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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 3, 1998 Commission file number 0-21697
HAYES CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 52-1987873
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5854 PEACHTREE CORNERS EAST
NORCROSS, GA 30092
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(770) 840-9200
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF EACH CLASS)
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 (or for such shorter period that the
registrant was required to file such reports), 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. [ ]
The aggregate market value of the voting stock held by persons other
than directors and executive officers of the Registrant, as of March 16, 1998
was $ 43,626,276.
The number of shares of the Registrant's Common Stock, par value $.01
per share, outstanding as of March 16, 1998, was 19,857,625.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Proxy Statement for the Registrant's Annual
Meeting of Stockholders are incorporated by reference in Part III.
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CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
<TABLE>
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Page No. or
Reference
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<S> <C> <C>
ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4. Submission of Matters to a Vote of Securities Holders . . . . . . . . 11
ITEM 4a. Executive Officers of the Registrant . . . . . . . . . . . . . . . . 11
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . 15
ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk . . . . . 20
ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . 20
ITEM 9. Changes in and Disagreements with Accountants on Accounting . . . . .
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 20
ITEM 10. Directors and Executive Officers of the Registrant . . . . . . . . . 20
ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 12. Security Ownership of Certain Beneficial Owners and Management . . . 20
ITEM 13. Certain Relationships and Related Transactions . . . . . . . . . . . 20
ITEM 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K . . . 20
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
Portions of this Form 10-K report contain "forward looking"
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward looking
statements. 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.
Factors that might cause such a difference include, but are not limited to,
market acceptance of the Company's products and services and other factors
discussed in "Business Risks" below and in "Risk Factors" of the Company's
Proxy Statement and Prospectus (included in its registration Statement on Form
S-4, Registration No. 333-37993), as well as the Company's subsequent filings
and reports with the Securities and Exchange Commission.
MERGER
On December 30, 1997, Hayes Corporation (the "Company" or "Hayes"),
formerly known as Access Beyond, Inc. ("Access Beyond"), completed a reverse
triangular merger (the "Merger") with Hayes Microcomputer Products, Inc.
("Hayes Microcomputer"). In the Merger, the Company issued 15,261,763 shares
of Common Stock and 405,977 shares of Series A Preferred Stock, after giving
effect to a one for three reverse stock split effected February 25, 1998 (the
"reverse stock split"). The stock issued in the transaction represented 79% of
the outstanding stock immediately after the Merger excluding the effect of
warrants, stock options, and the 6% Cumulative Convertible Preferred Stock.
Immediately following the Merger, the Company changed its name to Hayes
Corporation. Since the Hayes Microcomputer shareholders received a substantial
majority of the shares of stock of the Company, the transaction is treated as a
reverse acquisition of the Company by Hayes Microcomputer for accounting
purposes. As a result, the historical financial statements of the surviving
company for the periods prior to the Merger are those of Hayes Microcomputer
rather than those of Access Beyond.
GENERAL
Hayes engages in the design, manufacturing, marketing and support of
computer communication products for business, government, small office,
professional and individual consumers worldwide through the sale of modem,
access systems and broadband products.
While historically Hayes' business has focused on its core modem
business, Hayes has recently broadened its products to include integrated
network communication products (access systems). In addition, Hayes has
pursued penetrating the broadband market by offering products for the
asymmetric digital subscriber line ("ADSL") and the cable markets.
For nearly two decades, Hayes has been the leader in providing
value-based modems. The Hayes standard AT command set has become the de facto
industry standard for personal computer modems and, along with the patented
escape sequence, created the market requirement for "Hayes compatibility."
Hayes was founded by Dennis Hayes in 1977 to develop and market modems
designed for the microcomputer marketplace. Hayes' first product was released
in April 1977 which was a modem for the early S-100 type computers. Hayes
developed the Micromodem II for the Apple II before Apple had a disk drive.
Hayes introduced the Smartmodem in June 1981. In August 1981, IBM introduced
the first IBM PC that legitimized the personal computer industry. Personal
computer ("PC") sales began to skyrocket and Hayes was the leading manufacturer
of modems to serve this market. Fueled by the growth in the PC market and the
introductions of 1200 and 2400 bits per second modems, Hayes' sales grew from
$4.8 million in 1981 to $120.1 million in 1985. Hayes was included twice in
Inc. Magazine's list of Fastest Growing Privately Owned Companies.
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In the 1987 to 1988 time frame, the "low price" modem competition
began to consolidate into recognizable brands from the multitude of market
players. By 1989, Hayes realized the significance of the emergence of what was
internally referred to as clone modems (claiming Hayes compatibility) as had
been observed with clone PCs (IBM compatible) slightly earlier. Practical
Peripherals, Inc. had established itself as a true brand in the clone modem
segment. In August 1989, Hayes purchased Practical Peripherals, Inc. to
establish a presence in the clone modem segment.
In the early 1990s, the consumer, small office/home office ("SOHO")
market segment experienced rapid expansion. In response, Hayes introduced the
ACCURA product line in 1993. This product line provided a different feature
set and a lower price point than Hayes Ultra and Optima product lines.
Competitors in this market segment pursued an extremely aggressive price
strategy to gain market share by initiating rapid price erosion for this
market.
Due to market price pressures, Hayes reduced its ACCURA pricing in
March 1994 to competitive levels. As a result, the ACCURA volumes increased
dramatically. In responding to the ACCURA volume increase, Hayes experienced a
number of operational and manufacturing problems. Due to excess inventory of
old designs, Hayes could not benefit from new lower cost product designs.
Additionally, there was an inadequate internal infrastructure and process in
place to support subcontractor start-up necessary to support increased demand
and significant air freight expense was required due to resultant delays in
subcontractor production. Inventory increased and margin compression occurred.
The resulting strain on Hayes' cash position and operating losses combined with
insufficient capitalization precipitated Hayes' filing a petition for relief
under Chapter 11 of the U.S. Bankruptcy Code on November 15, 1994.
On April 16, 1996, Hayes consummated a court approved Reorganization
Plan (the "Plan"). Under the terms of the Plan, all prepetition creditors were
paid in full plus interest, except where other agreements were made. Funding
of the Plan was provided through three major sources. First, pursuant to the
Agreement and Plan of Merger dated April 12, 1996 entered into by and between
Rinzai Limited ("Acma"), Kaifa Technology (H.K) Limited ("Kaifa"), Rolling
Profit Holdings, Ltd., Lao Hotel (H.K.), Limited, Saliendra Pte Ltd., and S.P.
Quek Investments Pte. Ltd. (collectively, the "Investors"), certain
subsidiaries were created by the Investors which collectively contributed $35.0
million to fund the Plan and were merged with Hayes. The Investors received
preferred stock representing a 49% voting interest in Hayes. Second, Hayes
entered into an agreement with The CIT Group/Credit Finance, Inc. to borrow up
to an aggregate of $64.5 million through three separate debt instruments
collateralized by Hayes' intellectual property, certain equipment, and accounts
receivable and inventory balances. Third, pursuant to the Plan, Hayes sold
certain parcels of real property for $8.2 million. On October 9, 1997, Hayes
received the final decree bringing its Chapter 11 case to a close.
During 1996, Mr. Hayes assembled a new management team comprised of
individuals from the communications industry including a new chief financial
officer and vice presidents of sales, engineering and human resources.
On April 24, 1997, Hayes acquired Cardinal Technologies, Inc.
("Cardinal") which Hayes management believed added a highly visible brand to
Hayes' brand portfolio and strengthened Hayes' position in the North American
retail market. In connection with the Cardinal acquisition in April 1997, Hayes
received a $5.5 million investment from Vulcan Ventures, Inc., one of the Paul
Allen Group of Companies. The investment involved the issuance of 263,113
shares of Series B Preferred Stock of Hayes Microcomputer, which was converted
into 405,977 shares of Series A Preferred Stock of the Company, after giving
effect to the reverse stock split.
PRINCIPAL PRODUCTS
Hayes has invested in technologies that expand its products to meet
changing market demands. Hayes' business is structured around three core
product categories: modems, broadband products and access systems.
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MODEMS
Analog and ISDN modems represent the core of Hayes' business, and
accounted for approximately 96% of all revenues of Hayes for fiscal year 1997.
Hayes is widely recognized as being the company that commercialized the PC
modem in the early 1980's. The Hayes Standard AT Command Set has become the de
facto industry standard for PC modems and along with the patented escape
sequence created the market requirements for "Hayes compatibility."
Hayes markets its modem products under the Hayes ACCURA(TM), Hayes
OPTIMA(TM), Practical Peripherals(TM), and Cardinal(TM) brands. The modem
products are sold through the distribution, value added reseller and mass
merchant channels.
Due to demand for increased speed in delivery of information, modem
speeds have historically changed every 12 to 24 months. In 1997, Hayes
introduced a series of new products that transmit information at 56Kbs. Hayes
anticipates that the market will transition during 1998 to the 56Kbs speed from
the current 33.6Kbs standard. In February 1998, the industry determined a
56Kbs standard referred to as V.90. The standard is expected to be ratified
late 1998. Hayes currently sells products utilizing the two primary 56Kbs
technologies offered in the market prior to the determination of the standard,
as well as products utilizing the V.90 standard.
BROADBAND PRODUCTS
Recognizing the market's need for more information at faster speeds,
Hayes has launched significant activities to deliver its customers products at
speeds of multiples of those offered by current analog and ISDN products.
Hayes' efforts are focused on the ADSL and cable markets.
ADSL
On June 6, 1997, Hayes announced that it had been selected by Alcatel
Bell N.V. ("Alcatel") to jointly develop, manufacture and market products and
equipment implementing ADSL technology. These end-to-end ADSL solutions will
enable consumers, telecommuters and small business users to achieve affordable,
convenient, bandwith-efficient, high-speed access to the Internet and other
interactive services, such as corporate intranets.
ADSL technology, which utilizes the existing telephone copper-wiring
infrastructure serving virtually all homes and businesses, allows customers to
interact with data networks, the Internet and associated services at speeds
more than 100 times faster than current 56Kbps modems. In recent months,
Alcatel has signed contracts with Ameritech, Bell South, Pacific Bell,
Southwestern Bell, Singapore Telecom, Telia (Sweden) and others to provide its
1000 ADSL system. Hayes believes it will benefit from the deployment of ADSL
products by these companies.
Hayes is pursuing other opportunities utilizing ADSL technologies to
develop a strong market position in the emerging ADSL market. The Company
expects to begin shipping ADSL products in mid-1998.
Cable
Management believes that the consumer's demand for higher speed
communications will result in significant demand for cable modems. In 1996
Hayes launched a development and marketing effort with an Israeli cable modem
company. In the fourth quarter of 1996 Hayes introduced its cable modem
products to the industry and began a number of successful cable modem trials.
Hayes began shipping cable modems in the second half of 1997, under its
ULTRA(TM) brand.
On September 18, 1997, Hayes and Cisco Systems, Inc. ("Cisco") signed
a Collaboration Agreement whereby Hayes and Cisco agreed to promote Multimedia
Cable Network System ("MCNS") compliant cable modems and head end systems. The
Collaboration Agreement contemplates joint development and marketing of such
products.
On September 18, 1997, Cisco announced that Samsung Electronics Corp.,
Ltd. And Thomson Consumer Electronics had joined Cisco and Hayes in promoting
MCNS compliant cable modems.
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Hayes is pursuing several cable modem opportunities in North America
including the request for proposal by TeleCommunications, Inc. (the "TCI RFP").
The TCI RFP is believed to be the largest single cable modem opportunity in
North America. The Company recently announced retail distribution programs
with retailers such as Computer City to promote deployment of cable modems.
Hayes is also pursuing cable modem opportunities in China and Latin America.
ACCESS SYSTEMS
The communications industry has seen tremendous growth in the area of
network connectivity. As the number of telecommuters, traveling employees and
branch offices grow, the demand for fast, low-cost connectivity has grown.
Connectivity is enabled through client modems, modem pools and integrated
remote access devices. Hayes is seeking to leverage its experience and
technology strengths in communications to provide a portfolio of products that
meet the market's needs.
As a result of a prior supply agreement with Access Beyond and the
Merger, the Company markets a family of remote access servers including its
Century 2000 series, Century 9200 series and Century 9400 series products.
These products support the connectivity needs of the small business or branch
office. They are fully-integrated remote access servers providing advanced
management software which enables easy configuration and network monitoring.
These products use a modular design for flexibility and ease of upgrade. In
addition to the remote access servers, the Company markets other network
products under the Access Beyond brand. These products include statistical
multiplexers, host access servers, and ethernet terminal servers.
Hayes has a technology agreement with Microcom, Inc. ("Microcom")
under which Hayes and Microcom have agreed to develop end-to-end communication
solutions drawing from the technology in Microcom's ISP Porte Chassis and
Hayes' client and remote access server products. According to terms of the
agreement, the two companies will explore product development, product branding
and co-marketing opportunities worldwide.
SUPPLIERS
Hayes depends upon certain suppliers for its sole source for certain
components, including Rockwell and Lucent Technologies, Inc. for certain modem
chips used in most of Hayes' product. In addition, Hayes utilizes two
subcontractors with operations in China to manufacture product for the Asia
Pacific and Europe markets.
PATENTS, COPYRIGHTS AND LICENSES
Hayes' patent estate strategy is based upon three goals: (i) to
protect Hayes' technology and to enhance its commercial deployment, (ii) to
obtain cross licenses of the technology of others to optimize a royalty-free
access to new technology, and (iii) to generate income. This strategy has
resulted in a significant patent estate consisting of more than 115 owned and
licensed patents, including internationally recognized patents, in the area of
data communications.
Hayes is committed to a licensing program which defends the value of
its intellectual property and offers licenses to responsible third parties. As
a result of Hayes' aggressive patent estate development program, many of Hayes'
competitors formed the Modem Patent Defense Group. This group attempted to
refute the validity of the Hayes' patents, specifically the Heatherington '302
patent, U.S. patent #4549302 ("Heatherington Patent"), and to avoid payment of
royalty fees by filing suits against Hayes. To date, Hayes has successfully
defended its patent estate, resulting in additional manufacturers signing
license agreements to use Hayes' patents.
The Heatherington Patent has been Hayes' most valuable patent to date.
This patent enables the modem to be switched between data transmission mode and
command mode for configuring the modem. The patent was issued in 1985 and is
valid until February 14, 2001. The Heatherington Patent is licensed to
virtually every major modem manufacturer in the United States and is recognized
around the world as an industry standard for computer communications. The
validity of the patent was upheld by the U.S. Federal Court and since the fall
of 1994 has been fully protected in the European Community.
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Another significant patent is the AutoSync patent, U.S. patent
#4700358, which expires on October 13, 2004. This patent is a sophisticated
asynchronous to synchronous converter which allows serial communication through
the asynchronous serial port. Industry interest has been expressed in
implementing and licensing this technology. Currently there are approximately
12 companies licensing this patent from Hayes.
Hayes has other valuable license rights that were obtained through
cross-license agreements with key industry players, including AT&T Corporation,
3Com Corporation ("3Com"), Intel, Compaq, IBM Corporation, Racal Datacom and
Microcom.
Hayes has current and pending patents with potential commercial value
in the area of data compression, multi- channel communication and various other
technologies related to data communications.
The Company's credit facilities provide its lender collateralized
rights to Hayes' intellectual property. Use of Hayes' intellectual property is
not adversely affected by this collateralization and the intellectual property
is being used in the manufacturing and distribution of Hayes' products. Lender
approval is required prior to any material sale of Hayes' intellectual
property.
BACKLOG
Hayes forecasts demand and builds products in order to fill expected
demand. Customers generally expect delivery within one to two weeks and Hayes'
backlog of firm orders generally represents orders expected to be filled not
later than two months following the date of the order. Management believes
that current backlog may not necessarily be indicative of future revenues.
COMPETITION
The data communications industry is very competitive. Product life
cycles are short with rapid improvements required in terms of product
performance, features and cost. Hayes competes in a number of different
markets within the overall communications market.
Modem Business Market
Hayes faces competition primarily from established companies such as
3Com, Microcom, Multitech, Racal Datacom and Diamond Multimedia, Inc.
("Diamond"). The primary basis of competition is brand recognition,
performance, features, quality, reliability, price, service and support.
Modem Consumer Market
The retail modem market is expected to continue its consolidation.
The primary basis of competition is brand recognition and price. 3Com is the
most significant competitor in this market with several smaller competitors
competing at the very low price points. A sample of these smaller competitors
include Golden Video Corporation ("GVC"), Boca Research, Inc., and Zoom
Telephonics, Inc. The battle for retail shelf space is and will continue to be
fierce and brand recognition is and will continue to be a major benefit to
Hayes.
OEM Modem Market
Hayes intends to make significant efforts to reenter the OEM modem
market which is the fastest growing segment of the analog modem market. Low
cost, quality and responsiveness are critical to success in this market. The
key competitors in this market are CIS Technology, Inc., GVC, 3Com and others.
Access Systems
The access systems market is characterized by a large number of
participants, none of which have a dominant market position. The market is
experiencing high growth and higher margins in comparison to modems.
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Companies such as 3Com, Shiva Corporation, Ascend Communications and General
Datacom compete in this market.
Management believes that in addition to leveraging its strong brand
name, its products can be priced competitively which will enable Hayes to grow
its share of this market.
Broadband
ADSL is an emerging market with no competitor having dominant market
position. Many of the network product and modem companies are likely to
introduce products into this market. In addition, major telecommunications
companies such as Alcatel are expected to have significant presence in the ADSL
market as it matures.
The cable market is also an emerging market. Cable equipment
companies such as Scientific Atlanta, Inc. and Nextlevel Systems, Inc. are
expected to capture a share of this market. In addition, management believes
that modem companies such as 3Com and Bay Networks, Inc. will offer products in
this market. Management expects competition to intensify as cable modem
products gain acceptance.
International
Hayes' products are sold internationally in more than 40 countries.
Some of the U.S. based competitors are present in Hayes' international market
but competition is also present from smaller local modem and access systems
suppliers.
SALES
AMERICAS REGION
North America
Hayes sells its products directly to high-volume computer superstores,
mail order resellers and mass merchants as well as through the two-tiered PC
distribution channel that includes distributors, large national corporate
resellers and aggregators. In the two-tiered distribution model, distributors
and national corporate resellers provide an inventory, logistics, and credit
function to smaller resellers such as computer chains, company-owned locations
and value-added resellers.
The sales strategy for Hayes branded products is to retain a channel
"push" sales organization (reseller, marketing and telephone) ensuring channel
support and appropriate field inventory levels. The sales organization is
structured to focus on the Hayes, Practical Peripherals and Cardinal brands and
each respective product categories and product lines.
Hayes' sales force consists of the Field Sales Group and the National
Account Group. The Field Sales Group maintains relationships with the
corporate headquarters of Hayes' channel partners as well as the individual
reseller locations that sell to end users. The Field Sales Group works with
the resellers to maintain adequate inventory of Hayes' products and to develop
programs that promote Hayes products.
The National Account Group calls on large corporate customers and
directly markets Hayes' products to these large sophisticated end users. This
group is responsible for creating and maintaining demand in Fortune 1000
companies for Hayes' technologies. Hayes also maintains a sales office in
Gaithersburg, Maryland to market to the Federal Government and maintains
dedicated resources within its National Account Group to stimulate sales to
state and local governments.
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Latin America
Hayes has recently launched an initiative in Brazil to serve Brazil
and the Latin American region. Business is presently conducted directly with
large end users, OEMs and through distributors for other customers.
ASIA PACIFIC REGION
Hayes' sales strategy in the Asia Pacific region is similar to its
sales strategy in North America. Hayes operates sales, marketing and service
subsidiaries in China, Hong Kong and Australia. Relationships are developed
with key distributors in each of the major Asia Pacific region countries.
EUROPE REGION
Hayes' European sales, marketing and service efforts are headquartered
in the United Kingdom. Offices are also maintained in France, Denmark, and
Germany. Strategic partners are identified in major markets to distribute
Hayes' products.
REVENUES FROM EXPORT SALES
Hayes revenues from export sales to its principal foreign markets were
immaterial for the periods presented.
MARKETING
Hayes' marketing activities focus on developing brand recognition in
key market segments and geographic markets, as the underlying basis for cost
effective promotion of its products.
Public Relations
Hayes has focused its public relations activities on establishing
strong relationships with trade publications, reviewers and columnists. Hayes'
products have been consistently recognized for performance, quality, service
and support (i.e., Government Computer News, Computer Shopper, PC Week, Mobile
Office, PC Magazine, Computerworld). Hayes has pursued a proactive posture in
public affairs, taking a prominent role in standard setting committee (ITU,
ANSI) and public policy organizations (AOP, GHTA and CompTIA).
Advertising, Packaging and Documentation
Over the years, Hayes has developed an in-house expertise to create
advertising that has consistently scored well in advertising readership
studies. Hayes has been recognized by winning coveted awards for the quality
of its documentation and packaging, which is also developed by Hayes in-house.
Channel and Infrastructure Activities
Hayes has established an effective channel marketing program which
allows the sales force to consistently execute on tactical promotions through
the entire channel spectrum. Hayes was most recently successful in developing
new mail order and mass merchant distribution channels. Hayes also has had
success through its infrastructure program in seeding its new products with
influential user groups of early adopters. In addition, customers can purchase
Hayes products over the worldwide web via ordering and fulfillment programs
recently implemented by Hayes.
CUSTOMER SUPPORT, SERVICE AND WARRANTY
Hayes strives to provide users of its products with the highest
quality technical support and customer service, dedicating more than 50
professionals processing more than 60,000 incoming calls a month. Hayes
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constantly surveys its user base with regard to customer satisfaction and it
believes it consistently performs well in comparison to its competitors in the
area of support and service.
Hayes offers a standard two-year warranty which permits customers to
return any product for repair or replacement if the product does not perform as
warranted. In the U.S. and Canada only, Hayes also offers its customers the
option of an additional three-year warranty upon completion of a registration
card within 90 days of purchase. Some of the Practical Peripheral modems
previously sold have a lifetime warranty. Hayes to date has not encountered
material warranty claims or liabilities.
RESEARCH AND DEVELOPMENT
Hayes focuses its research and development ("R&D") efforts on hardware
and firmware system design, integration and testing for standalone and board
level data, fax and voice modems, modem pools, remote access servers and
broadband technologies for high speed communications. Additional R&D
activities include access systems and software products, object oriented
programming and digital signal processing technologies. Specialized knowledge
and skills in the areas of electromagnetic compatibility ("EMC"), agency
approvals, communications standards and product integration are applied to
ensure timely product delivery. The Company utilizes computer aided design
systems for three dimensional mechanical design and is upgrading its computer
aided engineering tools to improve the engineering process and strengthen
applications specific integrated circuit design capabilities.
Product development cycles typically range from three to twelve
months. Project duration of fifteen to eighteen months are common for new
access systems and new technology platforms. Engineering strategies employed
to reduce product costs and time to market include focused application of
resources, simulation, standardization, on-going product and process value
engineering, simplification, automation and reduction of the number of
development cycles. Hayes expensed approximately $10.7 million, $9.6 million
and $11.8 million for the fiscal year ending September 30, 1995, December 31,
1996 and January 3, 1998, respectively for research and development.
As of January 3, 1998 the Company estimates that the remaining costs
in connection with the completion of outstanding acquired research and
development projects are less than $6.0 million. Such costs are expected to be
incurred primarily over the next two years and to include labor costs for
design, prototype development and testing. As a result, the Company expects
research and development costs to increase in fiscal 1998.
ENVIRONMENTAL MATTERS
Hayes' compliance with federal, state and local environmental laws has
had no material effect upon Hayes' capital expenditures, earnings or
competitive position.
EMPLOYEES
Hayes employed approximately 651 employees and 117 temporary employees
as of January 3, 1998. Hayes management believes that its future success will
depend largely on its ability to retain certain key personnel and to recruit
and retain additional highly skilled employees. Hayes has experienced no work
stoppages and believes that its employee relations are satisfactory.
BUSINESS RISKS
In addition to the other information in this Form 10-K, readers
should carefully consider the following important factors that in some cases
have affected, and in the future could affect, the Company's actual performance
and results and could cause the Company's actual results of operations to
differ materially from those expressed in any of the forward-looking statements
made by, or on behalf of, the Company.
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ABSENCE OF PROFITABLE OPERATIONS
The Company has not been profitable in the last four years. Due to the
factors described below, there can be no assurance that the Company will
achieve its objectives and attain profitability.
TECHNOLOGICAL CHANGES
The market for networking and modem products is subject to rapid
technological change, evolving industry standards and frequent new product
introductions and, therefore requires a high level of expenditures for research
and development. There can be no assurance that customer demand for the
Company's products will grow at the rate expected by the Company or that the
Company will be successful in developing and manufacturing new products that
respond to customer demand.
COMPETITION
The networking and modem markets are very competitive. There are
numerous companies competing in various segments of these markets, many of the
Company's competitors have greater market, technology and financial resources
than those available to the Company. There can be no assurance that the Company
will be able to compete successfully with future and existing competitors.
INTERNATIONAL SALES
A significant portion of the Company's sales are in international
markets. As a result, the Company's operating results are subject to risks
inherent in international sales, including tariffs or other barriers,
difficulties in staffing and managing international operations, fluctuations in
foreign currency exchange rates, compliance with international regulations,
approval and market requirements, and the volatility of international economic
conditions.
PRODUCT RETURNS AND PRICE PROTECTION
Like other manufacturers of computer products, the Company is exposed
to the risk of product returns from wholesale distributors, resellers and
retailers, either through contractual stock rotation privileges or as a result
of the Company's interest in assisting customers in balancing inventories.
Although the Company attempts to monitor and manage the volume of sales to
wholesale distributors and retailers, large shipments in anticipation of sales
by wholesale distributors and retailers could lead to substantial overstocking
and higher than normal returns. Moreover, the risk of product returns may
increase if demand for the Company's products declines. When the Company
reduces prices, the Company credits their respective wholesale distributors and
retailers for the difference between the purchase price of products remaining
in their inventory and the reduced price for such products on terms negotiated
with the Company. To the extent credits due distributors and retailers are in
excess of amounts accrued by the Company, a material adverse effect on the
operation results of the Company could occur.
DEPENDENCE ON SUPPLIERS
Material and components for the Company's products are purchased from
outside suppliers. While most components are available from several suppliers,
a few are provided from sole-source vendors. The Company believes that in most
cases alternative sources of supply could be obtained within a reasonable time
period; however, an interruption in the supply of such components could have a
temporary adverse effect on the Company's operations. There can be no assurance
that severe shortages of components will not occur in the future which could
increase the cost or delay the shipment of products and have a material adverse
effect on the Company's operating results.
Page 9
<PAGE> 12
SALES CHANNEL RISKS
The Company sells its products primarily through national, regional
and international wholesale distributors, national corporate resellers,
computer superstores and mail order. Sales to wholesale distributors accounted
for a significant share of Hayes net sales in fiscal 1997. The personal
computer distribution industry has been characterized by rapid change,
including consolidations and financial difficulties of wholesale distributors
and the emergence of alternative distribution channels.
The Company is dependent upon the continued viability and financial
stability of its wholesale distributors. The loss or ineffectiveness of any
Hayes' largest wholesale distributors or a number of its smaller wholesale
distributors could have a material adverse effect on the Company's operating
results. In addition, an increasing number of vendors are competing for access
to wholesale distributors which could adversely affect the Company's ability to
maintain existing relationships with its wholesale distributors or could
negatively impact sales to such distributors.
The Company is dependent on the continued viability and financial
stability of its national resellers. The loss or ineffectiveness of any of the
Company's largest national resellers or a number of its smaller national
resellers could have a material adverse effect on the Company's operating
results.
Due to increased competition for limited shelf space, retailers are
increasingly in a better position to negotiate favorable terms of sale,
including price discounts and product return policies. There can be no
assurance that the Company will be able to sustain or increase its sales to
retailers, which could have a material adverse effect on the Company's
operating results.
The OEM modem market has grown to approximately 50% of the overall
modem market. Hayes has not participated substantially in the OEM modem market
for the last three years and the Company can give no assurance that it will be
able to successfully penetrate this market.
ITEM 2. PROPERTIES
Hayes' executive offices are located in Norcross, Georgia in leased
facilities. Hayes also has manufacturing and distribution facilities at the
same location. The manufacturing facility has five surface mount lines and
occupies approximately 50,000 square feet. The leases between Hayes and Essex
Capital are for 172,342 square feet and cover both the executive offices and
Hayes' manufacturing and distribution facilities. The leases expire between
December 31, 1999 and September 30, 2000.
The Company leases a 54,874 square foot facility in Gaithersburg,
Maryland which houses its government sales activities and serves as the
development center for its access systems products. Approximately 50% of the
facility is subleased. The lease on this facility expires on September 30,
1999.
The Company also leases a 44,403 square foot facility in Carlstadt,
New Jersey which is also a development center for its access system products. A
substantial portion of this facility is subleased. The lease on this facility
expires in September 2001.
In addition to the above leases, Hayes leases sales and marketing
facilities in China, Hong Kong, Australia, United Kingdom, France and Denmark.
Hayes believes its properties are adequate for its needs for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On March 22, 1996, Hayes filed a Complaint for Declaratory Judgment
and Damages for breach of fiduciary duties in the Superior Court of Fulton
County, Atlanta, Georgia against three of Hayes' former vice presidents, Gary
Franza, John Stuckey and Mikhail Drabkin. In the Complaint, Hayes claims $5.0
million in minimum damages against the defendants, jointly and severally, plus
punitive damages. The Complaint also seeks a declaratory judgment that a
rescission by the defendants of an earlier partial release executed by them is
Page 10
<PAGE> 13
enforceable and for the recovery of attorneys' fees. All three defendants have
filed counterclaims against Hayes and Dennis C. Hayes individually seeking
total contract damages against Hayes and Dennis C. Hayes of approximately
$450,000 and specific performance of claims for stock options for 292,012
shares of stock under certain option agreements. Two of the three defendants
assert libel claims and allege compensatory damages resulting therefrom in the
total amount of $10.0 million and punitive damages in the total amount of $10.0
million. All three defendants seek recovery of their attorney's fees and
expenses of litigation. Hayes' management believes that the likelihood of a
material adverse effect on the financial condition on operations of the Company
in the amount of damages claimed by the plaintiffs is remote. Hayes' insurer
has undertaken coverage of the libel and slander claims alleged in the
counterclaim against the Company. Other than the litigation matter described
above, Hayes believes that there are no other material legal proceedings to
which Hayes is a party or of which any of its properties are subject; nor are
there material legal proceedings known to Hayes to be contemplated by any
governmental authority; nor are there material legal proceedings known to
Hayes, pending or contemplated, in which any director, officer or affiliate or
any principal security holder of Hayes, or any associate of any of the
foregoing, is a party or has any interest adverse to Hayes.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 4(a).EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Dennis Hayes 48 Chairman and Director
Ronald Howard 42 Vice Chairman, Chief Executive Officer, and
Director
P.K. Chan 60 President, Chief Operating Officer, and Director
Alan Clark 44 Vice President and Chief Technical Officer
James Jones 40 Vice President and Chief Financial Officer
Bruce Meyer 48 Vice President of Human Resources
Keith Mintzer 44 Vice President of Worldwide Sales
Charlie Riehm 58 Vice President of Engineering
</TABLE>
Mr. Hayes founded Hayes in 1977 at the age of 27 and has served as Chairman and
a director of Hayes Microcomputer Products, Inc. since its inception. Upon the
Merger, Mr. Hayes became Chairman and a Director of the Company. Mr. Hayes
worked on the first four-bit microprocessor technology while employed at
Financial Data Services. After concluding his studies at Georgia Tech, Mr.
Hayes worked for National Data Corporation where he developed microcomputer
based systems to interconnect networks and maintain communications systems on
large mainframe computers. Mr. Hayes is active in both community and industry
associations including the Public Policy Committee of the Computing Technology
Industry Association, the Association of On Line Professionals, Georgia High
Tech Alliance, Governor's Advisory Council on Science and Technology and
Georgia Center for Advanced Telecommunications Technology. Mr. Hayes is also
the Georgia Representative to the Federal Lab Consortium and is one of the four
initial inductees into the Technology Hall of Fame of Georgia.
Mr. Howard became Vice Chairman and Chief Executive Officer of the Company on
December 30, 1997. Previously, he served as Chairman of the Board, President
and Chief Executive Officer of Access Beyond since November 1996. Mr. Howard
served as President of the Datability Networks Division of Penril from November
1994 to November 1996, and as Co-President of that division from May 1993 until
November 1994. He had held the position of Executive Vice President of Penril
from May 1993 until November, 1996. Mr. Howard served as President of
Datability Inc. from its founding in 1977 until it was acquired by Penril in
May 1993.
Page 11
<PAGE> 14
Mr. Chan became President and Chief Operating Officer of the Company upon the
Merger. Previously, he had held the same positions with Hayes Microcomputer
Products, Inc. since October 1997 and served as Vice President of Operations
from October 1994 to October 1997. Prior to joining Hayes Microcomputer
Products, Inc. in October 1994, Mr. Chan served as Managing Director of
Achiever Group, a subsidiary of Achiever Industrial Limited from 1991 to 1994.
Prior to joining Achiever Industrial Limited, he held various positions with
Ampex and Meadville Group, most recently serving as Managing Director of
Manufacturing.
Dr. Clark joined Hayes Microcomputer Products, Inc. in March 1993 and has
served as Vice President and Chief Technical Officer since March 1996 and was
appointed the same position with the Company upon the Merger. Prior to joining
Hayes Microcomputer Products, Inc., Dr. Clark served as Director, Research and
Strategy for Dowty Communications in the United Kingdom. Prior to this
position, Dr. Clark held a Marketing Director position and an Engineering
Director position for the Dowty Advanced Development Centre from 1989 to 1993.
Prior to joining Dowty, Dr. Clark served British Telecom in various positions.
Mr. Jones joined Hayes Microcomputer Products, Inc. in January 1996 as Vice
President and Chief Financial Officer and Treasurer. Upon the Merger, he
assumed the same position with the Company. He previously served in various
positions with Genicom Corporation for nine years, most recently as Vice
President - Finance. Prior to Genicom, Mr. Jones served as a manager with
Coopers and Lybrand L.L.P.
Mr. Meyer had served as Vice President of Human Resources of Hayes
Microcomputer Products, Inc. since August 1997. Upon the Merger, he assumed
the same position with the Company. He joined Hayes in August 1996 as Director
of Human Resources. Prior to joining Hayes, Mr. Meyer had served at Genicom
Corporation since 1983, most recently as Vice President of Human Resources and
Corporate Communications.
Mr. Mintzer joined Hayes Microcomputer Products, Inc. in January 1997 as Vice
President of Worldwide Sales. Upon the Merger, he assumed the same position
with the Company. Prior to joining Hayes, Mr. Mintzer served in a number of
senior executive positions with GBC Technologies for 10 years. Prior to
joining GBC Technologies, Mr. Mintzer held various sales and channel management
positions at the Sperry Corporation and Reynolds & Reynolds.
Mr. Riehm joined Hayes Microcomputer Products, Inc. in October 1996 as Director
of Development. In April 1997, he was promoted to Vice President of
Engineering. Upon the Merger he assumed the same position with the Company.
Mr. Riehm served as Vice President of Operations of SPE Microsystems, Inc. from
1994 to 1996. Prior to SPE Microsystems, Inc., he served as Director of
Communications Products of Silicom Systems, Inc.
Page 12
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol HAYZ. The following table sets forth the range of high and
low closing sale prices for the Company's Common Stock, after giving effect to
the reverse stock split as reported by NASDAQ/NMS, for each fiscal quarter
since the Common Stock began trading on NASDAQ/NMS on November 18, 1996. There
is no public market for the Series A Preferred Stock or the 6% Cumulative
Convertible Preferred Stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fourth Quarter 1996 (from November 18, 1996)......... 26 5/8 18
First Quarter 1997................................... 19 1/8 11 1/4
Second Quarter 1997.................................. 16 7/8 9
Third Quarter 1997................................... 23 1/4 9 3/4
Fourth Quarter 1997.................................. 24 3/4 12 3/16
</TABLE>
As of March 16, 1998, there were 791 record holders of the Company's
Common Stock.
The Company has never paid cash dividends. It is the Company's
present policy to retain earnings for use in the Company's business.
Accordingly, the Company does not anticipate that cash dividends will be paid
in the foreseeable future. The Company's credit facilities limit the Company's
ability to declare or pay dividends other than in the form of stock.
Holders of the Series A Preferred Stock will be entitled to receive,
as and when declared by the Board of Directors, cumulative compounding
dividends at the rate of 10% per annum of the original issue price per share of
the Series A Preferred Stock. Such dividends are to be paid in cash upon
redemption, or in additional shares of Common Stock upon conversion of the
Series A Preferred Stock.
Holders of the 6% Cumulative Convertible Preferred Stock are entitled
to receive a dividend of 6% per annum payable December 31 of each year. Such
dividend is payable in cash, Common Stock or additional shares of Cumulative
Convertible Preferred Stock at the Company's option.
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<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial information for the fiscal periods
ended January 3, 1998 is derived from the audited Consolidated Financial
Statements of the Company. The financial information has been restated to
reflect a one for three reverse stock split effected February 25, 1998. This
information should be read in conjunction with the Consolidated Financial
Statements and Notes thereto. Amounts are in thousands, except for per share
data.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JANUARY 3,
1993 1994 1995 1995 1996 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net Sales.............................. $ 206,191 $ 246,277 $ 269,155 $ 70,111 $ 257,452 $199,612
Cost of sales.......................... 138,167 195,188 204,787 51,765 195,918 154,799
--------- --------- --------- -------- --------- --------
Gross Profit...................... 68,024 51,089 64,368 18,346 61,534 44,813
--------- --------- --------- -------- --------- --------
Operating expenses.....................
Sales and marketing............... 38,665 41,278 33,364 8,867 42,757 37,405
General and administrative........ 23,717 23,908 22,223 5,100 18,970 18,897
Research and development.......... 16,139 16,153 10,713 2,281 9,640 11,788
Amortization and write-off
of intangibles................. 6,463 5,907
Restructuring charges............. 3,600 5,840
Purchased in-process
research and development......... 54,990
--------- --------- --------- -------- --------- --------
Total operating expenses....... 78,521 87,802 72,207 16,248 74,967 128,920
--------- --------- --------- -------- --------- --------
Operating (loss) income................ (10,497) (36,713) (7,839) 2,098 (13,433) (84,107)
Interest expense, net.................. (1,039) (1,928) (6,605) (1,807) (5,056) (4,478)
Gain on sale of investment............. 666
Gain on sale of land................... 8,153 4,092
Gain on patent infringement............
settlement........................ 8,796 3,993
Other income (expense), net............ 3,292 4,893 4,155 (24) 2,279 3,366
--------- --------- --------- -------- --------- --------
(Loss) income before
reorganization expense
and income tax
expense (benefit)................. 552 (29,755) (10,289) 267 (7,391) (81,127)
Reorganization expense................. 5,026 4,301 5,378
--------- --------- --------- -------- --------- --------
(Loss) income before income
tax expense (benefit)............ 552 (29,755) (15,315) (4,034) (12,769) (87,127)
Income tax expense (benefit)........... (335) (1,689) (932) 603 385 (4)
--------- --------- --------- -------- --------- --------
Net (loss) income................. 887 (28,066) (14,383) (4,637) (13,154) (81,123)
Preferred stock dividend............... 3,483
--------- --------- --------- -------- --------- --------
Net (loss) income applicable to
common shareholders............... $ 887 $ (28,066) $ (14,383) $ (4,637) $ (13,154) $(84,606)
--------- --------- --------- -------- --------- --------
Net (loss) income per basic
and diluted share................. $ 0.09 $ (3.24) $ (1.66) $ (0.53) $ (1.63) $ (10.80)
Weighted average number of
shares, basic and diluted......... 8,764 8,687 8,687 8,687 8,061 7,825
BALANCE SHEET DATA:
Working capital........................ $ 30,314 $ 15,840 $ 25,994 $ 25,270 $ 3,654 $ 8,611
Total assets........................... 103,939 124,964 100,964 91,696 69,215 115,328
Total debt............................. 10,307 28,685 11,134 20,854 11,943
Preferred stock........................ 52,914
Stockholders' equity (deficit)......... 44,125 15,897 1,683 (3,012) 5,741 (18,876)
</TABLE>
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<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL BUSINESS DEVELOPMENTS
Hayes is comprised of three business units: the Modem Products
business, the Access Systems business and the Broadband Products business. The
Modem Products business designs, manufactures and markets analog and ISDN modem
products. The Modem Products business distributes its products under the
Optima, Accura, Practical Peripherals, and Cardinal brands. The Access Systems
business designs and markets modem pool and remote access server products.
These products are distributed under the Century brand. The Broadband Products
business designs and markets ADSL and cable modem products and was formed in
June 1997. The Broadband Products business markets its products under the
Ultra brand.
On December 30, 1997, the Company (formerly known as Access
Beyond) merged with Hayes Microcomputer in a reverse triangular merger. Since
the Hayes Microcomputer shareholders received a substantial majority of the
shares of stock of the Company, the historical financial statements of the
surviving company for the periods prior to the Merger are those of Hayes
Microcomputer rather than those of Access Beyond. The former business of Access
Beyond will become a part of the Access Systems business unit. Because the
Merger occurred in the last week of the Company's fiscal year, the operations
of Access Beyond did not materially impact the Company's operating results. As
described further herein, the Company recorded significant restructuring and
acquired in process research and development charges in connection with the
Merger.
On October 1, 1995, Hayes changed its year end from September 30 to
December 31, and effective with fiscal year 1997 the Company changed its year
end to the Saturday closest to December 31.
LIQUIDITY AND CAPITAL RESOURCES
General. Hayes' primary capital requirements are for working capital,
acquisitions and other capital expenditures. Hayes has historically met its
capital requirements through a combination of equity transactions, cash flow
from operations, bank lines of credit and credit terms from suppliers.
Cash Flows. Cash and cash equivalents increased by approximately $9.5
million to $15.2 million at January 3, 1998 as compared to $5.7 million at
December 31, 1996. Cash and cash equivalent increased by $0.5 million at
December 31, 1996 from $5.2 million at September 30, 1995. Cash and cash
equivalents decreased by $3.1 million at September 30, 1995 as compared to
September 30, 1994. The increase in cash at January 3, 1998 versus December
31,1996 is due to the Company's placement of $35.0 million in 6% Cumulative
convertible Preferred Stock on December 31, 1997. The increase in cash in
fiscal 1996 resulted from implementation of the Plan and reduction in
restricted cash. The decrease in fiscal 1995 resulted primarily from the
increase in restricted cash as a result of Hayes' debtor-in-possession
financing with General Electric Capital Corporation ("GECC").
Cash used in operations was $20.3 million and $41.1 million in the
fiscal years 1997 and 1996, respectively. Cash usage in fiscal year of 1997
was caused primarily by the Company's operating losses and higher receivables
due to reduction in prompt payment discounts. Cash used in operations was
$41.1 million in fiscal 1996 due to the implementation of the Plan, which
included payments of approximately $44.6 million to pre-petition claimants, and
a net loss of $13.2 million. Cash generated by operations was approximately
$1.5 million in fiscal 1995 and resulted from a net loss of approximately $14.4
million which was more than offset by non-cash depreciation and amortization
and reduced working capital investment.
Cash provided by investment activities was approximately $0.1 million
in fiscal year 1997 due to capital expenditures which were largely offset by
gains on sales of investments. Cash from investment activities in fiscal 1996
was due to the sale of real estate, investments and equipment and a reduction
in restricted cash partially offset by capital expenditures. Cash used in
investment activities was $1.5 million in fiscal 1995 primarily due to capital
investments and an increase in restricted cash.
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<PAGE> 18
Cash provided from financing activities was approximately $30.6
million for fiscal 1997 largely due to the issuance of the Series A Preferred
Stock and the 6% Cumulative Convertible Preferred Stock less debt repayments.
Cash provided from financing activities was $29.5 million in fiscal 1996 due to
the implementation of the Plan. Cash used in financing activities in fiscal 1995
was $3.0 million and was the result of a net increase in borrowings.
As of January 3, 1998 the Company estimates that the remaining costs
in connection with the completion of outstanding acquired research and
development projects are less than $6.0 million. Such costs are expected to be
incurred primarily over the next two years and to include labor costs for
design, prototype development and testing. As a result, the Company expects
research and development costs to increase in fiscal 1998.
At January 3, 1998, Hayes' principal sources of liquidity included
cash and cash equivalents and its credit facilities with CIT (the "CIT
Facility"). The CIT Facility was replaced on February 20, 1998 by a credit
facility with the Commercial Funding Division of NationsCredit
("NationsCredit"). The NationsCredit facility consists of two term loans and a
revolving loan which provide for maximum borrowings of $42.5 million. The
revolving loan provides for financing based upon eligible receivables and
inventory. The term loans are based upon appraised values of equipment and
intangibles. The term loans and the revolving loans bear interest at prime
plus 0.75% (9.25% at February 20, 1998). The CIT Facility was similarly
comprised and bore interest at 1.875% over prime (10.375% at January 3, 1998.)
Management believes its cash and cash equivalents and its credit
facilities, will be sufficient to satisfy operating cash and capital
expenditure requirements for at least the next twelve months.
INFLATION
Hayes believes that inflation has not had a material impact on its
operating results and does not expect inflation to have a material impact on
its operating results in the foreseeable future.
