or warranty, express or implied, and Seller and
Penril hereby disclaim any such representation or warranty, whether by Seller,
Penril or any of their respective officers, directors, employees, agents or
representatives or any other person with respect to the execution, delivery or
performance by Seller or Penril of this Agreement or with respect to the
transactions contemplated hereby, notwithstanding the delivery or disclosure to
Purchaser or any of its Affiliates, officers, directors, employees, agents or
representatives or any other person of any documentation or other information
by Seller, Penril or any of their respective officers, directors, employees,
agents or representatives or any other person with respect to any one or more
of the foregoing. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE V, PURCHASER IS
PURCHASING THE ACQUIRED ASSETS "AS IS", "WHERE IS" AND "WITH ALL FAULTS", AND
SELLER AND PENRIL EXPRESSLY DISCLAIM ALL REPRESENTATIONS
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OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, IMPLIED WARRANTIES OF FITNESS AND MERCHANTABILITY
SHALL NOT APPLY.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and Penril as
follows:
6.01 Corporate Organization: Etc. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its State of
incorporation and has full corporate power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns. Purchaser has full corporate power and authority to execute, deliver
and carry out the terms of this Agreement and all related documents and
instruments and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and any and all related
documents or instruments to be executed and delivered by Purchaser. This
Agreement and all related documents or instruments to be executed and delivered
by Purchaser have been duly and validly authorized, and this Agreement
constitutes a valid and binding agreement of Purchaser and all such related
documents or instruments constitute valid and binding obligations thereof,
enforceable in accordance with their terms.
6.02 Consents and Approvals of Governmental Authorities No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental authority is required on the part of Purchaser in connection with
the execution, delivery and performance of this Agreement or the consummation
of the transactions contemplated hereby.
6.03 Creditor's Arrangement. Purchaser has not made any assignment
for the benefit of creditors, nor does Purchaser presently have any plans or
intentions to do so, nor has any involuntary or voluntary petition in
bankruptcy been filed by or against Purchaser.
6.04 No Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provision of the Certificate of Incorporation or By-Laws of
Purchaser, or violate, or be in conflict with, or constitute a default under,
or cause the acceleration of the maturity of any debt or obligation pursuant
to, or result in the creation or imposition of any security interest, lien or
other encumbrance upon any property or assets of Purchaser under any agreement
or commitment to which Purchaser is a party or by which Purchaser is bound, or
to which the property of Purchaser is subject, or violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.01 Survival of Representations and Warranties. All
representations and warranties made by any party in this Agreement shall
survive the Closing hereunder and any investigation at any time made by or on
behalf of any other party for a period of twelve months following the Closing.
Anything in this Agreement to the contrary notwithstanding, no claim based upon
misrepresentation or breach or representation or warranty shall be made, no
litigation with respect thereto commenced, and no remedy shall be available
unless written notice specifying with particularity the misrepresentation or
breach claimed shall have been delivered on or prior to the expiration of such
period.
7.02 Indemnification by Seller and Penril. Subject to the
limitations, conditions and adjustments set forth in this Article VII, Seller
and Penril, jointly and severally, agree to indemnify, defend and hold
Purchaser harmless from and against any demands, claims, losses, damages, costs
and expenses, including, without limitation, interest, costs, penalties and
reasonable attorneys' fees (collectively, "Damages") asserted against,
resulting to, imposed upon or incurred or suffered by Purchaser as a result of
or arising from any breach of any representation, warranty, covenant or
agreement of Seller or Penril contained in this Agreement.
7.03 Indemnification by Purchaser. Subject to the limitations,
conditions and adjustments set forth in this Article VII, Purchaser agrees to
indemnify, defend and hold Seller and Penril harmless from and against any and
all Damages asserted against, resulting to, imposed upon or incurred or
suffered by Seller or Penril as a result of or arising from any breach of any
representation, warranty, covenant or agreement of Purchaser contained in this
Agreement.
7.04 Limitations on Indemnification; Adjustments. (a) The remedies
provided in this Article VII shall be exclusive and shall preclude assertion by
any party of any other rights or the seeking of any and all other remedies
against any other for claims based on this Agreement.
(b) Any claims for indemnity under this Agreement shall
be subject to the following limitations and adjustments: (i) the provisions of
Section 7.02 shall be effective only when the aggregate amount of all Damages
for which Seller and Penril may be liable under this Article VII exceeds
$35,000, in which case Seller and Penril shall be liable for only such amounts
as exceed $35,000; (ii) the amount of any claim by any party for
indemnification shall be subject to adjustment to reflect (A) any actual direct
or indirect income tax benefit (taking into account the amount of any
indemnification actually received) resulting therefrom to the indemnified
party, (B) any insurance coverage with respect thereto and (C) any amounts
recoverable from third parties based on claims the indemnified party has
against such third parties which would reduce the
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damages that could otherwise be sustained; and (iii) in no event shall Seller
and Penril be liable, in the aggregate, for indemnification hereunder in an
amount greater than $350,000 ( the "Cap").
(c) No party hereto shall be liable to any other party
for special, incidental, consequential or punitive damages, however arising.