RESULTS OF OPERATIONS
Fiscal 1997 Compared to Fiscal 1996
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1996 1998 CHANGE
------------ ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Net Revenues:
Modem Products .................... $245,438 $190,893 $(54,545)
Access Systems .................... 12,014 8,336 (3,678)
Broadband ........................ 383 383
-------- -------- --------
$257,452 $199,612 $(57,840)
======== ======== ========
</TABLE>
Net revenues in fiscal 1997 decreased by $57.8 million, or 22.5%, from
the same period in 1996 due to lower revenues in both the Modem Products and
Access Systems businesses. The decrease in net revenues was largely
attributable to Hayes' introduction of modems with 56Kbs speeds. In the third
quarter of fiscal 1996, Rockwell and 3 Com announced the introduction of modem
technology that would permit data to be transmitted on analog phone lines at
56Kbs. These announcements were followed by announcements by most modem
providers, including Hayes, indicating product availability in the first and
second quarters of 1997. As a result of these announcements and commentary
from various industry analysts, management believed that its channel partners
assumed that modem customers would move quickly to 56Kbs modems and away from
the then industry standard 33.6Kbs modems. Consequently, Hayes' channel
partners significantly reduced orders for 33.6Kbs products and substantially
reduced channel inventories of such products in the first quarter. Instead of
placing orders for 33.6Kbs products, Hayes' channel partners began placing
orders for Hayes' 56Kbs products. Due to the lack of availability of 56Kbs
modem chips from its suppliers, Hayes was unable to fill many of these orders
and backlog rose to $10.5 million at March 31, 1997 from $4.6 million at
December 31, 1996.
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<PAGE> 19
In the second quarter of 1997, Hayes began to fill its channel
partners demand for 56Kbs product. Management believes that during this period
its channel partners realized that customer demand was weighted heavily toward
33.6Kbs products and the market had not yet accepted 56Kbs products. As a
result, Hayes' channel partners began to place significant orders for 33.6Kbs
products. Hayes had converted much of its manufacturing schedule to 56Kbs
products and was therefore unable to meet much of its channel partners' demand
for 33.6Kbs product during the second quarter. Although second quarter 1997
revenues increased 42.2% from the first quarter of 1997 to $55.7 million at
June 1997, backlog grew to $20.9 million at June 30, 1997.
In the second half of 1997, market demand continued to be unstable and
Hayes experienced 33.6Kbs chip shortages from its vendors and experienced
quality problems with certain 33.6Kbs chips provided by a supplier. These
factors limited shipments and disrupted supply to certain customers. In
addition, continued uncertainty about the industry's determination of a
standard suppressed demand. Backlog declined to $10.6 million at January 3,
1998.
Gross profit as a percentage of net revenues declined to 22.5% in
fiscal 1997 from 23.9% in fiscal 1996 due to unfavorable manufacturing
variances caused by disruption to manufacturing schedules and lower average
selling prices for 33.6Kbs products resulting from the introduction of 56Kbs
products. In addition, the Company recorded additional inventory reserves in
the fourth quarter.
Selling, general and administrative expenses decreased by $5.4 million
in fiscal 1997 from the comparable period in 1996. Such expenses represented
28.2% of revenue in fiscal 1997 compared to 24.0% in fiscal 1996. Hayes
reduced operating expenditures in anticipation of lower revenues in fiscal
1997, but expenses as a percent of revenue were higher due to such lower
revenues. General and administration expenses for fiscal 1997 include $1.3
million in bonus and change of control payments in connection with the Merger.
Research and development expense increased to $11.8 million from $9.6
million in fiscal 1997 compared to fiscal 1996 as a result of increased
development expenses related to new products for the access systems and
broadband markets.
In connection with the Merger, the Company took a charge of $55.0
million related to acquired in-process research and development. In addition
the Company recorded $5.8 million in restructuring charges related to cost of
severance, facility closures and asset write-offs.
In fiscal 1997, the Company recognized a $4.1 million gain from
the sale of stock in a French software Company and other income increased $1.1
million over 1996 due to increased royalty payments. Hayes also recognized a
gain in fiscal 1996 of $8.2 million from the sale of certain parcels of real
estate.
Interest expense was $0.6 million lower in fiscal 1997 compared to
fiscal 1996. The interest expense in 1996 included interest at 12%, which was
payable on most of the pre-petition claims. These claims were paid in full in
April of 1996.
The effective tax rate was 0.0% in fiscal 1997 compared to 3.0% in
fiscal 1996. The effective tax rate was significantly impacted by the
Company's losses and the recognition of valuation allowances on its deferred
tax assets.
Hayes reported a net loss applicable to common shares of $84.6 million
for fiscal 1997 and net loss of $13.2 million for fiscal 1996. On a per share
basis, net loss was $(10.80) and net loss was $(1.63) in fiscal 1997 and 1996,
respectively.
Page 17
<PAGE> 20
Fiscal 1996 Compared to Fiscal 1995
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1996 CHANGE
------------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C>
Net Revenues:
Modem Products........................... $260,303 $245,438 $ (14,865)
Access Systems........................... 8,852 12,014 3,162
-------- -------- ----------
$269,155 $257,452 $ (11,703)
======== ======== ==========
</TABLE>
In fiscal 1996, Hayes reported net sales of approximately $257.5
million, a decrease of 4.3% from fiscal 1995. Modem Products business net
revenues decreased 5.7% to $245.4 million in fiscal 1996. This decrease
resulted from price erosion in the Company's 14.4Kbs and 28.8Kbs modem
products. Access Systems business net revenues increased 35.7% in fiscal 1996
to $12.0 million due to growth in Century product sales.
Gross profit, as a percentage of net sales, remained constant at 23.9%
in 1996 and 1995. Although average sales prices declined in fiscal 1996 versus
fiscal year 1995, improved product designs and lower manufacturing and material
costs enabled Hayes to maintain its gross profit margins.
Selling, general and administrative expenses, excluding restructuring
charges and amortization and write-off of intangibles, increased by
approximately $6.1 million in fiscal 1996 and rose as a percentage of revenue
to 24.0% versus 20.7% in fiscal 1995. The primary factors in the increase were
higher marketing expenses resulting from Hayes' sponsorship of a NASCAR racing
team at a cost of $3.8 million, higher marketing expenses and recruiting and
relocation expenses due to the employment of a new management team as Hayes
emerged from Chapter 11, partially offset by lower administrative expenses.
Research and development expense declined $1.1 million in 1996
compared to 1995 due to management's curtailment of expenditures in the first
half of 1996 as a result of the Chapter 11 proceedings.
Interest expense decreased 23.5% or approximately $1.5 million in
fiscal 1996 as compared to fiscal 1995 as a result of the $35.0 million capital
investment made in Hayes, the sale of certain parcels of real estate, and a new
borrowing arrangement, all of which were part of the Plan by which Hayes
emerged from Chapter 11. The implementation of the Plan enabled Hayes to pay
pre-petition claims which generally accrued interest at 12%.
In fiscal 1996, Hayes recognized a gain of approximately $0.7 million
on the sale of stock of a public company which it had previously received as
settlement of an intellectual property dispute. Hayes also recognized a gain
of approximately $8.2 million on the sale of certain parcels of real estate it
had previously acquired for development as a corporate campus.
Other income consists primarily of insert fees from third parties for
the inclusion of their software and related promotional materials in Hayes'
products and intellectual property license fees. Other income declined by
approximately $1.9 million or 45.2% in fiscal 1996 from approximately $4.2
million in fiscal 1995. The decline resulted from a reduction in license fees
from Rockwell. In July 1995, Hayes and Rockwell entered into an agreement in
which, among other things, Rockwell agreed to supply Hayes modem chips and
Hayes agreed to waive license fees from the date of the agreement through
December 31, 1996 (the "Rockwell Agreement").
The effective tax rate was 3.0% in 1996 compared to 6.1% in fiscal
1995. The effective tax rate was significantly impacted by the Company's
losses, nondeductible Chapter 11 expenses and the recognition of valuation
allowances on its deferred tax assets.
Page 18
<PAGE> 21
Hayes reported a net loss of $13.2 million for fiscal 1996 and a net
loss of $14.4 million for fiscal 1995. On a per share basis, net loss was
$(1.63) for fiscal 1996 and $(1.66) for fiscal 1995, respectively.
YEAR 2000
The Company has assessed the impact of the year 2000 issue and
believes that the costs to upgrade its information and operating systems to
address this issue are not material. In 1997, the Company commenced efforts to
replace its information systems with software from Oracle Corporation which is
Year 2000 compliant. These efforts are expected to be completed in fiscal
1998.
SUMMARY OF QUARTERLY INFORMATION (UNAUDITED):
Quarterly financial information for the fiscal year ended as follows:
<TABLE>
<CAPTION>
(in thousands) EARNINGS (LOSS) PER
NET GROSS NET COMMON AND COMMON
SALES PROFIT INCOME (LOSS) SHARES EQUIVALENT
-------- -------- ------------- --------------------
<S> <C> <C> <C> <C>
For the year ended
December 31, 1996
First $ 76,968 $ 21,763 $ 5,515 $ 0.64
Second 68,617 19,013 (288) (0.04)
Third 55,849 7,827 (14,891) (1.90)
Fourth 56,018 12,931 (3,490) (0.45)
-------- -------- -------- -------
Total $257,452 $ 61,534 $(13,154) $ (1.63)
For the year ended
January 3, 1998
First $ 39,176 $ 9,957 $ (5,359) $ (0.69)
Second 55,721 13,975 (2,466) (0.32)
Third 51,804 10,950 (6,697) (0.87)
Fourth 52,911 9,931 (70,084) (8.55)
-------- -------- -------- -------
Total $199,612 $ 44,813 $(84,606) $(10.80)
</TABLE>
Basic net (loss) income per share was approximately the same as diluted net
(loss) income per share in each period presented above.
Page 19
<PAGE> 22
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth at the end of this
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Company filed an 8-K regarding a change in accountants on January
22, 1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Incorporated herein by reference to the Registrant's definitive proxy
statement.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Registrant's definitive proxy
statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference to the Registrant's definitive proxy
statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the Registrant's definitive proxy
statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statement Schedule
The combined financial statements and financial statement schedule of
the Company and its subsidiaries are set forth at the end of this Form 10-K.
Schedule II Valuation and Qualifying Accounts filed herewith.
(b) Reports on Form 8-K.
The Company filed the following Reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Report Item Reported
-------------- -------------
<S> <C>
November 11, 1997 The Company reported it had entered into an agreement to place
$45.0 million in 6% cumulative convertible preferred stock.
</TABLE>
Page 20
<PAGE> 23
<TABLE>
<S> <C>
January 9, 1998 The Company reported that it had completed the Merger and pursuant thereto, Hayes
Microcomputer became a subsidiary of the Company and the Company changed its name to
Hayes Corporation.
January 22, 1998 The Company reported that it had appointed Coopers & Lybrand LLP as the certifying
accountant for Hayes Corporation's consolidated financial statements effective January
19, 1998.
</TABLE>
(c) Exhibits
EXHIBITS FOR 10-K
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's registration
statement on Form S-1, as amended (Commission File Number 333-1074)).
3.2 Amended and Restated Certificate of Incorporation of the Company.
3.3 Amended and Restated Bylaws of the Company.
4.1 Specimen Common Stock Certificate (filed as Exhibit 4.6.1 to the Company's registration statement on Form S-
4, as amended (Commission File Number 333-37993)).
4.2 Specimen Series A Stock Certificate (filed as Exhibit 4.6.2 to the Company's registration statement on Form
S-4, as amended (Commission File Number 333-37993)).
10.1 Technology License Agreement, dated as of November 16, 1996 between Penril and the Company (filed as Exhibit
10.1 to the Company's registration statement on Form S-1, as amended (Commission File Number 333-10741)).
10.2 Development and License Agreement dated as of June 16, 1996 between Bay and Penril, on behalf of the Company
(filed as Exhibit 10.2 to the Company's registration statement on Form S-1, as amended (Commission File
Number 333-10741)).
10.3 Indemnification Agreement dated as of November 16, 1996 between Penril and the Company (filed as Exhibit 10.3
to the Company's registration statement on Form S-1, as amended (Commission File Number 333-10741)).
10.4 Transitional Services Agreement dated as of November 16, 1996 between the Company and Penril (filed as
Exhibit 10.7 to the Company's registration statement on Form S-1, as amended (Commission File Number
333-10741)).
10.5.1 Lease Agreement between Penril and Real Estate Income Partners dated as of March 31, 1989, as amended on May
14, 1990 and November 15, 1996 (filed as Exhibit 10.8.1 to the Company's Form 10-K filed October 16, 1997).
10.5.2 Assignment and Assumption of Lease between Penril and the Company dated as of November 18, 1996 (filed as
Exhibit 10.8.2 to the Company's Form 10-K filed October 16, 1997).
10.6 The Company's Amended and Restated 1996 Long-Term Incentive Plan (filed as Exhibit 10.9 to the Company's Form
10-K filed October 16, 1997).
10.7 Form of Option Agreement for the grant of non-qualified options under the Amended and Restated 1996 Long-Term
Incentive Plan (filed as Exhibit 10.10 to the Company's Form 10-K filed October 16, 1997).
</TABLE>
Page 21
<PAGE> 24
<TABLE>
<S> <C>
10.8 The Company's Amended and Restated 1996 Non-Employee Directors' Stock Option Plan (filed as Exhibit 10.11 to
the Company's Form 10-K filed October 16, 1997).
10.9 Form of Option Agreement for the grant of options under the Amended and Restated 1996 Non-Employee Directors'
Stock Option Plan (filed as Exhibit 10.12 to the Company's Form 10-K filed October 16, 1997).
10.10 2290 Remote Access Gateway ("Hawk") Technology Transfer Agreement dated as of May 2, 1997 between the Company
and Paradyne Corporation (filed as Exhibit 10.13 to the Company's Form 10-K filed October 16, 1997).
10.11 Stock Purchase Agreement dated as of May 2, 1997 between the Company and Paradyne Corporation, and First
Amendment thereto dated September, 1997 (filed as Exhibit 10.14 to the Company's Form 10-K filed October 16,
1997).
10.12 Employment Agreement dated as of November 18, 1996 between the Company and Ronald Howard (filed as Exhibit
10.15 to the Company's Form 10-K filed October 16, 1997).
10.13 Manufacturing Agreement dated as of March 1, 1997 between the Company and Hibbing Electronics Corporation
(filed as Exhibit 10.16 to the Company's Form 10-K filed October 16, 1997).
10.14 Form of Employment Agreement between the Company and Ronald Howard (filed as Exhibit 10.14 to the Company's
registration statement on Form S-4, as amended, (Commission File Number 333-37993)).
10.15 Form of Employment Agreement between the Company and Dennis Hayes (filed as Exhibit 10.15 to the Company's
registration statement on Form S-4, as amended, (Commission File Number 333-37993)).
10.16 Employment Agreement between the Company and P.K. Chan dated October 7, 1996, as amended.
10.17 Employment Agreement between the Company and Keith Mintzer dated December 20, 1996.
10.18 Employment Agreement between the Company and James A. Jones dated October 31, 1997.
10.19 Agreement between the Company and EMI Holding Corp., dated November 13, 1996, as amended on January 6, 1997,
February 26, 1997 and April 17, 1997 (filed as Exhibit 10.17 to the Company's Form 10-K filed October 16,
1997).
10.20 Hayes Stock Option Plan (filed as Exhibit 10.17 to the Company's registration statement on Form S-4, as
amended (Commission File Number 333-37993)).
10.21 First Amendment to Hayes Stock Option Plan (filed as Exhibit 10.18 to the Company's registration statement on
Form S-4, as amended (Commission File Number 333-37993)).
10.22 Declaration of Amendment to Hayes Stock Option Plan.
10.23 Forms of Hayes Stock Option Agreements, as amended (filed as Exhibit 10.19 to the Company's registration
statement on Form S-4, as amended (Commission File Number 333-37993)).
10.24 Loan and Security Agreement between the Company and Foothill Capital Corp. dated October 2, 1997 (filed as
Exhibit 10.20 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
</TABLE>
Page 22
<PAGE> 25
<TABLE>
<S> <C>
10.25 Shareholders' Agreement dated July 29, 1997, by and among Dennis C. Hayes, Ronald A. Howard, Access Beyond,
Inc. and Hayes Microcomputer Products, Inc.
10.26 Agreement and Plan of Merger dated April 16, 1996, by and among Hayes Microcomputer Products, Inc., Dennis C.
Hayes and certain investors.
10.27 Shareholders' Agreement dated April 16, 1996, by and among Dennis C. Hayes, Hayes Microcomputer Products,
Inc. and certain investors.
10.28 Amended and Restated Employment Agreement dated April 16, 1996 by and between Dennis C. Hayes and Hayes
Microcomputer Products, Inc.
10.29 Indemnification Agreement dated April 12, 1996 by and between Hayes Microcomputer Products, Inc., Rinzai
Limited, Dennis C. Hayes and certain investors.
10.30 Voting Trust Agreement dated April 16, 1996 by and between Dennis C. Hayes, Hayes Microcomputer Products,
Inc. and G. Donald Johnson.
10.31 Convertible Subordinated Promissory Note dated April 16, 1996 issued in the amount of $3,450,000 to Rinzai
Limited.
10.32 Convertible Subordinated Promissory Note dated April 16, 1996 issued in the amount of $1,000,000 to Kaifa
Technology (H.K.) Limited.
10.33 Convertible Subordinated Promissory Note dated April 16, 1996 issued in the amount of $500,000 to Rolling
Profit Holdings Limited.
10.34 Convertible Subordinated Promissory Note dated April 16, 1996 issued in the amount of $450,000 to Lao Hotel
(H.K.) Limited.
10.35 Convertible Subordinated Promissory Note dated April 16, 1996 issued in the amount of $300,000 to S.P. Quek
Investments, Ltd.
10.36 Convertible Subordinated Promissory Note dated April 16, 1996 issued in the amount of $300,000 to Saliendra
Pte. Ltd.
10.37 Warrant Plan dated April 11, 1996.
10.38 Warrant dated April 16, 1996 for Chiang Lam.
10.39 Warrant dated April 16, 1996 for Mina Hayes.
10.40 Lease Agreement dated July 27, 1990, between Hayes Microcomputer Products, Inc. and Peachtree Crossings
Business Park Associates regarding property located at 5923 Peachtree Industrial Boulevard, Norcross, Georgia
30092, as amended.
10.41 Lease Agreement dated July 27, 1990, between Hayes Microcomputer Products, Inc. and Peachtree Crossings
Business Park Associates regarding property located at 5953 Peachtree Industrial Boulevard, Norcross, Georgia
30092, as amended.
10.42 Lease Agreement dated July 27, 1990, between Hayes Microcomputer Products, Inc. and Peachtree Crossings
Business Park Associates regarding property located at 5804 Peachtree Corners East, Norcross, Georgia 30092,
as amended.
</TABLE>
Page 23
<PAGE> 26
<TABLE>
<S> <C>
10.43 Lease Agreement dated August 13, 1993, between Hayes Microcomputer Products, Inc. and Peachtree Crossings
Business Park Associates regarding property located at 5854 Peachtree Corners East, Norcross, Georgia 30092,
as amended.
10.44 Form of Distribution Agreement between the Company and Penril DataComm Networks, Inc. (filed as Exhibit 2.1
to the Company's registration statement on Form S-1, as amended (Commission File Number 333-10741).
10.45 Plan and Agreement of Merger dated as of June 16, 1996, as amended August 5, 1996, among Penril, Bay
Networks, Inc. ("Bay") and Beta Acquisition Corp. (filed as Exhibit 2.2 to the Company's registration
statement on Form S-1, as amended (Commission File Number 333-10741).
10.46 Agreement and Plan of Reorganization between the Company and Hayes Microcomputer Products, Inc. dated July
29, 1997 (filed as Exhibit 10.1 to the Company's Form 8-K filed August 7, 1997).
10.47 First Amendment to the Agreement and Plan of Reorganization, dated as of November 7, 1997 (filed as Exhibit
2.3.2 to the Company's registration statement on Form S-4 (Commission File Number 333-37993)).
10.48 Second Amendment to the Agreement and Plan of Reorganization, dated as of November 21, 1997 (filed as Exhibit
2.3.3 to the Company's registration statement on Form S-4 (Commission File Number 333-37993)).
10.49 Voting Agreement dated July 29, 1997 between the Company and Chestnut Capital Limited Partnership (filed as
Exhibit 4.1.1 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.50 Voting Agreement dated July 29, 1997 between the Company and Rinzai Limited (filed as Exhibit 4.1.2 to the
Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
10.51 Voting Agreement dated July 29, 1997 between the Company and Vulcan Ventures Incorporated (filed as Exhibit
4.1.3 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
10.52 Affiliate Agreement dated July 29, 1997 between the Company and Kaifa Technology (H.K.) Limited (filed as
Exhibit 4.2.1 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.53 Affiliate Agreement dated July 29, 1997 between the Company and Rinzai Limited (filed as Exhibit 4.2.2 to the
Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
10.54 Affiliate Agreement dated July 29, 1997 between the Company and Chestnut Limited Partnership (filed as
Exhibit 4.2.3 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.55 Affiliate Agreement dated July 29, 1997 between the Company and S. P. Quek Investments Pte Ltd. (filed as
Exhibit 4.2.4 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.56 Affiliate Agreement dated July 29, 1997 between the Company and Dennis Hayes (filed as Exhibit 4.2.5 to the
Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
</TABLE>
Page 24
<PAGE> 27
<TABLE>
<S> <C>
10.57 Market Standoff Agreement dated July 29, 1997 between the Company and Kaifa Technology (H.K.) Limited (filed
as Exhibit 4.3.1 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.58 Market Standoff Agreement dated July 29, 1997 between the Company and Rinzai Limited (filed as Exhibit 4.3.2
to the Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
10.59 Market Standoff Agreement dated July 29, 1997 between the Company and S.P. Quek Investments Pte Ltd. (filed
as Exhibit 4.3.3 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.60 Market Standoff Agreement dated July 29, 1997 between the Company and Rolling Profits Holdings Limited (filed
as Exhibit 4.3.4 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.61 Market Standoff Agreement dated July 29, 1997 between the Company and Saliendra Pte Ltd. (filed as Exhibit
4.3.5 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
10.62 Market Standoff Agreement dated July 29, 1997 between the Company and Lao Hotel (H.K.) Limited (filed as
Exhibit 4.3.6 to the Company's registration statement on Form S-4, as amended (Commission File Number 333-
37993)).
10.63 Market Standoff Agreement dated July 29, 1997 between the Company and Dennis Hayes (filed as Exhibit 4.3.7 to
the Company's registration statement on Form S-4, as amended (Commission File Number 333-37993)).
10.64 Preferred Stock Investment Agreement dated as of November 10, 1997 between the Company and certain investors
(filed as Exhibit 4.1 to the Company's Form 8-K filed November 17, 1997).
10.65 Registration Rights Agreement dated as of November 10, 1997 between the Company and certain investors (filed
as Exhibit 4.2 to the Company's Form 8-K filed November 17, 1997).
10.66 Loan and Security Agreement between the Company and the CIT Group/Credit Finance, Inc. ("CIT") dated December
21, 1995.
10.67 First Amendment to Loan and Security Agreement between the Company and CIT dated April 16, 1996.
10.68 First Amendment to Conditions Precedent Rider between the Company and CIT dated April 16, 1996.
10.69 Second Amendment to Loan and Security Agreement between the Company and CIT dated October 15, 1996.
10.70 Third Amendment to Loan and Security Agreement between the Company and CIT dated January 1, 1997.
10.71 Fourth Amendment to Loan and Security Agreement between the Company and CIT dated December 29, 1997.
10.72 Guaranty of Hayes Corporation dated January 2, 1998.
10.73 Security Agreement of Hayes Corporation dated January 2, 1998.
</TABLE>
Page 25
<PAGE> 28
<TABLE>
<S> <C>
10.74 Agreement and Plan of Merger between Hayes Microcomputer Products, Inc. and Cardinal Technologies, Inc.,
Vulcan Ventures Incorporated and Hayes Merger Sub., Inc. dated April 11, 1997.
10.75 Preferred Stock Purchase Agreement dated April 11, 1997 between the Hayes Microcomputer Products, Inc. and
Vulcan Ventures Incorporated.
21. List of subsidiaries of the Company.
23. Report of independent public accountants.
25. Power of attorney (included as part of signature page).
27. Financial Data Schedule (for SEC use only).
</TABLE>
Page 26
<PAGE> 29
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, thereto duly authorized on April 2,
1998.
HAYES CORPORATION
By: /s/ Dennis C. Hayes
----------------------------------
Dennis C. Hayes
Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dennis C. Hayes and Ronald A. Howard, or
either of them, with each the power of substitution, his or her
attorney-in-fact, to sign any amendments to this Annual Report on Form 10-K and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his or her substitute, may
do or choose to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1994,this Report has been signed by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dennis C. Hayes Chairman and Director April 2, 1998
--------------------------------
Dennis C. Hayes
/s/ Ronald A. Howard Chief Executive Officer April 2, 1998
-------------------------------- (Principal Executive Officer),
Ronald A. Howard Vice Chairman and Director
/s/ James Jones Vice President & Chief Financial April 2, 1998
------------------------------- Officer
James Jones (Principal Financial and Accounting
Officer)
/s/ P.K. Chan President, Chief Operating April 2, 1998
-------------------------------- Officer and Director
P.K. Chan
/s/ Barbara Perrier Dreyer Director April 2, 1998
--------------------------------
Barbara Perrier Dreyer
/s/ Chiang Lam Director April 2, 1998
--------------------------------
Chiang Lam
/s/ S.P. Quek Director April 2, 1998
--------------------------------
S.P. Quek
/s/ M.C. Tam Director April 2, 1998
--------------------------------
M.C. Tam
</TABLE>
Page 27
<PAGE> 30
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hayes Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Hayes
Corporation and subsidiaries as of December 31, 1996 and January 3, 1998 and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the year ended September 30, 1995, the three months ended
December 31, 1995, and the years ended December 31, 1996 and January 3, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hayes
Corporation and subsidiaries as of December 31, 1996 and January 3, 1998 the
results of their operations and their cash flows for the year ended September
30, 1995, the three months ended December 31, 1995, and the years ended December
31, 1996 and January 3, 1998 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 25, 1998
F-1
<PAGE> 31
HAYES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, JANUARY 3,
1996 1998
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................. $ 5,687 $ 15,240
Restricted cash ............................................ 594 530
Accounts receivable, less allowance for doubtful
accounts and product returns of $8,115 in 1996
and $4,241 in 1997....................................... 16,060 36,706
Receivables from related parties ........................... 6,828 2,705
Inventories, net ........................................... 25,422 32,250
Prepaid expenses and other current assets .................. 4,453 1,890
--------- ---------
Total current assets ............................... 59,044 89,321
Property and equipment, net .................................. 7,387 9,436
Computer software costs, net ................................. 307 623
Intangibles and other long-term assets, net .................. 2,477 15,948
--------- ---------
Total assets ........................................ $ 69,215 $ 115,328
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current debt ............................................... $ 13,973 $ 11,363
Accounts payable ........................................... 10,414 23,462
Amounts due to related parties ............................. 6,918 15,029
Accrued liabilities ........................................ 23,221 30,561
Income taxes payable ....................................... 864 295
--------- ---------
Total current liabilities .......................... 55,390 80,710
Long-term debt, less current ................................. 6,881 580
Other long-term liabilities .................................. 1,203
--------- ---------
Total liabilities .................................. 63,474 81,290
Redeemable preferred stock, Series A, no par value,
authorized 405,977 shares; issued and outstanding
405,977 at January 3, 1998 ................................. 5,455
6% Cumulative Preferred Stock ................................ 47,459
Stockholders' equity (deficit):
Common stock, $.01 par value; authorized 100,000,000
shares; issued and outstanding 1,663,917 shares
at December 31, 1996 and 19,497,882 shares
at January 3, 1998 ...................................... 16 193
Preferred stock no par value, authorized
10,000,000 shares; issued and outstanding 4,900,000
shares at December 31, 1996 ............................. 35,000
Paid-in capital............................................. 92,279
Accumulated deficit ........................................ (30,278) (111,401)
Foreign currency translation adjustment .................... 1,003 53
--------- ---------
Total stockholders' equity (deficit) .................... 5,741 (18,876)
--------- ---------
Total liabilities and stockholders' equity (deficit) $ 69,215 $ 115,328
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE> 32
HAYES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JANUARY 3,
1995 1995 1996 1998
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ...................... $ 269,155 $ 70,111 $ 257,452 $ 199,612
Cost of sales .................. 204,787 51,765 195,918 154,799
---------- ---------- --------- ----------
Gross profit .............. 64,368 18,346 61,534 44,813
---------- ---------- --------- ----------
Operating expenses:
Sales and marketing .......... 33,364 8,867 42,757 37,405
General and administrative ... 22,223 5,100 18,970 18,897
Research and development ..... 10,713 2,281 9,640 11,788
Write-off of intangibles ..... 5,907
Restructuring charges ........ 3,600 5,840
Purchased in-process
research and development .... 54,990
--------- ---------- --------- ----------
Total operating expense ........ 72,207 16,248 74,967 128,920
--------- ---------- --------- ----------
Operating (loss) income ........ (7,839) 2,098 (13,433) (84,107)
Interest expense, net .......... (6,605) (1,807) (5,056) (4,478)
Gain on sale of investment ..... 666 4,092
Gain on sale of land ........... 8,153
Other income (expense), net .... 4,155 (24) 2,279 3,366
---------- ---------- --------- ----------
(Loss) income before
reorganization expense
and income tax expense
(benefit) ............... (10,289) 267 (7,391) (81,127)
Reorganization expense ......... 5,026 4,301 5,378
---------- ---------- --------- ----------
Loss before income tax
expense (benefit) ....... (15,315) (4,034) (12,769) (81,127)
Income tax expense (benefit) ... (932) 603 385 (4)
---------- ---------- --------- ----------
Net loss .................. (14,383) (4,637) (13,154) (81,123)
---------- ---------- --------- ----------
Preferred stock dividend........ 3,483
Loss applicable to common ......
shareholders .............. $ (14,383) $ (4,637) $ (13,154) $ (84,606)
Basic and diluted loss per share $ (1.66) $ (0.53) $ (1.63) $ (10.80)
========== ========== ========= ==========
Weighted average number
of common shares
outstanding ............... 8,687 8,687 8,061 7,825
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE> 33
HAYES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK (1) PREFERRED STOCK
--------------------- ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Balance September 30, 1994............. 1,849 $18 $ 614
Net loss.............................
Foreign currency translation.........
Unrealized gain on securities
held for sale......................
------ ----- --------
Balance September 30, 1995............. 1,849 18 614
Net loss.............................
Foreign currency translation ........
Unrealized gain on securities
held for sale .....................
------ ----- --------
Balance December 30, 1995 ............. 1,849 18 614
Net loss ............................
Stock repurchased and retired........ (185) (2) (614)
Preferred stock issued............... 4,900 35,000
Foreign currency translation.........
Unrealized gain on securities
held for sale .....................
------ ----- ------- -------- --------
Balance December 31, 1996 ............. 1,664 16 4,900 35,000
Net loss.............................
Repurchase of stock.................. (1) (2)
Foreign currency translation.........
Preferred stock conversion............ 7,561 76 (4,900) (35,000) 34,924
Assumed issuance of common
stock in connection with
acquisition...................... 10,273 102 60,840
Beneficial conversion feature,
preferred stock.................. (3,483)
------ ----- ------- -------- --------
Balance January 3, 1998............... 19,498 $ 193 $ $ 92,279
====== ===== ======= ======== ========
<CAPTION>
FOREIGN UNREALIZED TOTAL
ACCUMULATED CURRENCY GAIN ON STOCKHOLDERS'
EARNINGS TRANSLATION MARKETABLE EQUITY
(DEFICIT) ADJUSTMENT SECURITIES (DEFICIT)
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Balance September 30, 1994............. $ 14,758 $ 506 $ 15,896
Net loss............................. (14,383) (14,383)
Foreign currency translation......... (96) (96)
Unrealized gain on securities
held for sale...................... $266 266
---------- ------ ---- --------
Balance September 30, 1995............. 375 410 266 1,683
Net loss............................. (4,637) (4,637)
Foreign currency translation......... (102) (102)
Unrealized gain on securities
held for sale...................... 44 44
---------- ------ ---- --------
Balance December 30, 1995.............. (4,262) 308 310 (3,012)
Net loss............................. (13,154) (13,154)
Stock repurchased and retired........ (12,862) (13,478)
Preferred stock issued............... 35,000
Foreign currency translation......... 695 695
Unrealized gain on securities
held for sale ..................... (310) (310)
---------- ------ ---- --------
Balance December 31, 1996 ............. (30,278) 1,003 5,741
Net loss............................. (81,123) (81,123)
Repurchase of stock.................. (3)
Foreign currency translation......... (950) (950)
Preferred stock conversion............
Assumed issuance of common
stock in connection with
acquisition ..................... 60,942
Beneficial conversion feature,
preferred stock ................. (3,483)
---------- ------ ---- --------
Balance January 3, 1998............... $ (111,401) $ 53 $(18,876)
========== ====== ==== ========
</TABLE>
(1) Retroactively adjusted to reflect the effect of a one for three reverse
common stock split effected February 25, 1998 and a one for 3.078 reverse
common stock split effected April 16, 1996.
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE> 34
HAYES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED ENDED YEAR ENDED YEAR ENDED
(IN THOUSANDS) SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JANUARY 3,
1995 1995 1996 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ......................................... $(14,383) $(4,637) $(13,154) $(81,123)
-------- ------- -------- --------
Purchased in-process research and
development ................................... 54,990
Adjustments to reconcile net loss
to net cash provided by
(used in) operating activities:
Depreciation and amortization ................... 5,989 1,301 4,729 6,019
Amortization and write-off of
intangibles ................................... 5,543 70 461
Provision for doubtful accounts
receivable ................................... 2,390 (20) 345 389
Provision for inventory write-downs ............. 12,727 575 5,440 2,290
Gain on sale of investment ..................... (666) (4,092)
Gain on sale of land ........................... (8,153)
Changes in assets and liabilities, net
of effects of acquisition:
Accounts receivable ........................... (11,513) 6,079 4,256 (10,557)
Inventories ................................... 3,541 (161) 7,442 3,118
Prepaid expenses and other current
assets ..................................... 1,043 (14) (1,338) 1,722
Accounts payable ............................. (47,850) 1,057 6,107 1,117
Amounts due to related parties................. 6,496 8,111
Accrued liabilities ........................... 8,441 7,605 (10,464) (948)
Income taxes payable ......................... (569)
Liabilities subject to compromise.............. 33,275 3,147 (44,581)
Other long-term liabilities ................... 2,310 3 2,394 (1,187)
-------- ------- -------- --------
Total adjustments ........................... 15,896 19,572 (27,923) 60,864
-------- ------- -------- --------
Net cash provided by (used in)
operating activities ..................... 1,513 14,935 (41,077) (20,259)
-------- ------- -------- --------
Cash flows from investing activities:
Capital expenditures ............................. (1,805) (453) (5,028) (4,079)
Proceeds from sale of land ....................... 14,317
Access Beyond consideration ....................... (704)
Cardinal consideration ........................... (38)
Proceeds from sale of investment................... 798 4,529
Proceeds from sale of equipment ................... 759 73 782
Changes in other long-term assets.................. 2,636 189 333 368
Changes in escrowed and restricted funds ......... (3,036) (465) 2,907 64
-------- ------- -------- --------
Net cash provided by (used in)
investing activities ..................... (1,446) (656) 14,109 140
-------- ------- -------- --------
Cash flows from financing activities:
Issuance of preferred stock ....................... 35,000 39,598
Payments on debt and convertible notes ........... (28,685) (16,318) (17,915) (29,475)
Proceeds from debt ............................... 26,266 22,057 15,311
Issuance of convertible notes ..................... 6,000 4,000
Repurchase of stock ............................... (13,478) (3)
Payment of debt issuance costs ................... (618) (625) (2,139) 675
Other ............................................. 516
-------- ------- -------- --------
Net cash provided by (used in)
financing activities ..................... (3,037) (16,943) 29,525 30,622
-------- ------- -------- --------
Effect of exchange rate changes on cash ............. (96) (102) 695 (950)
-------- ------- -------- --------
Net increase (decrease) in cash and cash
equivalents ....................................... (3,066) (2,766) 3,252 9,553
Cash and cash equivalents at beginning of
period ........................................... 8,267 5,201 2,435 5,687
-------- ------- -------- --------
Cash and cash equivalents at end of
period ........................................... $ 5,201 $ 2,435 $ 5,687 $ 15,240
-------- ------- -------- --------
Supplemental information:
Interest paid ..................................... $ 3,221 $ 1,203 $ 11,811 $ 4,360
Income taxes paid ................................. 15 7 658 573
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 35
HAYES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Hayes Corporation, along with its wholly owned subsidiaries
(collectively, the "Company"), is engaged in the development, production and
marketing of telecommunications equipment and software and sells primarily to
personal computer and peripheral distributors and resellers.
ACCESS BEYOND, INC. MERGER
On December 30, 1997 Access Beyond, Inc. ("Access Beyond") and Hayes
Microcomputer Products, Inc. ("Hayes Microcomputer") completed a reverse
triangular merger (the "Merger") whereby Access Beyond acquired Hayes
Microcomputer. Immediately after the Merger, Access Beyond changed its name to
Hayes Corporation ("Hayes"). In the Merger, shareholders of Hayes Microcomputer
received approximately 79% of the outstanding common stock of Access Beyond,
without giving effect to the 6% Cumulative Preferred Sock and the stock
warrants and options of the two companies. Since the Hayes Microcomputer
shareholders received a substantial majority of the shares of common stock of
the newly named Hayes, the transaction was treated as a reverse acquisition by
Hayes Microcomputer for accounting purposes. As a result the historical
financial statements of Hayes for the periods prior to the merger are those of
Hayes Microcomputer rather than those of Access Beyond.
HAYES MICROCOMPUTER REORGANIZATION
On November 15, 1994, Hayes Microcomputer filed a petition for relief
under Chapter 11 of the United States Bankruptcy Code due to its inability to
pay its debts on a current basis. Under Chapter 11, certain claims against the
debtor in existence prior to the filing of the petition for relief under the
federal bankruptcy laws were stayed while the Debtor continued business as a
debtor-in-possession ("DIP").
Hayes Microcomputer filed amended and restated plans of
reorganization, the most recent dated February 9, 1996 (the "Plan"). The Plan
was confirmed by the U.S. Bankruptcy Court on March 8, 1996 and became
effective on April 16, 1996. From November 1994 through April 1996, Hayes
Microcomputer operated as the DIP. The Plan provided for the payment in full of
all prepetition creditors on the effective date, plus interest on such
creditors' claims, except where such creditors have agreed to accept payments
over a period of time. Funding of the plan was provided through three major
sources. First, pursuant to an agreement and plan of merger dated April 12,
1996 (the "Agreement") and entered into by and between Rinzai Limited ("ACMA"),
Kaifa Technology (H.K.) Limited, Rolling Profit Holdings, Ltd., Lao Hotel
(H.K.), Limited, Saliendra Pte Ltd., and S.P. Quek Investments Pte. Ltd.
(collectively, the "Investors"), certain subsidiaries were created by the
investors which collectively contributed $35.0 million and merged with Hayes
Microcomputer. The Investors received preferred stock representing a 49 percent
voting interest in Hayes Microcomputer. Second, Hayes Microcomputer entered
into an agreement with The CIT Group/Credit Finance, Inc. ("CIT") to borrow up
to a total of $64.5 million through three separate debt instruments
collateralized by Hayes Microcomputer's intellectual property, certain
equipment, and accounts receivable and inventory balances. Third, pursuant to
the Plan, Hayes Microcomputer sold certain parcels of real property. On
October 9, 1997 Hayes Microcomputer received the final decree bringing its
Chapter 11 case to a close.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Hayes
and its wholly owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation. The Company's investments
in 20 to 50 percent owned companies in which it has the ability to exercise
significant influence over operating and financial policies are accounted for
on the equity method. Accordingly, the Company's share of the earnings of these
companies and any realized gains and losses are included in the
F-6
<PAGE> 36
consolidated statements of operations. Investments in other companies are
carried at cost. The cost of securities sold is based on the specific
identification method.
Effective January 3, 1998, the Company changed its year-end to the
Saturday closest to December 31. Separate financial information for the three
day transition period is not provided since there was no activity. During 1996,
the Company changed its year-end from September 30 to December 31. Certain
reclassifications have been made to prior period financial statements in order
to conform to the 1997 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Restricted cash at January 3, 1998 related to funds escrowed for letters of
credit and at December 31, 1996 related to Bankruptcy Court mandated escrowed
funds.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and include labor and related manufacturing overhead. Market with
respect to raw materials is replacement cost and for work in process and
finished goods is net realizable value. Inventories are presented net of
reserves for obsolescence.
Property and Equipment
Property and equipment, including certain equipment acquired under
capital leases, are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated for financial reporting purposes using
the straight-line method based on the estimated useful life of the assets
(three to five years). Leasehold improvements are depreciated over the shorter
of the lease term or useful life and assets acquired under capital leases are
amortized over the term of the underlying lease.
Maintenance and repairs are charged to expense as incurred. Upon sale,
retirement or other disposition of these assets, the cost and the related
accumulated depreciation are removed from the respective accounts and any gain
or loss on the disposition is included in the consolidated statements of
operations.
Computer Software Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," the Company capitalizes costs incurred for the development of
computer software to be sold. Costs are capitalized upon the establishment of
technical feasibility of the product. Capitalized costs are being amortized
based on current and future projected revenues for each product with an annual
minimum equal to the straight-line amortization over the five year estimated
economic useful life of the product.
Intangibles and Other Long-Term Assets
The Company evaluates the recoverability of all long-lived assets
including related intangible assets and goodwill based upon a comparison of
discounted estimated future cash flows from the related operations with the
then corresponding carrying values of those assets.
F-7
<PAGE> 37
Intangible assets consist principally of purchased software and
goodwill which is being amortized using the straight-line method over five
years and five to ten years, respectively. Accumulated amortization was $12.2
million and $4.7 million at December 31, 1996 and at January 3, 1998,
respectively.
Revenue Recognition
The Company's policy is to record revenue upon shipment of related
goods to customers. Sales to certain distributors are under terms which allow
for those distributors to receive price protection based on future price
reductions. Some sales made to distributors allow limited rights of return. The
Company provides an allowance for returns and price reductions based on
historical experience.
Income Taxes
Income taxes have been provided using the asset and liability method
in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Under SFAS 109, deferred tax liabilities and
assets are determined based on temporary differences between the bases of
certain assets and liabilities for income tax and financial reporting purposes.
The differences are primarily attributable to reserves on inventory, accounts
receivable, net operating loss carry forwards and reserves for warranty claims.
Future tax benefits, such as net operating loss carry forwards, are recognized
to the extent that realization of such benefits is more likely than not. The
effect of a change in the valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset in future years would be included in income in that
period.
Advertising
All advertising costs are expensed when incurred. Advertising expenses
were approximately $9.9 million, $3.4 million, $18.0 million and $15.2 million
for the years ended September 30, 1995, the three months ended December 31,
1995, and the years ended December 31, 1996 and January 3, 1998, respectively.
Foreign Currency Translation
The financial statements of subsidiaries of the Company outside the
United States are measured using the local currency as the functional currency.
Translation adjustments result from the process of translating those
subsidiaries' financial statements from functional currency into U.S. dollars.
Translation adjustments are reported separately and accumulated in a separate
component of equity. Assets and liabilities of these subsidiaries are
translated at the rates of exchange at the balance sheet dates. Income and
expense items are translated at monthly weighted average rates.
Future Adoption of Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131") and No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 131 specifies revised guidelines for
determining an entity's operating segments and the type and level of financial
information to be disclosed. SFAS 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. These
standards are effective for periods beginning after December 15, 1997.
The Company believes that the impact of these standards, when adopted,
will not have a material impact on the Company's consolidated financial
statements.
3. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash Equivalents
The Company estimates that the fair value of cash equivalents
approximates carrying value due to the relatively short maturity of these
instruments.
F-8
<PAGE> 38
Notes Payable
The Company estimates that the fair value of notes payable
approximates carrying value based upon its effective current borrowing rate for
issuance of debt with similar terms and remaining maturities.
Preferred Stock
The Company estimates that the fair value of its preferred stocks
approximate carrying value based upon their current dividend rates, terms and
valuation of certain beneficial conversion features.
4. SUPPLEMENTAL BALANCE SHEET INFORMATION
Inventories, net of reserves, consist of:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1996 1998
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials ........................... $ 9,199 $12,047
Work in process ......................... 4,728 5,205
Finished goods ......................... 11,495 14,998
------- -------
$25,422 $32,250
======= =======
</TABLE>
Property and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1996 1998
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment ....................... $ 19,735 $ 18,739
Data processing equipment ..................... 15,069 16,225
Furniture and fixtures ......................... 6,662 7,500
Leasehold improvements ......................... 4,738 4,439
Construction in progress ....................... 448 1,910
-------- --------
46,652 48,813
Less accumulated depreciation and amortization (39,265) (39,377)
-------- --------
$ 7,387 $ 9,436
======== ========
</TABLE>
Accrued liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1996 1998
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable .................... $ 8,444 $ 8,004
Payroll and benefits ................ 2,643 3,195
Vendor obligations .................. 2,348 2,049
Restructuring ........................ 2,058 6,198
Professional fees .................... 333 3,897
Promotional and marketing ............ 1,497 1,518
Other ................................ 5,898 5,700
------- -------
$23,221 $30,561
======= =======
</TABLE>
5. WRITE-OFF OF INTANGIBLES
In accordance with the Company's policy, management assessed the value of the
goodwill that was recorded as a result of the July 1989 acquisition of
Practical Peripherals, Inc., a computer products manufacturer with operations
in Thousand Oaks, California. As a result of changes in events and
circumstances related to the business, management determined that the goodwill
should be reduced
F-9
<PAGE> 39
significantly given the expected value that would be derived from these
intangible assets in the future. The Company recorded a charge to write-off
goodwill totaling $5.5 million in the year ended September 30, 1995.
6. RESTRUCTURING
1996
In September 1996, the Company announced the closure of its Thousand
Oaks, California operations. During the year ended December 31, 1996, the
Company recorded a restructuring charge of $3.6 million related to exiting these
operations. The restructuring charge consists of the following items:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Lease obligation ......................... $1,700
Employee severance ....................... 965
Equipment disposals ....................... 705
Other ..................................... 230
------
$3,600
======
</TABLE>
At December 31, 1996, the remaining restructuring reserve totaled $3.3
million of which $2.1 million is included in accrued liabilities and $1.2
million is included in other long-term liabilities. In addition, cost of sales
for the year ended December 31, 1996 includes $2.4 million of additional
inventory obsolescence charges associated with the termination of products
produced at the Thousand Oaks facility and the resulting disposal of excess
inventory. At January 3, 1998, the remaining restructuring reserve totaled $.5
million of which $.1 million is included in accrued liabilities and $.4 million
is included in long-term debt.