7.05 Conditions of Indemnification. (a) Any party claiming a right
to indemnification hereunder (an "Indemnified Party") shall give prompt written
notice to the other party (the "Indemnifying Party") of the commencement of any
action, audit, investigation, suit or proceeding, the receipt of any demand or
the occurrence of any item or incident in connection with which the Indemnified
Party bases its claim for indemnification from the Indemnifying Party under
this Article VII;
(b) Upon notice from the Indemnified Party, the
Indemnifying Party may assume the defense of any such action, audit,
investigation, suit, proceeding or demand, including its compromise or
settlement, and the Indemnifying Party shall pay all reasonable costs and
expenses thereof and shall be fully responsible for the outcome thereof,
subject to the provisions of Section 7.04. The Indemnifying Party shall give
notice to the Indemnified Party as to its intention to assume the defense of
any such action, audit, investigation, suit, proceeding or demand within
fifteen (15) days after the date of the Indemnified Party's notice thereof. If
the Indemnifying Party assumes the defense of such action, audit,
investigation, suit, proceeding or demand, (i) no compromise or settlement
thereof may be effected by the Indemnifying Party without the Indemnified
Party's consent (which shall not unreasonably be withheld) unless the sole
relief is monetary damages that are paid in full by the Indemnifying Party and
(ii) the Indemnifying Party shall have no liability with respect to any
compromise or settlement thereof effected without its consent (which shall not
unreasonably be withheld). If the Indemnifying Party does not, within fifteen
(15) days after the receipt of written notice from the Indemnified Party, give
notice to the Indemnified Party of its assumption of the defense of the action,
audit, investigation, suit, proceeding or demand in question, the Indemnifying
Party shall be bound by the Indemnified Party's control of the defense thereof
and by any determination made in such action, audit, investigation, suit,
proceeding or demand by a court or decision maker of competent jurisdiction.
ARTICLE VIII
CONDUCT OF BUSINESS PENDING THE CLOSING
Pending the Closing, and except as otherwise consented to or approved
by Purchaser in writing, Seller shall carry on its business substantially in
the manner as heretofore conducted, and Seller shall not institute any new
methods of manufacture, purchase, sale, lease, management,
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<PAGE> 19
accounting or operation or engage in any transaction or activity, enter into
any agreement or make any commitment, except in the ordinary course of
business. Seller shall also use reasonable efforts to preserve its
relationships with customers and suppliers.
ARTICLE IX
OBLIGATIONS PENDING THE CLOSING
Seller and Penril hereby jointly and severally covenant and agree with
Purchaser, and Purchaser hereby covenants and agrees with Seller and Penril
that:
9.01 Full Access. Seller shall afford to Purchaser, its counsel,
accountants and other authorized representatives full access during normal
business hours to the facilities, books, records and personnel of Seller in
order that Purchaser may have full opportunity to make such investigations as
it shall desire to make of the affairs of Seller.
9.02 Confidentiality. Each party will hold and will cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all documents and information concerning
the party furnished it by such other party or its representatives in connection
with the transactions contemplated by this Agreement (except to the extent that
such information can be shown to have been in the public domain through no
fault of such party) and each party will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors in connection with this
Agreement. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information comes into public domain through no fault in the party required to
hold in confidence, and such information shall not be used to the detriment of
the other party, and all such documents (including copies thereof) shall
immediately thereafter be returned to the other party upon the written request
of such other party.
9.03 No Public Announcement. No party hereto shall make any
announcement concerning this Agreement or the transactions contemplated thereby
without the prior written approval of the other parties, which approval shall
not be unreasonably withheld, except announcements which in the opinion of
counsel to a party are required by law, as to which the other parties shall be
given a reasonable opportunity to comment.
ARTICLE X
CONDITIONS TO PURCHASER'S OBLIGATIONS
Each and every obligation of Purchaser under this Agreement to be
performed on or before the Closing Date shall be subject to the satisfaction,
on or before the Closing Date, of each of the following conditions, unless
waived in writing by Purchaser:
14
<PAGE> 20
10.01 Representations and Warranties True. The representations and
warranties of Seller and Penril contained in Article V hereof shall be true and
accurate in all material respects as of the date when made and at and as of the
Closing Date as though such representations and warranties were made at and as
of such date, except for changes expressly permitted by the terms of this
Agreement.
10.02 Performance. Seller and Penril shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
10.03 Absence of Material Adverse Change. Seller shall not have
suffered any Material Adverse Change.
10.04 Financing. Purchaser shall have completed arrangements,
satisfactory to it, with investors and/or financial institutions for the
financing of the transactions contemplated hereby (and Purchaser shall use its
best efforts to secure such financing).
10.05 Certificates. Seller and Penril shall have furnished
Purchaser with such certificates of their respective officers to evidence
compliance with the conditions set forth in this Article X as may reasonably be
requested by Purchaser.
ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF SELLER AND PENRIL
Each and every obligation of Seller and Penril under this Agreement to
be performed on or before the Closing Date shall be subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, unless waived in writing by Seller and Penril.
11.01 Representations and Warranties True. The representations and
warranties of Purchaser contained in Article VI hereof shall be true and
accurate in all material respects as of the date when made and at and as of the
Closing Date as though such representations and warranties were made at and as
of the such date, except for changes expressly permitted by the terms of this
Agreement.
11.02 Performance. Purchaser shall have performed and complied with
all agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
15
<PAGE> 21
11.03 Certificates. Purchaser shall have furnished Seller and
Penril with such certificates of its officers to evidence compliance with the
conditions set forth in this Article XI as may reasonably be requested by
Seller and Penril.
ARTICLE XII
TERMINATION AND REMEDIES
12.01 Termination. Anything in this Agreement to the contrary
notwithstanding:
(a) Mutual Consent. This Agreement may be terminated by
the mutual consent of the parties hereto.
(b) Termination by Seller and Penril. This Agreement may
be terminated by Seller and Penril pursuant to Section 4.11(c) hereof.
(c) Default. In the event that a party hereto shall,
contrary to the terms of this Agreement, intentionally fail or refuse to
consummate the transactions contemplated herein or to take any other action
referred to herein necessary to consummate the transactions contemplated
herein, the non-defaulting party, after affording the defaulting party a 5-day
period after notice in which to cure such breach or default, shall have the
right, in addition to the other rights specified in Section 12.02 below, to
terminate this Agreement by written notice given to the other party hereto.
(d) Upset Date. In the event that the Closing shall not
have occurred on or prior to December 18, 1996, then, unless otherwise agreed
to in writing between the parties hereto, this Agreement shall terminate on or
following such date (as such date may be postponed pursuant hereto), upon
written notice given by one party to the other, unless the absence of such
occurrence shall be due to the failure or refusal of the party seeking to
terminate this Agreement of the type described in Section 12.01(c).
12.02 Remedies.
(a) Specific Performance. Subject to compliance with the
terms of Section 12.02 (d) hereof, any party desiring to proceed with the
Closing despite any intentional failure or refusal of the other party hereto of
the type described in Section 12.01(c) hereof shall have the right to pursue
the remedy of specific performance.
(b) Damage. Subject to compliance with the terms of
Section 12.02(d) hereof, any party terminating this Agreement pursuant to
Section 12.01(c) hereof shall, if the failure or refusal referred to in Section
12.01(c) hereof constituted a willful and material breach of this Agreement,
have the right to sue for actual damages and all reasonable out-of-pocket costs
and expenses theretofore suffered and sustained by the nondefaulting party.
16
<PAGE> 22
(c) Effect of Termination. Except as set forth in
Section 12.02(b) above, any termination of this Agreement by either party
hereto shall have the effect of causing this Agreement to thereupon become void
and of no further force or effect whatsoever, and thereupon neither party
hereto will have any rights, duties, liabilities or obligations of any kind or
nature whatsoever against any other party hereto based upon either this
Agreement or the transactions contemplated hereby, except in each case the
obligations of each party for its own expenses incurred in connection with the
transactions contemplated by this Agreement as provided in Section 13.04 and
the obligations of each party with respect to confidentiality set forth in
Section 9.02 hereof.
(d) Cure Period. Any party seeking any form of relief
referred to in Sections 12.02(a) or (b) hereof shall, as a condition to the
right to seek such relief, afford the defaulting party hereto with a 5-day
period to effect reasonable cure of such breach if default.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.01 Commissions and Finders' Fees. Each of the parties represents
that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller and Penril directly with
Purchaser and in such manner as not to give rise to any claims against any of
the parties hereto for a brokerage commission, finders' fee or other like
payment. Insofar as any such claims are made which are alleged to be based on
an agreement or arrangements made by, or on behalf of, a party, such party
agrees to indemnify and hold the other parties harmless from and against all
liability, loss, cost, charge or expense, including reasonable counsel fees,
arising therefrom.
13.02 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by written agreement of all parties hereto.
13.03 Waiver of Compliance. Any failure of Seller or Penril, on the
one hand, or Purchaser on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by Purchaser
or Seller and Penril, respectively, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
13.04 Expenses. Each of the parties hereto will pay its own
expenses incurred by it or on its behalf in connection with this Agreement or
any transaction contemplated by this Agreement, whether or not such transaction
shall be consummated, including, without limitation, all fees of their
respective counsel, and accountants. Purchaser shall pay all sales and
transfer taxes incurred in connection with the transactions contemplated by
this Agreement.
17
<PAGE> 23
13.05 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or mailed, certified or
registered mail with postage prepaid or delivered by express delivery or
facsimile transmission (with copy by mail):
(a) If to Seller or Penril, to:
Penril DataComm Networks, Inc.
1300 Quince Orchard Blvd.
Gaithersburg, MD 20878-4106
Attention: President
Fax No. (301) 948-5761
or to such other person or address as Seller or Penril shall furnish to
Purchaser in writing.
(b) If to Purchaser, to:
EMI Holding Corp.
269 Guy Park Avenue
Amsterdam, New York 12010
Attention: President
Fax No. (518) 762-2812
or to such other person or address as Purchaser shall furnish to Seller and
Penril in writing.
13.06 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other party, except that
all rights, duties, liabilities and obligations of Seller and Penril hereunder
may, without any additional consideration or any action or approval of any
other party, be assigned to and assumed by Access Beyond, Inc., a Delaware
corporation which is currently, but is not expected to continue to be, a
wholly-owned subsidiary of Penril, as a result of a spin-off and related merger
transaction, whereupon Access Beyond, Inc. shall have all the rights, duties,
liabilities and obligations of Seller and Penril hereunder, Seller and Penril
shall have no further rights (except that, without limiting the rights of
Access Beyond, Inc., Penril and Seller shall continue to have the rights
provided in Section 7.03 of this Agreement), duties, liabilities or obligations
hereunder, and Seller and Penril shall be automatically released and discharged
from and after the date of such assignment from any and all duties, liabilities
and obligations pursuant to this Agreement or any other agreement or
transaction contemplated hereby, including, without limitation, any
liabilities, obligations or duties under Article VII.
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13.07 Governing Law. This Agreement and the legal relations among
the parties hereto shall be governed by and construed in accordance with the
laws of the State of New York without regard to its conflicts of law doctrine.
13.08 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
13.09 Headings. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.
13.10 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto and other documents and certificates delivered pursuant to the
terms hereof, set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and supersede all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer,
employee or representative of any party hereto.
13.11 Third Parties. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than the
parties hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
13.12 Mutual Agreement. This Agreement embodies the arms-length
negotiation and mutual agreement between the parties hereto and shall not be
construed against either party as having been drafted by it.
13.13 Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of such provision in any other
jurisdiction or its application to other parties or circumstances. In
addition, if any one or more of the provisions contained in this agreement
shall for any reason in any jurisdiction be held to be excessively broad as to
time, duration, geographical scope, activity or subject, it shall be construed,
by limiting and reducing it, so as to be enforceable to the extent compatible
with the application law of such jurisdiction as it shall then appear.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
each corporate party by its duly authorized officer, all as of the day and year
first above written.
EMI HOLDING CORP.
By:
-------------------------
Title
ELECTRO-METRICS, INC.
By:
-------------------------
Title
PENRIL DATACOMM NETWORKS, INC.
By:
-------------------------
Title
Solely for the purpose of agreeing to be bound by Sections 4.10 and 4.11(b) of
this Agreement.