1997
In December 1997, Hayes Microcomputer implemented a restructuring
program in preparation for the Merger. In addition to the charge for the $1.4
million CIT unamortized facility fee, the restructuring program included the
following items:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Lease obligation ........................... $1,786
Employee severance ......................... 1,813
Equipment disposals ......................... 539
Other ....................................... 1,702
------
$5,840
======
</TABLE>
At January 3, 1998, the remaining restructuring reserve totaled $3.5
million and is included in accrued liabilities.
7. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1996 1998
------------- ----------
(IN THOUSANDS)
<S> <C> <C>
CIT line of credit................................... $ 6,035 $ 10,381
CIT term loan "A," due April 1, 2002................. 1,802 693
CIT term loan "B," due April 1, 2002................. 6,667
Convertible notes from Investors..................... 6,000
Other................................................ 350 869
--------- --------
20,854 11,943
Less current maturities.............................. (13,973) (11,363)
--------- --------
Total long-term debt................................. $ 6,881 $ 580
========= ========
</TABLE>
On April 16, 1996, the Company entered into two term loans and a
revolving loan facility (the "Line of Credit") with CIT which provide for
maximum borrowings of $64.5 million. The Line of Credit provides for financing
based on eligible accounts receivable and inventory, as defined in the
agreement, and expires April 16, 2000 unless otherwise renewed. The term loans
are based on eligible equipment and intangibles. Based on the applicable
calculations, the total available borrowings under the term loans and the Line
of
F-10
<PAGE> 40
Credit are approximately $15.9 million as of January 3, 1998. The term loans
and the Line of Credit bear interest at prime plus 1.875 percent (10.375
percent at January 3, 1998). Prior to December 30, 1997 Dennis C. Hayes,
Chairman of the Company, had provided to CIT a $5.0 million guarantee of the
outstanding Line of Credit. The Line of Credit has covenants requiring minimum
levels of tangible net worth and net income, as defined. The Company did not
meet the minimum levels at December 31, 1996, therefore the interest rate was
raised effective January 1, 1997 and the loan amortization on the term
facilities was accelerated effective July 1, 1997.
The CIT line of credit was replaced on February 20, 1998 by a credit
facility with the Commercial Funding Division of NationsCredit
("NationsCredit"). The NationsCredit facility consists of two term loans and a
revolving loan facility which provide for maximum borrowings of $42.5 million.
The revolving loan provides for financing based upon eligible receivables and
inventory. The term loans are based upon appraised values of equipment and
intangibles. The term loans and the revolving loans bear interest at prime plus
0.75% (9.25% at February 20, 1998) and expire four years from inception.
In April 1996, the Company entered into convertible subordinated promissory
notes (the "Convertible Notes") totaling $6.0 million with certain investors.
The Convertible Notes bore interest at prime plus 1.625 percent and were due on
December 31, 1997. The Convertible Notes were paid in full on January 2, 1998.
During March 1997, the Company issued additional Convertible Notes totaling
$4.0 million with certain investors. These Convertible Notes bore interest at
prime plus 1.625 percent and were due on December 31, 1997. The Convertible
Notes were paid in full on January 2, 1998.
The Company's weighted average interest rate on short-term borrowings was
approximately 9.9% and 10.4% at December 31, 1996 and January 3, 1998,
respectively.
Aggregate maturities of debt, including capitalized lease obligations, for
the next five years are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fiscal year:
1998 ................. $ 11,363
1999 ................. 390
2000 ................. 134
2001 ................. 56
--------
$ 11,943
========
</TABLE>
8. INCOME TAXES
The differences between the federal statutory income tax rate and the
Company's effective tax rate were as follows for the year ended September 30,
1995, the three months ended December 31, 1995, and the years ended December 31,
1996 and January 3, 1998:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JANUARY 3,
1995 1995 1996 1998
------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Federal statutory rate ................... (34.00)% (34.00)% (34.00)% (34.00)%
State income taxes, net of
federal benefit ......................... (4.00) (4.00) (4.00) (4.00)
Purchased in-process research
and development ......................... 25.73
Amortization and write-off of
intangibles ............................. 13.74 0.15
Taxes on foreign income ................... 3.20 14.95 3.00 (0.01)
Provision for valuation
allowance ............................... 29.20 63.74 35.86 11.51
Equity in foreign subsidiaries
and foreign sales
corporation ............................. (0.41) (19.61) (3.43) 0.41
Other, net................................. (13.82) (6.13) 5.59 0.21
------------- ------------ ------------ ----------
Total ............................... (6.09)% 14.95% 3.02% %
============= ============ ============ ==========
</TABLE>
F-11
<PAGE> 41
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JANUARY 3,
1995 1995 1996 1998
------------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal ......... $ (1,359) $ 2
Foreign ......... 427 $ 603 $ 385 (6)
State ...........
------------- ----------- ------------ ----------
$ (932) $ 603 $ 385 $ (4)
============= =========== ============ ===========
</TABLE>
Components of deferred income taxes as of December 31, 1996 and January 3, 1998
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 3,
1996 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Net operating loss carry forwards ............... $ 12,183 $ 36,586
Inventory obsolescence reserves ................. 2,915 3,387
Accrued employee benefits ....................... 519 630
Allowance for doubtful accounts and product
returns ....................................... 3,170 1,167
Reserves for warranty claims ................... 856 856
Accrued advertising ............................. 568 362
Accrued reorganization expenses ................. 96 28
Other ........................................... 1,623 1,101
Valuation allowance ............................. (21,892) (44,117)
------------ ----------
Total deferred tax assets ................... 38
Deferred income tax liabilities:
Computer software costs ......................... (38)
------------ ----------
Total deferred tax liabilities ............... (38)
------------ ----------
Net deferred tax asset ........................... $ $
============ ==========
</TABLE>
Due to the Hayes Microcomputer's filing of a voluntary petition for
bankruptcy in 1994, subsequent emergence from bankruptcy proceedings in April
1996, and the results of operations for the year ended January 3, 1998, the
Company has recorded a valuation allowance equal to the amount of its net
deferred tax assets. The loss carry forwards as of January 3, 1998 are subject
to annual limitations and will expire from 2010 to 2012.
9. COMMITMENTS AND CONTINGENCIES
The Company leases office, plant, and warehouse facilities and certain
vehicles and equipment under noncancelable operating leases. As of January 3,
1998, the approximate future minimum lease payments for noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fiscal year:
1998 ............. $ 4,417
1999 ............. 3,268
2000 ............. 1,611
2001 ............. 614
2002 ............. 154
Thereafter ....... 883
-------
$10,947
=======
</TABLE>
Rental expense was approximately $3.7 million, $1.0 million, $3.9 million
and $3.2 million for the year ended September 30, 1995, the three months ended
December 31, 1995, the years ended December 31, 1996 and January 3, 1998,
respectively.
There are various litigation proceedings and claims arising in the ordinary
course of business. The Company believes it has meritorious defenses and is
vigorously defending these matters. The Company believes that the resolution of
such contingencies will not have a material adverse effect on the consolidated
financial position, results of operations, or cash flows of the Company.
The Company has employment agreements with certain management personnel
with terms from six months to five years.
F-12
<PAGE> 42
The Company has an agreement with a supplier of modem chips, under which
the Company committed, under certain circumstances, to purchase a minimum number
of modem chips during 1996. The Company did not purchase the required number of
modem chips and has accrued a potential estimated penalty due the supplier. The
Company and supplier are in negotiations to resolve the matter.
10. PROFIT SHARING AND 401(K) PLANS
Prior to October 1, 1994, the Company maintained a separate defined
contribution profit-sharing plan (the "Profit-Sharing Plan") covering
substantially all of the Company's full-time employees.
On June 22, 1995, the Company authorized an amendment of the Profit Sharing
Plan to allow the Profit-Sharing Plan to be split into separate 401(k) and
profit-sharing components, whereby the profit-sharing component was frozen
retroactive to October 1, 1994 and all balances immediately vested. The 401(k)
component began functioning as a separate plan as of July 1, 1995, and provides
for eligibility for substantially all employees after one month of service and
vesting of matching contributions ratably over a five-year period. The Company
contributed $0.2 million, $0.1 million, $0.3 million and $0.3 million for the
year ended September 30, 1995, the three months ended December 31, 1995, and the
years ended December 31, 1996 and January 3, 1998, respectively.
Terminated employees are required to sell their stock to the Profit-Sharing
Plan at the appraised value of the stock. Under the terms of the Profit-Sharing
Plan, Hayes Microcomputer had the right to repurchase any shares acquired by the
Profit-Sharing Plan at their appraised value. Hayes Microcomputer repurchased
and retired 76,053 shares for $1.7 million and 652 shares for fourteen thousand
dollars in 1996 and 1997, respectively. There were no shares repurchased in
1995.
As part of the Plan, the Profit-Sharing Plan was amended to provide for a
one-time election whereby all active participants could convert all or part of
their Hayes Microcomputer stock to cash. In 1996, the Company paid approximately
$0.7 million to the Profit-Sharing plan to repurchase and retire 32,197 shares
of Hayes Microcomputer common stock.
11. CAPITAL STRUCTURE
(a) Hayes Microcomputer
Common and Preferred Stock
The Hayes Microcomputer's Restated Articles of Incorporation authorize the
issuance of up to 100,000,000 shares of one cent ($.01) par value common stock.
In accordance with the Plan, Hayes Microcomputer effected a 3.078-to-one reverse
stock split, which reduced the number of outstanding shares by 10,599,595
shares.
In fiscal 1996, Hayes Microcomputer authorized a new class of no par value
Hayes Microcomputer Series A Preferred Stock consisting of 10,000,000 shares.
The board of directors is authorized to issue the preferred stock in one or more
series and to fix the rights, preferences, privileges, and restrictions of such
stock, including dividend rights, preferences and the number of shares
constituting any series or the designation of such series, without further vote
or action by the shareholders. In connection with the plan Hayes Microcomputer
issued 4,900,000 shares of Hayes Microcomputer Series A Preferred Stock. Such
stock had no dividend rights, but did have preference and priority payment
rights senior to the Hayes Microcomputer Common Stock. The Hayes Microcomputer
Series A Preferred Stock was exchanged for 7,560,576 shares of Hayes Corporation
Common Stock in the Merger.
Stock Redemption Agreements
In 1988, Hayes Microcomputer entered into an agreement with a stockholder
whereby Hayes Microcomputer could be required to purchase 1,628,884 shares of
common stock at the option of the stockholder at any time after January 1, 1999
through June 2008. In April 1996, in accordance with the Plan, Hayes
Microcomputer repurchased all of the common shares held by a stockholder for
$11.0 million and subsequently retired these shares. In conjunction with this
payment, the shareholder agreement was terminated.
F-13
<PAGE> 43
(b) Hayes Corporation
The Company's Restated Articles of Incorporation authorize the issuance of
up to 50,000,000 shares of one cent ($.01) par value common stock and up to
10,000,000 shares of preferred stock.
On February 25, 1998 the Company effected a one for three reverse stock
split. The financial statements have been adjusted to reflect the effect of such
reverse stock split.
12. REDEEMABLE PREFERRED STOCKS
During April 1997, the Company completed an agreement with Vulcan to issue
263,113 shares of Hayes Microcomputer Series B Preferred Stock for $5.5 million
which included $45,000 of issuance costs. The preferred stockholders were
entitled to receive cumulative compounding dividends at the rate of 10% per
annum of the original issue price per share of Hayes Microcomputer Series B
Preferred Stock, subject to certain conditions. Hayes Microcomputer Series B
dividends had preference and priority payment over Hayes Microcomputer Series A
Preferred Stock and Hayes Microcomputer Common Stock. These preferred shares had
no voting rights except as required under applicable law or as expressly stated
in the agreement relating to the Hayes Microcomputer Series B Preferred Stock.
Hayes Microcomputer could be required to redeem these preferred shares by a
stated formula at the option of more than 50% of the stockholders at any time
after November 1, 1999. The Series B Preferred Stock also was convertible into
shares of Hayes Microcomputer Common Stock by a stated formula if Hayes
Microcomputer's shares were publicly traded at a stated value per share or in
the aggregate or if the Hayes Microcomputer Series B stockholders obtain an
affirmative majority vote. In the Merger, the Hayes Microcomputer Series B
Preferred Stock was exchanged for Hayes Corporation Series A Preferred Stock
which has terms consistent with those of the Hayes Microcomputer Series B
Preferred Stock.
On November 12, 1997 Access Beyond and Hayes Microcomputer executed an
agreement to issue $45.0 million of 6% Cumulative Convertible Preferred Stock
("6% Preferred Stock"). Under the preferred stock agreement Access Beyond issued
$10.0 million of the 6% Preferred Stock on the same day and Hayes issued $35.0
million on December 31, 1997.
Conversion Rights
The 6% Preferred Stock is convertible at any time into shares of Common
Stock at a conversion price (the "Conversion Price") equal to the lesser of (i)
$24.00 per share (the "Fixed Conversion Price") or (ii) 85% of the average
closing bid price of Common Stock for the five consecutive trading days prior to
the date of any conversion notice (the "Market Value"), subject to adjustment
under certain circumstances. If, however, the Company's Common Stock is trading
at a price which would result in a Conversion Price of less than $15.00 per
share then the number of shares of 6% Preferred Stock which may be converted in
any 30 day period is limited to such number of shares of 6% Preferred Stock as
have a liquidation preference of not more than 10% of the amount paid for the 6%
Preferred Stock. If the Conversion Price is below $15.00 per share, then (i) the
first 81.25% of the 6% Preferred Stock for which conversion notices are received
from an investor during a 30 day period will be convertible at a Conversion
Price equal to 85% of the Market Value and the remaining 18.75% will be
convertible at a conversion price equal to 92.5% of the Market Value and (ii)
the Company may redeem the 6% Preferred Stock submitted for conversion for cash
equal to the liquidation preference divided by 85%. In addition, if the
Conversion Price is below $15.00 for more than 5 trading days in any 30 day
period, then for the balance of such 30 day period and for the next 30 day
period, Market Value will be determined on the basis of the lowest 5 consecutive
trading day average closing price during the 15 trading days preceding the
conversion notice.
Redemption
The Company has the right to redeem the 6% Preferred Stock in whole or in
part, at any time, and from time to time, by paying an amount equal to the
liquidation preference per share divided by 85%. If the Company exercises such
redemption option, then it is required to issue to the investors warrants with a
strike price equal to the higher of $24.00 or the average closing bid price of
the Common Stock during the five trading day period which ends three days before
the redemption date. The number of warrants so issued will be equal to 50% of
the liquidation preference of the shares of 6% Preferred Stock which are
redeemed, divided by such strike price. All shares of 6% Preferred Stock which
have not been converted by the fourth anniversary of the Preferred Stock
agreement are required to then be converted, subject to extension of such date
under certain circumstances.
F-14
<PAGE> 44
Under certain circumstances, including the failure of the Company to
maintain a listing on an approved market for its common stock, suspension of
trading in its common stock for specified periods, a change of control (as
defined in the preferred stock agreements), holders of the 6% Preferred Stock
may require the Company to repurchase the 6% Preferred Stock, as defined in the
agreement.
Dividends
The shares of 6% Preferred Stock are entitled to receive cumulative
dividends at the rate of 6% per annum, payable in cash, or in Common Stock, or
by adding the amount of any dividend to the liquidation preference. No
distribution, whether by way of dividend or otherwise, may be declared or paid
upon or set apart for any class of security of the Company which is junior to
the 6% Preferred Stock if, at such time, any dividends on the 6% Preferred Stock
have not been paid or declared and set apart for payment with respect to all
preceding periods.
The terms of the preferred stock agreement which permit the conversion of
the 6% Preferred Stock at a discount to market is considered a beneficial
conversion feature (the "Beneficial Conversion Feature"). The Beneficial
Conversion Feature at the date of issuance of the security was recognized as a
dividend to the holders of the security. Based upon the terms of the preferred
stock agreement and the market value of the Company's Common Stock, on the date
of issue, the Company valued the undiscounted Beneficial Conversion Feature of
the 6% Preferred Stock at $3.5 million and recorded a dividend of the same
amount on December 31, 1997. The beneficial dividend does not effect the number
of 6% Preferred Stock shares outstanding or the number of common shares issuable
upon conversions of the 6% Preferred Stock or require any additional payments or
compensation to the holders of the 6% Preferred Stock.
13. STOCK-BASED COMPENSATION
(a) Warrants
In connection with the Plan, Hayes Microcomputer authorized 600,000
warrants to purchase shares at their estimated fair value on the date of grant.
Hayes Microcomputer issued 400,000 warrants during April 1996 at an exercise
price of $0.714 per share. The warrants were exchanged for 617,190 warrants of
Hayes Corporation and became exercisable and fully vested on the date of the
Merger. The warrants expire five years from the date of the Merger. The warrants
were issued to Directors and are valued and presented as options in the
information below.
(b) Hayes Microcomputer
The Hayes Microcomputer Products, Inc. Stock Option Plan (the "Hayes
Microcomputer Plan") was adopted by the Hayes Microcomputer stockholders in June
1996. No options were granted prior to that date. Options granted under the
Hayes Microcomputer Plan may be either (i) options intended to qualify as
incentive stock options ("ISO's") under Section 422 of the Internal Revenue Code
or (ii) non-qualified stock options. None of the options granted in 1996 were
intended to qualify as ISO's. The Stock Option Plan allows for three types of
grants: Executive, Management, and Performance Grants. Pursuant to the terms of
the Merger, the Hayes Microcomputer Plan was frozen and no further options may
be granted. In addition, each Hayes Microcomputer option outstanding at the
Merger was exchanged for 1.54297 options for Hayes Corporation Common Stock.
An explanation of each type of grant and a description of the options
awarded under each type of grant are as follows:
Executive Grant
Hayes Microcomputer granted options to purchase shares at exercise prices
ranging from $0.462 to $0.648 per share. The options were subject to a vesting
schedule and became exercisable at the Merger. The options expire five years
after the date of the Merger.
Management Grant
Hayes Microcomputer granted options to purchase shares at exercise
prices ranging from $0.462 to $13.61 per share. The options expire ten years
after the date of grant and become exercisable and vest based on a five-year
ratable vesting schedule beginning at the date of grant.
F-15
<PAGE> 45
Performance Grant
Hayes Microcomputer granted options to purchase shares at exercise prices
ranging from $0.648 to $0.817 per share. Vesting will be determined based on the
attainment of specified average share prices as defined in the Stock Option
Plan. The average share prices range from $15.68 to $39.19. To the extent share
price objectives are not attained, the option shares vest on the ninth
anniversary of the grant.
(c) Access Beyond
Incentive Plan
The board of directors unanimously adopted and approved the 1996 Incentive
Long-Term Option Plan on November 18, 1996, and unanimously adopted the plan as
amended and restated, on February 4, 1997 (the "Incentive Plan"). The Incentive
Plan was approved by stockholders at a Special Meeting on March 6, 1997. On
December 5, 1996, the Company granted 360,000 options to officers and key
employees of the Company at an exercise price of $19.875, on February 4, 1997,
an additional 25,000 options were granted at an exercise price of $20.25 and on
June 4, 1997, an additional 104,667 options were granted at an exercise price of
$12.00. All of such options vest at the rate of 30% after one (1) year, 60%
after two (2) years and 100% after three (3) years, subject to acceleration in
certain circumstances.
Directors' Plan
The board of directors unanimously adopted and approved the 1996
Non-employee Directors' Stock Option Plan on November 18, 1996, and unanimously
adopted the plan, as amended and restated, on February 4, 1997 (the "Directors'
Plan"). The Directors' Plan was approved by stockholders at a Special Meeting on
March 6, 1997. In accordance with the provisions of the Directors' Plan each
non-employee director, or his or her designee (s), was granted 8,333 options
("Options") under the Directors' Plans on November 18, 1996, at the exercise
price of $23.2125. Pursuant to the terms of the Directors' Plan, each director
is entitled to a grant of 1,667 shares on the fifth business day following the
Company's filing of an annual report on Form 10-K. Each non-employee director
received a grant of 1,667 shares at an exercise price of $16.875 on October 21,
1997. On December 30 and 31, 1997 the new non-employee directors elected to the
board of directors were granted 8,333 options at exercise prices of $12.54 and
$12.75. All of such Options vest at the rate of 30% after one (1) year, 60%
after two (2) years and 100% after three (3) years, subject to acceleration in
certain circumstances, including the occurrence of a transaction such as the
Merger.
As a result of the Merger the options granted on November 18, 1996 and
October 21, 1997 immediately vested and must be exercised by March 30, 1998 or
such option expires.
Options historically have been granted based on an amount greater than or
equal to the fair value of the shares at the date of grant. If no quoted market
price was available, the best estimate of the fair value of the stock was
determined by the board of directors.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in 1997: dividend yield of 0%, expected volatility of 72.2%, risk- free
interest rate of 5.57%, and an expected term of 4.9 years.
A summary of the Company's stock option plan activity and related
information is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Options outstanding at December 31, 1996 2,417,841 $ 0.545
Options granted ............................... 560,874 $ 2.720
Converted Access Beyond grants ............... 309,969 $ 19.020
Options canceled ............................. (710,930) $ 0.700
----------
Options outstanding at January 3, 1998 ....... 2,577,754 $ 3.990
==========
Weighted average fair value of options granted
during the year at the share's fair value ... $ 11.35
</TABLE>
F-16
<PAGE> 46
The following table summarizes information about the stock options
outstanding at January 3, 1998.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF OPTIONS REMAINING
OUTSTANDING AT CONTRACTUAL
EXERCISE PRICES JANUARY 3, 1998 LIFE
--------------- --------------- -----------
<S> <C> <C>
$0.46 to $0.82... 2,186,006 7.9 years
$12.00 to $14.25. 133,080 7.3 years
$16.88 to $23.21. 258,668 7.6 years
</TABLE>
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. For the fiscal year ended January 3, 1998, $0.2
million of compensation expense was recognized for its stock option plans. Had
compensation expense for the Company's stock-based compensation plans been
determined under the provisions consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the
Company's net loss for the year ended January 3, 1998, would have been the pro
forma amounts indicated below (in thousands):
<TABLE>
<CAPTION>
NET LOSS LOSS PER SHARE
-------- --------------
<S> <C> <C>
As reported ..... $(84,606) $ (10.80)
Pro forma ....... $(85,473) $ (10.92)
</TABLE>
14. GEOGRAPHIC SEGMENTS
The Company operates in several geographic areas worldwide. Revenues can be
grouped into three primary geographic segments: Domestic including immaterial
Canadian amounts, Europe and Asia. Selected financial data by primary geographic
area for the periods ended September 30,1995 and December 31, 1995 and 1996 and
January 3, 1998 follow:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
Customers.................. $228,983 $ 22,893 $ 18,315 $ (1,036) $ 269,155
Operating profit (loss) ..... (7,098) (1,492) 751 (7,839)
Identifiable assets ......... 99,919 8,656 7,687 (15,298) 100,964
THREE MONTHS ENDED DECEMBER 31, 1995
------------------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
Customers ................ $ 54,409 $ 8,102 $ 7,600 $ 70,111
Operating profit (loss) .... (445) 852 1,691 2,098
Identifiable assets ........ 82,944 10,675 6,309 $ (8,232) 91,696
TWELVE MONTHS ENDED DECEMBER 31, 1996
------------------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
Customers ................ $202,001 $24,516 $ 38,800 $ (7,865) $ 257,452
Operating profit (loss)...... (10,118) (2,536) (856) 77 (13,433)
Identifiable assets ........ 69,943 8,824 7,966 (17,518) 69,215
</TABLE>
F-17
<PAGE> 47
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JANUARY 3, 1998
------------------------------------------------------------------------
(IN THOUSANDS)
ADJUSTMENTS
AND
DOMESTIC EUROPE ASIA ELIMINATIONS CONSOLIDATED
-------- ------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
Customers ................... 136,378 25,976 50,471 (13,213) $ 199,612
Operating profit (loss) ..... (80,270) (2,452) (1,670) 285 (84,107)
Identifiable assets ......... 91,958 12,862 13,871 (3,364) 115,327
</TABLE>
Operating profit (loss) is calculated as total revenue less total operating
expenses. In calculating operating profit, none of the following items have been
added or deducted: net interest expense, net miscellaneous income,
reorganization items, or income taxes. Identifiable assets are those assets of
the Company that are identified with the operations in each geographic area,
including goodwill.
The Company generates significant sales outside the United States and is
subject to risks generally associated with international operations. The foreign
operations of the Company accounted for approximately 15%, 22%, 25% and 38% of
the Company's net sales for the year ended September 30,1995, the three months
ended December 31, 1995, the years ended December 31, 1996 and January 3, 1998,
respectively. Accordingly, the Company's financial results from international
operations may be affected by the economic, political, and regulatory climates
prevailing in the respective foreign countries and by fluctuations in currency
exchange rates.
15. ACQUISITIONS
(a) Cardinal Technologies, Inc.
During April 1997, the Company acquired 100% of the outstanding common
stock of Cardinal, a private manufacturer of modems and ISDN adapters, for $2.5
million. The acquisition has been accounted for utilizing the purchase method of
accounting. The estimated fair values assigned to the assets and liabilities
acquired were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------
<S> <C>
Total consideration paid (including acquisition costs of
$595) ......................................................... $ 3,095
Fair value of tangible and identifiable assets acquired.......... (15,350)
Fair value of liabilities assumed ............................... 17,055
------------
Estimated goodwill ......................................... $ 4,800
============
</TABLE>
Pro forma results of operations of Cardinal from the beginning of the
period through the acquisition date are not presented as they are not
significant to the Company's consolidated results of operations.
(b) Access Beyond, Inc.
On December 30, 1997, Access Beyond completed the Merger with Hayes
Microcomputer. In the Merger, Access Beyond issued 15,261,763 shares of Common
Stock and 405,977 shares of Series A Preferred Stock, after giving effect to a
one for three reverse stock split effected February 25, 1998. The stock issued
in the transaction represented 79% of the outstanding stock immediately after
the Merger excluding the effect of warrants, stock options, and the 6%
Cumulative Convertible Preferred Stock. Immediately following the Merger, the
Company changed its name to Hayes Corporation. Since the Hayes Microcomputer
shareholders received a substantial majority of the shares of stock of the
Company, the transaction is treated as a reverse acquisition of the Company by
Hayes Microcomputer for accounting purposes. As a result, the historical
financial statements of the surviving company for the periods prior to the
Merger are those of Hayes Microcomputer rather than those of Access Beyond.
F-18
<PAGE> 48
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Fair value of stock issued ............................................. $ 62,255
Other acquisition costs ................................................. 1,550
Fair value of liabilities assumed ....................................... 14,808
Fair value of tangible and identifiable assets acquired ................. (13,622)
Acquired product line technology ....................................... (4,772)
Acquired in process research and development ........................... (54,990)
--------------
Estimated goodwill ..................................................... $ 5,229
==============
</TABLE>
Approximately $55.0 million of the total purchase price represented the
value of in-process research and development based on an appraisal of the
product line that had not yet reached technological feasibility and had no
alternative future use. The amount was determined using the income forecast
method and was charged to the Company's operations in the fourth quarter.
The following pro forma results of operations have been prepared as though
the Merger had occurred as of the beginning of the periods presented. The pro
forma information does not purport to be indicative of the results of operations
that would have been attained had the merger been in effect on the dates
indicated, nor of future results of operations of the Company.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 January 3, 1998
----------------- ---------------
(In thousands, except per share data)
<S> <C> <C>
Statement of Operations Data:
Net revenues....................... $ 278,682 $ 211,115
Net loss........................... (42,463) (103,580)
Loss per share..................... (5.27) (13.24)
</TABLE>
16. SIGNIFICANT RISKS AND UNCERTAINTIES
The communications industry is highly competitive and competition is
expected to intensify. There are numerous companies competing in various
segments of the market in which the Company does business. Competitors include
organizations significantly larger and with more development, marketing and
financial resources than the Company. The Company's success is dependent on its
ability to develop and market products that are innovative, cost-competitive and
meet customer expectations.
The markets for the Company's products are characterized by rapid
technological developments resulting in short product life cycles. The market
for modems is primarily dependent upon the market for personal computers. From
diminished product demand, production over capacity, and resultant accelerated
erosion of average selling prices, the Company's business could be materially
and adversely affected by industry-wide fluctuations in the personal computer
marketplace in the future. The Company's ten largest customers account for
approximately 57%, 56%, 73% and 55% of net sales for the year ended September
30, 1995, the three months ended December 31, 1995, the years ended December 31,
1996 and January 3, 1998, respectively. The Company has one customer which
accounts for 14% of net sales at January 3, 1998.
The Company's accounts receivable are concentrated with a limited number of
customers. The amounts owed by the largest ten customers represented
approximately 55% and 52 % of the total accounts receivable balances as of
December 31, 1996 and January 3, 1998, respectively. The Company has one
customer which accounts for 17% of accounts receivable as of January 3, 1998.
17. RELATED PARTY TRANSACTIONS
As of January 3, 1998, the Company has the following related party
transactions:
The Company has a split-dollar life insurance policy on a shareholder of
the Company with the Company as the beneficiary. The split-dollar agreement is
included in other long-term assets in the amount of $0.6 million and $0.9
million as of December 31,1996 and January 3, 1998, respectively. The cash
surrender value, included in prepaids and other current assets, is $0.3 million
as of December 31, 1996 and January 3, 1998.
F-19
<PAGE> 49
A shareholder of the Company had a revolving credit arrangement with the
Company stating a maximum draw of $0.3 million. The balance outstanding,
included in prepaids and other current assets, is $0.2 million as of December
31,1996. The arrangement was paid in full and terminated in December 1997.
The Company has manufacturing subcontractor agreements with two of its
stockholders. During 1996 and 1997 the Company purchased $44.8 million and $47.4
million respectively, of finished goods from such manufacturers.
On December 10, 1997, Hayes sold 72,277 shares of common stock of BVRP
Software S.A. ("BVRP"), to an affiliate of ACMA Limited, a shareholder of Hayes,
for a purchase price of approximately $2.0 million. Such shares were sold at a
discount of 15% from the market price established by the average of the closing
price of BVRP for the three days prior to November 25, 1997. BVRP common stock
is registered and traded on the Nouveau Marche.
The Company believes that these transactions were all negotiated at arms
length.
18. NET LOSS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" ("FAS 128"). This statement establishes standards
for computing and presenting earnings per share ("EPS"). Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. FAS 128 requires restatement of all prior-period EPS data presented.
Potential common stock equivalents such as stock options and warrants have
an anti-dillutive effect on the year ended September 30, 1995, the three months
ended December 31, 1995 and the years ended December 31, 1996 and January 3,
1998 diluted net loss per common share calculations.
F-20
<PAGE> 50
SCHEDULE II
HAYES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged to
beginning of costs and other Balance at
period expenses accounts(1) Deductions(2) end of period
------ -------- ----------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended September 30, 1995.......... 2,849 2,628 1,826 3,651
Three months ended December 31, 1995... 3,651 2,938 1,165 5,424
Year ended December 31, 1996........... 5,424 7,591 4,900 8,115
Year ended January 3, 1998............. 8,115 2,699 1,101 7,674 4,241
</TABLE>
- ------------
(1) Reserves of companies acquired.
(2) Uncollectible receivables charged off and credits issued for price
protection and product returns.
F-21
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACCESS BEYOND, INC.
(ORIGINALLY INCORPORATED ON JULY 23, 1996)
ARTICLE I
The name of the Corporation is Hayes Communications Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware. The
name of its registered agent at that address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
has authority to issue is one hundred million (100,000,000) shares, consisting
of two classes: __________________ (__________) shares of Common Stock, $.01 par
value per share, and __________________ (__________) shares of Preferred Stock,
$.01 par value per share. __________________ ( 1 ) shares of the Preferred Stock
are designated as Series A Preferred Stock.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such wholly unissued series and any qualifications, limitations
or restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then
outstanding). The number of authorized shares of Preferred Stock may also be
increased or decreased (but not below the number of shares thereof then
outstanding) by the
- --------
1 This number will be equal to the number of shares of Series A Preferred
Stock issued in exchange for the Hayes Series B Preferred Stock.
<PAGE> 2
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, unless a vote of any other holders is required pursuant to a
certificate or certificates establishing a series of Preferred Stock.
Except as otherwise expressly provided in Article V or in any Certificate
of Designation designating any series of Preferred Stock pursuant to the
foregoing provisions of this Article IV, any new series of Preferred Stock may
be designated, fixed and determined as provided herein by the Board of Directors
without approval of the holders of the Common Stock or the holders of Preferred
Stock, or any series thereof, and any such new series may have powers,
preferences and rights, including, without limitation, voting rights, dividend
rights, liquidation rights, redemption rights and conversion rights, senior to,
junior to or pari passu with the rights of the Common Stock, the Preferred
Stock, or any future class or series of Preferred Stock or Common Stock.
ARTICLE V
The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock and the Common Stock are as follows:
1. DIVIDEND RIGHTS. The holders of Series A Preferred Stock shall be
entitled to receive, as and when declared by the Board, but only out of
funds legally available therefor, cumulative compounding dividends at the
dividend rate of ten percent (10%) per annum of $______. [THIS BLANK WILL
EQUAL THE ORIGINAL ISSUE PRICE PER SHARE OF HAYES SERIES B PREFERRED STOCK
($20.9036) DIVIDED BY THE CONVERSION RATIO] Dividends shall accrue
quarterly as if such dividends had commenced to accrue on April 24, 1997,
provided, however, that in the event of conversion of the Series A
Preferred Stock (as set forth in Section 3), dividends shall be accrued
through the day immediately prior to such conversion. Subject to the
restrictions set forth in this Section 1, dividends accumulated on the
Series A Preferred Stock shall be declared by the Board and paid on the
Redemption Date provided that the Redemption Request is provided as set
forth in Section 7. Such dividends shall be paid in cash upon redemption,
or in additional shares of Common Stock upon conversion of the Series A
Preferred Stock as provided in Section 3 below. Dividends accumulated on
the Series A Preferred Stock shall be declared by the Board and paid in
cash every three (3) months to the extent permitted by law. No dividends
may be paid on the Common Stock unless all accrued and unpaid dividends on
the Series A Preferred Stock are paid.
2. VOTING RIGHTS.
(a) Common Stock. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share thereof held.
(b) Preferred Stock. Each holder of shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which such shares of Series A Preferred
Stock could be converted pursuant to the
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provisions of Section 3 below at the record date for the determination of
the shareholders entitled to vote on such matters or, if no such record
date is established, the date such vote is taken or any written consent of
shareholders is solicited.
(c) Vote Required. Subject to the foregoing provisions of this
Section 2, each holder of Preferred Stock shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled to notice of any shareholders' meeting in
accordance with the bylaws of the Company (as in effect at the time in
question) and applicable law, and shall be entitled to vote, together with
the holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote, except as may be otherwise
provided by applicable law. Except as otherwise required by law or by the
provisions of Section 5 of this Article V, the holders of Preferred Stock
and the holders of Common Stock shall vote together and not as separate
classes.
3. CONVERSION RIGHTS. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing US
$______ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION RATIO]
by the Series A Conversion Price determined as hereinafter provided, in
effect on the date the certificate is surrendered for conversion. If any
holder elects to convert his shares of Series A Preferred Stock as
provided above, all unpaid and accrued dividends on the Series A Preferred
Stock existing immediately prior to the conversion of the Series A
Preferred Stock will be converted into such number of fully paid and
nonassessable shares of Common Stock as determined by dividing all unpaid
and accrued dividends by the Series A Conversion Price, determined as
hereinafter provided. The "Series A Conversion Price" shall initially be
US $__________ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION
RATIO]. Such initial Series A Conversion Price shall be adjusted as
hereinafter provided.
(b) Automatic Conversion. Each share of Series A Preferred Stock
shall automatically be converted (as set forth below) into such number of
fully paid and nonassessable shares of Common Stock as determined by
dividing US $_____ [THIS BLANK WILL EQUAL $20.9036 DIVIDED BY THE
CONVERSION RATIO] (adjusted for any stock splits, stock dividends, stock
combinations or similar events) plus the per share amount of all unpaid
and accrued dividends on the Series A Preferred Stock existing immediately
prior to the conversion of the Series A Preferred Stock by the Series A
Conversion Price, determined as hereinafter provided, in effect (i)
immediately prior to the consummation of a Qualified Public Offering (as
defined below) under the Securities Act of 1933, as amended (the
"Securities Act"); or (ii) at such time as the Corporation has registered
Common Stock pursuant to an underwritten public offering under the
Securities Act and
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<PAGE> 4
(a) the Corporation has listed or would be qualified to list its shares on
the NASDAQ National Market System; (b) the average market value of the
Common Stock equals or exceeds the lesser of US $_________ [THIS BLANK
WILL EQUAL $33.00 DIVIDED BY THE CONVERSION RATIO] per share or two (2)
times the then-current Series A Conversion Price (in either such case as
adjusted for stock splits, stock dividends, stock combinations or similar
events) determined by the median of the high and low sales price each day
for a consecutive twenty (20) day period; (c) the aggregate market value
of the shares of Common Stock held in the public market equals or exceeds
US $25,000,000, determined by the 20 trading day average of the high and
low sales price described in (b) above; and (d) the holders of the Series
A Preferred Stock have the unrestricted right at such time to sell in a
registered offering or pursuant to Rule 144 at least one-half of the
number of shares of Common Stock into which such Series A Preferred Stock
would be converted; or (iii) upon the affirmative vote of holders of at
least a majority of the Series A Preferred Stock (any such event described
in subsections (i), (ii) and (iii) above being referred to herein as a
"Series A Conversion Event"). All unpaid and accrued dividends on the
Series A Preferred Stock existing immediately prior to the Series A
Conversion Event shall automatically be converted into such number of
fully paid and nonassessable shares of Common Stock as determined by
dividing all unpaid and accrued dividends by the Series A Conversion
Price, determined as hereinafter provided, in effect immediately prior to
the Series A Conversion Event. As used herein, "Qualified Public Offering"
means an underwritten sale to the public of Common Stock pursuant to an
effective registration statement under the Securities Act in connection
with which (a) the gross proceeds to the Corporation for the Common Stock
actually sold to the public in such sale, prior to deducting the amount of
brokers' commissions and expense allowances paid by the Corporation in
connection with the original sale of such Common Stock, is US $25,000,000
or more, and (b) the public offering price per share (prior to
underwriters' commissions and expenses) equals or exceeds the lesser of
(i) US $______ [THIS BLANK WILL EQUAL $33.00 DIVIDED BY THE CONVERSION
RATIO] per share or (ii) two (2) times the then-current Series A
Conversion Price, in either such case as adjusted for stock splits, stock
dividends, stock combinations or similar events. Immediately prior to the
Qualified Public Offering, or promptly upon the occurrence of another
Series A Conversion Event, each share of Series A Preferred Stock shall be
automatically converted, without cost, on the terms of this Section 3(b),
into the number of shares of Common Stock into which such share of Series
A Preferred Stock would be convertible under Section 3 immediately prior
to such Series A Conversion Event.
(c) Mechanics of Conversion.
(i) Before any holder of Series A Preferred Stock shall be
entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of
the Corporation or of any transfer agent for such stock,
and shall give written notice to the Corporation at such
office that such holder elects to convert the same and
shall state therein the name or names in which such
holder wishes the
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<PAGE> 5
certificate or certificates for shares of Common Stock
to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office
to such holder of Series A Preferred Stock, a
certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the
date of surrender of the shares of Series A Preferred
Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common
Stock on such date.
(ii) If a conversion is in connection with an underwritten
offering of securities pursuant to the Securities Act,
the conversion may, at the option of any holder
tendering shares of Series A Preferred Stock for
conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series A
Preferred Stock shall not be deemed to have converted
such Series A Preferred Stock until immediately prior to
the closing of such sale of securities.
(d) Adjustments to Conversion Price for Certain Diluting Issues.
(i) Special Definitions. For purposes of this Section 3(d),
the following definitions apply:
(A) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities
(defined below).
(B) "Original Issue Date" shall mean, with respect to
the Series A Preferred Stock, the date on which a
share of Series A Preferred Stock was first
issued.
(C) "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than Common Stock
and Series A Preferred Stock) or other securities
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to
Section 3(d)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
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<PAGE> 6
(1) upon conversion of shares of Series A
Preferred Stock;
(2) up to _______ [THIS NUMBER WILL EQUAL THE
NUMBER OF SHARES OF ACCESS BEYOND COMMON
STOCK CURRENTLY SUBJECT TO OUTSTANDING
OPTIONS OR RESERVED FOR FUTURE ISSUANCE,
PLUS 1,800,000 MULTIPLIED BY THE CONVERSION
RATIO] shares, subject to adjustment for all
stock splits, stock dividends, subdivisions
and combinations of shares of Common Stock
issued (or, pursuant to Section 3(d)(iii),
deemed to be issued) to officers and
employees of the Corporation pursuant to the
Corporation's stock option, purchase or
similar plans, or other options or warrants
as approved by the Corporation's Board of
Directors;
(3) as a dividend or distribution on Series A
Preferred Stock; and
(4) upon exercise or conversion of, or otherwise
pursuant to, securities of the Corporation
outstanding as of the Original Issue Date of
the Series A Preferred Stock (including any
securities assumed by the Corporation on
such date or otherwise assumed or issued in
connection with the transactions consummated
by the Corporation on such date).
(E) "Board" shall mean the Board of Directors of the
Corporation.
(ii) No Adjustment of Conversion Price. Any provision herein
to the contrary notwithstanding, no adjustment in the
Series A Conversion Price shall be made in respect of
the issuance of Additional Shares of Common Stock unless
the consideration per share (determined pursuant to
Section 3(d)(v) hereof) for an Additional Share of
Common Stock issued or deemed to be issued by the
Corporation is less than the Series A Conversion Price
in effect on the date of, and immediately prior to, such
issue.
(iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to
time after the Original Issue Date of the Series A
Preferred Stock shall issue any Options or Convertible
Securities, then the maximum number of
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<PAGE> 7
shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein
designed to protect against dilution) of Common Stock
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, provided that in
any such case in which Additional Shares of Common Stock
are deemed to be issued:
(A) no further adjustments in the Series A Conversion
Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Corporation, or
decrease or increase in the number of shares of
Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Series A
Conversion Price computed upon the original issue
thereof, and any subsequent adjustments based
thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such
Options or the rights of conversion or exchange
under such Convertible Securities (provided,
however, that no such adjustment of the Series A
Conversion Price shall affect the Common Stock
previously issued upon conversion of the Series A
Preferred Stock);
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Series A Conversion Price computed
upon the original issue thereof (or upon the
occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only
Additional Shares of Common Stock issued
were the shares of Common Stock, if any,
actually issued upon the exercise of such
Options or the conversion or exchange of
such Convertible Securities and the
consideration
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<PAGE> 8
received therefor was the consideration
actually received by the Corporation for the
issue of all such Options, whether or not
exercised, plus the consideration actually
received by the Corporation upon such
exercise, or for the issue of all such
Convertible Securities which were actually
converted or exchanged, plus the additional
consideration, if any, actually received by
the Corporation upon such conversion or
exchange, and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities,
if any, actually issued upon the exercise
thereof were issued at the time of issue of
such Options, and the consideration received
by the Corporation for the Additional Shares
of Common Stock deemed to have been then
issued was the consideration actually
received by the Corporation for the issue of
all such Options, whether or not exercised,
plus the consideration deemed to have been
received by the Corporation (determined
pursuant to Section 3(d)(v)) upon the issue
of the Convertible Securities with respect
to which such Options were actually
exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the
Series A Conversion Price to an amount which
exceeds the lower of (1) the Series A Conversion
Price on the original adjustment date, or (2) the
Series A Conversion Price that would have resulted
from any issuance of Additional Shares of Common
Stock between the original adjustment date and
such readjustment date; and
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the
date of issue thereof, no adjustment of the Series
A Conversion Price shall be made until the
expiration or exercise of all such Options,
whereupon such adjustment shall be made in the
same manner provided in clause (C) above.
(iv) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event this
corporation, at any time after the Original Issue Date
shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued
pursuant to Section
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<PAGE> 9
3(d)(iii)), without consideration or for a consideration
per share less than US $______ [THIS BLANK WILL EQUAL
$20.9036 DIVIDED BY THE CONVERSION RATIO] per share but
equal to or greater than US $______ [THIS BLANK WILL
EQUAL $7.14 DIVIDED BY THE CONVERSION RATIO] per share
(in each case as adjusted for any stock splits, stock
dividends, stock combinations or similar events) then
and in such event, the Series A Conversion Price shall
be reduced concurrently with such issue, to a price
equal to the lowest per share consideration received by
the Corporation for any of the Additional Shares of
Common Stock. If such price per share of Additional
Shares is less than US $________ [THIS BLANK WILL EQUAL
$7.14 DIVIDED BY THE CONVERSION RATIO] (adjusted for any
stock splits, stock dividends, stock combinations or
similar events) then and in such event, the Series A
Conversion Price shall first be reduced to US $_______
[THIS BLANK WILL EQUAL $7.14 DIVIDED BY THE CONVERSION
RATIO] and then the Series A Conversion Price shall be
further reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by
multiplying such Series A Conversion Price by a
fraction, (i) the numerator of which shall be the number
of shares of Common Stock issuable upon conversion of
the shares of the Series A Preferred Stock actually
issued and outstanding (or deemed issued pursuant to
Section 3(d)(iii)) immediately prior to such issue plus
the quotient obtained by dividing (x) the aggregate
consideration received by the Corporation for the total
number of Additional Shares of Common Stock so issued
(or deemed issued pursuant to Section 3(d)(iii)) by (y)
the Series A Conversion Price in effect immediately
prior to such issuance, and (ii) the denominator of
which shall be the number of shares of Common Stock
issuable upon conversion of the shares of the Series A
Preferred Stock actually issued and outstanding (or
deemed issued pursuant to Section 3(d)(iii)) immediately
prior to such issue plus the number of such Additional
Shares of Common Stock so issued (or deemed issued
pursuant to Section 3(d)(iii)).