- -------------------------
Kenneth W. Bach
20
<PAGE> 26
Exhibit A
INSTRUMENT OF ASSUMPTION
OF ASSUMED LIABILITIES
--------------------------------
Instrument of Assumption of Liabilities made as of _____, 1996 by EMI
Holding Corp., a Delaware corporation ("Obligor"), in favor of Electro-Metrics,
Inc., a Delaware corporation ("Seller"), pursuant to an Asset Purchase
Agreement dated November 13, 1996 (the "Agreement") among Obligor, Seller and
Penril DataComm Networks, Inc.
In consideration of the sale, pursuant to the Agreement, by Seller to
Obligor of certain of Seller's assets, Obligor, pursuant to Section 2.02(b) of
the Agreement, hereby assumes all the "Assumed Liabilities" (as defined in the
Agreement).
The assumption by Obligor of the Assumed Liabilities shall not be
construed to defeat, impair or limit in any way any rights or remedies of
Obligor to contest or dispute the validity or amount thereof.
For the consideration aforesaid, Obligor, for itself and its
successors and assigns has covenanted, and by this Instrument of Assumption of
Liabilities does covenant, with Seller, its successors and assigns, that
Obligor and its successors and assigns, will do, execute and deliver, or will
cause to be done, executed and delivered, all such further acts and instruments
which Seller may reasonably request in order to more fully effectuate the
assumption of liabilities provided for in this Instrument.
IN WITNESS WHEREOF, this Instrument of Assumption of Liabilities has
been duly executed and delivered by the duly authorized officers of Obligor as
of the date first above written.
EMI HOLDING CORP.
[Corporate Seal]
By:
-------------------------
Title:
Attest:
- -------------------------
Title:
21
<PAGE> 27
STATE OF
----------------------- )
: ss.
COUNTY OF
------------------------)
On the ___ day of ______, 1996, before me personally came
________________________________________________to me known, who, being by me
duly sworn, did depose and say that s/he resides at
_______________________________________________________, that s/he is the
________________________ of EMI Holding Corp., the corporation described in and
which executed the foregoing instrument; that s/he signed his/her name on
behalf of the and by order of the board of directors of said corporation.
------------------------------------
Notary Public
22
<PAGE> 28
Exhibit B
INDENTURE, BILL OF SALE AND
ASSIGNMENT OF ASSETS
----------------------------------
THIS INDENTURE, BILL OF SALE AND ASSIGNMENT, made, executed and
delivered as of ____, 1996 by Electro-Metrics, Inc., a Delaware corporation
("Grantor"), to EMI Holding Corp., a Delaware corporation ("Grantee").
W I T N E S E T H :
WHEREAS, the Asset Purchase Agreement, dated November 13, 1996 (the
"Agreement") among Grantee, Grantor and Penril DataComm Networks, Inc. provides
for, among other things, the transfer and sale to Grantee of certain assets and
rights, all as more fully described in the Agreement, for consideration in the
amount and on the terms and conditions provided in the Agreement; and
WHEREAS, all of the terms and conditions precedent provided in the
Agreement have been met and performed by the respective parties thereto, and
the parties now desire to carry out the intent and purpose of the Agreement by
Grantor's execution and delivery to Grantee of this instrument evidencing the
vesting in Grantee of all of the assets and rights hereinafter described, in
addition to such other instruments as Grantee shall have otherwise received or
may hereafter reasonably request.
NOW, THEREFORE, in consideration of the premises and of other valuable
consideration to Grantor in hand paid by Grantee, at or before the execution
and delivery hereof, the receipt and sufficiency of which by Grantor is hereby
acknowledged, Grantor has conveyed, granted, bargained, sold, transferred, set
over, assigned, alien, remised, released, delivered and confirmed; and by this
Indenture and Bill of Sale does convey, grant, bargain, sell, transfer, set
over, assign, alien, remise, release, deliver and confirm unto Grantee, its
successors and assigns forever, all of the "Acquired Assets" (as defined and
described in the Agreement).
TO HAVE AND TO HOLD all of the Acquired Assets unto Grantee, its
successors and assigns to its and their own use and behoove forever.
Section 1. Grantor hereby constitutes and appoints Grantee, its
successors and assigns, Grantor's true and lawful attorney and attorneys, with
full power of substitution, in Grantor's name and stead, but on behalf and for
the benefit of Grantee, its successors and assigns, to demand and receive any
and all of the Acquired Assets, and to give receipts and releases for and in
respect of the same, and any part thereof, and from time to time to institute
and prosecute in Grantor's name, or otherwise, for the benefit of Grantee, its
successors and assigns, any and all proceedings at law, in equity or otherwise,
which Grantee, its successors or assigns, may deem proper for the collection or
reduction to possession
23
<PAGE> 29
of any of the Acquired Assets or for the collection and enforcement of any
claim or right of any kind hereby sold, conveyed, transferred and assigned, or
intended so to be, and to do all acts and things in relation to the Acquired
Assets which Grantee, its successors or assigns shall deem desirable, Grantor
hereby declaring that the foregoing powers are coupled with an interest and are
and shall be irrevocable by Grantor or by Grantor's dissolution or in any
manner or for any reason whatsoever.
Section 2. Grantor further authorizes Grantee, its successors
and assigns, to receive and open all mail, telegrams and other communications,
and all express or other packages, addressed to Grantor or to any of their
officers and to retain the same insofar as they relate to the Acquired Assets,
but any such mail, telegrams, communications or express or other packages not
relating to the Acquired Assets shall be forwarded with reasonable dispatch to
the Grantor. The foregoing shall constitute full authorization to the postal
authorities, all telegraph and express companies, and all other persons to make
delivery of such items to Grantee.
Section 3. Grantor hereby covenants that, from time to time
after the delivery of this instrument, at Grantee's request and without further
consideration, Grantor will do, execute, acknowledge, and deliver, or will
cause to be done, executed, acknowledged and delivered, all and every such
further acts, deeds, conveyances, transfers, assignments, powers of attorney
and assurances as reasonably may be required more effectively to convey,
transfer to and vest in Grantee, and to put Grantee in possession of, any of
the Acquired Assets.
Section 4. Notwithstanding any of the provisions of the
foregoing, this instrument shall not constitute an assignment to Grantee of any
claim (including but not limited to claims for refunds of taxes), contract,
license, lease, commitment, sales order or purchase order if an attempted
assignment of the same without the consent of the other party thereto would
constitute a breach thereof or in any way impair the rights of Grantor
thereunder; provided, however, that in the case of any of the foregoing,
Grantor shall endeavor to obtain such consents promptly and if any be
unobtainable, to use its best efforts to assure to Grantee the benefits
thereof.
Section 5. Nothing in this instrument, express or implied, is
intended or shall be construed to confer upon, or give to, any person, firm or
corporation other than Grantee and its successors and assigns, any remedy or
claim under or by reason of this instrument or any terms,
24
<PAGE> 30
covenants or condition hereof, and all the terms, covenants or condition
hereof, and all the terms, covenants and conditions, promises and agreements in
this instrument contained shall be for the sole and exclusive benefit of
Grantee and its successors and assigns.
Section 6. This instrument is executed by, and shall be binding
upon, Grantor, its successors and assigns, for the uses and purposes above set
forth and referred to, effective immediately upon its delivery to Grantee.
IN WITNESS WHEREOF, Grantor have caused this Bill of Sale to be
signed, by its duly authorized officers and its corporate seal to be affixed
hereto on the date first above written.
ELECTRO-METRICS, INC.
By:
--------------------------
Title:
Attest:
- ----------------------------
Secretary
(CORPORATE SEAL)
25
<PAGE> 31
STATE OF
----------------------)
:ss.
COUNTY OF
----------------------)
On the ___ day of ____, 1996, before me personally came
____________________to me known, who, being by me duly sworn, did depose and
say that s/he resides at ______________________ that s/he is the_______________
of Electro-Metrics, Inc., the corporation described in and which executed the
foregoing instrument; that s/he signed his/her name on behalf of the
corporation and by order of the board of directors of said corporation.
-----------------------------------
Notary Public
26
<PAGE> 32
Access Beyond, Inc.
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878-4106
VIA FACSIMILE
EMI Holding Corp.
269 Guy Park Avenue January 6, 1997
Amsterdam, NY 12010
RE: ASSET PURCHASE AGREEMENT
Gentlemen:
Reference is made to the Asset Purchase Agreement dated November 13,
1996 (the "Agreement") among EMI Holding Corp., Electro-Metrics, Inc. and
Penril DataComm Networks, Inc. Unless otherwise indicated, capitalized terms
used herein shall have the same meaning as in the Agreement.
The parties acknowledge that pursuant to Section 13.06 of the
Agreement, Penril has assigned all of its rights, duties, liabilities and
obligations under the Agreement to Access Beyond, Inc. As used herein,
"Penril" shall mean Access Beyond, Inc., a Delaware corporation.
1. Amendments to the Agreement.
(A) Section 2.02 of the Agreement is hereby deleted in its
entirety and the following new Section 2.02 substituted therefor:
"2.02 Consideration. In consideration of the sale,
assignment, transfer and delivery of the Acquired Assets,
Purchaser shall:
(a) pay to Seller in cash at the Closing, by
certified or official bank check or wire transfer of funds to
an account designated by Seller, the sum of $3,000,000;
(b) issue and deliver to Seller a subordinated
promissory note of Purchaser (the "Note") in form and
substance satisfactory to Seller which shall: be payable in
one installment on the fifth anniversary of the Closing; pay
interest in monthly installments at a variable rate at all
times equal to 2% above the rate charged to Purchaser by its
bank lender; be subordinated to Purchaser's indebtedness to
its bank lender, provided the principal balance of such
debt shall at no time exceed $5,000,000; and provide that if
the Note is prepaid in full on or before the first anniversary
of the Closing, all interest paid prior to the prepayment date
shall be credited against the principal amount otherwise
payable;
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<PAGE> 33
(c) in repayment of cash advances from Penril to
Seller, issue and deliver to Seller at the Closing the number
of shares of Purchaser's Common Stock, $.001 par value per
share ("Purchaser Stock"), equal to twelve percent (12%) of
the Purchaser Stock outstanding after giving effect to the
issuance of such shares on a fully diluted basis; provided
that the number of such shares issued and delivered at Closing
shall be subject to adjustment as follows: (i) for each
additional $50,000 cash advance made by Penril to Seller from
January 1, 1997 to the Closing Date, the number of shares of
Purchaser Stock issuable to Seller hereunder shall be
increased by that number of shares equal to one percent (1%)
of the outstanding Purchaser Stock outstanding after giving
effect to the issuance of such shares; and (ii) for each
$50,000 cash repaid by Seller to Penril from January 1, 1997
to the Closing Date, the number of shares of Purchaser Stock
issuable to Seller hereunder shall be decreased by a like one
percent (1%), provided that nothing in this Agreement require
Penril to make further advances to Seller; and
(d) assume the Assumed Liabilities and deliver
to Seller at the Closing an Instrument of Assumption in the
form of Exhibit A hereto."
(B) Subsection 3.03(a) is hereby deleted in its entirety
and the following substituted therefor:
"(a) the consideration set forth in subsection
2.02(a) and (d), the Note and certificates representing the
shares of Purchaser Stock to be issued to Seller pursuant to
subsection 2.02(c), registered in the name of Seller and
otherwise in form acceptable for transfer on the books of
Purchaser, with all requisite stock transfer tax stamps
attached."