(v) Determination of Consideration. For purposes of this
Section 3(d), the consideration received by the
Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be computed
at the aggregate amount of cash received by
the Corporation (without deducting any
discounts or commissions paid by the
Corporation);
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<PAGE> 10
(2) insofar as it consists of property other
than cash, be computed at the fair value
thereof at the time of such issue, as
determined in good faith by the Board; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares
or securities or other assets of the
Corporation for consideration which covers
both, be the proportion of such
consideration so received, computed as
provided in clauses (1) and (2) above, as
determined in good faith by the Board.
(B) Options and Convertible Securities. The
consideration per share received by the
Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section
3(d)(iii), relating to Options and Convertible
Securities shall be determined by dividing:
(1) the maximum amount, if any, received or
receivable by the Corporation as
consideration for the issue of such Options
or Convertible Securities, plus the minimum
aggregate amount of additional consideration
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect
against dilution) payable to the Corporation
upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by
(2) the maximum number of shares of Common Stock
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect
against dilution) issuable upon the exercise
of such Options or conversion or exchange of
such Convertible Securities.
(e) Adjustments for Stock Dividends, Subdivisions, or Split-ups of
Common Stock. If the number of shares of Common Stock outstanding at any time
after the filing of this Restated Certificate of Incorporation is increased by a
stock dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, effective at
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<PAGE> 11
the close of business upon the record date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend, subdivision or
split-up, the Series A Conversion Price shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase of
outstanding shares of Common Stock.
(f) Adjustments for Combinations of Common Stock. If the number of
shares of Common Stock outstanding at any time after the filing of this Restated
Certificate of Incorporation is decreased by a combination of the outstanding
shares of Common Stock, then, effective at the close of business upon the record
date of such combination, the Series A Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Series A Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
(g) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received had their
Series A Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 3(g) with respect to the rights of the
holders of the Series A Preferred Stock.
(h) Adjustments for Reorganizations, Reclassifications, etc. If the
Common Stock issuable upon conversion of the Series A Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock or other securities or property, whether by reclassification, a
merger or consolidation of this corporation with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of this
corporation (but only if the stockholders of this corporation hold more than
fifty percent (50%) of the outstanding voting equity securities of the surviving
corporation in such merger, consolidation or sale of assets reorganization), or
otherwise (other than a subdivision or combination of shares provided for above
or a merger or other transaction referred to in Section 4(c) below) the Series A
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted such that
the Series A Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock or
securities or other property equivalent to the number of shares of Common Stock
that would have been subject to receipt by the holders upon conversion of the
Series A Preferred Stock immediately before such event; and, in any such case,
appropriate adjustment (as determined by the Board) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the
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<PAGE> 12
Series A Preferred Stock, to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
Series A Conversion Price) shall thereafter be applicable, as nearly as may be
reasonable, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock. In the event of
any conflict between this Section 3(h) and Section 4(b), Section 4(b) shall be
controlling.
(i) No Impairment. The corporation will not, except by a properly
approved amendment of its Certificate of Incorporation, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(j) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series A Preferred Stock, a certificate executed by the
Corporation's President/Chief Executive Officer or Treasurer/Chief Financial
Officer setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustments and readjustments, (B) the Conversion Price
at the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the Series A Preferred Stock.
(k) Notices of Record Date. In the event that the Corporation shall
propose at any time: (a) to declare any special dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities, whether
or not out of earnings or earned surplus; (b) to offer to subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (c) to effect any reclassification
or recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or (d) to merge or consolidate with or into any other corporation
(other than a mere reincorporation transaction), or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, the Corporation shall send to the holders of
Series A Preferred Stock:
(A) at least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the
date on which the holders of Common Stock shall be
entitled thereto) or for determining
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<PAGE> 13
rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; and
(B) in the case of the matters referred to in (c) and (d)
above, at least twenty (20) days' prior written notice
of the date when the same shall take place (and
specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the
occurrence of such event).
(l) Issue Taxes. The corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(m) Reservation of Stock Issuable Upon Conversion. The corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in its best efforts to obtain
the requisite stockholder approval of any necessary amendment to the Certificate
of Incorporation.
(n) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board).
(o) Notices. Any notice required by the provisions of this Section 3
to be given to the holders of shares of Series A Preferred Stock shall be given
in writing and it or any certificates or other documents delivered hereunder
shall be deemed effectively given or delivered (as the case may be) upon
personal delivery; when deposited with a recognized international courier, five
(5) days after deposit (or if earlier, upon delivery against a signed receipt
therefor); when transmitted by telecopy, which transmission is confirmed, at the
address appearing on the books of the Corporation.
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<PAGE> 14
4. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holder of each share of
the Series A Preferred Stock then outstanding shall be entitled to receive out
of the remaining assets of the Corporation available for distribution to
stockholders, and before any payment or declaration and setting apart for
payment of any amount shall be made in respect of Common Stock, an amount equal
to $________. [THIS BLANK WILL EQUAL THE ORIGINAL ISSUE PRICE PER SHARE OF HAYES
SERIES B PREFERRED STOCK ($20.9036) DIVIDED BY THE CONVERSION RATIO] (which
amount shall be adjusted proportionately in the event the shares of Series A
Preferred Stock are subdivided into a greater number or combined into a lesser
number) plus an amount equal to any accrued but unpaid dividends through the
date of such liquidation, dissolution or winding up of the Corporation (the
"Series A Preferred Stock Liquidation Preference"). If, upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed to the holders of Series A Preferred Stock shall be
insufficient to permit the payment of the full Series A Preferred Stock
Liquidation Preference pursuant to this Section 4(a), then all of the remaining
assets of the Corporation to be distributed shall be distributed ratably to the
holders of Series A Preferred Stock.
(b) A merger, consolidation or reorganization of the Corporation
with or into any other corporation or corporations that results in the transfer
of fifty percent (50%) or more of the outstanding voting stock of the
Corporation (other than a transaction effected primarily for the purpose of
changing the domicile of the Corporation), a sale of all or substantially all of
the assets of the Corporation, or a transaction or series of related
transactions (other than a public offering of the Corporation's securities,
following which a majority of the Board is comprised of those persons who were
members of the Board prior to such offering) in which the Corporation issues
shares representing more than fifty percent (50%) of the voting power of the
Corporation immediately after giving effect to such transaction, shall be
treated as a liquidation, dissolution or winding up for purposes of this Section
4. Any securities to be delivered to the holders of the Series A Preferred Stock
and Common Stock pursuant to such event shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or reported on
a national inter dealer quotation system, the
value shall be deemed to be the average of the
closing prices of the securities on such exchange
over the 30-day period ending three (3) days prior
to the closing;
(B) If actively traded over the counter and not
reported on a national inter dealer quotation
system, the value shall be deemed to be the
average of the closing bid prices over the
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<PAGE> 15
30-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as
determined in good faith by the Board.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free
marketability shall be to make an appropriate discount
from the market value determined as above in (i)(A), (B)
or (C) to reflect the approximate fair market value
thereof, as determined in good faith by the Board.
(c) In the event of a transaction (or series of related
transactions) to be treated as a liquidation pursuant to this Section 4, the
Corporation shall give each holder of record of Series A Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 4, and the
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the Corporation has given the first notice provided for herein or
sooner than ten (10) days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of a majority of the shares of
Series A Preferred Stock.
5. RESTRICTIONS AND LIMITATIONS. So long as any of the Series A Preferred
Stock remain outstanding, this corporation shall not, without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the total number of shares of Series A Preferred Stock
outstanding:
(i) alter or change the rights, preferences or privileges of the
Series A Preferred Stock;
(ii) increase the aggregate number of authorized shares of Series A
Preferred Stock (other than an increase pursuant to a stock
split) or decrease the aggregate number of authorized shares
of Series A Preferred Stock below the number of shares of
Series A Preferred Stock then outstanding;
(iii) authorize or issue, or obligate itself to issue, any other
equity security senior to or on a parity with the Series A
Preferred Stock as to dividends or assets in liquidation or
create or reclassify any obligation or security convertible
into or exchangeable for, or having any option rights to
purchase, any such equity security other than shares of
capital stock
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<PAGE> 16
issuable upon conversion or exercise of securities outstanding
as of the Original Issue Date of the Series A Preferred Stock;
(iv) take any action which results in the redemption of, or payment
of dividends or the distribution of cash or any property with
respect to, any shares of Common Stock (other than pursuant to
(x) Section 4(a); (y) payments made to a stockholder who is
not a stockholder of the Corporation as of the Original Issue
Date of the Series A Preferred Stock in connection with an
acquisition or merger transaction by the Corporation which is
not deemed to be a liquidation pursuant to Section 4(b) above;
or (z) redemptions of employee or director owned stock or
options);
(v) incur or guarantee any indebtedness other than (a) in the
ordinary course of business; (b) under the Loan and Security
Agreement dated December 21, 1995, by and between Hayes
Microcomputer Products, Inc., an affiliate of the Corporation
and The CIT Group/Credit Finance, Inc., as amended thereafter,
or any replacement credit facility with a commercial lender
under which the Corporation or its subsidiaries maintains its
primary borrowing relationship; (c) indebtedness existing as
of the Original Issue Date of the Series A Preferred Stock;
(d) in an amount not to exceed $2,000,000 in the aggregate; or
(e) in connection with an acquisition or merger transaction by
the Corporation which is not deemed to be a liquidation under
Section 4(b) above; or
(vi) approve or create any mortgage, pledge or security interest in
all or substantially all of the assets or property of the
Corporation, except for such security interests or liens
arising under the Corporation's borrowings permitted under
Subsection 5(v) above.
6. NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or shares of Series
A Preferred Stock acquired by the Corporation by reason of purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue. The corporation may, from time to time, take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Series A Preferred Stock, but not below the number of shares of such Series then
outstanding.
7. REDEMPTION.
(a) Redemption Date. "Redemption Date" means April 23, 2000, or such
other date determined in accordance with Section 7(b) or 7(c) below.
(b) Stockholder Redemption Request. Subject to the limitations set
forth herein and in Section 7(f) below, on ninety (90) days prior written notice
from the holders of more than fifty percent (50%) of the Series A Preferred
Stock ("Redemption Request") delivered
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to the Corporation not earlier than November 1, 1999, the Corporation shall
redeem all of the shares of Series A Preferred Stock held by each holder as of
the date of such notice by paying in cash therefor, US $_________ [THIS BLANK
WILL EQUAL $20.9036 DIVIDED BY THE CONVERSION RATIO] per share of Series A
Preferred Stock (such amount to be adjusted proportionately in the event the
shares of Series A Preferred Stock are subdivided into a greater number or
combined into a lesser number and in the event the Corporation at any time pays
a dividend, or makes any other distribution, to holders of Series A Preferred
Stock payable in shares of Series A Preferred Stock) plus all accrued but unpaid
dividends on such shares (the "Redemption Price") on such Redemption Date.
(c) Corporation Redemption Request. The corporation may, at its sole
option and discretion, at any time at which it has funds legally available to do
so, redeem all (or, if the holders of a majority of the outstanding Series A
Preferred Stock consent thereto, any part) of the Series A Preferred Stock upon
thirty (30) days prior written notice to the holders of the Series A Preferred
Stock, by paying the Redemption Price on the Redemption Date. Any partial
redemption hereunder shall be made pro rata among all holders of the Series A
Preferred Stock. Notwithstanding the foregoing, any holder of Series A Preferred
Stock may elect to convert to Common Stock all or any part of the Series A
Preferred Stock shares which the Corporation has elected to redeem by providing
written notice of its conversion election to the Corporation within twenty (20)
days after the date of the Corporation's redemption notice. In such event, those
shares of Series A Preferred Stock shall convert to Common Stock at the Series A
Conversion Price as provided in, and subject to the terms and conditions of
Section 3.
(d) Surrender of Certificates. On or before the Redemption Date,
each holder of shares of Series A Preferred Stock being redeemed shall surrender
the certificate or certificates representing such shares to the Corporation, at
the Corporation's principal place of business. Upon such surrender (but not
earlier than the Redemption Date) the Redemption Price for such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. If a certificate is surrendered and all the shares
evidenced thereby are not being redeemed, the Corporation shall cause
certificates evidencing the shares not being redeemed to be issued in the name
of the registered owner of such shares and to be delivered to such person.
(e) Termination of Stock Rights. If the Corporation elects to redeem
the Series A Preferred Stock as provided above, or if a holder of Series A
Preferred Stock gives a Redemption Request and holds shares of Series A
Preferred Stock on the Redemption Date, and if on the Redemption Date the
Redemption Price is either paid or made available for payment through the
deposit arrangement specified in Section 7(f) below, then notwithstanding that
the certificates evidencing any of the shares of Series A Preferred Stock to be
redeemed shall not have been surrendered, all rights with respect to such shares
shall terminate as of the Redemption Date, except only the right of the holder
to receive the Redemption Price upon surrender of the certificate evidencing
such shares.
(f) Deposit of Redemption Price. On or prior to a Redemption Date,
the Corporation shall deposit with any bank or trust company in the United
States having a capital
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<PAGE> 18
and surplus of at least US $50,000,000, as a trust fund, a sum equal to the
aggregate Redemption Price of all shares of Series A Preferred Stock to be
redeemed on the Redemption Date, with irrevocable instructions and authority to
the bank or trust company to pay, on or after the Redemption Date or prior
thereto, the Redemption Price to the respective holders upon the surrender of
their share certificates. From and after the date of such deposit ("Redemption
Deposit"), the shares so called for redemption shall be redeemed. The deposit
shall constitute full payment of the shares to their holders, and from and after
the Redemption Date the shares shall be deemed to be no longer outstanding, and
the holders thereof shall cease to be stockholders with respect thereto and
shall have no rights with respect thereto except the rights to receive from the
bank or trust company payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor. Any funds so deposited
and unclaimed at the end of one year from the Redemption Date shall be released
or repaid to the holders of the shares called for redemption shall be entitled
to receive payment of the Redemption Price with respect to such shares only from
the Corporation.
(g) Insufficient Funds. If the funds of the Corporation legally
available therefor shall be insufficient to discharge the redemption
requirements under Section 7(b) in full due on any Redemption Date, funds to the
maximum extent legally available for such purpose shall be set aside on or
before the Redemption Date in accordance with Section 7(b). The maximum number
of full shares of Series A Preferred Stock that can be redeemed with such funds
shall be redeemed ratably from the holders of shares of Series A Preferred Stock
to be redeemed as of the Redemption Date. Thereafter, the Corporation shall
redeem shares of Series A Preferred Stock ratably from the holders thereof as
funds legally available therefor become available. Dividends shall continue to
accrue on shares of Series A Preferred Stock scheduled to be redeemed on a
Redemption Date but not yet redeemed until funds sufficient to redeem such
shares become legally available therefor and are paid or set aside in accordance
with this Section 7.
ARTICLE VI
The Board of Directors of the Corporation shall have the power to adopt,
amend or repeal Bylaws of the Corporation.
ARTICLE VII
The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by the affirmative
vote of a majority of the entire Board of Directors. The directors shall be
divided into three classes, designated as Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of the total number of
directors, initially, with the directors of Class I elected for a term of one
year, the directors of Class II elected for a term of two years and the
directors of Class III elected for a term of three years. At each succeeding
annual meeting of stockholders following such classification and election,
directors elected to succeed those directors whose terms expire shall be elected
for a three-year term.
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<PAGE> 19
Subject to the rights of the holders of any class or series of the
capital stock of the Corporation entitled to vote generally in the election of
directors (hereinafter in this Article VII and in the first proviso of Article
VIII of this Certificate of Incorporation, such stock is referred to as the
"Voting Stock") then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office, or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires.
No decrease in the number of authorized directors constituting the entire Board
of Directors shall shorten the term of any incumbent director. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Subject to the rights of the holders of any class or series of the
Voting Stock then outstanding, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80% of the voting power of all of
the then-outstanding shares of the Voting Stock, voting together as a single
class (it being understood that, for all purposes of this Article VII, and the
provisions of the By-Laws of the Corporation which require the affirmative vote
of the holders of at least 80% of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class,
to alter, amend or repeal any provision of the By-Laws which is to the same
effect as the provisions of this Certificate of Incorporation enumerated in the
first proviso of Article VIII hereof, each share of the Voting Stock shall have
the number of votes granted to it pursuant to Article V of this Certificate of
Incorporation or any designation of the rights, powers and preferences of any
class or series of Preferred Stock made pursuant to said Article IV (a
"Preferred Stock Designation")).
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be required
to alter, amend or repeal this Article VII.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by
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<PAGE> 20
the terms of this Certificate of Incorporation applicable thereto (including the
resolutions of the Board of Directors pursuant to Article IV), and such
Directors so elected shall not be divided into classes pursuant to this Article
VII unless expressly provided by such terms.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the bylaws of the Corporation;
provided, however, that notwithstanding any other provisions of the
Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of
the Voting Stock required by law, this Certificate of Incorporation
or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80% of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal (i) any
provision of the By-laws which is to the same effect as Article VII
of this Certificate of Incorporation, or (ii) this proviso of this
Article VIII.
To authorize and cause to be executed mortgages and liens upon
the real property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was
created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the
directors of the Corporation.
When and as authorized by the stockholders in accordance with
this Certificate of Incorporation and applicable statutes, to sell,
lease or exchange all or substantially all of the property and
assets of the Corporation, including its goodwill and its corporate
franchises, upon such terms and conditions and for such
consideration (which may consist, in whole or in part, of money or
property, including shares of stock in, and/or other securities of,
any other corporation or corporations) as the Corporation's Board of
Directors shall deem appropriate and in the best interests of the
Corporation.
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ARTICLE IX
To the fullest extent permitted by law, no director of the Corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article IX, nor the adoption of
any provision of this Restated Certificate of Incorporation inconsistent with
this Article IX, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
This Amended and Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been duly executed by the Corporation as of the ____ day of _________, 1997.
ACCESS BEYOND, INC.
BY:______________________________________
Name:_________________________________
Title:________________________________
21
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
HAYES CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1. PLACE OF STOCKHOLDERS' MEETINGS. All meetings of the
stockholders of the Corporation shall be held at such place or places, within or
outside the State of Delaware, as may be fixed by the Board of Directors from
time to time or as shall be specified in the respective notices thereof.
SECTION 2. DATE, HOUR AND PURPOSE OF ANNUAL MEETINGS OF STOCKHOLDERS.
Annual meetings of Stockholders, commencing with the year 1996, shall be held on
such day and at such time as the Directors may determine from time to time by
resolution, at which meeting the stockholders shall elect, by a plurality of the
votes cast at such election, a Board of Directors, and transact such other
business as may properly be brought before the meeting in accordance with these
Bylaws. To be properly brought before the annual meeting, business must be
either (i) specified in the notice of annual meeting (or any supplement or
amendment thereto) given by or at the direction of the Board of Directors, (ii)
otherwise brought before the annual meeting by or at the direction of the Board
of Directors, or (iii) otherwise properly brought before the annual meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
sixty (60) days prior to the meeting; provided, however, that in the event that
less than seventy (70) days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by a stockholder, to be
timely, must be received no later than the close of business on the tenth (10th)
day following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made, whichever first occurs. A
stockholder's notice to the Secretary shall set forth (a) as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, and (ii) any material
interest of the stockholder in such business, and (b) as to the stockholder
giving the notice (i) the name and record address of the stockholder and (ii)
the class, series and number of shares of capital stock of the Corporation which
are beneficially owned by the stockholder. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at the annual meeting
except in accordance with the procedures set forth in this
<PAGE> 2
Article II, Section 2. The officer of the Corporation presiding at an annual
meeting shall, if the facts warrant, determine and declare to the annual meeting
that business was not properly brought before the annual meeting in accordance
with the provisions of this Article II, Section 2, and if such officer should so
determine, such officer shall so declare to the annual meeting and any such
business not properly brought before the annual meeting shall not be transacted.
If for any reason a Board of Directors shall not be elected at the
Annual Meeting of Stockholders, or if it appears that such Annual Meeting is not
held on such date as may be fixed by the Directors in accordance with the
provisions of these Bylaws, then in either such event the Directors shall cause
the election to be held as soon thereafter as convenient.
SECTION 3. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the
stockholders entitled to vote may be called by the Chairman of the Board, if
any, the Vice Chairman of the Board, if any, the Chief Executive Officer, the
President or any Vice President, the Secretary or by the Board of Directors,
and shall be called by any of the foregoing at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the meeting.
SECTION 4. NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise
expressly required or permitted by the laws of Delaware, not less than ten (10)
days nor more than sixty (60) days before the date of every stockholders'
meeting the Secretary shall give to each stockholder of record entitled to vote
at such meeting written notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called. Such notice, if mailed, shall be deemed to be given when
deposited in the United States mail, with postage thereon prepaid, addressed to
the stockholder at the post office address for notices to such stockholder as it
appears on the records of the Corporation.
An Affidavit of the Secretary or an Assistant Secretary or of a
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
SECTION 5. QUORUM OF STOCKHOLDERS.
(a) Unless otherwise provided by the laws of Delaware,
at any meeting of the stockholders the presence in person or
by proxy of stockholders entitled to cast a majority of the votes
thereat shall constitute a quorum.
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<PAGE> 3
(b) At any meeting of the stockholders at which a quorum shall
be present, a majority of those present in person or by proxy may
adjourn the meeting from time to time without notice other than
announcement at the meeting. In the absence of a quorum, the officer
presiding thereat shall have power to adjourn the meeting from time to
time until a quorum shall be present. Notice of any adjourned meeting
other than announcement at the meeting shall not be required to be
given, except as provided in paragraph (d) below and except where
expressly required by law.
(c) At any adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been
transacted at the meeting originally called, but only those
stockholders entitled to vote at the meeting as originally noticed
shall be entitled to vote at any adjournment or adjournments thereof,
unless a new record date is fixed by the Board of Directors.
(d) If an adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. CHAIRMAN AND SECRETARY OF MEETING. The Chairman, or in his
absence, the Vice Chairman, or in his absence, the President, or in his absence,
any Vice President, shall preside at meetings of the stockholders. The Secretary
shall act as secretary of the meeting, or in his absence an Assistant Secretary
shall act, or if neither is present, then the presiding officer shall appoint a
person to act as secretary of the meeting.
SECTION 7. VOTING BY STOCKHOLDERS. Except as may be otherwise provided
by the Certificate of Incorporation or by these Bylaws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
stock standing in his name on the books of the Corporation on the record date
for the meeting. All elections and questions shall be decided by the vote of a
majority in interest of the stockholders present in person or represented by
proxy and entitled to vote at the meeting, except as otherwise permitted or
required by the laws of Delaware, the Certificate of Incorporation or these
Bylaws.
SECTION 8. PROXIES. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by his attorney-in-fact. Every proxy
shall be in writing, subscribed by the stockholder or his duly authorized
attorney-in-fact, but need not be dated, sealed, witnessed or acknowledged.
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SECTION 9. LIST OF STOCKHOLDERS.
(a) At least ten (10) days before every meeting of
stockholders, the Secretary shall prepare or cause to be prepared a
complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder.
(b) During ordinary business hours, for a period of at least
ten (10) days prior to the meeting, such list shall be open to
examination by any stockholder for any purpose germane to the meeting,
either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not
so specified, at the place where the meeting is to be held.
(c) The list shall also be produced and kept at the time and
place of the meeting during the whole time of the meeting, and it may
be inspected by any stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list
required by this Section or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
ARTICLE II
DIRECTORS
SECTION 1. POWERS OF DIRECTORS. The property, business and affairs of
the Corporation shall be managed by its Board of Directors, which may exercise
all the powers of the Corporation except such as are by the laws of Delaware or
the Certificate of Incorporation or these Bylaws required to be exercised or
done by the stockholders.
SECTION 2. NOMINATION OF DIRECTORS. Nominations of persons for election
to the Board of Directors at the annual meeting may be made at such meeting by
or at the direction of the Board of Directors, by any committee or persons
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Article III, Section 2. Such nominations
by any stockholder shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days prior to the meeting; provided
however, that in the event that less than
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seventy (70) days notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder, to be timely, must
be received no later than that the close of business on the tenth (10th) day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person, and (iv) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of directors pursuant
to the Rules and Regulations of the Securities and Exchange Commission under
Section 14 of the Securities Exchange Act of 1934, as amended; and (b) as to the
stockholder giving the notice (i) the name and record address of the stockholder
and (ii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as a director of the Corporation. No person shall be eligible for election
as a director of the Corporation unless nominated in accordance with the
procedures set forth herein. The officer of the Corporation presiding at an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. The directors shall be elected at the annual
meeting of the stockholders, except as provided in the Certificate of
Incorporation, and each director elected shall hold office until his successor
is elected and qualified; provided, however, that unless otherwise restricted by
the Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, either with or without cause, from the Board of
Directors at any meeting of stockholders by a majority of the stock represented
and entitled to vote thereat.
SECTION 3. VACANCIES ON BOARD OF DIRECTORS. Any Director may resign his
office at any time by delivering his resignation in writing to the Chairman or
the President or the Secretary. It will take effect at the time specified
therein, or if no time is specified, it will be effective at the time of its
receipt by the Corporation. The acceptance of a resignation shall
not be necessary to make it effective, unless expressly so provided
in the resignation.
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SECTION 4. MEETINGS OF THE BOARD OF DIRECTORS.
(a) The Board of Directors may hold their meetings, both regular
and special, either within or outside the State of Delaware.
(b) Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined by
resolution of the Board of Directors.
(c) The first meeting of each newly elected Board of Directors
except the initial Board of Directors shall be held as soon as practicable
after the Annual Meeting of the stockholders for the election of officers and
the transaction of such other business as may come before it.
(d) Special meetings of the Board of Directors shall be held
whenever called by direction of the Chairman, the Chief Executive Officer,
the President or at the request of Directors constituting one-third of the
number of Directors then in office, but not less than two Directors.
(e) The Secretary shall give notice to each Director of any
meeting of the Board of Directors by mailing the same at least two days
before the meeting or by telegraphing or delivering the same not later than
the day before the meeting. Such notice need not include a statement of the
business to be transacted at, or the purpose of, any such meeting. Any and
all business may be transacted at any meeting of the Board of Directors. No
notice of any adjourned meeting need be given. No notice to or waiver by any
Director shall be required with respect to any meeting at which the Director
is present.
SECTION 5. QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business; but if
there shall be less than a quorum at any meeting of the Board, a majority of
those present may adjourn the meeting from time to time. Unless otherwise
provided by the laws of Delaware, the Certificate of Incorporation or these
Bylaws, the act of a majority of the Directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors.
SECTION 6. PRESIDING OFFICER AND SECRETARY OF MEETING. The Chairman or,
in his absence, a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act as
secretary of the meeting, but in his absence the presiding officers shall
appoint a secretary of the meeting.
SECTION 7. ACTION BY CONSENT WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the
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Board of Directors or of any committee thereof may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the records of the Board or
committee.
SECTION 8. EXECUTIVE COMMITTEE. The Board of Directors may appoint from
among its members and from time to time may fill vacancies in an Executive
Committee to serve during the pleasure of the Board. The Executive Committee
shall consist of three members, or such greater number of members as the Board
of Directors may by resolution from time to time fix. One of such members shall
be the Chairman of the Board and another shall be the Vice Chairman of the
Board, who shall be the presiding officer of the Committee. During the intervals
between the meetings of the Board, the Executive Committee shall possess and may
exercise all of the powers of the Board in the management of the business and
affairs of the Corporation conferred by these Bylaws or otherwise. The Committee
shall keep a record of all its proceedings and report the same to the Board. A
majority of the members of the Committee shall constitute a quorum. The act of a
majority of the members of the Committee present at any meeting at which a
quorum is present shall be the act of the Committee.
SECTION 9. OTHER COMMITTEES. The Board of Directors may also appoint
from among its members such other committees of two or more Directors as it may
from time to time deem desirable, and may delegate to such committees such
powers of the Board as it may consider appropriate.
SECTION 10. COMPENSATION OF DIRECTORS. Directors shall receive such
reasonable compensation for their service on the Board of Directors or any
committees thereof, whether in the form of salary or a fixed fee for attendance
at meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
SECTION 11. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 11 of Article II shall
constitute presence in person at such meeting.
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ARTICLE III
OFFICERS
SECTION 1. EXECUTIVE OFFICERS OF THE CORPORATION. The executive
officers of the Corporation shall be chosen by the Board of Directors and shall
be a Chairman, a Chief Executive Officer, President, a Chief Financial Officer,
a Secretary and a Treasurer. The Board of Directors also may appoint a Chairman
of the Board, a Vice Chairman of the Board, and one or more Vice Presidents,
Assistant Secretaries and Assistant Treasurers. Any two offices except those of
Chairman of the Board and Vice Chairman of the Board, President and Vice
President, or President and Secretary may be filled by the same person. None of
the officers need be a member of the Board except the Chairman of the Board and
the Vice Chairman of the Board.
SECTION 2. CHOOSING OF EXECUTIVE OFFICERS. The Board of Directors at
its first meeting after each Annual Meeting of Stockholders shall choose a
Chairman, a Chief Executive Officer, a President, a Chief Financial Officer, a
Secretary and a Treasurer.
SECTION 3. ADDITIONAL OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
SECTION 4. SALARIES. The salaries of all officers and agents of the
Corporation specially appointed by the Board shall be fixed by the Board of
Directors.
SECTION 5. TERM, REMOVAL AND VACANCIES. The officers of the Corporation
shall hold office until their respective successors are chosen and qualify. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders.
He shall be the Chief Executive Officer of the Company, unless the Board has
designated a separate Chief Executive Officer. In the absence or disability of
the Chairman of the Board: (a) the Vice Chairman of the Board shall preside at
all meetings of the Board of Directors and of the stockholders, and (b) the
powers and duties of the Chairman of the Board shall be exercised jointly by the
Vice Chairman of the Board and the President until such authority is altered by
action of the Board of Directors. The Chairman of the Board shall present to the
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Annual Meeting of Stockholders a report of the business of the preceding fiscal
year.
SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board,
if any, shall have such powers and perform such duties as are provided in these
Bylaws or as may be delegated to him by the Chairman of the Board, and shall
perform such other duties as may from time to time be assigned to him by the
Board of Directors.
SECTION 8. CHAIRMAN. The Chairman shall serve as advisor to the Board
of Directors and shareholders in connection with the current and long term
operating and strategic planning and policy development for the Corporation, and
shall perform all such other duties as may be properly required of him by the
Board of Directors.
SECTION 9. PRESIDENT. The President shall have such powers and perform
such duties as are provided in these Bylaws or as may be delegated to him by the
Board of Directors or the Chairman of the Board. If there is no Chairman of the
Board or separate Chief Executive Officer, the President shall be the Chief
Executive Officer of the Corporation and shall have all the duties and
responsibilities previously enumerated for the Chairman of the Board. In the
absence of the Chairman of the Board and the Vice Chairman of the Board, the
President shall preside at all meetings of the stockholders.
SECTION 10. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The Chief
Executive Officer shall have general charge and supervision of the business of
the Company and shall exercise and perform all the duties incident to the office
of the Chief Executive Officer. He shall have direct supervision of the other
officers and shall also exercise and perform such powers and duties as may be
assigned to him by the Board of Directors.
SECTION 11. POWERS AND DUTIES OF VICE PRESIDENTS. Any Vice President
designated by the Board of Directors shall, in the absence, disability, or
inability to act of the President, perform all duties and exercise all the
powers of the President and shall perform such other duties as the Board may
from time to time prescribe. Each Vice President shall have such other powers
and shall perform such other duties as may be assigned to him by the Board.
SECTION 12. POWERS AND DUTIES OF TREASURER AND ASSISTANT
TREASURERS.
(a) The Treasurer shall have the care and custody of all the funds
and securities of the Corporation except as may be otherwise ordered by the
Board of Directors, and shall cause
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such funds to be deposited to the credit of the Corporation in such banks
or depositories as may be designated by the Board of Directors, the Chairman,
the President or the Treasurer, and shall cause such securities to be placed
in safekeeping in such manner as may be designated by the Board of Directors,
the Chairman, the President or the Treasurer.
(b) The Treasurer, or an Assistant Treasurer, or such other person
or persons as may be designated for such purpose by the Board of Directors,
the Chairman, the President or the Treasurer, may endorse in the name and on
behalf of the Corporation all instruments for the payment of money, bills of
lading, warehouse receipts, insurance policies and other commercial documents
requiring such endorsement.
(c) The Treasurer, or an Assistant Treasurer, or such other person
or persons as may be designated for such purpose by the Board of Directors,
the Chairman, the President or the Treasurer, may sign all receipts and
vouchers for payments made to the Corporation; he shall render a statement of
the cash account of the Corporation to the Board of Directors as often as it
shall require the same; he shall enter regularly in books to be kept by him
for that purpose full and accurate accounts of all moneys received and paid
by him on account of the Corporation and of all securities received and
delivered by the Corporation.
(d) Each Assistant Treasurer shall perform such duties as may from
time to time be assigned to him by the Treasurer or by the Board of
Directors. In the event of the absence of the Treasurer or his incapacity or
inability to act, then any Assistant Treasurer may perform any of the duties
and may exercise any of the powers of the Treasurer.
SECTION 13. POWERS AND DUTIES OF SECRETARY AND ASSISTANT
SECRETARIES.
(a) The Secretary shall attend all meetings of the Board, all
meetings of the stockholders, and shall keep the minutes of all proceedings
of the stockholders and the Board of Directors in proper books provided for
that purpose. The Secretary shall attend to the giving and serving of all
notices of the Corporation in accordance with the provisions of the Bylaws
and as required by the laws of Delaware. The Secretary may, with the
President, a Vice President or other authorized officer, sign all contracts
and other documents in the name of the Corporation. He shall perform such
other duties as may be prescribed in these Bylaws or assigned to him and all
other acts incident to the position of Secretary.
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(b) Each Assistant Secretary shall perform such duties as may from
time to time be assigned to him by the Secretary or by the Board of
Directors. In the event of the absence of the Secretary or his incapacity or
inability to act, then any Assistant Secretary may perform any of the duties
and may exercise any of the powers of the Secretary.
(c) In no case shall the Secretary or any Assistant Secretary,
without the express authorization and direction of the Board of Directors,
have any responsibility for, or any duty or authority with respect to, the
withholding or payment of any federal, state or local taxes of the
Corporation, or the preparation or filing of any tax return.
ARTICLE IV
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES.
(a) Every holder of stock in the Corporation shall be entitled to
have a certificate signed in the name of the Corporation by the Chairman or
the President or the Vice Chairman or a Vice President, and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary,
certifying the number of shares owned by him.
(b) If such a certificate is countersigned by a transfer agent
other than the Corporation or its employee, or by a registrar other than
the Corporation or its employee, the signatures of the officers of the
Corporation may be facsimiles and, if permitted by Delaware law, any other
signature on the certificate may be a facsimile.
(c) In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the Board of
Directors. They shall be numbered and registered in the order in which they
are issued. No certificate shall be issued until fully paid.
SECTION 2. RECORD OWNERSHIP. A record of the name and address of the
holder of each certificate, the number of shares represented thereby, and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact
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thereof, and accordingly shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as required by the
laws of Delaware.
SECTION 3. TRANSFER OF RECORD OWNERSHIP. Transfers of stock shall be
made on the books of the Corporation only by direction of the person named in
the certificate or his attorney, lawfully constituted in writing, and only upon
the surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. Certificates
representing shares of the stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, stolen or destroyed in such manner
and on such terms and conditions as the Board of Directors from time to time may
authorize.
SECTION 5. TRANSFER AGENT, REGISTRAR, RULES RESPECTING CERTIFICATES.
The Corporation shall maintain one or more transfer offices or agencies where
stock of the Corporation shall be transferable. The Corporation shall also
maintain one or more registry offices where such stock shall be registered. The
Board of Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
SECTION 6. FIXING RECORD DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. The Board of Directors may fix in advance a date as the record date for
the purpose of determining the stockholders entitled to notice of, or to vote
at, any meeting of the stockholders or any adjournment thereof, or the
stockholders entitled to receive payment of any dividend or other distribution
or the allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or to express consent to corporate
action in writing without a meeting, or in order to make a determination of the
stockholders for the purpose of any other lawful action. Such record date in any
case shall not be more than sixty (60) days nor less than ten (10) days before
the date of a meeting of the stockholders, nor more than sixty (60) days prior
to any other action requiring such determination of the stockholders. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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ARTICLE V
SECURITIES HELD BY THE CORPORATION
SECTION 1. VOTING. Unless the Board of Directors shall otherwise order,
the Chairman, the Vice Chairman, the President, any Vice President or the
Treasurer shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of the stockholders of any corporation in
which the Corporation may hold stock and at such meeting to exercise any or all
rights and powers incident to the ownership of such stock, and to execute on
behalf of the Corporation a proxy or proxies empowering another or others to act
as aforesaid. The Board of Directors from time to time may confer like powers
upon any other person or persons.
SECTION 2. GENERAL AUTHORIZATION TO TRANSFER SECURITIES HELD BY THE
CORPORATION.
(a) Any of the following officers, to-wit: the Chairman, the Chief
Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Corporation shall be and are hereby authorized and empowered
to transfer, convert, endorse, sell, assign, set over and deliver any and all
shares of stock, bonds, debentures, notes, subscription warrants, stock
purchase warrants, evidences of indebtedness, or other securities now or
hereafter standing in the name of or owned by the Corporation, and to make,
execute and deliver under the seal of the Corporation any and all written
instruments of assignment and transfer necessary or proper to effectuate the
authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of
assignment and transfer executed, pursuant to and in accordance with the
foregoing paragraph (a), a certificate of the Secretary or an Assistant
Secretary of the Corporation in office at the date of such certificate
setting forth the provisions hereof and stating that they are in full force
and effect and setting forth the names of persons who are then officers of
the Corporation, then all persons to whom such instrument and annexed
certificate shall thereafter come shall be entitled, without further inquiry
or investigation and regardless of the date of such certificate, to assume
and to act in reliance upon the assumption that the shares of stock or other
securities named in such instrument were theretofore duly and properly
transferred, endorsed, sold, assigned, set over and delivered by the
Corporation, and that with respect to such securities the authority of these
provisions of the Bylaws and of such officers is still in full force and
effect.
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ARTICLE VI
DIVIDENDS
SECTION 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the Corporation may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 2. PAYMENT AND RESERVES. Before payment of any dividend, there
may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Directors shall think conducive to
the interest of the Corporation, and the directors may modify or abolish any
such reserves in the manner in which they were created.
SECTION 3. RECORD DATE. The Board of Directors may, to the extent
provided by law, prescribe a period, in no event in excess of sixty (60) days,
prior to the date for payment of any dividend, as a record date for the
determination of stockholders entitled to receive payment of any such dividend,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on said date so fixed shall be entitled to receive
payment of such dividend, notwithstanding any transfer of any stock on the books
of the Corporation after any such record date fixed as aforesaid.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. SIGNATURES OF OFFICERS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate. The signature of any officer upon any of the foregoing instruments
may be a facsimile whenever authorized by the Board.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 3. SEAL. Upon resolution of the Board of Directors, the
Corporation may elect to have a corporate seal. In such event, the corporate
seal shall have inscribed thereon the name of the Corporation, the year of its
incorporation and the
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words "Corporate Seal, Delaware". Said seal may be used for causing it or a
facsimile thereof to be impressed or affixed or reproduced
or otherwise.
ARTICLE VIII
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex, facsimile transmission or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, or, for a meeting, actual attendance at the meeting in person,
or in the case of the stockholders, by his attorney-in-fact, shall be deemed
equivalent to the giving of such notice to such persons. No notice need be given
to any person with whom communication is made unlawful by any law of the United
States or any rule, regulation, proclamation or executive order issued under any
such law.
ARTICLE IX
AMENDMENT OF BYLAWS
These Bylaws, or any of them, may from time to time be supplemented,
amended or repealed by the Board of Directors, or by the vote of a majority in
interest of the stockholders represented and entitled to vote at any meeting at
which a quorum is present, except as otherwise provided in these Bylaws or in
the Certificate of Incorporation.
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EXHIBIT 10.16
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") is entered into
by and between HAYES MICROCOMPUTER PRODUCTS, INC. (the "Company") and P.K. CHAN
(the "Executive") on this 7th day of October, 1996.
For and in consideration of the employment or continued employment, as
the case may be, of the Executive by the Company, the mutual covenants and
promises contained herein, and in the Terms and Conditions of Employment
attached hereto as Exhibit "A," and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Executive hereby covenant and agree as follows:
1. Employment; Compensation. Company hereby employs or continues
to employ Executive as Vice President - Manufacturing on the terms and
conditions set forth herein and Executive accepts such employment. Executive's
initial salary shall be $175,000.00 per year, and, subject to paragraph 3 below,
shall continue for so long as Executive is employed by the Company, or until
such salary is modified by mutual consent of the parties hereto.
2. Term. The Term of this Agreement shall be two (2) years from
the date hereof, unless sooner terminated in accordance with paragraph 3 below.
3. Termination and Severance. This Agreement may be terminated by
Company, its Chairman of the Board, its Chief Executive Officer, or Executive
with or without Cause. In the event Company, the Chairman of the Board, or the
Chief Executive Officer terminates this Agreement without Cause during the Term,
then Executive shall be entitled to severance pay in the form of continuation of
his or her salary for six (6) months following the date of termination. In the
event that Company, the Chairman of the Board, or the Chief Executive Officer
terminates Executive's employment for Cause, or Executive voluntarily terminates
employment, or the Term expires, the Company shall not be obligated to pay any
salary or other Compensation to Executive after the effective date of
termination. During the Term, Executive shall be entitled to receive bonuses in
accordance with the Company's normal policies with respect to similarly situated
Executives, if any. Executive agrees to provide Company with at least six (6)
weeks advance written notice prior to voluntary termination or resignation by
Executive.
4. Terms and Conditions. Executive acknowledges that this
Agreement, and his employment obligations hereunder, expressly include the
provisions set forth in the Terms and Conditions of Employment attached hereto
as Exhibit "A,"which are incorporated herein by this reference thereto. This
Agreement shall supersede any prior employment agreement, and any restrictive
covenants, previously entered into by Executive with the Company.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
on the date and year first above written.
COMPANY:
/s/ P. K. Chan (SEAL) By:/s/ Dennis C. Hayes (SEAL)
- -------------------------- --------------------------------------
Executive
Attest:/s/ Kim Gallagher
----------------------------------
<PAGE> 3
EXHIBIT "A"
TERMS AND CONDITIONS OF EMPLOYMENT
1. Duties and Responsibilities. Executive shall devote his full
time and best efforts to the duties and responsibilities assigned by the Company
and shall abide by this Agreement and the Company's Operations Policies.
2. Confidential Information, Trade Secrets. Executive shall not
use or disclose to any person or entity any Confidential Information or trade
secrets of Company other than as necessary in the fulfillment of this Agreement
in the course of employment. This paragraph shall be effective during the term
hereof and for a period of two (2) years after termination of employment,
whether with or without Cause.
3. Inventions. The Company and Executive acknowledge that in the
course of Executive's employment by the Company, Executive may from time to time
develop or participate in the development of software or technology. All works
or inventions conceived, originated, authored, or discovered, in whole or in
part, by Executive, which result from any work performed for the Company or
related to or useful in the business of the Company are and shall be the
exclusive property of the Company. Executive shall cooperate with the Company in
the protection of the Company's copyrights, patents, and other proprietary
rights therein and, to the extent deemed desirable by the Company, in the
registration of the same. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to any and all inventions,
processes, systems and creations, whether or not patentable or copyrightable,
that Executive may conceive, develop, or create, in whole or in part, during his
employment with the Company, whether or not during normal working hours.
Executive shall sign and deliver all documents relative to said inventions
requested by the Company for the purpose of confirming the Company's title
thereto.
4. Company Property. Upon request of the Company, and without
request promptly on termination of this Agreement or Executive's employment
hereunder, Executive shall deliver all Company Property in Executive's
possession or control to the Company. Executive acknowledges and agrees that
title to all Company Property is vested in the Company, and Executive shall not
retain any such property or any copies thereof in any form, including magnetic
or electronic form.
5. Protective Covenants. Executive is and will during the course
of employment become intimately familiar with Confidential Information, trade
secrets, facilities and services, and other property of the Company, and the
protection of the Company requires that all such property and information must
remain the sole and private property of the Company to be used only for the
Company's benefit, not to be disclosed to any other party or used by Executive
against Company. Accordingly, Executive does hereby warrant, represent, covenant
and agree, as follows:
(i) Covenant Not to Compete. Executive agrees that, for a
period of two (2) years from the termination of his employment
with Company, whether with or without Cause, he shall not,
directly or indirectly, on behalf of himself or any other
<PAGE> 4
person or entity, compete with the Company within a fifty (50)
mile radius of the Company's principal place of business in
Norcross, Georgia, or its principal place of business in
Thousand Oaks, California, by engaging in the manufacture,
assembling, or selling of computer component products,
software, or systems, including modems, competitive with those
manufactured, assembled, or sold by the Company, in a capacity
which requires Executive to perform services substantially
identical to the services performed by Executive on behalf of
Company.
(ii) Covenant Not to Solicit Customers. During the term of
Executive's employment hereunder, and for a period of two (2)
years following the termination of such employment for any
reason whatsoever, Executive shall not (except on behalf of or
with the prior written consent of Company), either directly or
indirectly, on Executive's own behalf or on behalf of others,
solicit, divert, or appropriate any business for the
manufacture, assembling, or sale of computer competent
products, software or systems, including modems, competitive
with those manufactured, assembled or sold by the Company,
from any customer or actively sought prospective customer of
the Company to whom the Company offered or provided products
or services, and with whom Executive had material contact at
any time during the twenty-four (24) months preceding the
termination of Executive's employment.