(C) The Agreement is hereby amended to add a new Section
4.12 thereto to read as follows:
"4.12 Stock Agreement. At the Closing, Seller,
Purchaser and Bach shall execute and deliver an agreement (the
"Stock Agreement"), in form and substance satisfactory to
Seller, providing, inter alia; (a) an option for Seller to
resell the shares of Purchaser Stock held by it to Purchaser
for an aggregate price equal to the sum of $400,000, plus the
amount of any additional advances made by Penril to Seller
from January 1, 1997 to the Closing Date (or minus any amount
repaid to Penril by Seller from January 1, 1997 to the Closing
Date) plus a return on that sum calculated at twenty percent
(20%) per annum, compounded annually, with the option to be
exercisable at any time after the fifth anniversary of the
Closing but before the close of business on the sixth
anniversary; (b)
2
<PAGE> 34
registration rights, including one demand registration
exercisable only after Purchaser's IPO, if any, and piggyback
rights; (c) tag-along rights with respect to any sale by Bach of
his shares of Purchaser Stock or any sale of Purchaser, however
structured; (d) preemptive rights, granting Seller the right to
purchase its proportional share of any additional shares of
Purchaser Stock or securities convertible, exchangeable or
exercisable for shares of Purchaser Stock offered by Purchaser,
except for shares of Purchaser Stock offered pursuant to
employee stock option and purchase plans to employees of
Purchaser other than Bach, which shares in the aggregate shall
not exceed 8% of the shares of Purchaser Stock outstanding; and
(e) appropriate representations and warranties with respect to
the Purchaser Stock."
(D) The Agreement is amended to renumber existing Section 11.03
as Section 11.04 and to add a new Section 11.03 to read as follows:
"11.03 Stock Agreement. The Stock Agreement shall have
been executed and delivered by the parties thereto."
(E) Subsection 12.01(d) is hereby amended to delete the date
"December 18, 1996" and to insert "January 31, 1997."
2. Section Headings. The Section headings in this letter agreement
are for convenience of reference only and are not a part of this letter
agreement.
3. Governing Law. This letter agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of law doctrine.
4. Effect of Amendment. Except as amended and supplemented hereby,
all of the terms, conditions, provisions, and covenants of the Agreement shall
remain and continue in full force and effect and are hereby ratified, repeated
and confirmed in all respects.
5. Entire Agreement. The Agreement as supplemented and amended by
this letter agreement constitutes the entire agreement and understanding among
the parties and supersedes any and all prior agreements and understandings
relating to the subject matter hereof.
6. Counterparts: Effectiveness. This letter agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This letter agreement shall not be effective and binding upon the
parties until signed by all of them.
3
<PAGE> 35
Please acknowledge your agreement to the foregoing by signing where
indicated on the enclosed duplicate copy of this letter agreement and returning
it to the undersigned.
Very truly yours,
ACCESS BEYOND, INC.
By:
---------------------------
Title
ELECTRO-METRICS, INC.
By:
---------------------------
Title
AGREED TO:
EMI HOLDING CORP.
By: /s/ [SIG]
----------------------------
Title President
1/6/97
4
<PAGE> 36
Access Beyond, Inc.
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878-4106
VIA FACSIMILE
EMI Holding Corp.
269 Guy Park Avenue February 26, 1997
Amsterdam, NY 12010
RE: ASSET PURCHASE AGREEMENT
Gentlemen:
Reference is made to the Asset Purchase Agreement dated November 13, 1996,
as amended by letter agreement dated January 6, 1997 (as so amended, the
"Agreement"), among EMI Holding Corp., Electro-Metrics, Inc. and Penril DataComm
Networks, Inc. Unless otherwise indicated, capitalized terms used herein shall
have the same meaning as in the Agreement.
As used herein, "Penril" shall mean Access Beyond, Inc., a Delaware
corporation to which Penril has assigned all of its rights, duties, liabilities
and obligations under the Agreement pursuant to Section 13.06 thereof.
The parties desire to further amend the Agreement as follows.
1. Amendments to the Agreement.
(A) Section 2.02 of the Agreement is hereby deleted in its
entirety and the following new Section 2.02 substituted therefor:
"2.02 Consideration. In consideration of the sale,
assignment, transfer and delivery of the Acquired Assets,
Purchaser shall:
(a) pay to Seller in cash at the Closing, by
certified or official bank check or wire transfer of funds to an
account designated by Seller, the sum of $2,000,000;
(b) issue and deliver to Seller at the Closing a
subordinated promissory note of Purchaser in the principal amount
of $1,000,000 (the "2 Year Note"), in form and substance
satisfactory to Seller which shall: mature on the second
anniversary of the Closing; require payments of principal and
interest in quarterly installments of $50,000 each, commencing on
the Closing Date; bear interest at a variable rate at all times
equal to the rate charged to Purchaser by its
1
<PAGE> 37
bank lender; be subordinated to Purchaser's indebtedness to its bank lender,
provided the principal balance of such debt shall at no time exceed $5,000,000;
accelerate upon default or upon a sale or change of control or IPO of Purchaser;
and require Purchaser to use its best efforts to obtain additional credit and to
apply 100% of credit obtained under new facilities or guarantees and 75% of all
increases in availability under its existing facilities to prepayment of the 2
Year Note;
(c) issue and deliver to Seller at the Closing a subordinated note of
Purchaser in the principal amount of $500,000 (the "5 Year Note"), in form and
substance satisfactory to Seller which shall: be payable in one installment of
principal on the fifth anniversary of the Closing; bear interest at a variable
rate at all times equal to 2% above the rate charged to Purchaser by its bank
lender; be subordinated in the same manner as the 2 Year Note; accelerate upon
default (including default under the 2 Year Note) or upon a sale or change of
control or IPO of Purchaser; and require monthly payments of accrued interest
commencing on the first day of the month following that in which the 2 Year Note
is repaid in full.
(d) in repayment of cash advances from Penril to Seller, issue and
deliver to Seller at the Closing seven-year warrants (the "Warrants"), in form
and substance satisfactory to Seller, to purchase at $.001 per share, shares of
Purchaser's Non-voting Convertible Preferred Stock, $.001 par value per share
("Preferred Stock"), which shall be convertible in the aggregate into that
number of shares of Purchaser's Common Stock ("Common Stock") as will equal
twelve percent (12%) of the Common Stock outstanding on the date of conversion
of the Preferred Stock, after giving effect to the issuance of such shares on a
fully diluted basis; provided that the number of shares of Common Stock issuable
upon conversion of the Preferred Stock shall be adjusted at Closing as follows:
(i) for each additional $50,000 cash advance made by Penril to Seller from
January 1, 1997 to the Closing Date, the number of shares of Common Stock
issuable upon conversion of the Preferred Stock shall be increased by that
number of shares equal to one percent (1%) of the Common Stock outstanding on
the date of conversion of the Preferred Stock after giving effect to the
issuance of such shares on a fully diluted basis; and (ii) for each $50,000 cash
advance repaid by Seller to Penril from January 1, 1997 to the Closing Date, the
number of shares of Purchaser Stock issuable upon conversion of the Preferred
Stock shall be decreased by a like one percent (1%), further provided that
nothing in this Agreement shall require Penril to make further advances to
Seller. The Preferred Stock shall be non-voting, shall pay dividends equal to
any dividends paid on the underlying Common Stock, shall have a liquidation
preference over Common Stock equal to the amount that would be
2
<PAGE> 38
payable with respect to the Preferred Stock or the underlying Common
Stock pursuant to the resale option provided to the holder pursuant to
the Warrant Agreement (as hereinafter defined), and shall not be
redeemable, except at the option of the holder as provided in the
Warrant Agreement; and
(e) assume the Assumed Liabilities and deliver to Seller at
the Closing an Instrument of Assumption in the form of Exhibit A
hereto."
(B) Subsection 3.03(a) of this Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(a) the consideration set forth in subsection 2.02(a) and (d),
the 2 Year Note, the 5 Year Note and the Warrants."
(C) Section 4.12 of the Agreement is hereby deleted in its entirety
and the following substituted therefor:
"4.12 Warrant Agreement. At the Closing, Seller, Purchaser
and Bach shall execute and deliver an agreement (the "Warrant
Agreement"), in form and substance satisfactory to Seller, providing,
inter alia: (a) an option for Seller to resell the Warrants or
underlying shares of Preferred Stock or Common Stock to Purchaser for
an aggregate price equal to the sum of $400,000, plus the amount of any
additional advances made by Penril to Seller from January 1, 1997 to
the Closing Date (or minus any amount repaid to Penril by Seller from
January 1, 1997 to the Closing Date) plus a return on that sum
calculated at 2% above the rate of interest charged to Purchaser by its
bank lender from time to time, compounded annually, with the option to
be exercisable at any time after the fifth anniversary of the Closing
but before the close of business on the seventh anniversary or earlier
upon a sale or change of control or IPO of the Purchaser; (b)
registration rights relating to the underlying Common Stock, including
one demand registration exercisable only after Purchaser's IPO, if any,
and piggyback rights; (c) tag-along rights with respect to any sale by
Bach of his shares of Common Stock or any sale of Purchaser, however
structured; and (d) appropriate representations and warranties with
respect to the Warrants and the underlying Preferred Stock and Common
Stock."
(D) Section 11.03 of the Agreement is hereby deleted in its
entirety and the following substituted therefor:
"11.03 Warrant Agreement. The Warrant Agreement shall have
been executed and delivered by the parties thereto."
3
<PAGE> 39
(E) Subsection 12.01(d) is hereby amended to delete the date
"January 31, 1997" and to insert "March 31, 1997."
2. Section Headings. The Section headings in this letter agreement
are for convenience of reference only and are not a part of this letter
agreement.
3. Governing Law. This letter agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of law doctrine.
4. Effect of Amendment. Except as amended and supplemented hereby,
all of the terms, conditions, provisions and covenants of the Agreement shall
remain and continue in full force and effect and are hereby ratified, repeated
and confirmed in all respects.
5. Entire Agreement. The Agreement as supplemented and amended by
this letter agreement constitutes the entire agreement and understanding among
the parties and supersedes any and all prior agreements and understandings
relating to the subject matter hereof.
6. Counterparts: Effectiveness. This letter agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This letter agreement shall not be effective and binding upon the
parties until signed by all of them.
Please acknowledge your agreement to the foregoing by signing where
indicated on the enclosed duplicate copy of this letter agreement and returning
it to the undersigned.
Very truly yours,
ACCESS BEYOND, INC.
By:
----------------------------
Title
ELECTRO-METRICS, INC.
By:
----------------------------
Title
AGREED TO:
EMI HOLDING CORP.
By:
----------------------------
Title
4
<PAGE> 40
EMI Holding Group
259 Guy Park Avenue
Amsterdam, NY 12010
April 17, 1997
Access Beyond, Inc.
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878-4106
Re: Asset Purchase Agreement
Gentlemen:
Reference is made to the Asset Purchase Agreement dated November 13,
1996, as amended by letter agreements dated January 6, 1997, and February 26,
1997 (as so amended, the "Agreement"), among EMI Holding Corp.,
Electro-Metrics, Inc. and Penril DataComm Networks, Inc. Unless otherwise
indicated, capitalized terms used herein shall have the same meaning as in the
Agreement.
Penril has assigned all of its rights, duties, liabilities and
obligations under the Agreement to Access Beyond, Inc. a Delaware Corp.
pursuant to Section 13.06 thereof. Thus Access Beyond has been substituted for
Penril in all purposes of the Agreement.
The parties desire to further amend the Agreement as follows.