(iii) Covenant Not to Solicit Employees. During the term of
Executive's employment hereunder, and for a period of two (2)
years following the termination of such employment for any
reason whatsoever, Executive shall not employ or solicit the
employment of any employee of the Company who was an employee
of the Company at any time during the six (6) months preceding
the termination of Executive's employment with the Company,
for the purpose of causing such employee to take employment
with Executive or a competitor of the Company.
Executive agrees and acknowledges that the restrictions in
this Agreement are not vague, over broad or indefinite, and are reasonable and
designed to protect the legitimate business interests of the Company. In
addition to any other remedies which Company may have under the law for breach
of any or all of said covenants, Company shall be entitled to injunctive and/or
other equitable relief against Executive for any violation of any of said
Covenants.
6. Survival. Paragraphs 2, 3, 4, 5, and 6 hereof, together with
any provisions of the Company's Operations Policies expressly or by necessary
implication applicable after the termination of employment, shall survive
termination of this Agreement. Upon termination, Executive shall repay to
Company immediately any advances by Company, not offset by earnings or other
credits due him or her, even if not expressly made repayable at the time of such
advance, it being the intent of the parties that all such advances shall be
repayable as provided by this paragraph. Company may offset any sums owed to
Company by Executive against any amounts otherwise owed by Company to Executive.
No sums otherwise due Executive at termination shall be payable to Executive if,
at the time of termination or thereafter, Executive shall be in violation of any
term or provision of this Agreement.
<PAGE> 5
7. Entire Agreement. This Agreement contains the entire
understanding and agreement between the parties, and all promises,
representations, warranties or inducements made by either party to the other,
including any prior employment agreement or restrictive covenants, not
specifically made in writing or made a part hereof by reference, are expressly
superseded and shall have no force or effect. This Agreement may not be modified
except in a writing signed by both parties hereto.
8. Severability. If any provision of this Agreement (including
any subparts of any paragraph) is invalid or unenforceable by any rule of law or
public policy, this Agreement shall be construed so as to delete herefrom the
invalid or unenforceable covenant or provision. To the extent that any provision
is invalid or unenforceable that may be valid or enforceable by limitation
thereof, then such provision shall be enforceable to the fullest extent
permitted under the law of the jurisdiction in which enforcement is sought. If
any particular provision is held to be invalid, illegal or unenforceable, all
other covenants, terms, conditions and provisions hereof shall be and remain in
full force and effect.
9. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, each respective party's heirs, successors, legal
representatives, executors and assigns. This Agreement shall be construed and
governed in accordance with the laws of the State of Georgia.
10. Definitions. Any word used in this Agreement which is defined
in this paragraph shall have the meaning set forth below:
(a) Agreement. The Executive Employment Agreement,
together with the Terms and Conditions of Employment and any documents
incorporated therein by reference. In the event of any inconsistency between the
Agreement and any Operations Policies, the Agreement shall control.
(b) "Cause." The term "Cause" as used in the within and
foregoing Agreement shall mean (i) Executive's breach of a covenant or
obligation of this Agreement, including any of the Terms and Conditions of
Employment, or any failure or refusal by Executive to perform Executive's duties
hereunder to the satisfaction of the Board of Directors, or to comply with any
lawful directive of the Board of Directors, if, after receiving written notice
of such breach, failure or refusal to perform, Executive does not cure or
correct such breach, failure or refusal within five (5) business days after
Executive's receipt of such notice; and (ii) any act of Executive in the course
of Executive's employment that constitutes larceny, fraud, deceit, gross
negligence, a crime involving moral turpitude, wilful misrepresentation, wilful
misconduct, or failure to maintain the confidentiality of the Confidential
Information and trade secrets of Company.
(c) "Company." Hayes Microcomputer Products, Inc., and
any successor or assignee hereof.
(d) "Company Property." All property, without limitation,
whether real, personal, tangible or intangible, including all inventions,
confidential information, trade secrets, facilities, trade names, logos, patents
and all tangible materials and supplies (whether originals or duplicates
<PAGE> 6
and including, but not in any way limited to, sample products, video tape
cassettes, film, catalogues, price lists, rate sheets, outstanding quotations,
books, records, manuals, sales presentation literature, training materials,
calling or business cards, customer record cards, customer files, customer
names, addresses and telephone numbers, supplier information, contacts, pricing
and practices, strategic partner information, files and records, current or
prospective business plans, Operations Policies, directives, correspondence,
documents, contracts, orders, messages, memoranda, notes, circulars, agreements,
bulletins, invoices and receipts, and sources of financing), which in any way
pertain to Company's business, whether or not furnished to Executive by Company
and whether or not prepared, compiled, or acquired by Executive while employed
by Company, are the sole property of Company.
(e) "Compensation." Any and all payments, remuneration
and benefits, including employment, provided to Executive by the Company,
regardless of the form thereof. Such compensation as is paid to Executive shall
be conclusively deemed legally sufficient consideration for this Agreement.
(f) "Confidential Information." All confidential
information regarding the Company"s business, including but not limited to its
methods of operation, products, software programs, equipment and techniques,
existing and contemplated facilities and services, inventions, systems, devices
(whether or not patentable), financial information and practices, plans,
pricing, selling techniques, names, addresses and phone numbers of the Company's
Customers and prospective Customers and suppliers and prospective suppliers,
credit information and financial data of the Company and the Company's Customers
and prospective customers and suppliers and prospective suppliers, particular
business requirements of the Company's Customers, and special methods and
processes involved in designing, producing and selling Company's facilities and
services, current and prospective business plans, strategic partner information,
files and records, and the terms of this Agreement, all shall be deemed
Confidential Information and the Company's exclusive property. The parties agree
that Confidential Information shall be deemed to be trade secrets under the
Georgia Trade Secrets Act. Confidential Information shall not include
information that is in the public domain or otherwise readily accessible to
members of the public.
(g) "Customer." Each person, corporation, firm,
partnership or other entity whatsoever, which has purchased or shall purchase
the Company's products, facilities or services.
(h) "Executive." The person signing this Agreement as
Executive, regardless of any title or duties which may now or hereafter be
assigned to such person by the Company. This Agreement shall govern the
employment relationship in any and all such situations.
(i) "Inventions." Any and all devices, systems, software
and other programs, processes, products, patents and any other creation (all of
the foregoing, for purposes of this paragraph, called "inventions") identical or
similar to or relating to devices, processes, systems, products or services
utilized and/or offered by the Company.
(j) "Operations Policies." All written procedures,
policies, instructions from Company's officers, directors or managers, the
Company Employee Manual (if any), and all other
<PAGE> 7
written communications from the Company to Executive individually, or to all
Company's employees. Said Operations Policies are hereby incorporated herein and
expressly made a part of this Agreement by this reference thereto.
(k) "Termination." Cessation of this Agreement or the
underlying employment relationship, whether by action of the Executive or
Company, and whether voluntary or involuntary. Termination hereby may be with or
without Cause.
(l) "Terms and Conditions of Employment." This document
entitled Terms and Conditions of Employment, which is Exhibit "A" to the
Executive Employment Agreement, and all of the provisions hereof.
PLEASE INITIAL: /s/ P. K. Chan
-----------------
Executive
<PAGE> 8
FIRST AMENDMENT TO
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") is entered into
by and between HAYES MICROCOMPUTER PRODUCTS, INC. (the "Company") and P.K. CHAN
(the "Executive") on this 1st day of October, 1997.
For and in consideration of the employment or continued employment, as
the case may be, of the Executive by the Company, the mutual covenants and
promises contained herein, and in the Terms and Conditions of Employment
attached hereto as Exhibit "A," and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Executive hereby covenant and agree as follows:
1. Employment; Compensation. Company hereby employs or continues
to employ Executive as President and Chief Operating Officer on the terms and
conditions set forth herein and Executive accepts such employment. Executive's
initial salary shall be $240,000.00 per year, and, subject to paragraph 3 below,
shall continue for so long as Executive is employed by the Company, or until
such salary is modified by mutual consent of the parties hereto. In addition,
Executive shall be entitled to an executive incentive bonus of up to 30% of
Executive's base salary, based upon performance criteria to be determined by the
Company.
2. Term. The Term of this Agreement shall be two (2) years from
the date hereof, unless sooner terminated in accordance with paragraph 3 below.
3. Termination and Severance. This Agreement may be terminated by
Company, its Chairman of the Board, or Executive with or without Cause. In the
event Company or the Chairman of the Board terminates this Agreement without
Cause during the Term, then Executive shall be entitled to severance pay in the
form of continuation of his or her salary for twelve (12) months following the
date of termination. In the event that Company or the Chairman of the Board
terminates Executive's employment for Cause, or Executive voluntarily terminates
employment, or the Term expires, the Company shall not be obligated to pay any
salary or other Compensation to Executive after the effective date of
termination. During the Term, Executive shall be entitled to receive bonuses in
accordance with the Company's normal policies with respect to similarly situated
Executives, if any. Executive agrees to provide Company with at least six (6)
weeks advance written notice prior to voluntary termination or resignation by
Executive.
4. Terms and Conditions. Executive acknowledges that this
Agreement, and his employment obligations hereunder, expressly include the
provisions set forth in the Terms and Conditions of Employment attached hereto
as Exhibit "A,"which are incorporated herein by this reference thereto. This
Agreement shall supersede any prior employment agreement, and any restrictive
covenants, previously entered into by Executive with the Company.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
on the date and year first above written.
COMPANY:
/s/ P. K. Chan (SEAL) By:/s/ Dennis C. Hayes (SEAL)
- ------------------------------- ---------------------------------
Executive
Attest:/s/ Kim Gallagher
-----------------------------
<PAGE> 10
EXHIBIT "A"
TERMS AND CONDITIONS OF EMPLOYMENT
1. Duties and Responsibilities. Executive shall devote his full
time and best efforts to the duties and responsibilities assigned by the Company
and shall abide by this Agreement and the Company's Operations Policies.
2. Confidential Information, Trade Secrets. Executive shall not
use or disclose to any person or entity any Confidential Information or trade
secrets of Company other than as necessary in the fulfillment of this Agreement
in the course of employment. This paragraph shall be effective during the term
hereof and for a period of two (2) years after termination of employment,
whether with or without Cause.
3. Inventions. The Company and Executive acknowledge that in the
course of Executive's employment by the Company, Executive may from time to time
develop or participate in the development of software or technology. All works
or inventions conceived, originated, authored, or discovered, in whole or in
part, by Executive, which result from any work performed for the Company or
related to or useful in the business of the Company are and shall be the
exclusive property of the Company. Executive shall cooperate with the Company in
the protection of the Company's copyrights, patents, and other proprietary
rights therein and, to the extent deemed desirable by the Company, in the
registration of the same. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to any and all inventions,
processes, systems and creations, whether or not patentable or copyrightable,
that Executive may conceive, develop, or create, in whole or in part, during his
employment with the Company, whether or not during normal working hours.
Executive shall sign and deliver all documents relative to said inventions
requested by the Company for the purpose of confirming the Company's title
thereto.
4. Company Property. Upon request of the Company, and without
request promptly on termination of this Agreement or Executive's employment
hereunder, Executive shall deliver all Company Property in Executive's
possession or control to the Company. Executive acknowledges and agrees that
title to all Company Property is vested in the Company, and Executive shall not
retain any such property or any copies thereof in any form, including magnetic
or electronic form.
5. Protective Covenants. Executive is and will during the course
of employment become intimately familiar with Confidential Information, trade
secrets, facilities and services, and other property of the Company, and the
protection of the Company requires that all such property and information must
remain the sole and private property of the Company to be used only for the
Company's benefit, not to be disclosed to any other party or used by Executive
against Company. Accordingly, Executive does hereby warrant, represent, covenant
and agree, as follows:
(i) Covenant Not to Compete. Executive agrees that, for a
period of two (2) years from the termination of his employment
with Company, whether with or without Cause, he shall not,
directly or indirectly, on behalf of himself or any other
<PAGE> 11
person or entity, compete with the Company within a fifty (50)
mile radius of the Company's principal place of business in
Norcross, Georgia, or its principal place of business in
Thousand Oaks, California, by engaging in the manufacture,
assembling, or selling of computer component products,
software, or systems, including modems, competitive with those
manufactured, assembled, or sold by the Company, in a capacity
which requires Executive to perform services substantially
identical to the services performed by Executive on behalf of
Company.
(ii) Covenant Not to Solicit Customers. During the term of
Executive's employment hereunder, and for a period of two (2)
years following the termination of such employment for any
reason whatsoever, Executive shall not (except on behalf of or
with the prior written consent of Company), either directly or
indirectly, on Executive's own behalf or on behalf of others,
solicit, divert, or appropriate any business for the
manufacture, assembling, or sale of computer competent
products, software or systems, including modems, competitive
with those manufactured, assembled or sold by the Company,
from any customer or actively sought prospective customer of
the Company to whom the Company offered or provided products
or services, and with whom Executive had material contact at
any time during the twenty-four (24) months preceding the
termination of Executive's employment.
(iii) Covenant Not to Solicit Employees. During the term of
Executive's employment hereunder, and for a period of two (2)
years following the termination of such employment for any
reason whatsoever, Executive shall not employ or solicit the
employment of any employee of the Company who was an employee
of the Company at any time during the six (6) months preceding
the termination of Executive's employment with the Company,
for the purpose of causing such employee to take employment
with Executive or a competitor of the Company.
Executive agrees and acknowledges that the restrictions in
this Agreement are not vague, over broad or indefinite, and are reasonable and
designed to protect the legitimate business interests of the Company. In
addition to any other remedies which Company may have under the law for breach
of any or all of said covenants, Company shall be entitled to injunctive and/or
other equitable relief against Executive for any violation of any of said
Covenants.
6. Survival. Paragraphs 2, 3, 4, 5, and 6 hereof, together with
any provisions of the Company's Operations Policies expressly or by necessary
implication applicable after the termination of employment, shall survive
termination of this Agreement. Upon termination, Executive shall repay to
Company immediately any advances by Company, not offset by earnings or other
credits due him or her, even if not expressly made repayable at the time of such
advance, it being the intent of the parties that all such advances shall be
repayable as provided by this paragraph. Company may offset any sums owed to
Company by Executive against any amounts otherwise owed by Company to Executive.
No sums otherwise due Executive at termination shall be payable to Executive if,
at the time of termination or thereafter, Executive shall be in violation of any
term or provision of this Agreement.
<PAGE> 12
7. Entire Agreement. This Agreement contains the entire
understanding and agreement between the parties, and all promises,
representations, warranties or inducements made by either party to the other,
including any prior employment agreement or restrictive covenants, not
specifically made in writing or made a part hereof by reference, are expressly
superseded and shall have no force or effect. This Agreement may not be modified
except in a writing signed by both parties hereto.
8. Severability. If any provision of this Agreement (including
any subparts of any paragraph) is invalid or unenforceable by any rule of law or
public policy, this Agreement shall be construed so as to delete herefrom the
invalid or unenforceable covenant or provision. To the extent that any provision
is invalid or unenforceable that may be valid or enforceable by limitation
thereof, then such provision shall be enforceable to the fullest extent
permitted under the law of the jurisdiction in which enforcement is sought. If
any particular provision is held to be invalid, illegal or unenforceable, all
other covenants, terms, conditions and provisions hereof shall be and remain in
full force and effect.
9. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, each respective party's heirs, successors, legal
representatives, executors and assigns. This Agreement shall be construed and
governed in accordance with the laws of the State of Georgia.
10. Definitions. Any word used in this Agreement which is defined
in this paragraph shall have the meaning set forth below:
(a) Agreement. The Executive Employment Agreement,
together with the Terms and Conditions of Employment and any documents
incorporated therein by reference. In the event of any inconsistency between the
Agreement and any Operations Policies, the Agreement shall control.
(b) "Cause." The term "Cause" as used in the within and
foregoing Agreement shall mean (i) Executive's breach of a covenant or
obligation of this Agreement, including any of the Terms and Conditions of
Employment, or any failure or refusal by Executive to perform Executive's duties
hereunder to the satisfaction of the Board of Directors, or to comply with any
lawful directive of the Board of Directors, if, after receiving written notice
of such breach, failure or refusal to perform, Executive does not cure or
correct such breach, failure or refusal within five (5) business days after
Executive's receipt of such notice; and (ii) any act of Executive in the course
of Executive's employment that constitutes larceny, fraud, deceit, gross
negligence, a crime involving moral turpitude, wilful misrepresentation, wilful
misconduct, or failure to maintain the confidentiality of the Confidential
Information and trade secrets of Company.
(c) "Company." Hayes Microcomputer Products, Inc., and
any successor or assignee hereof.
(d) "Company Property." All property, without limitation,
whether real, personal, tangible or intangible, including all inventions,
confidential information, trade secrets, facilities, trade names, logos, patents
and all tangible materials and supplies (whether originals or duplicates
<PAGE> 13
and including, but not in any way limited to, sample products, video tape
cassettes, film, catalogues, price lists, rate sheets, outstanding quotations,
books, records, manuals, sales presentation literature, training materials,
calling or business cards, customer record cards, customer files, customer
names, addresses and telephone numbers, supplier information, contacts, pricing
and practices, strategic partner information, files and records, current or
prospective business plans, Operations Policies, directives, correspondence,
documents, contracts, orders, messages, memoranda, notes, circulars, agreements,
bulletins, invoices and receipts, and sources of financing), which in any way
pertain to Company's business, whether or not furnished to Executive by Company
and whether or not prepared, compiled, or acquired by Executive while employed
by Company, are the sole property of Company.
(e) "Compensation." Any and all payments, remuneration
and benefits, including employment, provided to Executive by the Company,
regardless of the form thereof. Such compensation as is paid to Executive shall
be conclusively deemed legally sufficient consideration for this Agreement.
(f) "Confidential Information." All confidential
information regarding the Company"s business, including but not limited to its
methods of operation, products, software programs, equipment and techniques,
existing and contemplated facilities and services, inventions, systems, devices
(whether or not patentable), financial information and practices, plans,
pricing, selling techniques, names, addresses and phone numbers of the Company's
Customers and prospective Customers and suppliers and prospective suppliers,
credit information and financial data of the Company and the Company's Customers
and prospective customers and suppliers and prospective suppliers, particular
business requirements of the Company's Customers, and special methods and
processes involved in designing, producing and selling Company's facilities and
services, current and prospective business plans, strategic partner information,
files and records, and the terms of this Agreement, all shall be deemed
Confidential Information and the Company's exclusive property. The parties agree
that Confidential Information shall be deemed to be trade secrets under the
Georgia Trade Secrets Act. Confidential Information shall not include
information that is in the public domain or otherwise readily accessible to
members of the public.
(g) "Customer." Each person, corporation, firm,
partnership or other entity whatsoever, which has purchased or shall purchase
the Company's products, facilities or services.
(h) "Executive." The person signing this Agreement as
Executive, regardless of any title or duties which may now or hereafter be
assigned to such person by the Company. This Agreement shall govern the
employment relationship in any and all such situations.
(i) "Inventions." Any and all devices, systems, software
and other programs, processes, products, patents and any other creation (all of
the foregoing, for purposes of this paragraph, called "inventions") identical or
similar to or relating to devices, processes, systems, products or services
utilized and/or offered by the Company.
(j) "Operations Policies." All written procedures,
policies, instructions from Company's officers, directors or managers, the
Company Employee Manual (if any), and all other
<PAGE> 14
written communications from the Company to Executive individually, or to all
Company's employees. Said Operations Policies are hereby incorporated herein and
expressly made a part of this Agreement by this reference thereto.
(k) "Termination." Cessation of this Agreement or the
underlying employment relationship, whether by action of the Executive or
Company, and whether voluntary or involuntary. Termination hereby may be with or
without Cause.
(l) "Terms and Conditions of Employment." This document
entitled Terms and Conditions of Employment, which is Exhibit "A" to the
Executive Employment Agreement, and all of the provisions hereof.
PLEASE INITIAL: /s/ P. K. Chan
----------------------
Executive
<PAGE> 1
EXHIBIT 10.17
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") is
entered into by and between Hayes Microcomputer Products, Inc. (the "Company")
and Keith Mintzer (the "Executive") on this 20th day of December, 1996.
For and in consideration of the employment or continued
employment, as the case may be, of the Executive by the Company, the mutual
covenants and promises contained herein, and in the Terms and Conditions of
Employment attached hereto as Exhibit "A," and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive hereby covenant and agree as follows:
1. Employment; Compensation. Company hereby employs or
continues to employ Executive as Vice President of Sales on the terms and
conditions set forth herein and Executive accepts such employment. Executive's
initial base salary shall be One Hundred Seventy Five Thousand and no/100
Dollars ($175,000.00) per year, and, subject to the provisions below, shall
continue for so long as Executive is employed by the Company, or until such
salary is modified by mutual consent of the parties hereto. The Company shall
review Executive's performance and salary annually. Executive shall be entitled
to receive bonuses in accordance with the Company's normal policies with respect
to similarly situated Executives, if any. In addition, Executive will be
entitled to receive further consideration, if any, pursuant to the Variable
Compensation Plan executed on or before the effective date hereof.
2. Term. Following execution, this Agreement shall
become effective January 6, 1997. The Term of this Agreement shall be two (2)
years from the effective date, unless sooner terminated in accordance with
paragraph 3 below, or if the events occur and Executive chooses to resign as set
forth in paragraph 4 below.
3. Termination and Severance. This Agreement may be
terminated by Company, its Chairman of the Board, its Chief Executive Officer,
or Executive with or without Cause. In the event Company, the Chairman of the
Board, or the Chief Executive Officer terminates this Agreement without Cause
during the Term, or if the events occur as set forth in paragraph 4 below during
the term, then Executive shall be entitled to severance pay in the form of
continuation of his base salary for six (6) months following the date of
termination ("Severance Pay"). In the event that Company, the Chairman of the
Board, or the Chief Executive Officer terminates Executive's employment for
Cause, or Executive voluntarily terminates employment other than for the events
set forth in paragraph 4 below, or the Term expires, the Company shall not be
obligated to pay any salary or other Compensation to Executive, including
Severance Pay, after the effective date of termination or resignation. Executive
agrees to provide Company with at least six (6) weeks advance written notice
prior to voluntary termination or resignation by Executive.
4. Change in Control. If any of the events constituting
a Change in Control of the Company shall have occurred, Employee shall be
entitled to two times Severance Pay (or continuation of his base salary for
twelve (12) months ) upon termination of employment, or resignation of
employment for Good Reason, before the first anniversary of the date of such a
Change in Control of the Company and during the term, unless such termination is
(a) due to Executive's death, (b) because of Executive's incapacity due to
physical or mental illness, or (c) by the Company for Cause, or unless such
resignation is for something other than Good Reason. In the event Executive's
employment with the Company is terminated for any reason prior to a Change in
Control (provided that such termination did not occur during
<PAGE> 2
the pendency of a Potential Change in Control) and subsequently a Change in
Control occurs, Employee shall not be entitled to Severance Pay under this
paragraph 4.
5. Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company could be required to perform this Agreement if
no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Executive to compensation from
the Company in the same amount and on the same terms to which Executive would be
entitled hereunder. As used in this Agreement, "Company" shall mean the Company
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
6. Terms and Conditions. Executive acknowledges that
this Agreement, and his employment obligations hereunder, expressly include the
provisions set forth in the Terms and Conditions of Employment attached hereto
as Exhibit "A," which are incorporated herein by this reference thereto. This
Agreement shall supersede any prior employment agreement, and any restrictive
covenants, previously entered into by Executive with the Company.
IN WITNESS WHEREOF, the parties hereto have set their hands
and seals on the date and year first above written.
COMPANY:
/s/ Keith Mintzer (SEAL) By:/s/ J. C. Formichelli (SEAL)
- -------------------------------- -----------------------------------
Executive
Attest:
-------------------------------
[TERMS AND CONDITIONS OF EMPLOYMENT ON FOLLOWING PAGES]
<PAGE> 3
EXHIBIT "A"
TERMS AND CONDITIONS OF EMPLOYMENT
1. Duties and Responsibilities. Executive shall devote his full
time and best efforts to the duties and responsibilities assigned by the Company
and shall abide by this Agreement and the Company's Operations Policies.
2. Confidential Information, Trade Secrets. Executive shall not
use or disclose to any person or entity any Confidential Information or trade
secrets of Company other than as necessary in the fulfillment of this Agreement
in the course of employment. This paragraph shall be effective during the term
hereof and for a period of two (2) years after termination of employment,
whether with or without Cause.
3. Inventions. The Company and Executive acknowledge that in the
course of Executive's employment by the Company, Executive may from time to time
develop or participate in the development of software or technology. All works
or inventions conceived, originated, authored, or discovered, in whole or in
part, by Executive, which result from any work performed for the Company or
related to or useful in the business of the Company are and shall be the
exclusive property of the Company. Executive shall cooperate with the Company in
the protection of the Company's copyrights, patents, and other proprietary
rights therein and, to the extent deemed desirable by the Company, in the
registration of the same. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to any and all inventions,
processes, systems and creations, whether or not patentable or copyrightable,
that Executive may conceive, develop, or create, in whole or in part, during his
employment with the Company, whether or not during normal working hours.
Executive shall sign and deliver all documents relative to said inventions
requested by the Company for the purpose of confirming the Company's title
thereto.
4. Company Property. Upon request of the Company, and without
request promptly on termination of this Agreement or Executive's employment
hereunder, Executive shall deliver all Company Property in Executive's
possession or control to the Company. Executive acknowledges and agrees that
title to all Company Property is vested in the Company, and Executive shall not
retain any such property or any copies thereof in any form, including magnetic
or electronic form.
5. Protective Covenants. Executive is and will during the course
of employment become intimately familiar with Confidential Information, trade
secrets, facilities and services, and other property of the Company, and the
protection of the Company requires that all such property and information must
remain the sole and private property of the Company to be used only for the
Company's benefit, not to be disclosed to any other party or used by Executive
against Company. Accordingly, Executive does hereby warrant, represent, covenant
and agree, as follows:
(i) Covenant Not to Compete. Executive agrees that, for a
period of one (1) year from the termination of his employment
with Company, whether with or without Cause, he shall not,
directly or indirectly, on behalf of himself or any other
person or entity, compete with the Company within a fifty (50)
mile radius of the Company's principal place of business in
Norcross, Georgia, by engaging in the manufacture, assembling,
or selling of products competitive with those designed,
manufactured, assembled, or sold by the Company at the time of
the termination of employment, in a capacity which requires
Executive to perform services substantially identical to the
services performed by Executive on behalf of Company.
<PAGE> 4
(ii) Covenant Not to Solicit Customers. During the term of
Executive's employment hereunder, and for a period of one (1)
years following the termination of such employment for any
reason whatsoever, Executive shall not (except on behalf of or
with the prior written consent of Company), either directly or
indirectly, on Executive's own behalf or on behalf of others,
solicit, divert, or appropriate any business for the
manufacture, assembling, or sale of products competitive with
those manufactured, assembled or sold by the Company, from any
customer or actively sought prospective customer of the
Company to whom the Company offered or provided products or
services, and with whom Executive had material contact at any
time during the twelve (12) months preceding the termination
of Executive's employment.
(iii) Covenant Not to Solicit Employees. During the term of
Executive's employment hereunder, and for a period of one (1)
year following the termination of such employment for any
reason whatsoever, Executive shall not employ or solicit the
employment of any employee of the Company who was an employee
of the Company at any time during the six (6) months preceding
the termination of Executive's employment with the Company,
for the purpose of causing such employee to take employment
with Executive or a competitor of the Company.
Executive agrees and acknowledges that the restrictions in
this Agreement are not vague, over broad or indefinite, and are reasonable and
designed to protect the legitimate business interests of the Company. In
addition to any other remedies which Company may have under the law for breach
of any or all of said covenants, Company shall be entitled to injunctive and/or
other equitable relief against Executive for any violation of any of said
Covenants.
6. Survival. Paragraphs 2, 3, 4, 5, and 6 hereof, together with
any provisions of the Company's Operations Policies expressly or by necessary
implication applicable after the termination of employment, shall survive
termination of this Agreement. Upon termination, Executive shall repay to
Company immediately any advances by Company, not offset by earnings or other
credits due him or her, even if not expressly made repayable at the time of such
advance, it being the intent of the parties that all such advances shall be
repayable as provided by this paragraph. Company may offset any sums owed to
Company by Executive against any amounts otherwise owed by Company to Executive.
No sums otherwise due Executive at termination shall be payable to Executive if,
at the time of termination or thereafter, Executive shall be in violation of any
term or provision of this Agreement.
7. Entire Agreement. This Agreement contains the entire
understanding and agreement between the parties, and all promises,
representations, warranties or inducements made by either party to the other,
including any prior employment agreement or restrictive covenants, not
specifically made in writing or made a part hereof by reference, are expressly
superseded and shall have no force or effect. This Agreement may not be modified
except in a writing signed by both parties hereto.
8. Severability. If any provision of this Agreement (including
any subparts of any paragraph) is invalid or unenforceable by any rule of law or
public policy, this Agreement shall be construed so as to delete herefrom the
invalid or unenforceable covenant or provision. To the extent that any provision
is invalid or unenforceable that may be valid or enforceable by limitation
thereof, then such provision shall be enforceable to the fullest extent
permitted under the law of the jurisdiction in which enforcement is sought. If
any particular provision is held to be invalid, illegal or unenforceable, all
other covenants, terms, conditions and provisions hereof shall be and remain in
full force and effect.
<PAGE> 5
9. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, each respective party's heirs, successors, legal
representatives, executors and assigns. This Agreement shall be construed and
governed in accordance with the laws of the State of Georgia.
10. Definitions. Any word used in this Agreement which is defined
in this paragraph shall have the meaning set forth below:
(a) "Agreement." The Executive Employment Agreement,
together with the Terms and Conditions of Employment and any documents
incorporated therein by reference. In the event of any inconsistency between the
Agreement and any Operations Policies, the Agreement shall control.
(b) "Cause." The term "Cause" as used in the within and
foregoing Agreement shall mean (i) Executive's breach of a covenant or
obligation of this Agreement, including any of the Terms and Conditions of
Employment, or any failure or refusal by Executive to perform Executive's duties
hereunder to the satisfaction of the Board of Directors, or to comply with any
lawful directive of the Board of Directors, if, after receiving written notice
of such breach, failure or refusal to perform, Executive does not cure or
correct such breach, failure or refusal within five (5) business days after
Executive's receipt of such notice; and (ii) any act of Executive in the course
of Executive's employment that constitutes larceny, fraud, deceit, gross
negligence, a crime involving moral turpitude, wilful misrepresentation, wilful
misconduct, or failure to maintain the confidentiality of the Confidential
Information and trade secrets of Company.
(c) "Change in Control." "Change in Control" shall have
occurred if any of the following events shall occur:
(i) the Company is merged, consolidated or
reorganized into or with another corporation or other legal person in any
transaction or series of related transactions (other than a transaction to which
only the Company and one or more of its subsidiaries are parties) and as a
result of such merger, consolidation or reorganization less than a majority of
the combined voting power of the then-outstanding voting securities of the
surviving entity or person immediately after such transaction or series of
related transactions are held in the aggregate by persons or entities who were
holders of voting securities of the Company immediately prior to such
transaction; or
(ii) the Company sells all or substantially all
of its assets to any other corporation or other legal person in any sale or
series of related sales (other than a transaction to which only the Company and
one or more of its subsidiaries are parties).
(d) "Company." Hayes Microcomputer Products, Inc., and
any successor or assignee hereof.
(e) "Company Property." All property, without limitation,
whether real, personal, tangible or intangible, including all inventions,
confidential information, trade secrets, facilities, trade names, logos, patents
and all tangible materials and supplies (whether originals or duplicates and
including, but not in any way limited to, sample products, video tape cassettes,
film, catalogues, price lists, rate sheets, outstanding quotations, books,
records, manuals, sales presentation literature, training materials, calling or
business cards, customer record cards, customer files, customer names, addresses
and telephone numbers, supplier information, contacts, pricing and practices,
strategic partner information, files and records, current or prospective
business plans, Operations Policies, directives, correspondence, documents,
contracts, orders, messages, memoranda, notes, circulars, agreements, bulletins,
invoices and receipts, and sources of financing), which in any way pertain to
Company's business, whether or not furnished to Executive by
<PAGE> 6
Company and whether or not prepared, compiled, or acquired by Executive while
employed by Company, are the sole property of Company.
(f) "Compensation." Any and all payments, remuneration
and benefits, including employment, provided to Executive by the Company,
regardless of the form thereof. Such compensation as is paid to Executive shall
be conclusively deemed legally sufficient consideration for this Agreement.
(g) "Confidential Information." All confidential
information regarding the Company's business, including but not limited to its
methods of operation, products, software programs, equipment and techniques,
existing and contemplated facilities and services, inventions, systems, devices
(whether or not patentable), financial information and practices, plans,
pricing, selling techniques, names, addresses and phone numbers of the Company's
Customers and prospective Customers and suppliers and prospective suppliers,
credit information and financial data of the Company and the Company's Customers
and prospective customers and suppliers and prospective suppliers, particular
business requirements of the Company's Customers, and special methods and
processes involved in designing, producing and selling Company's facilities and
services, current and prospective business plans, strategic partner information,
files and records, and the terms of this Agreement, all shall be deemed
Confidential Information and the Company's exclusive property. The parties agree
that Confidential Information shall be deemed to be trade secrets under the
Georgia Trade Secrets Act. Confidential Information shall not include
information that is in the public domain or otherwise readily accessible to
members of the public.
(h) "Customer." Each person, corporation, firm,
partnership or other entity whatsoever, which has purchased or shall purchase
the Company's products, facilities or services.
(i) "Executive." The person signing this Agreement as
Executive, regardless of any title or duties which may now or hereafter be
assigned to such person by the Company. This Agreement shall govern the
employment relationship in any and all such situations.
(j) "Good Reason." Without Executive's express written
consent, the occurrence after a Change in Control of the Company of any of the
following circumstances:
(i) a reduction by the Company in Executive's
annual base salary as in effect on the date of the Change in Control;
(ii) the Company's requiring Executive to be
based at a Company office more than fifty (50) miles from the Company's offices
at which Executive is principally employed immediately prior to the date of the
Change in Control of the Company, except for required travel on the Company's
business to an extent substantially consistent with Executive's present business
travel obligations immediately prior to the Change in Control;
(iii) a reduction in the Executive's position,
duties or responsibilities as in effect on the date of the Change in Control; or
(iv) the failure of the Company to obtain the
agreement to assume and to perform this Agreement by any successor as
contemplated in section 5 of this Agreement.
(k) "Inventions." Any and all devices, systems, software
and other programs, processes, products, patents and any other creation (all of
the foregoing, for purposes of this paragraph, called "inventions") identical or
similar to or relating to devices, processes, systems, products or services
utilized and/or offered by the Company.
<PAGE> 7
(l) "Operations Policies." All written procedures,
policies, instructions from Company's officers, directors or managers, the
Company Employee Manual (if any), and all other written communications from the
Company to Executive individually, or to all Company's employees. Said
Operations Policies are hereby incorporated herein and expressly made a part of
this Agreement by this reference thereto.
(m) "Potential Change in Control." "Potential Change in
Control" shall be deemed to have occurred if:
(i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control of
the Company;
(ii) any person (including the Company) publicly
announces a serious and legitimate intention to take or to consider taking
actions which if consummated would constitute a Change in Control of the
Company; or
(iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control of the
Company has occurred.
(n) "Termination." Cessation of this Agreement or the
underlying employment relationship, whether by action of the Executive or
Company, and whether voluntary or involuntary. Termination hereby may be with or
without Cause.
(o) "Terms and Conditions of Employment." This document
entitled Terms and Conditions of Employment, which is Exhibit "A" to the
Executive Employment Agreement, and all of the provisions hereof.
PLEASE INITIAL: /s/ Keith Mintzer
--------------------------
Executive
<PAGE> 1
EXHIBIT 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") is entered into
by and between HAYES MICROCOMPUTER PRODUCTS, INC. (the "Company") and JAMES A.
JONES (the "Executive") on this 31st day of October, 1997.
For and in consideration of the employment or continued employment, as
the case may be, of the Executive by the Company, the mutual covenants and
promises contained herein, and in the Terms and Conditions of Employment
attached hereto as Exhibit "A," and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Executive hereby covenant and agree as follows:
1. Employment; Compensation. Company hereby employs or continues
to employ Executive as Treasurer/Chief Financial Officer on the terms and
conditions set forth herein and Executive accepts such employment. Executive's
initial salary shall be $181,000.00 per year, and, subject to paragraph 3 below,
shall continue for so long as Executive is employed by the Company, or until
such salary is modified by mutual consent of the parties hereto. In addition,
Executive shall be entitled to an executive incentive bonus of up to $54,300.00
based upon performance criteria to be determined by the Company.
2. Term. The Term of this Agreement shall be two (2) years from
the date hereof, unless sooner terminated in accordance with paragraph 3 below.
3. Termination and Severance. This Agreement may be terminated by
Company, its Chairman of the Board, or Executive with or without Cause. In the
event Company or the Chairman of the Board terminates this Agreement without
Cause during the Term and prior to the first anniversary of the date hereof,
then Executive shall be entitled to severance pay in the form of continuation of
his salary until the later of (i) the expiration of the remainder of the
two-year Term, or (ii) six (6) months following the effective date of such
termination without Cause if such termination occurs during the Term. In the
event that Company or the Chairman of the Board terminates Executive's
employment for Cause, or Executive voluntarily terminates employment, or the
Term expires, the Company shall not be obligated to pay any salary or severance
or other Compensation to Executive after the effective date of termination.
During the Term, Executive shall be entitled to receive bonuses in accordance
with the Company's normal policies with respect to similarly situated
Executives, if any. Executive agrees to provide Company with at least six (6)
weeks advance written notice prior to voluntary termination or resignation by
Executive.
4. Terms and Conditions. Executive acknowledges that this
Agreement, and his employment obligations hereunder, expressly include the
provisions set forth in the Terms and Conditions of Employment attached hereto
as Exhibit "A" and the duties described in Exhibit "B," which are incorporated
herein by this reference thereto. This Agreement shall supersede any prior
employment agreement, and any restrictive covenants, previously entered into by
Executive with the Company.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
on the date and year first above written.
COMPANY:
/s/ James A. Jones (SEAL) By:/s/ Dennis C. Hayes (SEAL)
- --------------------------------- ------------------------------------
Executive
Attest:/s/ Kim Gallagher
--------------------------------
<PAGE> 3
EXHIBIT "A"
TERMS AND CONDITIONS OF EMPLOYMENT
1. Duties and Responsibilities. Executive shall devote his full
time and best efforts to the duties and responsibilities assigned by the Company
and shall abide by this Agreement and the Company's Operations Policies.
Executive's specific job description and responsibilities include, but are not
limited to, those listed on Exhibit "B."
2. Confidential Information, Trade Secrets. Executive shall not
use or disclose to any person or entity any Confidential Information or trade
secrets of Company other than as necessary in the fulfillment of this Agreement
in the course of employment. This paragraph shall be effective during the term
hereof and for a period of two (2) years after termination of employment,
whether with or without Cause.
3. Inventions. The Company and Executive acknowledge that in the
course of Executive's employment by the Company, Executive may from time to time
develop or participate in the development of software or technology. All works
or inventions conceived, originated, authored, or discovered, in whole or in
part, by Executive, which result from any work performed for the Company or
related to or useful in the business of the Company are and shall be the
exclusive property of the Company. Executive shall cooperate with the Company in
the protection of the Company's copyrights, patents, and other proprietary
rights therein and, to the extent deemed desirable by the Company, in the
registration of the same. Executive hereby assigns to the Company all of
Executive's right, title and interest in and to any and all inventions,
processes, systems and creations, whether or not patentable or copyrightable,
that Executive may conceive, develop, or create, in whole or in part, during his
employment with the Company, whether or not during normal working hours.
Executive shall sign and deliver all documents relative to said inventions
requested by the Company for the purpose of confirming the Company's title
thereto.
4. Company Property. Upon request of the Company, and without
request promptly on termination of this Agreement or Executive's employment
hereunder, Executive shall deliver all Company Property in Executive's
possession or control to the Company. Executive acknowledges and agrees that
title to all Company Property is vested in the Company, and Executive shall not
retain any such property or any copies thereof in any form, including magnetic
or electronic form.
5. Protective Covenants. Executive is and will during the course
of employment become intimately familiar with Confidential Information, trade
secrets, facilities and services, and other property of the Company, and the
protection of the Company requires that all such property and information must
remain the sole and private property of the Company to be used only for the
Company's benefit, not to be disclosed to any other party or used by Executive
against Company. Accordingly, Executive does hereby warrant, represent, covenant
and agree, as follows:
(i) Covenant Not to Compete. Executive agrees that, for a
period of two (2) years from the termination of his employment
with Company, whether with or
<PAGE> 4
without Cause, he shall not, directly or indirectly, on behalf
of himself or any other person or entity, compete with the
Company within a fifty (50) mile radius of the Company's
principal place of business in Norcross, Georgia, or its
principal place of business in Thousand Oaks, California, by
engaging in the manufacture, assembling, or selling of
computer component products, software, or systems, including
modems, competitive with those manufactured, assembled, or
sold by the Company, in a capacity which requires Executive to
perform services substantially identical to the services
performed by Executive on behalf of Company.
(ii) Covenant Not to Solicit Customers. During the term of
Executive's employment hereunder, and for a period of two (2)
years following the termination of such employment for any
reason whatsoever, Executive shall not (except on behalf of or
with the prior written consent of Company), either directly or
indirectly, on Executive's own behalf or on behalf of others,
solicit, divert, or appropriate any business for the
manufacture, assembling, or sale of computer competent
products, software or systems, including modems, competitive
with those manufactured, assembled or sold by the Company,
from any customer or actively sought prospective customer of
the Company to whom the Company offered or provided products
or services, and with whom Executive had material contact at
any time during the twenty-four (24) months preceding the
termination of Executive's employment.
(iii) Covenant Not to Solicit Employees. During the term of
Executive's employment hereunder, and for a period of two (2)
years following the termination of such employment for any
reason whatsoever, Executive shall not employ or solicit the
employment of any employee of the Company who was an employee
of the Company at any time during the six (6) months preceding
the termination of Executive's employment with the Company,
for the purpose of causing such employee to take employment
with Executive or a competitor of the Company.
Executive agrees and acknowledges that the restrictions in
this Agreement are not vague, over broad or indefinite, and are reasonable and
designed to protect the legitimate business interests of the Company. In
addition to any other remedies which Company may have under the law for breach
of any or all of said covenants, Company shall be entitled to injunctive and/or
other equitable relief against Executive for any violation of any of said
Covenants.
6. Survival. Paragraphs 2, 3, 4, 5, and 6 hereof, together with
any provisions of the Company's Operations Policies expressly or by necessary
implication applicable after the termination of employment, shall survive
termination of this Agreement. Upon termination, Executive shall repay to
Company immediately any advances by Company, not offset by earnings or other
credits due him or her, even if not expressly made repayable at the time of such
advance, it being the intent of the parties that all such advances shall be
repayable as provided by this paragraph. Company may offset any sums owed to
Company by Executive against any amounts otherwise owed by Company to Executive.
No sums otherwise due Executive at termination shall be payable to Executive if,
at the time of termination or thereafter, Executive shall be in violation
of any term or provision of this Agreement.
<PAGE> 5
7. Entire Agreement. This Agreement contains the entire
understanding and agreement between the parties, and all promises,
representations, warranties or inducements made by either party to the other,
including any prior employment agreement or restrictive covenants, not
specifically made in writing or made a part hereof by reference, are expressly
superseded and shall have no force or effect. This Agreement may not be modified
except in a writing signed by both parties hereto.
8. Severability. If any provision of this Agreement (including
any subparts of any paragraph) is invalid or unenforceable by any rule of law or
public policy, this Agreement shall be construed so as to delete herefrom the
invalid or unenforceable covenant or provision. To the extent that any provision
is invalid or unenforceable that may be valid or enforceable by limitation
thereof, then such provision shall be enforceable to the fullest extent
permitted under the law of the jurisdiction in which enforcement is sought. If
any particular provision is held to be invalid, illegal or unenforceable, all
other covenants, terms, conditions and provisions hereof shall be and remain in
full force and effect.
9. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, each respective party's heirs, successors, legal
representatives, executors and assigns. This Agreement shall be construed and
governed in accordance with the laws of the State of Georgia.
10. Definitions. Any word used in this Agreement which is defined
in this paragraph shall have the meaning set forth below:
(a) "Agreement." The Executive Employment Agreement,
together with the Terms and Conditions of Employment and any documents
incorporated therein by reference. In the event of any inconsistency between the
Agreement and any Operations Policies, the Agreement shall control.
(b) Cause. The term "Cause" as used in the within and
foregoing Agreement shall mean (i) Executive's breach of a covenant or
obligation of this Agreement, including any of the Terms and Conditions of
Employment, or any failure or refusal by Executive to perform Executives duties
hereunder to the satisfaction of the Company or its Board of Directors, or to
comply with any lawful directive of the Board of Directors, if, after receiving
written notice of such breach, failure or refusal to perform, Executive does not
cure or correct such breach, failure or refusal within five (5) business days
after Executive's receipt of such notice; and (ii) any act of Executive in the
course of Executive~s employment that constitutes larceny, fraud, deceit, gross
negligence, a crime involving moral turpitude, wilful misrepresentation, wilful
misconduct, or failure to maintain the confidentiality of the Confidential
Information and trade secrets of Company; and (iii) any other act recognized by
applicable law to constitute cause for termination.
(c) "Company." Hayes Microcomputer Products, Inc., and
any successor or assignee hereof.