1. Amendments to the Agreement
(A) Section 2.02 of the Agreement is hereby deleted in its entirety
and the following new Section 2.02 substituted therefor:
"2.02 Consideration. In consideration of the sale, assignment,
transfer and delivery of the Acquired Assets, Purchaser shall:
(a) pay to Seller in cash at the Closing, by certified
or official bank check or wire transfer of funds to an account
described by Seller, the sum of $2,000,000;
(b) issue and deliver to Seller at the Closing a
subordinated promissory note of Purchaser in the principal
amount of $1,000,000 (the "2 Year Note"), in form and substance
satisfactory to Seller which shall mature on the second
anniversary of the Closing; require payments of principal and
interest in quarterly installments of $50,000 each, commencing
on the Closing
<PAGE> 41
-2-
Date; bear interest at a variable rate at all times equal to the rate
charged to Purchaser by its bank lender; be subordinated to Purchaser's
indebtedness to its bank lender, provided the principal balance of such
debt shall at no time exceed $5,000,000; accelerate upon default or upon
a sale or change of control or IPO of Purchaser; and require Purchaser
to use its best efforts to obtain additional credit and to apply 100%
of credit obtained under new facilities or guarantees and 75% of all
increases in availability under its existing facilities to prepayment
of the 2 Year Note;
(e) issue and deliver to Seller at the Closing a
subordinated note of Purchaser in the principal amount of $500,000 (the
"5 Year Note") in form and substance satisfactory to Seller which shall
be payable in one installment of principal on the fifth anniversary of
the Closing; bear interest at a variable rate at all times equal to 2%
above the rate charged to Purchaser by its bank lender; be subordinated
in the same manner as the 2 Year Note; accelerate upon default
(including default the 2 Year Note) or upon a sale or change of control
or IPO of Purchaser; and require monthly payments of accrued interest
commencing on the first day of the month following that in which the 2
Year Note is repaid in full;
(d) in repayment of cash advances from Access Beyond to
Seller, issues and deliver to Seller at the Closing seven-year warrants
(the "Warrant"), in form and substance satisfactory to Seller, for the
purchase of the number of shares Purchaser's Preferred Stock, $.001 par
value per share ("Preferred Stock"), such that Seller receives twelve
percent (12%) of the total shares of stock outstanding after giving
effect to the issuance of such shares on a fully diluted basis (for
purposes of this calculation, Preferred Stock shall be assumed to be
equivalent to Common Stock); provided that the number of shares shall be
subject to adjustment as follows: (i) for each additional $50,000 cash
advance made by Access Beyond to Seller from January 1, 1997 to the
Closing Date, the number of shares Preferred Stock issuable to Seller
hereunder shall be increased by that number of shares equal to one
percent (1%) of all shares of Purchaser outstanding after giving effect
to the issuance of such shares and (ii) for each $50,000 cash repaid by
Seller to Access Beyond from January 1, 1997 to the Closing Date, the
number of shares of Preferred Stock issuable hereunder shall be
decreased by a like one percent (1%), provided that nothing in this
Agreement shall require Access Beyond to make further advances to
Seller. The Preferred Stock shall be non-voting shall pay dividends
equal to any dividends paid on Purchaser's Common Stock and shall have a
liquidation preference over Common Stock equal to the
<PAGE> 42
-3-
amount that would be payable with respect to the Preferred Stock
pursuant to the resale option provided to the holder pursuant to the
Warrant Agreement (as hereinafter defined), and shall not be redeemable,
except at the option of the holder as provided in the Warrant Agreement;
and
(e) assume the Assumed Liabilities and deliver to Seller at
the Closing an Instrument of Assumption in the form of Exhibit A
hereto."
(B) Subsection 3.03(a) of this Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(a) the consideration set forth in subsection 2.02(a) and (d),
the 2 Year Notes, the 5 Year Note and the Warrants."
(C) Section 4.13 of the Agreement is hereby deleted in its entirety
and the following substituted therefor;
"4.12 Warrant Agreement. At the Closing, Seller and
Purchaser shall execute and deliver an agreement (the "Warrant
Agreement"), in form and substance satisfactory to Seller, providing,
inter alia (a) an option for Seller to resell the Warrants or underlying
shares of Preferred Stock to Purchaser for an aggregate price equal to
the sum of $400,000, plus the amount of any additional advances made by
Access Beyond to Seller from January 1, 1997 to the Closing Date (or
minus any amount repaid to Access Beyond by Seller from January 1, 1997
to the Closing Date) plus a return on that sum calculated at 2% above
the rate of interest charged to Purchaser by its bank lender from time
to time, compounded annually, with the option to be exercisable at any
time after the fifth anniversary of the Closing but before the close of
business on the seventh anniversary or earlier upon a sale or change of
control or IPO of the Purchaser and (b) appropriate representations
and warranties with respect to the Warrants and the underlying Preferred
Stock."
(D) Subsection 12.01(d) is hereby amended to delete the date "March
31, 1997" and to insert June 30, 1997.
2. Section Headings. The Section headings in this letter agreement
are for convenience of reference only and are not a part of this letter
agreement.
<PAGE> 43
-4-
3. Governing Law. This letter agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to its conflicts of law doctrine.
4. Effect of Amendment. Except as amended and supplemented
hereby, all of the terms, conditions, provisions and covenants of the Agreement
shall remain and continue in full force and effect and are hereby ratified,
repeated and confirmed in all respects.
5. Entire Agreement. The Agreement as supplemented and
amended by this letter agreement constitutes the entire agreement and
understanding among the parties and supersedes any and all prior agreements and
understandings relating to the subject matter hereof.
6. Counterparts; Effectiveness. This letter agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This letter agreement shall not be effective and
binding upon the parties until signed by all of them.
Please acknowledge your agreement to the foregoing by signing where
indicated on the enclosed duplicate copy of this letter agreement and returning
it to the undersigned.
Very truly yours,
EMI HOLDING CORP.
/s/ KENNETH W. BACH
------------------------
By: Kenneth W. Bach
Title: President
<PAGE> 44
-5-
AGREED TO:
ACCESS BEYOND, INC.
By:
------------------------
Title:
ELECTRO-METRICS, INC.
By:
-----------------------
Title:
<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>