<PAGE> 6
(d) "Company Property." All property, without limitation,
whether real, personal, tangible or intangible, including all inventions,
confidential information, trade secrets, facilities, trade names, logos, patents
and all tangible materials and supplies (whether originals or duplicates and
including, but not in any way limited to, sample products, video tape cassettes,
film, catalogues, price lists, rate sheets, outstanding quotations, books,
records, manuals, sales presentation literature, training materials, calling or
business cards, customer record cards, customer files, customer names, addresses
and telephone numbers, supplier information, contacts, pricing and practices,
strategic partner information, files and records, current or prospective
business plans, Operations Policies, directives, correspondence, documents,
contracts, orders, messages, memoranda, notes, circulars, agreements, bulletins,
invoices and receipts, and sources of financing), which in any way pertain to
Company's business, whether or not furnished to Executive by Company and whether
or not prepared, compiled, or acquired by Executive while employed by Company,
are the sole property of Company.
(e) "Compensation." Any and all payments, remuneration
and benefits, including employment, provided to Executive by the Company,
regardless of the form thereof. Such compensation as is paid to Executive shall
be conclusively deemed legally sufficient consideration for this Agreement.
(f) "Confidential Information." All confidential
information regarding the Company's business, including but not limited to its
methods of operation, products, software programs, equipment and techniques,
existing and contemplated facilities and services, inventions, systems, devices
(whether or not patentable), financial information and practices, plans,
pricing, selling techniques, names, addresses and phone numbers of the Company's
Customers and prospective Customers and suppliers and prospective suppliers,
credit information and financial data of the Company and the Company's Customers
and prospective customers and suppliers and prospective suppliers, particular
business requirements of the Company's Customers, and special methods and
processes involved in designing, producing and selling Company's facilities and
services, current and prospective business plans, strategic partner information,
files and records, and the terms of this Agreement, all shall be deemed
Confidential Information and the Company's exclusive property. The parties agree
that Confidential Information shall be deemed to be trade secrets under the
Georgia Trade Secrets Act. Confidential Information shall not include
information that is in the public domain or otherwise readily accessible to
members of the public.
(g) "Customer." Each person, corporation, firm,
partnership or other entity whatsoever, which has purchased or shall purchase
the Company's products, facilities or services.
(h) "Executive." The person signing this Agreement as
Executive, regardless of any title or duties which may now or hereafter be
assigned to such person by the Company. This Agreement shall govern the
employment relationship in any and all such situations.
(i) "Inventions." Any and all devices, systems, software
and other programs, processes, products, patents and any other creation (all of
the foregoing, for purposes of this paragraph, called "inventions") identical or
similar to or relating to devices, processes, systems, products or services
utilized and/or offered by the Company.
<PAGE> 7
(j) "Operations Policies." All written procedures,
policies, instructions from Company's officers, directors or managers, the
Company Employee Manual (if any), and all other written communications from the
Company to Executive individually, or to all Company's employees. Said
Operations Policies are hereby incorporated herein and expressly made a part of
this Agreement by this reference thereto.
(k) "Termination." Cessation of this Agreement or the
underlying employment relationship, whether by action of the Executive or
Company, and whether voluntary or involuntary. Termination hereby may be with or
without Cause.
(l) "Terms and Conditions of Employment." This document
entitled Terms and Conditions of Employment, which is Exhibit "A" to the
Executive Employment Agreement, and all of the provisions hereof.
PLEASE INITIAL:/s/ James A. Jones
-----------------------------------
Executive
<PAGE> 8
EXHIBIT "B"
JOB DESCRIPTION
TITLE: Vice President - Finance and Administration
REPORTS TO: Chief Executive Officer
SUMMARY:
Plans, directs and controls the organization's overall financial
plans and policies along with its accounting practices and the
conduct of its relationship with lending institutions, shareholders
and the financial community. Directs treasury, budgeting, audit, tax,
accounting, human resources, data processing, real estate, insurance
activities and certain administrative functions for the company and
its subsidiaries.
DUTIES AND RESPONSIBILITIES:
1. Directs the Controller in providing and directing procedures and
systems necessary to maintain proper records and to afford adequate accounting
controls and services.
2. Directs the Treasury function in activities as custodian of the funds,
securities and assets of the organization.
3. Directs the tax department in activities including compliance with tax
filing requirements, tax planning and financial statement tax provisions.
4. Appraises the organization's financial position and issues periodic
financial and operating reports. Directs and coordinates the establishment of
organization budget programs.
5. Directs and analyzes studies of general economic, business and
financial conditions and their impact on the organization's policies and
operations.
6. Directs the activities of the Human Resources department ensuring that
the company's organizational structure and people resources meet the current
needs of the company as well as anticipating future needs. Establishes policies
in the areas of staffing, compensation and benefits.
7. Directs the Information Technology function ensuring that the company
has an enterprise resource planning system that provides the company a
competitive edge and supports the company's growth plan.
8. Directs and coordinates the activities of the Corporate Services
function, including long range facilities planning.
9. Performs other duties as directed by the Chief Executive Officer.
<PAGE> 1
EXHIBIT 10.22
ACCESS BEYOND, INC.
1997 DECLARATION OF AMENDMENT TO
HAYES MICROCOMPUTER PRODUCTS, INC.
STOCK OPTION PLAN
THIS DECLARATION OF AMENDMENT, made this 30th day of December, 1997, by
ACCESS BEYOND, INC., a Delaware corporation (the "Corporation"), to the Hayes
Microcomputer Products, Inc. Stock Option Plan (the "Plan").
R E C I T A L S:
WHEREAS, Hayes Microcomputer Products, Inc. ("Hayes") maintains the
Plan, as adopted by the board of directors and shareholders of Hayes on June 4,
1996; and
WHEREAS, pursuant to certain transactions (the "Merger") contemplated
under the Agreement and Plan of Reorganization dated July 29, 1997, as amended
by the First Amendment to the Merger Agreement dated November 7, 1997, and the
Second Amendment to the Merger Agreement dated November 21, 1997 (as so amended,
the "Merger Agreement") by and between Hayes and the Corporation, Hayes will
become a wholly-owned subsidiary of the Corporation; and
WHEREAS, pursuant to Section 1.3.1 of the Merger Agreement, at the
effective time of the Merger, each outstanding option under the Plan shall be
assumed by the Corporation in accordance with the terms of such option and
converted into rights with respect to that number of shares of the Corporation's
common stock (the "Common Stock"), determined by multiplying that number of
shares of Hayes common stock subject to such option (on an as if exercised
basis) immediately prior to the effective time by the Merger Conversion Ratio,
and the exercise price per share for each such assumed option will equal the
exercise price of each such Hayes option immediately prior to the effective time
divided by the Merger Conversion Ratio (rounded up to the nearest whole cent);
and
WHEREAS, pursuant to Section 1.3.2 of the Merger Agreement, (i) the
Corporation will assume the Plans in a manner that complies with Rule 13b-3
promulgated under the Securities Exchange Act of 1934, as amended; (ii) the
terms of the outstanding options granted under the Plan will remain unchanged
except as provided in the Merger Agreement; and (iii) the Corporation will take
certain other actions in connection with the Plan and shares issuable
thereunder; and
WHEREAS, pursuant to Section 1.7 of the Merger Agreement,
contemporaneously with or immediately prior to Closing (as defined in the Merger
Agreement), the name of the corporation will be changed to "Hayes Corporation";
and
WHEREAS, pursuant to Section 13.1 of the Plan, the Board may terminate,
amend or modify the Plan, subject to the terms of the Plan; and
<PAGE> 2
WHEREAS, in connection with its assumption of awards under the Plan,
and subject to the consummation of the Merger, the Corporation has determined
that it would be in the best interest of the Corporation to make certain
amendments to the Plan in order to reflect the Corporation's assumption of the
Plan and to facilitate administration of the Plan by the Corporation.
NOW, THEREFORE, IT IS DECLARED, that, effective immediately following
the effective time of the Merger, and subject in all respects to consummation of
the Merger, the Plan shall be amended as follows:
1. All references in the Plan to the "Corporation," including but in no
way limited to the definition of the term contained in Section 1, shall
hereafter be deemed to be references to Hayes Corporation.
2. All references to the "Stock," including but not limited to the
definition of such term contained in Section 2, shall hereafter be deemed to be
references to the Common Stock of Hayes Corporation.
IN WITNESS WHEREOF, this Declaration of Amendment is executed on behalf
of Access Beyond, Inc. as of the day and year first above written.
ACCESS BEYOND, INC.
By: /s/ Ronald A. Howard
-----------------------------------------
Ronald A. Howard, Chairman, President and
Chief Executive Officer
ATTEST:
/s/ Pricilla Wise
- ------------------------
Pricilla Wise, Secretary
[Corporate Seal]
2
<PAGE> 1
EXHIBIT 10.25
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT ("Shareholders' Agreement"), is made as
of the 29th day of July, 1997 and is entered into by and among DENNIS C. HAYES,
a resident of the State of Georgia (the "Principal Shareholder"), Chestnut
Capital Limited Partnership ("Chestnut"), the persons or entities listed on
Schedule I hereto (the "Investors") (hereinafter the Principal Shareholder and
the Investors are sometimes referred to collectively as the "Shareholders" and
individually as a "Shareholder"), HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia
corporation ("Hayes Microcomputer Products"), ACCESS BEYOND, INC., a Delaware
corporation (hereinafter referred to as the "Company") and Ronald A. Howard
("Howard") only for the purposes of Sections 8 and 11 of this Shareholders'
Agreement.
RECITALS
WHEREAS, Hayes Microcomputer Products is a duly organized and existing
corporation under the laws of the State of Georgia;
WHEREAS, the Company is a duly organized and existing corporation
under the laws of the State of Delaware;
WHEREAS, contemporaneously with the execution and delivery of the
Hayes Microcomputer Products, Inc. Shareholders' Agreement made as of the 16th
day of April, 1996, as amended by that certain Addendum and Amendment made as
of April 23, 1997 (the "Hayes Shareholders' Agreement"), the Shareholders (or
their successors in interest) acquired and obtained voting control in respect
of (A) an aggregate of 4,943,221 shares of the common stock, no par value, of
Hayes Microcomputer Products (the "Common Stock"), and (B) an aggregate of
4,900,000 shares of Series A Preferred Stock of Hayes Microcomputer Products
(the"Series A Preferred Stock") and 263,113 shares of Series B Preferred Stock
of Hayes Microcomputer Products (the "Series B Preferred Stock") which
constitute 100% of the issued and outstanding preferred stock of Hayes
Microcomputer Products on the date hereof, in each case as set forth with
respect to each Shareholder on Schedule I to this Shareholders' Agreement;
WHEREAS, the Company and Hayes Microcomputer Products have entered
into an Agreement and Plan of Reorganization dated as of the 29th day of July,
1997 (the "Merger Agreement"), pursuant to and subject to the ten-ns and
conditions of which a wholly-owned subsidiary of the Company will merge with
and into Hayes Microcomputer Products in a reverse triangular merger (the
"Merger"), with Hayes Microcomputer Products to be the surviving corporation of
the Merger;
WHEREAS, upon the effectiveness of the Merger, all the outstanding
capital stock of Hayes will be converted into capital stock of the Company in
the manner and on the basis determined in the Merger Agreement and the Company
will change its name to Hayes Communications, Inc.; and
<PAGE> 2
WHEREAS, the Shareholders wish to enter into this Shareholders'
Agreement pursuant to Section 14-2-731 of the Georgia Business Corporation Code
and Section 218(c) of the Delaware General Corporation Law for the purposes of
defining their respective rights and obligations with respect to the Stock (as
hereinafter defined) and making provision with respect to the termination of
the Hayes Shareholders' Agreement and for the regulation of the Company's
affairs subsequent to the consummation of the Merger;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by all parties, it is agreed as
follows:
1. DEFINITIONS.
1. 1. Definitions. As used in this Shareholders' Agreement,
the following terms shall have the following meanings:
(a) "Balance" shall have the meaning ascribed to that ten-n
in Section 4.4 of this Shareholders' Agreement.
(b) "Board of Directors" shall mean the board of directors of
the Company, as constituted from time to time.
(c) "Chairman" shall mean the individual appointed as the
Chairman of the Board of Directors of the Company from time to time by
the Board of Directors.
(d) "Closing" shall mean the closing of the transactions
contemplated by the Merger Agreement and shall have the same meaning
as the phrase "the Closing" used in the Merger Agreement.
(e) "Common Stock" shall mean the $0.01 par value per share
voting common stock of the Company.
(f) "Director" shall mean a Person who is at the time in
question a member of the Board of Directors.
(g) "Effective Date" shall have the meaning ascribed to that
term in Section 2 of this Shareholders' Agreement.
(h) "Employee Plan" shall mean Hayes Microcomputer Products'
Profit Sharing, Savings and Stock Plan or any successor plan pursuant
to the Merger.
(i) "Exercise Notice" shall mean written notice, which shall
be irrevocable, by or on behalf of any Shareholder or the Company, as
applicable, entitled to exercise an option or election to purchase all
or any Offered Shares pursuant to Article 4 hereof given to any
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<PAGE> 3
Transferor or selling Shareholder, or its representative, within the
acceptance period, specifying a date for the closing of the purchase,
if applicable, which closing date shall conform to the applicable
requirements of Article 4 and such notice shall specify the number of
Offered Shares which the purchasing Shareholder or the Company, as the
case may be, elects to purchase.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) "Expiration Date" shall have the meaning ascribed to that
term in Section 4.2 of this Shareholders' Agreement.
(l) "Holder" shall mean any Person owning or having the right
to acquire Registrable Securities or any assignee thereof in
accordance with Section 7.10 of this Shareholders' Agreement.
(m) "Initiating Holders" shall have the meaning ascribed to
that term in Section 7.1 of this Shareholders' Agreement.
(n) "Investors" shall mean those persons or entities set
forth on Schedule I hereto, who are sometimes individually referred to
herein as an "Investor."
(o) "Non-Offering Shareholders" shall have the meaning
ascribed to that term in Section 4.2 of this Shareholders' Agreement.
(p) "Offer" shall have the meaning ascribed to that term in
Section 4.1 of this Shareholders' Agreement.
(q) "Offered Shares" shall mean any and all Preferred Shares
required or desired to be offered for sale by a Shareholder to any
other Shareholder or Shareholders or the Company pursuant to the terms
of this Shareholders' Agreement.
(r) "Offer Date" shall have the meaning ascribed to that term
in Section 4.2 of the Shareholders' Agreement.
(s) The phrase "owned or controlled" (or corollary phrases)
when used in this Shareholders' Agreement to describe a Person's
rights with respect to shares of Stock shall mean that such Person has
voting control over such shares, provided that shares of Stock held in
the Employee Plan shall not be deemed to be "owned or controlled" by
the trustee of the Employee Plan at any time when the Principal
Shareholder is such trustee.
(t) "Person" shall mean any natural person, corporation,
partnership, venture, joint venture, association, or other entity
whatsoever.
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<PAGE> 4
(u) "Preferred Shares" shall mean the issued and outstanding
shares of Series A Preferred Stock of the Company.
(v) "President and CEO" shall be the individual appointed to
be the President and Chief Executive Officer of the Company from time
to time by the Board of Directors.
(w) "Proportion" shall mean, with respect to any Shareholder
entitled to purchase Offered Shares, the proportion of the total
number of such Offered Shares which the total number of shares of
Stock owned by each Shareholder (or by the Principal Shareholder and
his Permitted Transferees) entitled to purchase Offered Shares bears
to the total number of shares of Stock owned by all Shareholders (or
by the Principal Shareholder and his Permitted Transferees) entitled
to purchase Offered Shares.
(x) "Register," "registered," and "registration" shall mean
a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act,
and the declaration or ordering of effectiveness of such registration
statement or document.
(y) "Registrable Securities" means the Stock.
(z) "Registrable Securities then outstanding" shall (i) mean
the number of shares of Common Stock outstanding which are Registrable
Securities and the number of shares of Common Stock issuable pursuant
to the exercise of warrants, options or other rights which are
Registrable Securities and (ii) the number of shares of Common Stock
issuable upon the conversion of convertible securities which are
exercisable for or convertible into Registrable Securities.
(aa) "Merger Agreement" shall have the meaning ascribed to
that term in the Recitals to this Shareholders' Agreement.
(bb) "Rinzai" shall mean Rinzai Limited, a Hong Kong company.
(cc) "SEC" shall mean the Securities and Exchange Commission.
(dd) "Securities Act" shall mean the Securities Act of 1933,
as amended.
(ee) "Stock" shall mean (1) the Common Stock issuable or
issued upon conversion of the Hayes Microcomputer Products capital
stock in accordance with the terms of the Merger Agreement; (2) the
Common Stock issuable or issued upon conversion of the Preferred
Shares; and (3) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such
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<PAGE> 5
securities, excluding in all cases, however, any Registrable
Securities sold by a Person in a transaction in which its registration
rights are not assigned.
(ff) "Terms" shall have the meaning ascribed to that term in
Section 4.3 of this Shareholders' Agreement.
(gg) "Transfer" shall have the meaning ascribed to that term
in Section 2.1 of this Shareholders' Agreement.
(hh) "Transferor" shall have the meaning ascribed to that
term in Section 4.1 of this Shareholders' Agreement.
(ii) "Violation" shall have the meaning ascribed to that term
in Section 7.7 of this Shareholders' Agreement.
2. EFFECTIVE DATE.
This Amendment shall be effective as of the Closing of the Merger (the
"Effective Date") and shall continue in full force and effect until terminated
in accordance with Section 9 of this Shareholders' Agreement, whereupon the
Company shall become a party hereto.
3. TERMINATION OF HAYES SHAREHOLDERS' AGREEMENT, ANTI-
DILUTION WARRANT AND VOTING TRUST AGREEMENT.
3.1. Termination of Hayes Shareholders' Agreement. The
Shareholders agree that, effective as of the Effective Date, the Hayes
Shareholders' Agreement shall be terminated and all of the respective rights
and obligations of the Shareholders under the Hayes Shareholders' Agreement
shall be of no further force or effect.
3.2. Termination of Anti-Dilution Warrant. Rinzai hereby
agrees that its rights under that Warrant (No. 1) to Purchase Common Stock
dated April 16, 1996 issued by Hayes to Rinzai will terminate on the Effective
Date.
3.3. Termination of Voting Trust Agreement. The Shareholders
agree that, effective as of the Effective Date, the Voting Trust Agreement
shall be terminated and all of the respective rights and obligations of any of
the Shareholders under the Voting Trust Agreement shall be of no further force
or effect.
4. REQUIRED OFFER PRIOR TO SALE AND OTHER RESTRICTIONS.
4.1. Required Offer Prior to Sale. No Shareholder may sell,
give, bequeath, pledge, assign, transfer or encumber in any manner whatsoever
(all such dispositions being hereinafter referred to as a "transfer" or
"disposition" and shall be deemed included in the verb "to dispose") any
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<PAGE> 6
Preferred Shares to any Person unless the Shareholder seeking to make the
transfer (the "Transferor") shall first have made the written offer to sell
described in Section 4.2 below (the "Offer") and that Offer has not been
accepted pursuant to the terms of this Shareholders' Agreement.
4.2. Offer by Transferor. The Offer referred to in Section
4.1 shall be given by the Transferor to the Company and to each of the other
Shareholders (,herein the "Non-Offering Shareholders") and shall consist of a
written Offer to sell all the Offered Shares which the Transferor then intends
to dispose of, to which Offer shall be attached a statement of intention to
dispose of the Offered Shares pursuant to a bona fide offer from a prospective
purchaser or purchasers (the "Transferee"), a description of the contemplated
disposition, the name and address of each bona fide Transferee, the number of
Preferred Shares involved in and other terms (the "Terms") of the proposed
disposition. The Terms shall include, without limitation, the purchase price
per Offered Share offered by each Transferee and the manner in which such
purchase price shall be paid to the Transferor. Such Offer shall be signed by
the Transferor and shall remain irrevocable until the earlier of (a) the time
at which all of the Offered Shares are accepted by the Company or the Non-
Offering Shareholders, as provided in Sections 4.3 and 4.4 or (b) one hundred
twenty (120) days after the "Offer Date," which date shall be the date on which
a notice is given to the Company and such Non-Offering Shareholders in
accordance with the terms of Section 12.1 of this Shareholders' Agreement. The
date on which the Offer becomes revocable is referred to herein as the
"Expiration Date."
4.3. Acceptance of Offer by the Company. The Company may, at
its option exercise within sixty (60) days after the Offer Date, elect to
purchase all or any portion of the Offered Shares on the Terms (with the
designees of the selling Shareholder abstaining on any vote of the Board of
Directors of the Company with respect to such purchase). If and to the extent
the Company does not accept the Offer in accordance with this Section 4.3 with
respect to all of the Offered Shares, the Offered Shares may be disposed of in
accordance with Section 4.4. The Company shall exercise its option under this
Section 4.3 by giving an Exercise Notice. The Exercise Notice shall be in
accordance with the Terms. Any purchase by the Company of one hundred percent
(100%) of the Offered Shares shall be completed not later than ninety (90) days
after the Offer Date (subject to any extension of time required to permit
necessary governmental or regulatory filings, notices or approvals).
4.4. Acceptance of Offer by Shareholders. If and to the
extent the Company does not accept the Offer with respect to all of the Offered
Shares in accordance with the provisions of Section 4.3, the remaining Offered
Shares shall be deemed to be offered to the Non-Offering Shareholders and each
Non-Offering Shareholder may, at its option exercised within ten (10) days
after (i) the last day of the exercise period pursuant to Section 4.3 or, if
earlier (ii) the date on which the Company notifies the Shareholders of its
election to purchase less than all (or none) of the Offered Shares, elect to
purchase not more than its Proportion of the remaining Offered Shares. Each
Non-Offering Shareholder who exercises its option to purchase its Proportion of
the Offered Shares shall do so by giving an Exercise Notice. In the event that
any such Non-Offering Shareholder gives an Exercise Notice covering less than
its Proportion of the Offered Shares
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<PAGE> 7
available to be purchased by Non-Offering Shareholders (such shares not covered
by Exercise Notices being referred to as the "Balance"), each of the
Non-Offering Shareholders that time delivered an Exercise Notice covering its
full Proportion of the Offered Shares available to be purchased by Non-Offering
Shareholders, may, by a second Exercise Notice delivered within ten (10) days
after the expiration of the first ten (10) day period referred to above, elect
to purchase up to that number of Offered Shares that is equal to the product of
the Balance multiplied by a fraction, the numerator of which shall be such
Non-Offering Shareholder's Proportion of the number of Offered Shares first
made available for purchase by Non-Offering Shareholders pursuant to this
Section 4.4, and the denominator of which shall be the total number of such
Offered Shares covered by the first Exercise Notices timely delivered by all
Non-Offering Shareholders which purchased their respective full Proportions.
If, after the expiration of the second ten (10) day period any Offered Shares
remain available to be purchased, any Non-Offering Shareholder which has timely
delivered Exercise Notices covering the maximum number of Offered Shares
available to it, may notify the Company, within five (5) days after the
expiration of such second ten (10) day period of its desire to purchase
additional Offered Shares, specifying the maximum number of such Offered Shares
it is willing to purchase. If more than one such notice is received by the
Company, the number of additional Offered Shares shall be allocated to the
Non-Offering Shareholders delivering such notices in the same proportion as
their respective offers bear to the total number of Offered Shares available in
the third and final round.
4.5. Purchases by Company and Shareholders. If the Company
and the Non- Offering Shareholders together, or the Non-Offering Shareholders
(or any of them) alone, elect to purchase 100% of the Offered Shares, the sale
and purchase of such shares shall be completed not later than one hundred and
five (105) days after the Offer Date (subject to any extension of time required
to permit necessary governmental or regulatory filings, notices or approvals).
The Transferor shall not be obligated to sell any Offered Shares to the Company
or to any Non-Offering Shareholder unless the Company and/or the Non-Offering
Shareholders have agreed to purchase, and purchase, 100% of the Offered Shares.
"Completion" of any sale pursuant to this Article 4 shall mean, at a minimum,
delivery by the selling Shareholder to each purchaser of certificate(s)
representing the number of Preferred Shares to be sold, in form for transfer by
delivery, and payment by each purchaser of the purchase price therefor in
accordance with the Terms, or as may otherwise be agreed by the parties.
5. SALE OF OFFERED SHARES TO TRANSFEREE.
If the Non-Offering Shareholders and the Company do not elect to
purchase all of the Offered Shares in accordance with the terms of Sections 4.3
and 4.4 the Transferor shall not be obligated to sell any of the Offered Shares
to the Non-Offering Shareholders or the Company and shall be entitled to
dispose of all of the Offered Shares to the Transferee on the Terms, provided
that such disposition is consummated within one hundred fifty (150) days
(subject to any extension of time required to permit necessary governmental or
regulatory filings, notices or approvals) after the Offer Date and the
Transferee executes a counterpart of this Shareholders' Agreement and agrees to
remain bound by all terms of this Shareholders' Agreement. Any proposed
transfer on terms and conditions
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<PAGE> 8
other than the Terms, as well as any subsequent proposed transfer of Preferred
Shares by such Shareholder, shall again be subject to the rights of the Company
and the Non-Offering Shareholders and shall require compliance by Transferor
with the procedures described in Article 4.
6. EFFECTS OF NON-PARTICIPATION.
The exercise or non-exercise of the rights of any Shareholder or the
Company under Article 4 to participate in one or more sales of shares of Stock
made by the Company or any Shareholder shall not adversely affect such
Shareholder's or the Company's right, as applicable, to participate in
subsequent sales of shares of Stock subject to Article 4.
7. REGISTRATION RIGHTS.
7.1. Company Registration. If at any time after the date of
this Shareholders' Agreement the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders other than
the Holders) 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, or a registration relating to shares to be issued in
connection with the acquisition of another company, or a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder made within (30) days after the Company shall have given such notice in
accordance with Section 12.1 hereof, the Company shall, subject to the
provisions of Section 7.5, use all reasonable efforts to cause to be registered
under the Securities Act all of the Registrable Securities that each such
Holder has requested to be registered.
7.2. Obligations of the Company. Whenever required under this
Article 7 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and,
upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration statement
effective for up to one hundred twenty (120) days;
(b) 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;
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<PAGE> 9
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(d) Use all reasonable 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, provided, however, 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; and
(e) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under
such an agreement.
7.3. Furnish Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Article 7
that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be reasonably and customarily
required to effect the registration of the Registrable Securities.
7.4. Expenses of Company Registration. The Company shall bear
and pay all, expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 7.1 for each Holder (which right may be assigned as
provided in Section 7.10), including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees relating or
apportionable thereto and the reasonable fees and disbursements (not to exceed
US $50,000) of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
7.5. Underwriting Requirements. In connection with any
offering involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 7.1 to include any of the Holders'
securities in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by the Company, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in an offering exceeds the amount of securities to
be sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of Registrable Securities which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders according to the total amount of securities requested to be
included therein
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<PAGE> 10
owned by each selling shareholder or in such other proportions as shall
mutually be agreed to by such selling shareholders).
If any Person does not agree to the terms of any such
underwriting, it shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration, the Company shall then offer to all Persons
who have retained the right to include securities in the registration the right
to include additional securities in the registration in an aggregate amount
equal to the number of shares so withdrawn, with such shares to be allocated
among the Persons requesting additional inclusion pro rata according to the
total amount of securities requested to be included in such registration owned
by each such Person or in such other proportions as shall be mutually agreed by
such selling shareholders.
For purposes of the immediately preceding paragraph
concerning apportionment, for any selling shareholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners, and any trusts for the
benefit of any of the foregoing Persons shall be deemed to be a single "selling
shareholder," and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder," as defined in this sentence.
7.6. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Article 7.
7.7. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Article 7:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors,
partners, employees and legal counsel of each Holder, and each Person,
if any, who controls such Holder 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 any other federal or state
law, rule or regulation 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"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) 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 in light of the circumstances in which they were made, or
(iii) any violation or alleged violation
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<PAGE> 11
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 reimburse each such Holder, officer, director, partner,
employee, legal counsel, underwriter or controlling Person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action or enforcing these indemnification provisions, as such expenses
are incurred; provided, however, that the indemnity agreement
contained in this subsection 7.7(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, 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 shed expressly for use in connection with
such registration by any such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors and
officers, its legal counsel, each Person, if any, who controls the
Company within the meaning of the Securities Act, and any other Holder
selling securities in such registration statement or any of such other
Holder's directors, officers, employees, legal counsel or any Person
who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such
director, officer, employee, legal counsel, or controlling Person, or
other such Holder or director, officer, employee, legal counsel or
controlling Person of such other Holder 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 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 reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
employee, legal counsel, controlling Person, other Holder, or officer,
director, employee, legal counsel, or controlling Person of such other
Holder in connection with investigating or defending any such loss.
claim, damage, liability, or action or enforcing these
indemnifications provisions, as such expenses are incurred; provided,
however, that the indemnity agreement contained in this subsection
7.7(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 indemnifying Holder.
(c) Promptly after receipt by an indemnified party under this
Section 7.7 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 7.7, give 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,
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<PAGE> 12
however, that an indemnified party shall have the right to retain its
own counsel at its own expense if it so desires. Notwithstanding the
foregoing, if the indemnified party and the indemnifying party have
conflicting interests with respect to the action so that joint counsel
for them would be inappropriate (as determined by counsel to the
indemnified party and counsel to the indemnifying party), then the
indemnifying party shall pay reasonable fees and expenses of one
counsel to the indemnified party. Each indemnified party shall give
reasonably prompt notice to each indemnifying party or parties of any
action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but the failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, shall not relieve such indemnifying
party of any liability to the indemnified party under this Section
7.7, unless the indemnifying party is materially prejudiced by such
failure to give notice.
(d) If the indemnification provided for in this Section 7.7
is held by a court of competent jurisdiction to be unavailable to an
indemnified party or insufficient to hold harmless an indemnified
party under subsection (a), (b), or (c) above, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a), (b), or (c) above, 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 action, statement or omission that
resulted in such claims, as well as other equitable considerations.
The relative fault shall be determined with reference to, among other
things, whether the untrue statement or alleged omission to state a
material fact relates to information supplied by the indemnifying
party or such indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing provisions
of this Section 7.7, a Holder of Registrable Securities shall not, as
an indemnifying party, be required to contribute any amount in excess
of (x) the amount by which the total price at which the Registrable
Securities sold by such indemnifying party were offered to the public
exceeds (y) the amount of any damages which such indemnifying party
has otherwise been required to pay by reason of such action, untrue or
alleged untrue statement or omission or alleged omission. The Company
and each Holder of Registrable Securities agrees that it would not be
just and equitable if contribution pursuant to this Section 7.7(d)
were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 7.7(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to above in this Section 7.7(d) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigation or defense of any
such action or claim which is the subject of this subsection (d) or
enforcement of these contribution provisions.
(e) The obligations of the Company and Holders under this
Section 7.7 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Article
7, and otherwise.
- 12 -
<PAGE> 13
7.8. Reports Under Securities Exchange Act. 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 securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of
SEC Rule 144, the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), and (ii)
a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company.
7.9. Form S-3 Registration. In case the Company shall receive
at any time after ninety (90) days from the Closing Date written request or
requests from a Holder that the Company effect a registration on Form S-3 and
any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as
would permit or facilitate the sale and distribution of all such
portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request made within thirty (30)
days after the Company shall have given such notice pursuant to
Section 12.1 hereof; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance
pursuant to this Section 7.9 (i) if Form S-3 is not available for such
offering by the Holders; (ii) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion
in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less
than Five Million Dollars (US $5,000,000); (iii) if the Company shall
furnish to the Holders a certificate signed by the CEO stating that in
the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its stockholders for such
Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3
Registration Statement for a period of not more than one hundred
eighty (180) days after receipt of the request of the Holder or
Holders
- 13 -
<PAGE> 14
under this Section 7.9; provided, however, that the Company shall not
utilize this right more than once in any 12 month period; (iv) if the
Company within the nine month period preceding the date of such
request, already has effected one registration on Form S-3 for the
Holders pursuant to this Section 7.9 or within the 48 month period
preceding the date of such request already has effected five such
registrations and other similar provisions granting rights to the
registration on Form S-3; or (v) in any particular jurisdiction in
which the Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such
registration, qualification or compliance.
Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered (including securities which
the Company wishes to issue), as soon as practicable after receipt of
the request or requests of the Holders. All expenses, other than
underwriting discounts and commissions, incurred in connection with
the registrations pursuant to this Section 7.9, including (without
limitation) all other registration, filing, qualification, printer's
and accounting fees shall be borne by the Company.
7.10. Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Article 7 may
be assigned by a Holder to a transferee or assignee who has lawfully received
the shares in a private sale in accordance with all applicable laws and
regulations and with respect to Registrable Securities, the terms of this
Shareholders' Agreement; provided, however, in each case, the Company is,
within a reasonable period of time after such transfer, given written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if (i) immediately
following such transfer the further disposition of any such securities by the
transferee or assignee is restricted under the Securities Act and (ii) the
transferee agrees to be bound by the terms of this Article 7.
7.11. Amendment of Registration Rights. Any provision of this
Article 7 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least seventy percent (70%) of the Registrable Securities. Any amendment or
waiver effected in accordance therewith shall be binding upon each holder of
any securities purchased under this Shareholders' Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company; provided, however,
that no such amendment or the waiver of the observance of any provisions of
this Article 7 that adversely affect the rights of Vulcan Ventures Incorporated
may occur without Vulcan Ventures Incorporated's consent.
7.12. Termination of Registration Rights. The Company's
obligations pursuant to this Article 7 shall terminate with respect to each
Holder upon the earlier to occur of (i) five (5) years after the Closing Date
or (ii) such time as such Holder may sell all of its Registrable Securities
- 14 -
<PAGE> 15
pursuant to Rule 144 of the Securities Act without being subject to the volume
limitations of Rule 144.
8. DIRECTORS.
8.1 Election of Directors. The Principal Shareholder,
Chestnut, Rinzai and Howard agree to vote their shares of Stock (or in the case
of Howard all shares of the Company held beneficially or of record by him) for
the election of directors as hereinafter set forth. Subject to the provisions
of Section 8.2 of this Shareholders' Agreement, each of the Principal
Shareholder, Chestnut, Rinzai and Howard shall vote (or cause to be voted) all
of the shares of Stock owned or controlled by him or it (or in the case of
Howard all shares of the Company held beneficially or of record by him) so as
to provide for the election to the Board of Directors, at any annual or special
meeting called for such purpose, of
8.1.1. With respect the Class I Directors as defined
in the Amended and Restated Certificate of Incorporation of
the Company: (i) one (1) individual designated by Rinzai and
(ii) one (1) individual to be approved by both the Principal
Shareholder and Rinzai in writing in their respective sole
and absolute discretion;
8.1.2. With respect to the Class 11 Directors as
defined in the Amended and Restated Certificate of
Incorporation of the Company: two (2) individuals to be
approved by both the Principal Shareholder and Rinzai in
writing in their respective sole and absolute discretion;
8.1.3. With respect to the Class III Directors as
defined in the Amended and Restated Certificate of
Incorporation of the Company: (i) one (1) individual to be
approved by both the Principal Shareholder and Rinzai in
writing in their respective sole and absolute discretion;
(ii) Howard; and (iii) the Principal Shareholder; and
8.1.4. In the event that the number of directors
making up any of the aforesaid Class I, II or III is
increased the individuals who make up the such additional
members of the Board of Directors shall be approved by both
the Principal Shareholder and Rinzai in writing in their
respective sole and absolute discretion;
provided, however, that in the event that both the Principal
Shareholder and Rinzai have not approved one or more of the individuals as
contemplated by this Section 8.1. not less than seventy five (75) days prior
to each annual general meeting of the Company, then Rinzai shall within ten
(10) days thereafter propose two (2) individuals (each of whom may not be, nor
have been, an affiliate of either the Company, Rinzai or the Principal
Shareholder) in respect of each such vacant position and the individual chosen
by the Principal Shareholder (such choice to be made within five (5) days of
receipt of such proposal) from Rinzai's nominations shall be deemed to have
been approved by both the Principal Shareholder and Rinzai for the purposes of
this Section 8.1.
- 15 -
<PAGE> 16
8.2. Termination of Provisions under Certain Circumstances. If
at any time the number of shares of Stock owned or controlled by any of the
Principal Shareholder and Chestnut, or Rinzai (or by any transferee of any
thereof who is entitled, pursuant to the provisions of Section 8.1, to
designate Directors) shall be less than ten percent (10%) of the then issued
and outstanding shares of capital stock of the Company by reason of any sale or
other disposition made by either (i) the Principal Shareholder and Chestnut or
(ii) Rinzai, as applicable, this Article 8 shall terminate and be of no further
force and effect. 'This Agreement shall terminate as to Howard, and Howard
shall have no further rights or obligations hereunder, at such time as Howard
ceases to be Vice Chairman and Executive Vice President of the Company.
9. TERMINATION.
This Shareholders' Agreement shall continue until the first to occur
of (a) the tenth (10th) anniversary of this Shareholders' Agreement or (b) the
termination of all the rights of each Shareholder under this Shareholders'
Agreement pursuant to the terms hereof, provided, however, that if at any time
prior to the Effective Date, the Merger Agreement terminates in accordance with
its terms, this Shareholders' Agreement shall terminate concurrently with the
Merger Agreement.
10. RELEASE OF GUARANTEES.
Hayes Microcomputer Products (the "Releasors") hereby release and
forever discharge AC Limited (in respect of its guarantee of the obligations,
covenants and agreements of Rinzai), Wong's International (Holdings) Limited
(in respect of its guarantee of the obligations, covenants and agreements of
Rolling Profit Holdings, Ltd.), G.K. Goh Holdings Limited (in respect of its
guarantee of Saliendra Pte Ltd.), Guthrie GTS Limited (in respect of its
guarantee of the obligations, covenants and agreement of Lao Hotel (H.K.)
Limited) and their respective stockholders, predecessors, assigns, successors,
subsidiaries, directors, officers, employees, agents, representatives,
attorneys and persons acting on its behalf (the "Releasees") from any and all
manner of actions, claims, lawsuits, liabilities and damages based on or
otherwise relating to Releasors' rights or obligations with respect to their
respective shareholders or any third party arising from or otherwise relating
to the Shareholders' Agreement. This Release is intended to release any and all
matters known, unknown, suspected, unsuspected or hereafter discovered or
ascertained with respect to the subject matter thereof. Releasors warrant and
represent to Releasees that they have not assigned, conveyed or transferred any
of the claims or possible claims against Releasees (or any interest therein)
which are released or referred to herein and that the Release herein is what
Releasors purport it to be. This Release is binding upon, and shall inure to
the benefit of, each of the parties and their respective officers, directors,
investors, agents, representatives, partners, predecessors, successors and
assigns. The parties hereto agree that ACMA Limited, Wong's International
(Holdings) Limited, G.K. Goh Holdings, and Guthrie GTS Limited are express
third party beneficiaries of this Section 10.
- 16 -
<PAGE> 17
11. SPECIFIC PERFORMANCE.
The Shareholders, the Company and Howard acknowledge and agree that
the recovery of money damages will not constitute an adequate remedy for breach
of the provisions of this Shareholders' Agreement. Accordingly, the parties
agree that the provisions of this Shareholders' Agreement may be specifically
enforced against them and transferees of securities of the Company which are
subject to this Shareholders' Agreement (in addition to any other remedies
available for breach of this Shareholders' Agreement), and the parties (for
themselves and, in the case of the Shareholders, transferees of their
securities of the Company), hereby waive the defense in any equitable
proceeding that there is an adequate remedy at law for any such breach.
12. MISCELLANEOUS.
12.1. Notices. All notices, approvals, consents, requests and
other communications that any party is required or elects to give hereunder
shall be in writing and shall be deemed to have been given (a) upon personal
delivery thereof, including by appropriate international courier (e.g. Fedex or
DHL) service, five (5) days after delivery to the courier or, if earlier, upon
delivery against a signed receipt therefor or (b) upon transmission by
facsimile or telecopier, which transmission is confirmed, in either case
addressed to the party to be notified at the address set forth below or at such
other address as such party shall have notified the other parties hereto, by
notice given in conformity with this Section 12.1:
The Company: Hayes Communications, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to: G. Donald Johnson
Womble Carlyle Sandridge & Rice
1275 Peachtree Street, N.E.
Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
Howard: Ronald Howard
c/o Access Beyond
1300 Quince Boulevard
Gaithersburg, Maryland 20878
- 17 -
<PAGE> 18
Kaifa: Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Mills Industrial Building
31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Attention: Mr. Tam Man Chi, President
Telecopy: (852) 2480-4723
with a required copy to: Vivien Chan & Company
15/F, One Exchange Square
8 Connaught Place
Central Hong Kong
Attention: Mr. George Riberio
Telecopy: (852) 2845-9160
RPH: Rolling Profit Holdings Limited
Arion Commercial Center
Third Floor, Room 304
2-12 Queen's Road West
Hong Kong
Attention: President
Telecopy: (852) 2854-0438
with a required copy in
either case to: Farrand, Cooper & Bruiniers
235 Montgomery, Suite 1035
San Francisco, California 94104
Attention: Wayne Cooper, Esq.
Telecopy: (415) 677-2950
Rinzai: Rinzai Limited
c/o Acma Limited
17 Jurong Port Road
Singapore 2661
Attention: President
Telecopy: 011 65 264-0125
Lao Hotel: Lao Hotel (H.K.) Limited
c/o Guthrie GTS Limited
115Amoy Street # 02-00
Singapore 059935
Attention: Mr. Arthur Tan
Telecopy: 011 65 224-921 1
- 18 -
<PAGE> 19
Saliendra Pte: Saliendra Pte Ltd.
c/o GK Goh Holdings Limited
50 Raffles Place
#33-00 Shell Tower
Singapore 048623
Attention: Mr. Lee Teong Sang
Telecopy: 011 65 538-6189
S.P. Quek Investments: S.P. Quek Investments Pte Ltd.
c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Attention: President
Telecopy: 011 65 224-9933
with a required copy in the case of any notice to Rinzai, Lao Hotel (H.K.)
Limited, Saliendra Pte Ltd., or S.P. Quek Investments Pte Ltd. to:
Jackson Tufts Cole & Black, LLP
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Richard Scudellari, Esq.
Telecopy: (408) 998-4889
Principal Shareholder or Chestnut: Dennis Hayes: Dennis C. Hayes
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
12.2. Governing Law. This Shareholders' Agreement shall be
governed by and construed under the laws of the State of Delaware without
reference to its conflicts of law principles. Any action brought hereunder
shall be heard by a court sitting in Fulton County, Georgia.
12.3. Counterparts. This Shareholders' Agreement may be
executed in one or more counterparts, including counterparts transmitted by
telecopier or telefax, all of which shall be considered one and the same
agreement. Facsimile copies with signatures of the parties to this
Shareholders' Agreement, or their duly authorized representatives, shall be
legally binding and enforceable. All such facsimile copies are declared as
originals and accordingly admissible in any jurisdiction or tribunal having
jurisdiction over any matter relating to this Shareholders' Agreement.
- 19 -
<PAGE> 20
12.4. Titles and Subtitles. The titles and subtitles used in
this Shareholders' Agreement are used for convenience only and are not to be
considered in construing or interpreting this Shareholders' Agreement.
12.5. Amendments and Waivers. Except as expressly provided in
Section 7.11 hereof, no amendment to this Shareholders' Agreement shall be
effective unless it is in writing and is signed by all the parties hereto, and
no waiver of any provision of this Shareholders' Agreement or consent to any
departure by any party from the terms hereof, shall in any event be effective
unless in writing and signed by the party or parties against whom such waiver
or consent is asserted and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose recited therein.
12.6. Severability. If one or more provisions of this
Shareholders' Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Shareholders' Agreement and the balance
of this Shareholders' Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms.
12.7. Entire Agreement. This Shareholders' Agreement, the
Merger Agreement and the other documents and agreements delivered pursuant
hereto and thereto constitute the full and entire understanding and agreement
among the parties with regard to the subjects hereof and thereof and supersedes
any prior agreements (including any memorandum of understanding or letters of
intent) between the parties regarding the subject matter hereof.
12.8. Execution of Certain Other Agreements. The Shareholders
and Hayes Microcomputer Products hereby acknowledge that neither the execution
by any of them of any Voting Agreement (and related Proxy), Affiliate
Agreement, Market Standoff, Pledge Agreement or other similar agreement
contemplated by the Merger Agreement or otherwise entered into in connection
with the Merger Agreement nor the consummation of any of the actions or
transaction contemplated thereby shall constitute a breach of the Hayes'
Shareholders Agreement.
IN WITNESS WHEREOF, the parties hereto have set forth their hand and
seal effective as of the date first above written.
- 20 -
<PAGE> 21
SHAREHOLDERS:
/s/ Catherine R. Edwards /s/ Dennis C. Hayes
- ------------------------------ --------------------------------------
Witness Dennis C. Hayes
RINZAI LIMITED
By: /s/ Chou Kong Seng
-----------------------------
Name: Chou Kong Seng
Title: Authorized Representative
KAIFA TECHNOLOGY (H.K.) LIMITED
By: /s/ Tam Man Chi
-----------------------------
Name: Tam Man Chi
Title: President
ROLLING PROFIT HOLDINGS LIMITED
By: /s/ Paulus Chan
-----------------------------
Name: Paulus Chan
Title: Director
LAO HOTEL (H.K.) LIMITED
By: /s/ Harry Ong Kim Seng
-----------------------------
Name: Harry Ong Kim Seng
Title: Director
SALIENDRA PTE LTD.
By: /s/ Lee Teong Sang
------------------------------
Name: Lee Teong Sang
Title: Director
- 21 -
<PAGE> 22
S. P. QUEK INVESTMENTS PTD. LTD.
By: /s/ Sim Pin Quek
------------------------------------------
Name: Sim Pin Quek
Title: Director
VULCAN VENTURES INCORPORATED
By: /s/ William D. Savoy
------------------------------------------
Name: William D. Savoy
Title: Vice President
CHESTNUT
CHESTNUT CAPITAL LIMITED
PARTNERSHIP
By: /s/ Dennis C. Hayes
------------------------------------------
Name: Dennis C. Hayes
Title: General Partner
"HOWARD"
RONALD A . HOWARD
Only for the purposes of Sections of 8 and 11 of
this Shareholders' Agreement
/s/ Ronald A. Howard
---------------------------------------------------
"COMPANY"
ACCESS BEYOND, INC.
By: /s/ Ronald A. Howard
------------------------------------------
Name: Ronald A. Howard
Title: President and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
By:
-------------------------------
- 22 -
<PAGE> 1
EXHIBIT 10.26
HAYES MICROCOMPUTER PRODUCTS, INC.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the
12th day of April, 1996, by and among HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation (the "Company"), DENNIS C. HAYES, a Georgia resident
("Dennis Hayes"), each of the individuals or entities listed on Schedule 1
hereto and identified thereon as the "Investors" (which are referred to herein
from time to time individually as an "Investor" or collectively as the
"Investors") and the direct or indirect subsidiary of one of the Investors,
formed or to be formed, as identified on Schedule 1 hereto ("Investor Sub").
BACKGROUND
A. On November 15, 1994, the Company filed a petition in the United
States Bankruptcy Court for the Northern District of Georgia (the "Bankruptcy
Court") seeking protection from its creditors and a reorganization under Chapter
11 of Title 11 of the United States Code (the "Bankruptcy Code"), in the case
entitled In re Hayes Microcomputer Products, Inc., a/k/a Practical Peripherals,
Inc., Bankr. Case No. A94-75900-HR (the "Bankruptcy Case"). On May 15, 1995, the
Company filed with the Bankruptcy Court its Plan of Reorganization (as amended
on July 6, July 10, July 20, August 21, November 1, November 16 and December 8,
1995, January 8, 1996, and February 9, 1996, and pursuant to the Order (as
defined below), and as it may otherwise be amended in accordance with the terms
of this Agreement, the "Plan"). The Company is the Debtor-in-Possession in the
Bankruptcy Case, no trustee having been appointed.
B. The Company has obtained an Order of the Bankruptcy Court dated
March 8, 1996, pursuant to Section 1129 of the Bankruptcy Code and intends to
seek an Order in Aid of Confirmation (the "Order in Aid of Confirmation") (i)
confirming the Plan, including without limitation the amendment to the Company's
Articles of Incorporation contemplated by Section 1.1(d) and the merger of the
Company (as described in Section 1.1) including without limitation the issuance
of the Preferred Shares (as defined in Section 1.1) and the Warrant (as defined
in Section 1.3) to the Investors as set forth herein; (ii) approving any
required amendments to the Disclosure Statement with Regard to Debtor's Second
Amended and Restated Plan of Reorganization dated July 20, 1995; and (iii)
approving this Agreement and each of the agreements and certificates
contemplated by this Agreement, as such agreements may be amended from time to
time, such Orders as approved and entered by the Bankruptcy Court being
hereinafter referred to collectively as the "Order." The date upon which the
Plan becomes effective is hereinafter referred to as the "Effective Date."
C. The parties desire to consummate a merger that will constitute a
reorganization pursuant to Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended.
<PAGE> 2
D. Pursuant to that certain Notice of Election of Alternative Treatment
under the Debtor's Second Amended and Restated Plan of Reorganization, as
Modified and Amended, filed on March 13, 1996 (the "Election"), Melita Easters
Hayes has elected under the Plan to have the shares of Common Stock owned by her
redeemed by the Company for a total consideration of Eleven Million U.S. Dollars
(US $11,000,000) payable at such time and in the manner provided by the Plan,
which redemption shall occur simultaneously with the Closing (as defined in
Section 1.4).
AGREEMENT
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereby agree as follows:
1. Plan of Merger.
1.1 Terms and Conditions of Merger.
(a) Merger. Prior to the date hereof, Rinzai Limited
("Rinzai") has formed or will form Financial Sub, Inc. ("Financial Sub"), which
is a directly or indirectly owned subsidiary under the Georgia Business
Corporation Code (the "Georgia Code") for the purpose of accomplishing the
merger described herein, which is a party hereto. Upon the terms and subject to
the conditions set forth herein and in accordance with the Georgia Code, at the
Effective Time, Financial Sub shall be merged with and into the Company (the
"Merger"), and the separate existence of Financial Sub shall cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"). At the Closing, the Company shall cause a
Certificate of Merger in the form attached hereto as Exhibit "A" (the
"Certificate of Merger"), together with all other required certifications,
filings and instruments, to be duly filed with the Secretary of State of the
State of Georgia and cause all fees associated therewith to be paid. The Merger
shall be effective at the time of such filings with the Secretary of State (the
"Effective Time").
(b) Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any further action, each outstanding share of capital
stock of each of the Company and Financial Sub, subject to Section 1.1(c), shall
be converted into the right to receive the following property, deliverable to
the applicable holder of each such shares, without interest, upon the surrender
of the certificate(s) formerly representing such outstanding share(s):
(i) The Common Stock owned by Dennis Hayes or owned by a
person or entity who would be a "Permitted Transferee" of Dennis Hayes under
Section 7 of the Shareholders' Agreement to be entered into between the Company
and the Investors, in the form attached hereto as Exhibit "B" (hereinafter the
"Investors Shareholders' Agreement") at the Effective Time shall be converted
into the right to receive 4,943,221 shares of the Common Stock of the Surviving
Corporation;
- 2 -
<PAGE> 3
(ii) As Melita Easters Hayes has elected under the Plan to
receive Eleven Million Dollars (US $11,000,000) for the Common Stock owned by
her, at the Effective Time such Common Stock shall be converted into the right
to receive such payment, which shall occur simultaneously with the Closing, as
provided in Section 6.9 hereof, in the manner provided by the Plan and the
Election made by her;
(iii) The Common Stock owned by the Hayes Microcomputer
Products, Inc. Profit-Sharing, Saving and Stock Plan (the "Employee Stock Plan")
at the Effective Time shall be converted into the right to receive 156,779
shares of the Common Stock of the Surviving Corporation;
(iv) All outstanding shares (or fraction thereof) of the
stock of Financial Sub at the Effective Time shall be converted into the right
to receive that number of shares of the Series A Preferred Stock of the
Surviving Corporation (the "Preferred Shares") as set forth opposite Rinzai's
name on Schedule 1 hereto (the "Schedule of Investors"), which shall, in any
event, represent an aggregate number of shares to be issued to Rinzai equal to
twenty-eight and one hundredth seventy-five thousands percent (28.175%) of the
Surviving Corporation's capital stock issued and outstanding immediately after
the Merger and the sale and issuance of Preferred Shares pursuant to Section 1.3
(determined on an as-converted basis); and
(v) Any shares of capital stock of the Company or
Financial Sub which at the Effective Time are held in the treasury of such
company, shall be canceled and retired, and no payment shall be made with
respect thereto.
(c) Dissenters' Rights. Notwithstanding anything contained
herein to the contrary, any shares of the outstanding stock of the Company held
by a holder who has demanded and perfected the right to receive "fair value" for
such shares in accordance with Article 13 of the Georgia Code and who has not
effectively lost or withdrawn such right to receive "fair value" (a "Dissenter")
shall not be converted into the right to receive the merger consideration set
forth above, but the Dissenter shall be entitled to only such rights as are
granted by the Georgia Code. Any shares held by any Dissenter who withdraws
his/her/its demand to receive "fair value" or becomes ineligible to receive
"fair value" under the Georgia Code shall immediately be converted into and
become, as of the Effective Time, the right to receive the merger consideration
set forth herein, without interest or other consideration, and such holder shall
not thereafter be considered a "Dissenter."
(d) Articles of Incorporation; Bylaws; Officers and Directors.
The Articles of Incorporation of the Company, as amended pursuant to the
Certificate of Merger, shall be the Articles of Incorporation of the Surviving
Corporation following the Merger (the "Restated Articles"). The Certificate of
Merger shall amend the Articles of Incorporation of the Company to provide that
the Surviving Corporation shall be authorized to issue 100,000,000 shares of
common stock with $.01 par value and 10,000,000 shares of Series A Preferred
Stock having the preferences and designations described in Exhibit "A" hereto
(the "Series A Preferred Stock"). Prior to the Merger, the Bylaws of the Company
shall be amended and restated in the form set forth in Exhibit "C" hereto, which
Bylaws shall be the Bylaws of the Surviving Corporation. At the Effective Time,
the Board of Directors of the Company shall be the Board
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<PAGE> 4
of Directors of the Surviving Corporation. At the Effective Time, the officers
of the Company shall be the officers of the Surviving Corporation.
(e) Formation and Capitalization of Subsidiaries. Prior to the
Effective Time, Rinzai shall form Financial Sub, and shall cause it to take all
such corporate and other actions necessary to consummate the transactions
contemplated by this Agreement. Rinzai agrees to vote in favor of the Merger.
Subject to the terms and conditions of this Agreement, Rinzai agrees to
capitalize Financial Sub in the amount set forth on Schedule 1.
(f) Shareholder Approval. As soon as practicable following the
execution and delivery of this Agreement, the Company shall take such actions as
are necessary in accordance with applicable law to obtain the approval of its
shareholders to this Agreement, the Merger and the consummation of the
transactions contemplated hereby, including without limitation the following:
(i) duly call, give notice of, convene and hold a special
meeting of shareholders for the purpose of considering the Merger and taking
action upon this Agreement (or take such action as may be allowed under the
Articles of Incorporation and Bylaws of the Company by written consent of the
shareholders);
(ii) include in any notice of special meeting all
documents required by the Georgia Code and the recommendation of the Company's
Board of Directors that the shareholders vote in favor of the Merger and approve
and adopt this Agreement; and
(iii) use its reasonable best efforts to obtain shareholder
approval of the Merger and this Agreement.
(g) Dennis Hayes Approval. Dennis Hayes shall vote all shares
of Common Stock owned by him in favor of the Merger at any meeting of the
shareholders of the Company called for such purpose or in connection with any
written consent in lieu thereof.
(h) Delivery of Cash Consideration. Any shareholders entitled
to receive cash consideration in exchange for their stock of the Company in
connection with the Merger and who are not Dissenters at the Effective Time,
shall be paid the cash consideration specified in Section 1.1(b) above after the
Merger upon surrender by such shareholder to the Surviving Corporation of the
certificate(s) representing all of their shares of stock in the Company, duly
endorsed in blank for transfer, and such certificate(s) shall thereupon
immediately be canceled. Until surrendered, said certificate(s) shall represent
for all purposes only the right to receive the specified cash consideration,
without any interest.
1.2 Effect of Merger; Tax Status of Merger. The Merger shall have
the effects set forth in Section 14-2-1106 of the Georgia Code, and immediately
after the Merger the Surviving Corporation shall possess all of the rights,
privileges, powers and franchises of each of the Company and Financial Sub, and
all property and other interests due or belonging to the Company and Financial
Sub shall be vested in the Surviving Corporation. It is the intent of the
parties hereto that the Merger will be consummated in accordance with the
applicable
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<PAGE> 5
provisions of the Georgia Code, and that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code. It shall not be a condition to the consummation of the Merger that
any party shall have received a ruling of the Internal Revenue Service or an
opinion of tax counsel as to the federal income tax consequences of the Merger.
1.3 Sale and Issuance of Additional Preferred Shares and
Anti-Dilution Warrant.
(a) Subject to the terms and conditions of this Agreement, at
Closing each Investor (other than Rinzai) agree severally and not jointly to
purchase from the Company the number of Preferred Shares set forth opposite such
Investor's name on Schedule 1. The Preferred Shares shall be purchased at a
price per share equal to $7.142857 per share for the total purchase price for
each such Investor shown on Schedule 1.
(b) Subject to the terms and conditions of this Agreement,
Rinzai agrees to purchase, and the Company agrees to sell and issue to Rinzai at
the time and place of the Closing and at an aggregate purchase price of Ten U.S.
Dollars ($10.00), a Warrant, in the form attached hereto as Exhibit "D", to
purchase the number of shares of Common Stock and at an exercise price set forth
therein (the "Warrant"). The Preferred Shares and the Warrant are hereafter
collectively referred to as the "Securities."
1.4 Closing. The consummation of the Merger, including the
issuance of the Securities to the Investors as provided herein shall take place
at the offices of Parker, Johnson, Cook & Dunlevie, Suite 700, 1275 Peachtree
Street, N.E., Atlanta, Georgia 30309 on the fifth (5th) business day following
the date on which the conditions set forth in sections 4.1, 4.5, 4.6, 4.9, 4.11,
5.1 and 5.4 herein shall have been satisfied or waived, or at such other time
and place as the Company and the Investors mutually agree upon (the time, date
and place are hereby designated as the "Closing"). At the Closing, each of the
following transactions shall occur:
(a) The Company shall deliver to the Investors the following:
(i) evidence of the filing of the Certificate of Merger
with the Secretary of State of the State of Georgia;
(ii) certificates of good standing for the Company and
each of its Subsidiaries, as of the most recent practicable date, from the
Secretary of State or other governmental authority of the jurisdiction of
incorporation for each such entity;
(iii) the Investors Shareholders' Agreement executed by
the Company;
(iv) executed consents and waivers and copies of all
authorizations required to be obtained pursuant to Sections 2.6 and 6.3 hereof;
(v) the opinions of counsel contemplated by Section 4.8
hereof;
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<PAGE> 6
(vi) a certificate of the Secretary or an Assistant
Secretary or other officer of the Company dated the date of Closing certifying
the names of the officers of the Company authorized to sign this Agreement, the
Warrant, the certificates for the Preferred Shares, the Investors Shareholders'
Agreement, the Employment Agreement, the Voting Trust Agreement (as defined in
Section 1.4(a)(xi)), and the other documents, instruments or certificates to be
delivered pursuant to this Agreement by the Company or any of its officers,
together with the true signatures of such officers;
(vii) a copy of the resolutions of the Board of Directors
and, if required, the shareholders of the Company evidencing the amendment to
the Company's Articles of Incorporation contemplated hereby, the approval of
this Agreement, the Merger, the Investors Shareholders' Agreement, the
Employment Agreement, the issuance of the Preferred Shares, the Warrant, the
Voting Trust Agreement and the other matters contemplated hereby, certified by
the Secretary of the Company to be true, complete and correct as of the Closing
date;
(viii) the compliance certificate required by Section 4.4
hereof;
(ix) a copy of the Order and the Order in Aid of
Confirmation;
(x) the Employment Agreement (as defined in Section 6.2
hereof) executed by the Company;
(xi) the Voting Trust Agreement to be entered into by
Dennis Hayes in connection herewith in the form of Exhibit "E" attached hereto
(the "Voting Trust Agreement") executed by the Company;
(xii) the documents required by Section 4.11 hereof;
(xiii) in the case of Rinzai, stock certificates
representing the Preferred Shares issuable to Rinzai pursuant to Section
1.1(b)(iv) upon receipt from Rinzai of all certificates representing the
outstanding shares of the capital stock of Financial Sub and the funds required
to be transferred to the Company pursuant to Section 1.1(e); and
(xiv) in the case of all Investors other than Rinzai,
stock certificates representing the Preferred Shares issuable to such Investor
pursuant to Section 1.3(a) upon receipt from such Investor of the purchase price
set forth therein.
(b) The Company shall deliver to Rinzai the following:
(i) the Warrant purchasable by Rinzai pursuant to
Section 1.3.
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<PAGE> 7
(c) The Company shall deliver to Dennis Hayes the following:
(i) stock certificates representing the Common Stock
issuable to him pursuant to Section 1.1(b)(i) upon receipt from Dennis Hayes of
all certificates of the stock of the Company issued and outstanding in his name
at the Effective Time; and
(ii) the Employment Agreement executed by the Company.
(d) Each Investor shall deliver to the Company the following:
(i) in the case of Rinzai, all of the outstanding
shares of the capital stock of Financial Sub;
(ii) to the extent applicable to such Investor, evidence
of such Investor's compliance with its covenants described in Sections 1.1(a),
1.1(e) and 1.3(a) hereto and the condition described in Section 5.3 hereof;
(iii) in the case of Rinzai, a copy of the articles of
incorporation of Financial Sub, certified by the Secretary or an Assistant
Secretary thereof;
(iv) a copy of the resolutions of the Board of
Directors, and shareholders to the extent required by such Investor or Financial
Sub, of such Investor and Financial Sub, evidencing the approval of this
Agreement, the Merger, the Investors Shareholders' Agreement and the other
matters contemplated hereby, certified by the Secretary or an Assistant
Secretary of such Investor and Financial Sub, to be true, complete and correct
as of the date of Closing;
(v) the Investors Shareholders' Agreement executed by
such Investor;
(vi) the opinion of counsel to such Investor required by
Section 5.7 hereof;
(vii) certificates of the Secretary or an Assistant
Secretary or other officer of such Investor and its respective Investor Sub,
dated the Closing certifying the names of the officers of such Investor and its
respective Investor Sub, authorized to sign this Agreement and the Investors
Shareholders' Agreement and the other documents, instruments or certificates to
be delivered pursuant to this Agreement by such Investor and its respective
Investor Sub, or any of its officers, together with the true signatures of such
officers; and
(viii) the documents required by Section 5.6 hereof.
(e) Dennis Hayes shall deliver to the Investors the following:
(i) the Employment Agreement executed by Dennis Hayes;
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<PAGE> 8
(ii) the Investor Shareholders' Agreement executed by
Dennis Hayes;
(iii) the Voting Trust Agreement executed by Dennis
Hayes;
(iv) the compliance certificate required by Section 4.4
hereof; and
(v) the opinion of counsel required by Section 4.8
hereof.
1.5 Required Actions.
(a) The Company hereby agrees to propose to the Bankruptcy
Court as part of the Order in Aid of Confirmation, the transactions contemplated
by this Agreement, such that such order will authorize and direct the Company to
consummate the transactions contemplated hereby, without the necessity of
creditor approval. Subject to the Bankruptcy Court granting such order, the
Company, the Investors and Dennis Hayes agree to proceed diligently to
effectuate such transactions on the terms and conditions described herein. The
Company shall not make any modifications to the Plan without the prior written
consent of Investors purchasing a majority of the Preferred Shares.
(b) Dennis Hayes hereby agrees, in his capacity as the
principal shareholder of the Company classified as Class 5(a) under the Plan, to
take all lawful actions to support the Order in Aid of Confirmation and to
proceed diligently to seek such order by the Bankruptcy Court.
1.6 Termination. Anything contained in this Agreement other than in
this Section 1.6 to the contrary notwithstanding, this Agreement may be
terminated in writing at any time:
(a) without liability on the part of any party hereto by
mutual consent of the Company and the Investors purchasing a majority of the
Preferred Shares;
(b) without liability on the part of any party hereto (unless
occasioned by reason of a material breach by such party of any of its
representations, warranties or obligations hereunder) by either the Company or
any of the Investors, if the Closing shall not have occurred on or before April
22, 1996 (or such later date as may be agreed upon in writing by the Company and
the Investors);
(c) by the Company or any Investor, if any other Investor
shall materially breach any of its representations, warranties or obligations
hereunder and such breach shall not have been cured or waived, and such Investor
shall not have provided reasonable assurance that such breach will be cured on
or before the Effective Time;
(d) by any Investor, if the Company or Dennis Hayes shall
materially breach any of their respective representations, warranties (which
determination for purposes of
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<PAGE> 9
this subsection 1.6(d) only shall be made by reading such representations and
warranties in question as if all materiality standards contained therein had
been deleted in their entirety) or obligations hereunder and such breach shall
not have been cured or waived by Investors purchasing a majority of the
Preferred Shares, and the Company or Dennis Hayes, as the case may be, shall not
have provided reasonable assurance that such breach will be cured on or before
the Effective Time;
(e) without liability on the part of any party hereto, if the
Order in Aid of Confirmation in form and substance satisfactory to the Company
and the Investors purchasing a majority of the Preferred Shares is denied by the
Bankruptcy Court; or
(f) by any of the Investors upon delivery of written notice to
the other parties hereto, without any liability to any party hereunder, if the
terms and conditions of the new debt financing referred to in Section 4.9 are
modified in any respect which, in the respective and sole discretion of the
Investors purchasing a majority of the Preferred Shares, is not acceptable for
any reason whatsoever.
2. Representations and Warranties of the Company and Dennis Hayes.
2A. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor, except as set forth on the Schedule of
Exceptions delivered to the Investors simultaneously herewith (the "Schedule of
Exceptions"), each of which exceptions shall specifically identify the Section
of this Agreement to which it applies and be deemed to be a representation and
warranty as if made hereunder, as follows:
2.1 Organization, Good Standing and Qualification. The Company
and each of its Subsidiaries (as defined in Section 2.3) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation (as described in the Schedule of Exceptions) and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company and each of its
Subsidiaries is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure so to qualify might result, individually
or in the aggregate, in a material adverse change in the assets, condition or
prospects of the Company or any of its Subsidiaries, financial or otherwise. A
true, correct and complete copy of the articles of incorporation as currently in
effect and the bylaws as currently in effect of the Company and each of the
Subsidiaries have been made available to each Investor.
2.2 Capitalization.
(a) Issued and Outstanding Stock.
(i) The entire authorized capital stock of the Company
currently consists, and immediately prior to the Merger will consist, of
100,000,000 shares of Common Stock of which 17,328,478.46496 shares are issued
and outstanding in the manner disclosed in the Schedule of Exceptions.
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<PAGE> 10
(ii) At the Effective Time, as a result of the Merger,
the entire authorized capital stock of the Surviving Corporation shall consist
of 100,000,000 shares of Common Stock and 10,000,000 shares of Series A
Preferred Stock, of which 5,100,000 shares of Common Stock and 4,900,000 shares
of Series A Preferred Stock shall be issued and outstanding in the manner
disclosed in the Schedule of Exceptions.
(b) Agreements for Purchase of Securities. Except for:
(i) the rights granted pursuant to this Agreement;
(ii) the conversion privileges and preemptive rights of
the Series A Preferred Stock; and
(iii) the rights of Melita Easters Hayes pursuant to
Section 4 of that certain Shareholder Agreement dated July 6, 1988 among the
Company and the shareholders described therein (the "1988 Shareholder
Agreement") (which rights shall be terminated effective as of the Redemption (as
defined in Section 6.9));
prior to and as of the Effective Time there will not be any outstanding options,
warrants, rights (including conversion rights, preemptive rights or rights of
first offer) or agreements for the purchase or acquisition from the Company or
any Subsidiary of any shares of its capital stock or any obligation of the
Company to pay dividends on such shares or to purchase, redeem or retire such
shares.
(c) The issued and outstanding shares of the capital stock of
the Company and each Subsidiary are duly and validly issued, fully paid and
nonassessable, and such shares of such capital stock, and all outstanding
options, warrants, convertible notes and other securities of the Company and
each Subsidiary, have been issued in compliance with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Securities Act") or in compliance with applicable exemptions therefrom, the
registration and qualification requirements of all applicable securities laws of
states of the United States and all other provisions of applicable securities
laws of the states of the United States, including, without limitation,
anti-fraud provisions.
(d) The Schedule of Exceptions includes a true, correct and
complete list, both immediately prior to and immediately after the Merger and
the sale and issuance of Preferred Shares pursuant to Section 1.3, of all issued
and outstanding shares of the capital stock of the Company and each Subsidiary
and all options, warrants, convertible notes and other securities (and rights to
purchase any of the foregoing) of the Company and its Subsidiaries, together
with a true, correct and complete list of the shareholders, option holders,
warrant holders, convertible note holders and other security holders and holders
of other rights to receive securities of the Company and its Subsidiaries
(including number of shares affected).
2.3 Subsidiaries. The Schedule of Exceptions sets forth a
complete list of all direct or indirect Subsidiaries of the Company. As used in
this Agreement, the term "Subsidiary" shall mean any corporation, association,
partnership, limited liability company,
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<PAGE> 11
joint venture or other legal entity of which the Company directly or indirectly,
owns or controls capital stock, membership interests or partnership interests
representing more than fifty percent (50%) of the general voting power under
ordinary circumstances of such entity. Neither the Company nor any Subsidiary
presently owns or controls, directly or indirectly, any interest in any other
corporation, association, partnership or other business entity. The Company
owns, beneficially and of record, either directly or indirectly, all of the
capital stock or other equity ownership or proprietary interest in each
Subsidiary described as being owned by it on the Schedule of Exceptions. Such
capital stock or other equity or ownership or proprietary interests are owned by
the Company free and clear of all liens, claims, options, rights of first
refusal and other encumbrances of any kind or nature whatsoever.
2.4 Authorization. The Company has the capacity and authority to
execute and deliver this Agreement, the Warrant, the convertible promissory
notes deliverable pursuant to the Investors Shareholders' Agreement (the "Cap
Call Notes"), the Investors Shareholders' Agreement, the Employment Agreement,
the Voting Trust Agreement and the other documents, instruments and agreements
to be entered into pursuant hereto and thereto by it, to perform hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby
without the necessity of any act or consent of any other person whomsoever
(other than the entry of the Order in Aid of Confirmation by the Bankruptcy
Court). All corporate action on the part of the Company, its officers, directors
and shareholders necessary for the authorization, execution and delivery of this
Agreement, the Warrant, the Cap Call Notes, the Investors Shareholders'
Agreement, the Employment Agreement, the Voting Trust Agreement and the other
agreements, documents and instruments to be entered into by the Company pursuant
hereto and thereto, the performance of all obligations of the Company hereunder
and thereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Preferred Shares, the Warrant, the Cap Call Notes and the
Preferred Shares issuable upon conversion of the Cap Call Notes, if applicable,
and the Common Stock issuable upon conversion of the Preferred Shares and the
exercise of the Warrant, has been taken or will be taken on or prior to the
Closing, and this Agreement constitutes, and the Warrant, the Cap Call Notes,
the Investors Shareholders' Agreement, the Voting Trust Agreement and the
Employment Agreement will upon execution and delivery thereof, constitute a
valid and legally binding obligation of the Company enforceable in accordance
with its terms, except as affected by public policy, equitable principles or the
exercise of judicial discretion.
2.5 Valid Issuance of Preferred Shares and Warrant. The Preferred
Shares and the Warrant being sold hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and, based in part upon
the representations of the Investors set forth in Section 3 of this Agreement,
will be issued in compliance with all applicable federal and state securities
laws free and clear of all restrictions on transfer (other than those arising
from application of the securities laws and those set forth in the Investors
Shareholders' Agreement) and free and clear of any liens, claims and
encumbrances. The shares of Common Stock issuable pursuant to the Merger will,
when issued in accordance with this Agreement, be issued in compliance with all
applicable federal and state securities laws and will be duly and validly
issued, fully-paid
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<PAGE> 12
and nonassessable, free and clear of any liens, claims and encumbrances. Upon
the issuance thereof, the shares of Series A Preferred Stock issuable upon the
conversion of the Cap Call Notes and Common Stock or Series A Preferred Stock
issuable upon exercise of the Warrant will be duly and validly issued,
fully-paid and nonassessable and free and clear of all restrictions on transfer
(other than those arising from application of the securities laws and those set
forth in the Investors Shareholders' Agreement) and free and clear of any liens,
claims and encumbrances. At Closing, the Preferred Shares and the Common Stock
issuable upon conversion of the Preferred Shares and the Cap Call Notes and the
exercise of the Warrant, will have been duly and validly reserved for issuance.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of the Company or any Subsidiary is required
to be obtained in connection with:
(a) the Company's valid execution, delivery, or performance of
this Agreement, the Warrant, the Cap Call Notes, the Investors Shareholders'
Agreement, the Voting Trust Agreement or the Employment Agreement; and
(b) the offer, sale, or issuance by the Company of the
Securities hereunder and the Cap Call Notes under the Investors Shareholders'
Agreement or (assuming the exemption provided by Section 3(a)(9) of the
Securities Act, in its current form is available and no commission is paid in
conjunction therewith) the issuance of Common Stock upon conversion of the
Preferred Shares and exercise of the Warrant, or the issuance of Series A
Preferred Stock upon the conversion of the Cap Call Notes;
except for the Order in Aid of Confirmation by the Bankruptcy Court, and as
required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), and except for any notices of sale required to be filed with
the Securities and Exchange Commission ("SEC") under Regulation D of the
Securities Act, or such post-closing filings as may be required under applicable
state securities laws, which will be timely filed within the applicable periods
therefor.
2.7 Litigation. There is no action, suit, proceeding, claim,
arbitration, audit or investigation (an "Action") pending or to the best
knowledge of the Company currently threatened against the Company or any
Subsidiary, its properties or assets or, to the best knowledge of the Company
against any officer, director, employee, consultant, independent contractor,
agency employee or other agent of the Company or any Subsidiary in connection
with such individual's relationship with, or actions taken on behalf of, the
Company or any Subsidiary which questions the validity of this Agreement or the
right of the Company to enter into this Agreement, or to consummate the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse change in the assets, condition, or
prospects of the Company and its Subsidiaries taken as a whole, financial or
otherwise, or any change in the current equity ownership of the Company or any
Subsidiary. To the best knowledge of the Company, there is no factual basis for
any such Action that might result, individually or in the aggregate, in any
material adverse change in the assets, condition or prospects of the Company or
any Subsidiary, financial or otherwise. By way of example but
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<PAGE> 13
not by way of limitation, there are no Actions pending or, to the best knowledge
of the Company, threatened (or any basis therefor known to the Company) relating
to the prior employment of any officer, director, employee, consultant,
independent contractor, agency employee or other agent of the Company or any
Subsidiary, their use in connection with the Company's business of any
information, technology or techniques allegedly proprietary to any of their
former employers, clients or other parties, or their obligations under any
agreements with prior employers, clients or other parties which would result in
any material adverse change in the assets, condition, or prospects of the
Company and its Subsidiaries taken as whole, financial or otherwise. Neither the
Company nor any Subsidiary is a party or subject to the provisions of any
settlement agreement, order, writ, injunction, judgment or decree of any court
or government agency or instrumentality, other than orders of the Bankruptcy
Court in the Bankruptcy Case, true and complete copies of which orders have been
furnished to the Investors. There is no Action by the Company nor any Subsidiary
currently pending or which the Company or any Subsidiary intends to initiate.
2.8 Patents and Trademarks. The Company's and its Subsidiaries'
businesses as now conducted do not conflict with or infringe upon anyone's
patents, copyrights, trademarks, service marks, mask works, trade secrets, or
other proprietary rights in a manner which would have a material adverse effect
on the assets, condition or prospects of the Company or any Subsidiary,
financial or otherwise. The Company either directly or through its Subsidiaries
owns, or has the right to use, all patents, trademarks, service marks,
copyrights, mask works, trade secrets or other proprietary rights necessary for
the conduct of its business as it is presently conducted without infringing on
any patents, trademarks, service marks, copyrights, mask works, trade secrets or
other proprietary rights of others. Neither the Company nor any Subsidiary has
received any communications alleging that the Company or any Subsidiary (or any
of their respective employees or consultants) has violated or infringed or, by
conducting its business as proposed, would violate or infringe, any patents,
trademarks, service marks, copyrights, mask works, trade secrets or other
proprietary rights of any other person or entity. A complete list of all the
Company's patents, trademarks, service marks, copyrights, and mask works,
including applications for the foregoing, is attached as Annex A to the Schedule
of Exceptions. To the best knowledge of the Company, no third party has any
ownership right, title, interest, claim in or lien on any of the Company's
patents, trademarks, service marks, copyrights, mask works, trade secrets or
other proprietary rights and the Company has taken, and in the future the
Company intends to use its best efforts to take, all steps reasonably necessary
to preserve its legal rights in the same. Neither the Company nor any Subsidiary
is obligated to pay any royalties or other payments to third parties with
respect to the license or use of any patents, trademarks, service marks,
copyrights, mask works, trade secrets or other proprietary rights.
2.9 Compliance with Law. The execution and delivery of this
Agreement, the Employment Agreement, the Investors Shareholders' Agreement, the
Voting Trust Agreement and the Warrant by the Company do not, and the
consummation of the Merger and the issuance of the Cap Call Notes, the Common
Stock, the Preferred Shares and the other transactions contemplated hereby and
thereby will not, subject to the entry of the Order in Aid of Confirmation by
the Bankruptcy Court, violate or constitute an occurrence of default under any
provisions of the articles of incorporation or bylaws of the Company or any of
its Subsidiaries
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<PAGE> 14
or any judgment, order, writ or decree to which the Company, or any of its
Subsidiaries is a party or by which any of the foregoing is bound or its assets
are affected or violate any foreign, domestic, federal, state or local statute,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or their respective businesses and assets. The Company and each
Subsidiary is presently conducting its business so as to comply with all
applicable foreign, domestic, federal, state and local statutes, ordinances,
rules and regulations of any governmental authority, the violation of which
would have a material adverse effect on the assets, condition or prospects of
the Company or any Subsidiary, financial or otherwise. The Company and each
Subsidiary is presently conducting its business so as to comply in all respects
with all judgments, orders, writs and decrees to which it is a party or its
assets or businesses are affected.
2.10 Agreements; Action.
(a) There are no agreements, understandings, instruments or
contracts to which the Company or any Subsidiary is a party or by which it is
bound which involve (i) the leasing or subleasing of any real property or
material item of personal property (which shall exclude leases of personal
property having payment obligations of less than $100,000 per year), or (ii) the
employment of any individuals by the Company or any of its Subsidiaries, or
(iii) license of any patent, trademark, service mark, copyright, mask work,
trade secret or other proprietary right, or (iv) a joint venture or partnership,
acquisition or disposition of a material asset, or the purchase or sale of
securities, or (v) the settlement of any Action by or against the Company or any
Subsidiary (collectively, with the agreements and arrangements described in
items (x), (y) and (z) of the following sentence of this subsection, the
"Material Agreements"). The Schedule of Exceptions contains a true, correct and
complete list of (x) the top twenty (20) reseller agreements and arrangements of
the Company or any of its Subsidiaries, determined on the basis of expected
revenues during the current fiscal year; (y) the top twenty (20) agreements and
arrangements of the Company or any of its Subsidiaries, determined on the basis
of expected revenues during the current fiscal year; and (z) the top twenty (20)
agreements and arrangements of the Company or any of its Subsidiaries determined
on the basis of expected monetary obligations during the current fiscal year.
Neither the Company nor any Subsidiary has breached any Material Agreement in
any material respect. Neither the Company nor any Subsidiary has, and to the
Company's best knowledge no other party thereto has, breached any provision of
or is in default under any agreement or arrangement to which the Company or any
Subsidiary is a party, which breach or default would have a material adverse
effect on the assets, condition or prospects of the Company or any Subsidiary,
financial or otherwise. Dennis Hayes has not breached, nor does the Company have
any knowledge of any claim or threat that Dennis Hayes has breached, the 1988
Shareholder Agreement. Each Material Agreement is in full force and effect and,
to the best knowledge of the Company, no other party to such Material Agreement
is or threatens to be in default thereunder, and there is no basis for
termination thereunder. Each of the Material Agreements is enforceable by and
against the Company or its Subsidiaries in accordance with its terms, except as
affected by (i) the Bankruptcy Code or the Plan, or (ii) equitable principles or
the exercise of judicial discretion. The execution and delivery of this
Agreement, the Employment Agreement, the Warrant, the Voting Trust Agreement,
the Cap Call Notes and the Investors Shareholders' Agreement by the Company do
not, and the consummation of the Merger and the other transactions contemplated
hereby and thereby will not, violate or constitute an occurrence of default
under (A) any Material Agreement
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<PAGE> 15
or (B) any agreement, document or instrument to which the Company or any of its
Subsidiaries is a party or any of its assets or business is bound or affected
which violation or default would have a material adverse effect on the assets,
condition or prospects of the Company or any of its Subsidiaries, financial or
otherwise.
(b) The Company has not since September 30, 1995 (i) declared
or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock, or agreed to do any of the
foregoing, (ii) incurred any indebtedness for money borrowed or incurred any
other liabilities individually in excess of US $50,000 or in excess of US
$250,000 in the aggregate, other than obligations or liabilities of the Company
entered into (x) in the ordinary course of business and consistent with prior
practice or (y) in connection with the Bankruptcy Case of less than Six Million
U.S. Dollars (US $6,000,000) in the aggregate, (iii) made any loans or advances
to any person, or (iv) sold, exchanged or otherwise disposed of any of its
material assets or rights.
(c) The Company (i) is not a party to any contract with any
agency or instrumentality of the U.S. government (a "Government Agency") which
has been classified as to confidentiality by such Government Agency; (ii) does
not manufacture or sell any products which have been designed to transmit
encrypted voice, video or data traffic; (iii) does not manufacture or sell any
products or items which are controlled pursuant to the International Traffic in
Arms Regulations; (iv) does not conduct research or development activities for
any Government Agency; and (v) does not sell any products to any Government
Agency for which there is no readily available substitute which would perform
substantially the same function.
2.11 Registration Rights. Except for the registration rights
under the 1988 Shareholder Agreement (which rights will be terminated as of the
Redemption) and except as provided in the Investors Shareholders' Agreement, the
Company has not granted or agreed to grant any registration rights, including
piggy-back rights, to any person or entity.
2.12 Title to Property and Assets. Included in the Schedule of
Exceptions is a true, correct and complete list and brief description of all
real property and a list of all material items of personal property owned or
leased by the Company and each of its Subsidiaries. The Company and its
Subsidiaries own their property and assets free and clear of all mortgages,
liens, claims, loans and encumbrances, except such encumbrances and liens which
arise in the ordinary course of business (excluding liens for borrowed money, or
that may arise by reason of violations of law or breach of contract) and do not
materially impair the Company's or its Subsidiaries' ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company and each of its Subsidiaries are in compliance with such leases and, to
the best knowledge of the Company, holds a valid leasehold interest free of any
liens, claims or encumbrances, which liens, claims or encumbrances would be
materially adverse to the Company or such Subsidiary.
2.13 Voting Arrangements. The Company is not a party to, nor
to the best knowledge of the Company, are there any outstanding shareholder
agreements, voting trusts, proxies or other arrangements or understandings among
the shareholders of the Company relating to the voting of their respective
shares.
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<PAGE> 16
2.14 Financial Statements. The Company has delivered to each
Investor its audited financial statements (balance sheet and profit and loss
statement) at and for the fiscal year ended September 30, 1994, and its
unaudited financial statements (balance sheet, profit and loss statement) at and
for the year ended September 30, 1995 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and have been prepared on a
consistent basis throughout the periods indicated. The Company has also
delivered to the Investors true and complete copies of all reports prepared by
Arthur Andersen & Company and Deloitte & Touche with respect to the Company. The
Financial Statements fairly present the financial condition and operating
results of the Company and its Subsidiaries on a consolidated basis as of the
dates, and for the periods, indicated therein.
The Company and its Subsidiaries have incurred no liabilities or
obligations since September 30, 1995, whether absolute, accrued, contingent or
otherwise, except for (a) the liabilities and obligations of the Company
disclosed or provided for in the Plan, to the extent and in the amounts so
disclosed or provided for, and (b) liabilities incurred or accrued in the
regular and ordinary course of business which will not, either individually or
in the aggregate, have a material adverse effect on the assets, condition or
prospects of the Company or its Subsidiaries, financial or otherwise.
2.15 Changes. Since September 30, 1995, there has been no material
adverse change in the assets, liabilities (contingent or otherwise), condition,
operating results, business or prospects of the Company or any Subsidiary,
financial or otherwise.
2.16 Absence of Change or Event. Since September 30, 1995, the
Company and the Subsidiaries have conducted their respective businesses only in
the ordinary course and have not:
(a) when considered as a whole, incurred any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, in excess of US $50,000 individually or $250,000 in the aggregate, except
liabilities or obligations incurred in the ordinary course of business and
consistent with prior practice;
(b) mortgaged, pledged or subjected to lien, restriction or
any other encumbrance any of the material property, businesses or assets,
tangible or intangible, of the Company or any Subsidiary;
(c) (i) sold, transferred, leased to others or otherwise
disposed of any of its material assets (or committed to do any of the
foregoing), including the payment of any loans owed to any affiliate, except for
inventory sold to customers or returned to vendors and payments to any
non-affiliates on account of accounts payable or scheduled payments in respect
of indebtedness for money borrowed disclosed in the Financial Statements or in
the Schedule of Exceptions, in each case in the ordinary course of business and
consistent with prior practice, or (ii) canceled, waived, released or otherwise
compromised any debt or claim or any right of significant value;
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<PAGE> 17
(d) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or could have a material adverse effect on
the assets, condition or prospects of the Company and its Subsidiaries,
financial or otherwise;
(e) when considered as a whole, made or committed to make any
capital expenditures or capital additions or betterments in excess of an
aggregate of US $100,000, excluding individual items of less than $10,000 which
would not in the aggregate exceed $500,000;
(f) encountered any labor union organizing activity or had any
actual or threatened employee strikes, work stoppages, slow-downs or lock-outs;
(g) instituted any litigation, action or proceeding before any
court, governmental body or arbitration tribunal relating to it or its property,
except for litigation, actions or proceedings instituted in connection with the
Bankruptcy Case or in the ordinary course of business and consistent with prior
practice;
(h) declared or paid any dividend or made or agreed to make
any other payment or distribution in respect of its capital stock, or directly
or indirectly redeemed, purchased or otherwise acquired any of its capital stock
or agreed to do any of the foregoing;
(i) increased or agreed to increase the compensation of any
officer, director, employee, consultant, independent contractor, agency employee
or other agent of the Company or any Subsidiary, directly or indirectly,
including by means of any bonus, loan, retention plan, pension plan, profit
sharing, deferred compensation, savings, insurance, retirement, incentive,
severance, stock purchase or stock option plan or any other employee benefit
plan, compensation or remuneration plan, program or arrangement, except with
respect to ordinary or semi-annual increases to base pay consistent with past
practices;
(j) increased promotional or advertising expenditures except
in the ordinary course of business consistent with prior practice or otherwise
changed its policies or practices with respect thereto; or
(k) made or changed any election concerning taxes or tax
returns, changed an annual accounting period, adopted or changed any accounting
method, filed any amended return, entered into any closing agreement with
respect to taxes, settled any tax claim or assessment or surrendered any right
to claim a refund of taxes or obtained or entered into any tax ruling,
agreement, contract, understanding, arrangement or plan.
2.17 Proprietary Information. None of the Company, any Subsidiary
or Dennis Hayes has done anything to compromise the secrecy, confidentiality or
value of any of its trade secrets, know-how, inventions, prototypes, designs,
processes or technical data required to conduct its business as now conducted.
All of the officers, directors and employees of the Company and each of its
Subsidiaries have executed a non-disclosure/invention assignment agreements in
the forms attached to the Schedule of Exceptions. To the best knowledge of the
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<PAGE> 18
Company, no officer, director, employee or consultant of the Company or any
Subsidiary in connection with such employee's employment with the Company or any
Subsidiary, has violated the terms of any agreement with a previous employer. To
the best knowledge of the Company, none of the officers, directors, employees or
consultants of the Company or any Subsidiary are 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 would conflict with their obligation to use their best efforts to
promote the interests of the Company and its Subsidiaries or that would conflict
with the Company's business as conducted. It is currently not necessary nor will
it be necessary for the Company or any of its Subsidiaries to utilize, nor will
the Company or any of its Subsidiaries utilize, any inventions of any of its
directors, officers, employees or consultants (or people it currently intends to
hire) made or owned (by the directors, officers, employees or consultants or
their former employees) prior to their employment with or engagement by the
Company or any of its Subsidiaries in violation of any limitations or
restrictions to which any such director, officer, employee or consultant is a
party. To the best knowledge of the Company, none of the directors, officers,
employees or consultants (including without limitation former directors,
officers, employees and consultants) of the Company or any of its Subsidiaries
have taken, removed or made copies of any proprietary documentation, manuals,
products, materials, or any other tangible item from his or her previous
employer relating to the business as conducted or proposed to be conducted of
such previous employer.
2.18 Permits. The Company and its Subsidiaries have all franchises,
permits, licenses, orders of the Bankruptcy Court and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could materially and adversely affect the business, properties,
prospects, or financial condition of the Company or any of its Subsidiaries and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as currently planned to be conducted. Neither
the Company nor any of its Subsidiaries is in default in any material respect
under any of such franchises, permits, licenses, or other similar authority.
Neither the execution nor delivery of this Agreement, the Employment Agreement,
the Warrant, the Voting Trust Agreement, the Cap Call Notes or the Investors
Shareholders' Agreement, nor the consummation of the transactions contemplated
hereby and thereby will result in the termination of any material franchise,
permit, license or right held by the Company or any Subsidiary, and all such
franchises, permits, licenses and rights will remain vested in and inure to the
benefit of the Company and the Subsidiaries after the consummation of the
transactions contemplated by this Agreement.
2.19 Brokers or Finders. None of the Company, any Subsidiary or
Dennis Hayes has engaged any broker, investment banker or finder in connection
with the sale of the Securities.
2.20 Minute Books. The minute books of the Company and each
Subsidiary as provided to the Investors contain a complete record of all
meetings, consents and actions of the Board of Directors and the shareholders of
the Company and such Subsidiaries since the time of its incorporation,
accurately reflecting all such meetings, consents and actions in all material
respects.
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<PAGE> 19
2.21 Tax. As used in this Agreement, "taxes" or "tax liability"
means all taxes (including but not limited to income taxes, excise taxes, sales
taxes, property taxes, occupational or employment taxes, gross receipts taxes or
any other taxes), including applicable interest additions to tax and penalties.
(a) Each of the Company and its Subsidiaries has filed all
required tax returns, and has paid all taxes owed by any of the Company and its
Subsidiaries (whether or not shown on any tax return) with respect to any period
ending on or before the date of Closing or any period on or before the last day
of the taxable year of the Company's consolidated group in which the Closing
date occurs (determined with respect to such year by closing the books of the
Company and its Subsidiaries as of the end of the Closing date). Such returns
are correct and complete in all material respects.
(b) Each of the Company and its Subsidiaries has withheld and
paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party.
(c) Each of the Company and its Subsidiaries has adequately
accrued amounts with respect to the payment of all taxes that are not yet due
and payable and that relate to periods through the date hereof and the Closing
date.
(d) Neither the Company nor any of its Subsidiaries has been a
member of an affiliated group filing a consolidated federal income tax return,
or any consolidated or combined or unitary group filing a state tax return,
other than a group the common parent of which is the Company.
(e) None of the Company or its Subsidiaries has any liability
for taxes (i) as a transferee or successor, or (ii) imposed by contract which
would not be otherwise paid by the Company or such Subsidiary.
There are no unpaid foreign, federal, state or local taxes assessed
or asserted in writing in respect of any tax returns filed by the Company or any
of its Subsidiaries or claimed in writing to be due by the appropriate taxing
authority, except those, if any, currently being contested in good faith which
are disclosed on the Schedule of Exceptions. Neither the Company nor any of its
Subsidiaries is being audited or has ever been audited by the Internal Revenue
Service (the "IRS") or any other taxing authority. No request by the Company or
any of its Subsidiaries for ruling or determination letters relating to foreign,
federal, state or local taxes is pending with any taxing authority. Neither the
Company nor any of its Subsidiaries has agreed to or is required to make any
adjustment pursuant to Section 481(a) of the Code, by reason of a change in
accounting method initiated by it or required by law, and neither the Company
nor Dennis Hayes has any knowledge that the IRS has proposed or purported to
require any such adjustment or change in accounting method.
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<PAGE> 20
2.22 Environmental Matters.
(a) The Company and its Subsidiaries have complied in all
material respects with and are in material compliance with all foreign, federal,
state and local laws, statutes, rules, regulations, ordinances, permits and
licenses relating to the protection of the environment ("Environmental Laws")
applicable to their respective businesses, facilities and properties, and the
Company and its Subsidiaries have obtained all environmental licenses and
permits required for their respective businesses and operations, a list of which
is contained in the Schedule of Exceptions, and all of which are valid and in
full force and effect.
(b) Neither the Company nor any of its Subsidiaries has
received any notice or is subject to any claim or demand from any person or
governmental body concerning any emission, discharge, spill, leak, release,
threatened release, event, condition, circumstance, activity, practice or
incident of or relating to Hazardous Materials (as hereinafter defined) that (i)
may interfere with or prevent material compliance or continued compliance by the
Company or its Subsidiaries with any Environmental Law, (ii) may give rise to or
result in any liability of the Company or its Subsidiaries to any person or
governmental body for damage or injury to natural resources, wildlife, human
health or the environment, or (iii) could reasonably be expected to result in
the Company or its Subsidiaries incurring any expense, cost, loss or liability.
(c) The Company and its Subsidiaries are not, as a result of
the operation or condition of their business or assets, subject to any (i)
contingent liability in connection with any release or threatened release of
Hazardous Materials (as hereafter defined) into the environment whether on or
off any property or facility now or previously owned, leased or used by the
Company or its Subsidiaries (collectively, the "Company Properties") or (ii)
removal or remediation requirements under any Environmental Law, or any
reporting requirements related thereto.
(d) Neither the Company nor its Subsidiaries have been
notified that any of them are potentially liable or have received any requests
for information or other correspondence concerning any of the Company Properties
or any other site or facility, and are not otherwise aware that they are
considered potentially liable under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or any similar state law.
(e) No use, storage, handling, disposal, release, burial or
placement of hazardous or toxic substances, wastes, pollutants, or contaminants,
or petroleum, gas products, biomedical waste or asbestos-containing materials
(as any of such terms may be defined under federal, state or local law)
(hereinafter collectively referred to as "Hazardous Materials") by the Company
has occurred, except in accordance with law, on, in, at, or about the Company
Properties or to the knowledge of the Company, any other facility or site to
which Hazardous Materials from the Company or its Subsidiaries may have been
taken at any time in the past.
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<PAGE> 21
(f) To the best knowledge of the Company, there has been no
disposal, release, burial or placement of Hazardous Materials on any property
which (i) is currently owned or upon which the Company or its Subsidiaries
currently conduct activities or operations; or (ii) was owned by the Company, or
upon which the Company, its Subsidiaries, or any of their predecessors
previously conducted activities or operations which may result or has resulted
in contamination of, or beneath, any of the Company Properties.
(g) All of the above ground and underground storage tanks
located on Company and Subsidiary owned properties have been identified in the
Schedule of Exceptions.
(h) No lien has been asserted on any Company or Subsidiary
owned properties or to the knowledge of the Company any other Company Property
under Environmental Laws.
(i) Except as provided in the Schedule of Exceptions, no
audit, investigation or audit has been conducted by the Company, or to the
knowledge of the Company by any other person as to the environmental matters at
any of the Company Properties.
2.23 Insurance. The insurance policies held by the Company and
its Subsidiaries are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date of the Closing have been or
will be paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for compliance
with all requirements of law and all agreements to which the Company and each
Subsidiary is a party; are valid, outstanding and enforceable policies; provide
adequate insurance coverage for the assets and operations of the Company and
each Subsidiary; will remain in full force and effect through the Closing
without the payment of additional premiums; and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Schedule of Exceptions identifies all risks which have been
designated as being self insured. None of the Company and the Subsidiaries has
been refused any insurance with respect to the respective assets or operations
of the Company or any Subsidiary, nor has any such coverage been limited, by any
insurance carrier to which the Company or any Subsidiary has applied for any
such insurance or with which the Company or any Subsidiary has carried insurance
during the last five years.
2.24 Affiliate Interests.
(a) The Schedule of Exceptions sets forth all amounts in
excess of US $10,000 in the aggregate paid (or deemed for accounting purposes to
have been paid) and services provided by the Company or any Subsidiary to, or
received by the Company or any Subsidiary from, any affiliate of the Company,
any Subsidiary or any shareholder, officer or director of the Company or any
Subsidiary during the last fiscal year for products or services (including any
charge for administrative, purchasing, financial or other services) and all such
amounts currently owed by the Company or any Subsidiary to, or to the Company or
any Subsidiary by, any affiliate of the Company, any Subsidiary, or any
shareholder, officer or director of the Company or any Subsidiary.
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<PAGE> 22
(b) Each contract, agreement or arrangement between the
Company or any Subsidiary, on the one hand, and any affiliate of the Company or
any Subsidiary or any shareholder, officer or director of the Company or any
Subsidiary, on the other hand ("Affiliate Agreements") is described in the
Schedule of Exceptions. Except as disclosed in the Schedule of Exceptions, each
of the transactions described in the Schedule of Exceptions and each of the
Affiliate Agreements was entered into in the ordinary course of business and on
commercially reasonable terms and conditions.
(c) Except as set forth in the Schedule of Exceptions, no
shareholder, officer or director of the Company or any Subsidiary has any
material interest in any property, real or personal, tangible or intangible,
including without limitation, inventions, patents, trademarks, service marks or
trade names, used in or pertaining to the business of the Company or any
Subsidiary.
2.25 Customers, Suppliers, Distributors, Etc. No material supplier,
customer, distributor or sales representative of the Company or any Subsidiary
has canceled or otherwise terminated, or made any written threat to the Company
or any Subsidiary or to any of their affiliates to cancel or otherwise
terminate, for any reason, including the consummation of the transactions
contemplated hereby, its relationship with the Company or any Subsidiary, or has
at any time on or after September 30, 1995 decreased materially its services or
supplies to the Company or any Subsidiary in the case of any such supplier,
distributor or sales representative, or its usage of the services or products of
the Company or any Subsidiary in the case of any customer. To the best knowledge
of the Company, no such supplier, customer, distributor or sales representative
intends to cancel or otherwise terminate its relationship with the Company or
any Subsidiary or to decrease materially its services or supplies to the Company
or any Subsidiary or its usage of the services or products of the Company or any
Subsidiary, as the case may be.
2.26 Absence of Questionable Payments. Neither the Company or any
Subsidiary nor, to the best knowledge of the Company, any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Neither the
Company or any Subsidiary nor, to the best knowledge of the Company, any current
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary, has accepted or received any unlawful contributions,
payments, gifts, or expenditures. Each of the Company and the Subsidiaries that
is required to file reports pursuant to Section 12 or 15(d) of the Exchange Act
is in compliance with the provisions of Section 13(b) of the Exchange Act.
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<PAGE> 23
2.27 Products.
(a) The Schedule of Exceptions sets forth all claims asserted
or, to the best knowledge of the Company, threatened at any time during the past
five years against the Company or any Subsidiary in respect of personal injury,
wrongful death or property damage (excluding claims of property damage of less
than $10,000 individually or $250,000 in the aggregate) alleged to have resulted
from products or services provided by the Company or any Subsidiary, together
with a description of each such claim or action initiated with respect thereto
and the disposition thereof.
(b) The Company and the Subsidiaries have not experienced
product recall or warranty claims in excess of 5% of aggregate gross sales for
any of the past five (5) years.
2.28 Benefit Plans. Neither the Company nor any of its Subsidiaries
is in material default with respect to compliance with the provisions of any
employment, bonus, profit sharing, compensation, loan remuneration, employee
benefit, incentive, pension or retirement, stock purchase or stock option,
retention or employment agreement, plan, program or arrangement or any oral or
written contract or agreement with directors, officers, employees, independent
contractors, agency employees or unions, or consultants to which the Company or
any of its Subsidiaries is a party or is subject. The Company has delivered to
the Investors true, correct and complete copies of all such obligations (to the
extent they are in writing or written descriptions to the extent they are oral),
each of which is attached to the Schedule of Exceptions.
Neither the Company nor any of its Subsidiaries has, and never has
had, any union contracts or collective bargaining agreements with, or employee
benefit plans for collective bargaining groups or pursuant to collective
bargaining agreements, or any other obligations to, employee organizations or
groups relating to the Company's business or the Company's or its Subsidiaries'
employees. No collective bargaining agent has been certified as a representative
of any of the employees of the Company or any Subsidiary and no representation
campaign, strike, slowdown, picketing, work stoppage or other job action has
occurred or is threatened to occur with respect to any of the employees of the
Company or any of its Subsidiaries.
All plans are in full compliance with all applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and regulations
issued under the Code and ERISA.
All employee benefit plans which are identified as, and have been
represented to be, qualified plans under Section 401(a) or Section 401(k) with
exempt trusts under Section 501(a) of the Code are in full compliance with all
Code provisions and all applicable regulations with respect to Section 401(a)
and Section 401(k) qualified plans and Section 501(a) exempt trusts. Such plans
and their funding agreements and administrative forms and notices contain no
language and the administrators and fiduciaries of such plans have engaged in no
acts of commission or omission which may result in the disqualification of such
plans under Section 401(a) or Section 401(k) of the Code or trusts under Section
501(a) of the Code.
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<PAGE> 24
To the best knowledge of the Company, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, or
on behalf of, against or with respect to any of the employee benefit or
compensation plans, programs, arrangements or agreements maintained or
previously maintained by the Company or any of its Subsidiaries.
None of the Company, any of its Subsidiaries or any of the plans
subject to ERISA, nor any fiduciary or any employee of the Company or any of its
Subsidiaries involved in the administration of such plans has engaged in a
transaction subject to either a civil penalty pursuant to Section 409 or 502(i)
or Section 502(l) of ERISA or a tax pursuant to Section 4975 or 4976 of the Code
in connection with which the Company or any of its Subsidiaries has directly or
indirectly incurred, or may incur, liability.
All compensation and benefit plans, programs, arrangements and
agreements currently maintained by the Company or any of its Subsidiaries may be
amended or terminated by the Company or its applicable Subsidiary at any time
upon reasonable notice without reservation or penalty except for customary
"run-out" provisions. All terminated compensation and benefit plans, programs,
arrangements and agreements of the Company or any of its Subsidiaries were
terminated in accordance with the written provisions of the plan, program,
arrangement or agreement and of applicable provisions of the Code and ERISA. Any
employee pension benefit plan which was qualified under Code Section 401(a)
retained its qualified plan status at the time of termination of the plan.
To the extent that the Employee Stock Plan and any predecessor to
that plan holds or held securities of the Company or any Subsidiary as an
investment of the plan, the Employee Stock Plan, its sponsors, fiduciaries and
trustee have complied in all material respects with all requirements of the
federal or state securities laws, ERISA and the Code which apply to the
purchase, holding or sale of such securities by an employee pension benefit plan
which is intended to be a qualified plan under Section 401(a) of the Code. Such
compliance includes, but is not limited to, all applicable disclosure, reporting
and registration requirements; benefit distribution requirements; and voting
requirements.
2.29 Disclosure. None of (i) this Agreement (including the Schedule
of Exceptions); (ii) all other written statements made or delivered in
connection herewith, including the Confidential Disclosure Memorandum dated
November 17, 1995 (the "Disclosure Memorandum"); or (iii) the information
concerning the Company which is set forth in the "Disclosure Statement of Debtor
with Regard to Debtor's Amended and Restated Plan of Reorganization dated July
20, 1995," contain any untrue statement of a material fact or omit to state a
material fact necessary to make statements herein or therein not misleading. The
Disclosure Memorandum and the information contained therein shall not modify any
representation and warranty of the Company contained in this Agreement.
2.30 Business Relationships. The Company has not entered into any
legally binding agreement or undertaking with or made legally binding promises
to any Investor, as an inducement for such Investor to enter into this Agreement
or otherwise, which would obligate the Company (i) to conduct business with such
Investor in the future on any basis or (ii) to make any investment, directly or
indirectly, in any entity or facility.
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2B. Representations and Warranties of Dennis Hayes. Dennis Hayes hereby
represents and warrants to each Investor, except as set forth on the Schedule of
Exceptions, which exceptions shall specifically identify the Section to which it
applies and shall be deemed to be a representation and warranty as if made
hereunder, as follows:
2B.1 Title to Stock. Dennis Hayes owns, beneficially and of record,
15,216,974.2181 shares of Common Stock of the Company free and clear of all
liens, claims and encumbrances whatsoever. Dennis Hayes owns of record, in trust
for the Company, those shares of stock of the Subsidiaries as shown in the
Schedule of Exceptions, free and clear of all liens, claims and encumbrances
whatsoever.
2B.2 Authorization. Dennis Hayes has the capacity and authority to
execute and deliver this Agreement, the Investors Shareholders' Agreement, the
Employment Agreement, the Voting Trust Agreement and each other document,
instrument and agreement to be entered into by Mr. Hayes pursuant hereto or
thereto, to perform hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby without the necessity of any act or consent of
any other person whomsoever. This Agreement constitutes, and the Investors
Shareholders' Agreement, the Employment Agreement and the Voting Trust Agreement
will upon the execution and delivery thereof constitute, the valid and legally
binding obligations of Dennis Hayes, enforceable in accordance with their terms
except as affected by (i) bankruptcy or insolvency laws, and (ii) equitable
principles, public policy or the exercise of judicial discretion.
2B.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of Dennis Hayes is required to be obtained in
connection with Dennis Hayes' valid execution, delivery, or performance of this
Agreement, the Investors Shareholders' Agreement, the Voting Trust Agreement or
the Employment Agreement.
2B.4 Litigation. There is no Action pending or to the knowledge of
Dennis Hayes currently threatened against Dennis Hayes, his properties or assets
which questions the validity of this Agreement or the right of Dennis Hayes to
enter into this Agreement, or to consummate the transactions contemplated
hereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, or prospects of the Company
and its Subsidiaries taken as a whole, financial or otherwise, or any change in
the current equity ownership of the Company or any Subsidiary. By way of example
but not by way of limitation, there are no Actions pending or, to the best
knowledge of Dennis Hayes threatened (or any basis therefor known to Dennis
Hayes) relating to his prior employment, his use in connection with the
Company's business of any information, technology or techniques allegedly
proprietary to any of his former employers, clients or other parties, or his
obligations under any agreements with prior employers, clients or other parties
which would result in any material adverse change in the assets, condition, or
prospects of the Company and its Subsidiaries taken as whole, financial or
otherwise. Dennis Hayes is not a party or subject to the provisions of any
settlement agreement, order, writ, injunction, judgment or decree of any court
or government
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<PAGE> 26
agency or instrumentality, other than orders of the Bankruptcy Court in the
Bankruptcy Case, true and complete copies of which orders have been furnished to
the Investors. There is no Action by Dennis Hayes currently pending or which
Dennis Hayes intends to initiate.
2B.5 Voting Arrangements and Other Ownership Interests. Except for
the 1988 Shareholder Agreement and the Investors Shareholders' Agreement and
Voting Trust Agreement to be entered into in connection herewith, Dennis Hayes
is not a party to, nor to the best knowledge of Dennis Hayes, are there any
outstanding shareholder agreements, voting trusts, proxies or other arrangements
or understandings among the shareholders of the Company relating to the voting
of their respective shares. Dennis Hayes has not breached, nor is he aware of
any threat that he has breached, the 1988 Shareholder Agreement. Except as set
forth in Section 2.3 of the Schedule of Exceptions, neither Dennis Hayes, Mina
Hayes nor any affiliate of Dennis Hayes presently owns or controls, directly or
indirectly, any interest in any other corporation, association, partnership or
other business entity that conducts any material business with or has any
material business relationship with the Company or any of its Subsidiaries.
2B.6 Company Representations. To the best knowledge of Dennis
Hayes, each of the representations and warranties of the Company contained in
Article 2A hereof is true and correct.
3. Representations and Warranties of Each Investor. Each Investor
hereby severally and not jointly represents and warrants with respect to itself
that except as set forth in such Investor's Schedule of Exceptions delivered to
the Company simultaneously herewith (provided that the representation and
warranty in Section 3.5 is made as of the date of Closing only):
3.1 Authorization. Such Investor has the capacity and authority to
execute and deliver this Agreement, the Investors Shareholders' Agreement and
the other documents, instruments and agreements to be entered into pursuant
hereto by such Investor, to perform hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby without the necessity of any
act or consent of any other person whomsoever (other than the expiration or
early termination of the HSR Act waiting period). All corporate action on the
part of such Investor, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement and the Investors
Shareholders' Agreement and the performance of all obligations of such Investor
hereunder and thereunder has been taken or will be taken on or prior to the
Closing. This Agreement constitutes, and the Investor Shareholders' Agreement
will on the date of Closing constitute such Investor's valid and legally binding
obligation, enforceable in accordance with its terms except as affected by (i)
bankruptcy or insolvency laws, and (ii) equitable principles, public policy or
the exercise of judicial discretion. Each Investor hereby represents that the
person executing this Agreement on its behalf is duly authorized to do so.
3.2 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of such Investor is required in connection
with such Investor's valid execution, delivery, or performance of this Agreement
of the Investors Shareholders' Agreement except the Order in Aid of Confirmation
of the Plan
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<PAGE> 27
and as required pursuant to the HSR Act, and except for any notices of sale
required to be filed with the SEC under Regulation D of the Securities Act, or
such post-closing filings as may be required under applicable state securities
laws, which will be timely filed within the applicable periods therefor.
3.3 Litigation. There is no Action pending or currently threatened
against such Investor or, to the best knowledge of the Investor, against any
officer, director or employee of such Investor in connection with such
officer's, director's or employee's relationship with, or actions taken on
behalf of such Investor which questions the validity of this Agreement or the
right of such Investor to enter into this Agreement, or to consummate the
transactions contemplated hereby.
3.4 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor confirms,
that the Securities to be received by such Investor hereunder will be acquired
for investment for such Investor's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, such Investor
purchasing Securities hereunder further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities, or any portion thereof. Each Investor
that is an entity represents that it has full power and authority to enter into
this Agreement.
3.5 Disclosure of Information. Such Investor believes it has
received all the information it has requested from the Company for deciding
whether to purchase the Securities. Such Investor further represents that it has
had an opportunity to ask questions and receive answers and to obtain copies of
any documents or other instruments from the Company regarding the terms and
conditions of the offering of the Securities and is not relying on the due
diligence or financial or legal representation of any other Investor. The
foregoing does not modify the Company's and Dennis Hayes' representations and
warranties set forth herein or the Investor's right to rely thereon.
3.6 Investment Experience. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
solely for the purpose of acquiring the Securities.
3.7 Accredited Investor. Such Investor is an "Accredited Investor"
as defined in Regulation D of the Securities Act.
3.8 Brokers or Finders. Such Investor has not engaged any broker,
investment banker or finder in connection with the purchase of the Securities.
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<PAGE> 28
3.9 Organization and Capitalization. Such Investor is and will be
at the Effective Time a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. To the extent
applicable to each Investor, each Investor hereby represents and warrants that
its Investor Sub will be at Closing a newly formed corporation, in good standing
under the laws of the State of Georgia with no operating history and will have
no obligations, liabilities or encumbrances of any kind or nature whatsoever,
other than its obligations under this Agreement.
3.10 Business Relationships. Such Investor has no legally binding
agreement or understanding with the Company (i) which obligates the Company to
conduct business with such Investor in the future on any basis, or (ii) to make
any investment, directly or indirectly, in any entity or facility.
4. Conditions of Each Investor's Obligations at Closing. The
obligations of each Investor under Section 1 of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions:
(a) the entry of the Order in Aid of Confirmation; and (b) the satisfaction or
waiver, as determined by the Investors purchasing a majority of the Preferred
Shares (which determination shall be at the sole and absolute discretion of such
Investors and may be made without regard to the interests of any other
Investor), of each of the conditions set forth below, the waiver of which shall
be effective if waived in writing by Investors purchasing a majority of the
Preferred Shares:
4.1 Expiration of Bankruptcy Appeal. The Effective Date will have
passed such that the Order and the Order in Aid of Confirmation will have become
final, subject only to the provisions of Section 1144 of the Bankruptcy Code. As
used herein, the Order and the Order in Aid of Confirmation shall be deemed
"final" when (i) the time to appeal, petition for certiorari or to seek
reargument or rehearing has expired and no appeal, reargument, certiorari
petition or rehearing is pending; or (ii) if any appeal, reargument, writ of
certiorari or rehearing thereof has been sought, the Order or the Order in Aid
of Confirmation has been affirmed by the highest court to which the Order or the
Order in Aid of Confirmation was appealed or from which the reargument,
certiorari, or rehearing was sought, and the time to take any further appeal or
to seek certiorari or further reargument or rehearing has expired. The Order in
Aid of Confirmation shall be in form and substance satisfactory to the Investors
purchasing a majority of the Preferred Shares in such Investors' sole
discretion.
4.2 Representations and Warranties. The representations and
warranties of the Company and Dennis Hayes contained in Section 2 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.
4.3 Performance. The Company and Dennis Hayes shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it or him on or
before the Closing. The entering into, delivery and performance of this
Agreement by the Company shall have been duly authorized by all necessary
corporate action.
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<PAGE> 29
4.4 Compliance Certificate. At the Closing, Dennis Hayes as the
President of the Company, and personally shall deliver to each Investor a
certificate dated as of the Closing certifying that the conditions set forth in
Sections 4.1, 4.2 and 4.3 have been fulfilled as of the Closing, provided that
Dennis Hayes' personal certificate shall apply to his representations and
warranties and the performance of his covenants only.
4.5 Regulatory Approvals. The Company and the Investors shall have
filed all required reports and satisfied all requests for additional information
pursuant to the HSR Act, and all applicable waiting periods shall have expired
or been terminated.
4.6 No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement, the Investors Shareholders' Agreement, the
Warrant, the Voting Trust Agreement, the Employment Agreement, the Merger or the
consummation of the transactions contemplated hereby or thereby, or which is
related to or arises out of the business of the Company or any of its
Subsidiaries, if such action, proceeding, investigation, regulation or
legislation, in the reasonable judgment of the Investors purchasing a majority
of the Preferred Shares would make it inadvisable to consummate such
transactions.
4.7 Investor Performance. With respect to each Investor, each other
Investor shall have performed and complied with all agreements and obligations
contained in this Agreement that are required to be performed and complied with
by it on or before Closing and its representations and warranties 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.
4.8 Opinions.
(a) The Company shall have delivered the opinions of Parker,
Johnson, Cook & Dunlevie with respect to the transactions contemplated by this
Agreement, and Lamberth, Bonapfel, Cifelli, Willson & Stokes, P.A., with respect
to the Bankruptcy Case, in each case in form and substance reasonably
satisfactory to the Investors purchasing a majority of the Preferred Shares.
(b) Dennis Hayes shall have delivered the opinion of Greene,
Buckley, Jones & McQueen in form and substance reasonably satisfactory to the
Investors purchasing a majority of the Preferred Shares.
4.9 Completed Financing. All conditions to the lender's (or
lenders') obligations to make loans to the Company under the definitive
agreements between the Company and the CIT Group/Credit Finance, Inc. in respect
of new debt financing in an amount available to be borrowed of up to $70 million
(the "New Debt Financing") shall have been satisfied or waived (other than any
such conditions related solely to receipt of evidence of satisfaction or waiver
of the conditions to the obligations of the parties to this Agreement to
consummate the transactions contemplated hereby).
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<PAGE> 30
4.10 Closing Deliveries. The Company and Dennis Hayes shall have
delivered to the Investors each of the certificates, documents and agreements
required to be delivered by such party hereunder.
4.11 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto and deliverable by the Company, its Subsidiaries and
Dennis Hayes at the Closing shall be reasonably satisfactory in form and
substance to counsel to the Investors purchasing a majority of the Preferred
Shares, and such counsel shall have received all such counterpart originals and
certified or other copies of such documents as they may reasonably request.
5. Conditions of the Company's and Dennis Hayes' Obligations at
Closing. The obligations of the Company and Dennis Hayes under Section 1 of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions by each Investor:
5.1 Expiration of Bankruptcy Appeal. The Effective Date will have
passed such that the Order and the Order in Aid of Confirmation will have become
final, subject only to the provisions of Section 1144 of the Bankruptcy Code. As
used herein, the Order and the Order in Aid of Confirmation shall be deemed
"final" when (i) the time to appeal, petition for certiorari or to seek
reargument or rehearing has expired and no appeal, reargument, certiorari
petition or rehearing is pending; or (ii) if any appeal, reargument, writ of
certiorari or rehearing thereof has been sought, the Order or the Order in Aid
of Confirmation has been affirmed by the highest court to which the Order or the
Order in Aid of Confirmation was appealed or from which the reargument,
certiorari, or rehearing was sought, and the time to take any further appeal or
to seek certiorari or further reargument or rehearing has expired. The Order in
Aid of Confirmation shall be in form and substance reasonably satisfactory to
the Company.
5.2 Representations and Warranties. The representations and
warranties of the Investors contained in Section 3 hereof shall be true on and
as of the date of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.3 Capitalization of Subsidiaries. Rinzai shall have duly formed
and capitalized Financial Sub in the amount and as specified in Section 1.1(e)
hereof.
5.4 Regulatory Approvals. The Company and the Investors shall have
filed all required reports and satisfied all requests for additional information
pursuant to the HSR Act and all applicable waiting periods shall have expired or
terminated.
5.5 Closing Deliveries. Each of the Investors shall have delivered
to the Company each of the certificates, documents and agreements required to be
delivered by such party hereunder.
5.6 Proceedings and Documentation. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto
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<PAGE> 31
and deliverable by the Investors or the Investor Subs shall be reasonably
satisfactory in form and substance to counsel to the Company, and such counsel
shall have received all such counterpart originals and certified or other copies
of such documents as they may reasonably request.
5.7 Investor Opinions. Each of the Investors shall have delivered
the opinion of counsel to such Investor with respect to the transactions
contemplated by this Agreement in form and substance reasonably satisfactory to
the Company.
6. Covenants.
6.1 Conduct of Business Prior to the Closing Date. The Company
agrees that, between the date hereof and the date of Closing:
(a) Except as contemplated by this Agreement or permitted by
written consent of the Investors purchasing a majority of the Preferred Shares,
the Company and each Subsidiary shall operate their respective businesses only
in the ordinary course consistent with prior practice and not to:
(i) take any action of the nature referred to in
Section 2.16, except as permitted therein;
(ii) change the Company's or any Subsidiary's banking or
safe deposit arrangements; or
(iii) change the Company's or any Subsidiary's certificate
or articles of incorporation or bylaws.
(b) The Company shall preserve the business organization of
the Company and each Subsidiary intact and shall use its best efforts to keep
available to the Company the services of the present officers and employees of
the Company and each Subsidiary and to preserve for the Company the goodwill of
the Company's and each Subsidiary's suppliers, customers, distributors, sales
representatives and others having business relations with the Company or any
Subsidiary.
(c) The Company and each Subsidiary shall maintain in force
the insurance policies referred to in Section 2.23 or insurance policies
providing the same or substantially similar coverage; provided, however, that
the Company will notify the Investors prior to the expiration of any of such
insurance policies.
(d) Except as contemplated by this Agreement or permitted by
written consent of the Investors, no plan, fund, or arrangement described in
Section 2.28 has been or will be:
(i) terminated by the Company or any Subsidiary;
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<PAGE> 32
(ii) amended (except as expressly required by law) in any
manner which would directly or indirectly increase the benefits accrued, or
which may be accrued, by any participant thereunder; or
(iii) amended in any manner which would materially
increase the cost to the Company or any Subsidiary of maintaining such plan,
fund, or arrangement.
6.2 Employment Agreement. At the Closing, Dennis Hayes and the
Company shall enter into an Employment Agreement in the form attached hereto as
Exhibit "F" (the "Employment Agreement").
6.3 Consents. The Company and Dennis Hayes agree to take all
actions and effect all filings necessary to obtain all licenses, consents,
approvals and authorizations of all third parties and governmental bodies
necessary for it to consummate the Merger and the other transactions
contemplated by this Agreement.
6.4 Chief Executive and Chief Financial Officers. During the period
prior to the Closing, the Company agrees not to appoint, or enter into any
agreement or arrangement to appoint, a new Chief Executive Officer or Chief
Financial Officer without first obtaining the prior written consent of the
Investors purchasing a majority of the Preferred Shares, which consent may be
withheld by any such party in exercise of its sole and absolute discretion.
6.5 Examination of Records. Subject to any applicable court orders,
during the period prior to the Closing, the Company shall allow the Investors,
their respective counsel and other representatives reasonable access during
normal business hours to all books, records, files, documents, assets,
properties, contracts and agreements of the Company and its Subsidiaries and
shall furnish Investors and their respective counsel and representatives with
all available information concerning the affairs of the Company and its
Subsidiaries which is reasonably requested or as necessary to allow the Investor
to make (i) the representation and warranty contained in Section 3.5 hereof, or
(ii) the determination that the condition set forth in Section 4.9 has been
satisfied.
6.6 Delivery of Interim Financial Statements. During the period
prior to the Closing, the Company shall promptly deliver to each Investor all
regularly prepared unaudited financial statements of the Company, in format
historically utilized internally, as soon as available.
6.7 Notification of Certain Matters. Promptly after receipt of
notice thereof, each of the Company, Dennis Hayes, and the Investors shall
advise the other parties hereto of (i) the occurrence or failure to occur of any
event, the occurrence or failure of which is reasonably believed by such party
to cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect any time from the
date hereof through the Closing Date; and (ii) any material failure of such
party to comply with or satisfy any covenant or condition to be complied with or
satisfied by him or it hereunder prior to the Closing; and such party shall use
his or its commercially reasonably efforts to remedy the same.
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<PAGE> 33
6.8 Debt Financing. The Company agrees, and Dennis Hayes as
President of the Company agrees, to cause the Company to use its reasonable best
efforts to obtain funding of the new debt financing referred to in Section 4.9
hereof.
6.9 Redemption of Common Stock of Melita Easters Hayes. All Common
Stock of the Company owned by Melita Easters Hayes shall be redeemed by the
Company simultaneously with the Closing in accordance with and as provided in
the Plan and the Election made by her pursuant thereto (the "Redemption").
7. Indemnification.
7.1 Indemnification by the Company. The Company hereby agrees to
defend, indemnify and hold harmless each Investor and their respective
successors, assigns and affiliates (collectively, the "Investor Indemnitees")
from and against any and all losses (including, without limitation, any
diminution in value of the Investor's investment in the Company, based on the
valuation of the Company as of the date of Closing of US $71,400,000),
deficiencies, liabilities, damages, assessments, judgments, costs and expenses,
including attorneys' fees (both those incurred in connection with the defense or
prosecution of the indemnifiable claim and those incurred in connection with the
enforcement of this provision) (collectively, "Investor Losses"), caused by,
resulting from or arising out of:
(a) (i) breaches of any representation or warranty on the part
of the Company herein or in the Schedule of Exceptions or any Schedule or
Exhibit hereto or in any other written statement, certificate or other
instrument delivered by it pursuant hereto; and (ii) failures by the Company to
perform or otherwise fulfill any of its undertakings or other agreements
(including, without limitation, the Investors Shareholders' Agreement, the Cap
Call Notes, the Voting Trust Agreement and the Warrant) or obligations
hereunder;
(b) any and all actions, suits, proceeding, claims or demands
arising out of, or otherwise relating to, the Employee Stock Plan in respect of
the period prior to the ninetieth (90th) day following the date of Closing;
(c) any and all actions, suits, proceedings, claims or demands
arising out of, or otherwise relating to, brokers or finders fees sought by The
Robinson-Humphrey Company, Inc.;
(d) any and all actions, suits, proceedings, claims or demands
relating to Gary J. Franza, John C. Stuckey and Mikail Drabkin (the "Employee
Actions"); and
(e) any and all actions, suits, proceedings, claims or demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted by a third party naming an Investor
Indemnitee as a party to an action or otherwise making a claim or seeking
recovery from an Investor Indemnitee in respect of which an Investor Indemnitee
proposes to demand indemnification (a "Third Party Investor Indemnified
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<PAGE> 34
Claim") from the Company, such Investor Indemnitee shall notify the Company,
provided further, however, that the failure to so notify the Company shall not
reduce or affect the obligations of the Company with respect thereto except to
the extent that the Company is materially prejudiced thereby. Subject to Section
7.6 of this Agreement and to rights of or duties to any insurer or other third
person having liability therefor, the Company shall have the right promptly upon
receipt of such notice to assume the control and defense of, and to compromise
or settle, any such Third Party Investor Indemnified Claims, unless the Investor
Indemnitee notifies the Company that such Investor Indemnitee has determined, in
the exercise of its reasonable discretion, that a conflict of interest makes
separate representation by such Investor Indemnitee's own counsel advisable. If
the Investor Indemnitee gives the foregoing notice, it will have the right,
subject to Section 7.6 hereof, to assume the control and defense of and to
compromise and settle any such Third Party Investor Indemnified Claim. The
Company shall be responsible for the costs and expenses of such defense.
7.2 Indemnification by Dennis Hayes. Dennis Hayes hereby agrees to
defend, indemnify and hold harmless each Investor Indemnitee from and against
any and all Investor Losses, caused by, resulting from or arising out of:
(a) (i) breaches of any representation or warranty on the part
of Dennis Hayes herein or in the Schedule of Exceptions or any Schedule or
Exhibit hereto or in any other written statement, certificate or other
instrument delivered by him pursuant hereto; and (ii) failures by Dennis Hayes
to perform or otherwise fulfill any of his undertakings or other agreements
(including, without limitation, the Investors Shareholders' Agreement, the Cap
Call Notes, the Voting Trust Agreement and the Employment Agreement) or
obligations hereunder; or
(b) any and all actions, suits, proceedings, claims or
demands, incident to any of the foregoing or such indemnification;
provided, however, that if any Third Party Investor Indemnified Claim shall be
asserted in respect of which an Investor Indemnitee proposes to demand
indemnification from Dennis Hayes, such Investor Indemnitee shall notify Dennis
Hayes of such Third Party Investor Indemnified Claim, provided further, however,
that the failure to so notify Dennis Hayes shall not reduce or affect the
obligations of Dennis Hayes with respect thereto except to the extent that
Dennis Hayes is materially prejudiced thereby. Subject to Section 7.6 of this
Agreement and to rights of or duties to any insurer or other third person having
liability therefor, Dennis Hayes shall have the right promptly upon receipt of
such notice to assume the control and defense of, and to compromise or settle,
any such Third Party Investor Indemnified Claims, unless the Investor Indemnitee
notifies Dennis Hayes that such Investor Indemnitee has determined, in the
exercise of its reasonable discretion, that a conflict of interest makes
separate representation by such Investor Indemnitee's own counsel advisable. If
the Investor Indemnitee gives the foregoing notice, it will have the right,
subject to Section 7.6 hereof, to assume the control and defense of and to
compromise and settle any such Third Party Investor Indemnified Claim. Dennis
Hayes shall be responsible for the costs and expenses of such defense on a pro
rata basis.
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<PAGE> 35
7.3 Indemnification by the Investors. Each Investor hereby
respectively and severally, and not jointly, agrees to defend, indemnify and
hold harmless the Company and its respective successors, assigns and affiliates
and Dennis Hayes (collectively, the "Company Indemnitees") from and against any
and all losses, deficiencies, liabilities, damages, assessments, judgments,
costs and expenses, including attorneys' fees (both those incurred in connection
with the defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this provision) (collectively, "Company
Losses"), caused by, resulting from or arising out of:
(a) (i) breaches of any representation or warranty on the part
of such Investor herein or in any Schedule or Exhibit hereto or in any other
written statement, certificate or other instrument delivered by such Investor
pursuant hereto; and (ii) failures by such Investor to perform or otherwise
fulfill any of its undertakings or other agreements (including, without
limitation, the Investors Shareholders' Agreement and the Cap Call Notes) or
obligations hereunder; and
(b) any and all actions, suits, proceedings, claims or demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted by a third party naming a Company
Indemnitee as a party to an action or otherwise making a claim or seeking
recovery from a Company Indemnitee in respect of which a Company Indemnitee
proposes to demand indemnification from an Investor (a "Third Party Company
Indemnified Claim"), such Company Indemnitee shall notify the Investor thereof,
provided further, however, that the failure to so notify the Investor shall not
reduce or affect the obligations of such Investor with respect thereto except to
the extent that such Investor is materially prejudiced thereby. Subject to
Section 7.6 of this Agreement and to rights of or duties to any insurer or other
third person having liability therefor, such Investor shall have the right
promptly upon receipt of such notice to assume the control and defense of, and
to compromise or settle, any such Third Party Company Indemnified Claims, unless
the Company Indemnitee notifies such Investor that such Company Indemnitee has
determined, in the exercise of its reasonable discretion, that a conflict of
interest makes separate representation by such Company Indemnitee's own counsel
advisable. If the Company Indemnitee gives the foregoing notice, it shall have
the right, subject to Section 7.6 hereof, to assume the control and defense of
and to compromise and settle any such Third Party Company Indemnified Claim. The
indemnifying Investor shall be responsible for the costs and expense of such
defense.
7.4 Certain Limitations.
(a) The obligations of the Company to indemnify Investor
Indemnitees under Section 7.1(a)(i) of this Article shall accrue only if the
aggregate Investor Losses for all matters indemnifiable under this Article 7
exceed Five Hundred Thousand Dollars (US $500,000), and then the Company shall
be liable for all such Investor Losses, subject to the maximum amount described
below; provided, however, that there shall be no such limitation on Investor
Losses arising from a breach of any of the representations or warranties in
Sections 2.2, 2.4, 2.5 and 2.19 hereof. The obligations of the Company to
indemnify the Investors under this Article 7 shall not exceed the aggregate of
Seventeen Million Five Hundred Thousand U.S.
- 35 -
<PAGE> 36
Dollars (US $17,500,000), plus fifty percent (50%) of the amount of all advances
made by the Investors which are converted into capital stock of the Surviving
Corporation as contemplated by the Investors Shareholders' Agreement, plus fifty
percent (50%) of the aggregate of all amounts paid by Rinzai upon any exercise
of the Warrant; provided, however, that there shall be no such limitation with
respect to a breach of Sections 2.2, 2.4, 2.5 and 2.19 hereof. Notwithstanding
the foregoing provisions of this subsection 7.5(a), there shall be no limitation
on the obligations of the Company to indemnify Investor Indemnitees against
Investor Losses arising from Third Party Investor Indemnified Claims.
(b) The obligations of Dennis Hayes to indemnify Investor
Indemnitees under Section 7.2(a)(i) of this Article 7 (other than in respect of
Third Party Investor Indemnified Claims) shall accrue only if the aggregate
Investor Losses for all matters indemnifiable under this Article 7 exceed Two
Million Five Hundred Thousand Dollars (US $2,500,000) (the "Minimum Amount") and
then Dennis Hayes shall be liable for all such Investor Losses, subject to the
maximum amount described below; provided, however, that there shall be no such
requirement to exceed the Minimum Amount on Investor Losses arising from a
breach of any of the representations or warranties in Sections 2B.1, 2B.2, 2B.4,
2B.5 and 2B.6 (to the extent such breach relates to Section 2.2, 2.4, 2.5 or
2.19). The obligations of Dennis Hayes to make a payment to an Investor
Indemnitee pursuant to Section 7.2 of this Article 7 in respect of any Third
Party Investor Indemnified Claims which relate to a breach of Section 2B.6 shall
arise only when such Investor Indemnitee has diligently sought payment from the
Company and determined in good faith that the Company has insufficient assets to
satisfy such Third Party Investor Indemnified Claim; provided, however, that no
such Investor Indemnitee shall be required to seek to recover payment from the
Company in the event that the Company is subject to Chapter 7 or Chapter 11 of
the Bankruptcy Code. The obligations of Dennis Hayes to indemnify the Investors
under this Article 7 shall not exceed the aggregate of Three Million Five
Hundred Thousand Dollars (US $3,500,000).
(c) The obligations of each Investor to indemnify the Company
Indemnitees under Section 7.3(a)(i) of this Article 7 shall accrue only if the
aggregate of its respective Company Losses of the Company Indemnitees for all
matters indemnifiable under this Article 7 exceed Five Hundred Thousand Dollars
(US $500,000) and then such Investor shall be liable for all such Company
Losses, subject to the maximum amount described below; provided, however, that
there shall be no such limitation on Company Losses arising from a breach of any
of its representations and warranties in Sections 3.1, 3.4, 3.6, 3.7, 3.8 and
3.9 hereof. The obligations of each Investor to indemnify the Company
Indemnitees under this Article 7 shall not exceed one-half (1/2) of the purchase
price of the Preferred Shares purchased by it pursuant to Section 1.3(a), or, in
the case of Rinzai only, one-half (1/2) of its capital contribution to its
Investor Sub pursuant to Section 1.1(e).
7.5 Waiver. Dennis Hayes hereby irrevocably waives any right
against the Company or the Surviving Corporation of subrogation, contribution,
indemnity or reimbursement to which he may be entitled in any capacity in
respect of his payment of Investor Losses pursuant to this Article 7.
7.6 Defense of Certain Claims. In any Third Party Investor
Indemnified Claims or any Third Party Company Indemnified Claims defended by the
Company, Dennis Hayes or an Investor pursuant to this Agreement (i) the party
not controlling the defense of such claim shall have the right to be represented
by counsel and accountants, at such person's own
- 36 -
<PAGE> 37
expense, (ii) the party controlling the defense of such claim shall keep the
other party fully informed of the status of such claim at all stages thereof,
whether or not such other party is represented by its own counsel, (iii) the
Company, Dennis Hayes or the Investor, as applicable, shall make available to
the indemnified party and its accountants and legal representatives all books
and records of the Company, Dennis Hayes or the Investor relating to such Third
Party Investor Indemnified Claims or Third Party Company Indemnified Claims, as
applicable, (iv) the parties shall render to each other such assistance as may
reasonably be requested in order to insure the proper and adequate defense of
such Third Party Investor Indemnified Claims or Third Party Company Indemnified
Claims, as applicable, and (v) the party controlling the defense of such claim
shall not make any settlement or claim without the written consent of the other
party, which consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be unreasonable for an indemnified
party to withhold consent to a settlement that does not provide for the complete
and unconditional release of such indemnified party with respect to such Third
Party Investor Indemnified Claims or Third Party Company Indemnified Claims, as
applicable.
7.7 No Impairment of Investors' Rights. Any examination or
inspection by audit of the properties, financial condition or other matters of
the Company and its Subsidiaries or their respective businesses or of Dennis
Hayes conducted by any Investor or their respective affiliates or
representatives prior to the Closing shall in no way limit, affect or impair the
ability of any Investor to rely upon the representations, warranties, covenants
and obligations of the Company and Dennis Hayes set forth in this Agreement or
otherwise limit the indemnification obligations set forth in this Article 7.
8. Miscellaneous.
8.1 Survival of Warranties. The warranties and representations of
the Company, Dennis Hayes, and the Investors contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing for a period beginning on the date of Closing and expiring on the
earlier of (i) two (2) years from the date of Closing and (ii) the date of the
closing of the Company's initial public offering of its securities pursuant to a
Registration Statement declared effective by the Securities and Exchange
Commission, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company; provided,
however, that notwithstanding the foregoing, the representations and warranties
of Dennis Hayes and the Company set forth in Sections 2.2, 2.4, 2.5, 2.19, 2.21,
2.28, 2B.1, 2B.2, 2B.5 and 2B.6 (to the extent it relates to Sections 2.2, 2.4,
2.5, 2.19, 2.21 and 2.28) and their obligations to indemnify the Investor
Indemnitees pursuant to Article 7 hereof with respect to a breach thereof or
otherwise shall survive the Closing indefinitely; provided, further, that any
representation or warranty that is the subject of an outstanding written
indemnification claim on the date it would otherwise expire shall survive beyond
such date for purposes of such claim until such claim is finally resolved.
8.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. 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,
- 37 -
<PAGE> 38
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. The rights and obligations of the parties
hereto may not be assigned without the express written consent of the other
parties hereto; provided however, that each Investor may assign its respective
rights and obligations to a wholly owned direct or indirect subsidiary of such
Investor, so long as such assignment is not made at a time which would cause a
delay in or interfere with the Closing or cause a breach of this Agreement; and
provided further that no assignment by an Investor shall relieve such Investor
from or diminish or affect such Investor's obligations hereunder.
8.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Georgia without reference to its
conflicts of law principles. Any action brought hereunder shall be heard by a
court sitting in the County of Fulton, State of Georgia.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, including counterparts transmitted by telecopier or telefax, all
of which shall be considered one and the same agreement. Facsimile copies with
signatures of the parties to this Agreement, or their duly authorized
representatives, shall be legally binding and enforceable. All such facsimile
copies are declared as originals and accordingly admissible in any jurisdiction
or tribunal having jurisdiction over any matter relating to this Agreement.
8.5 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.
8.6 Notices. All notices, requests and other communications that
any party is required or elects to give hereunder shall be in writing and shall
be deemed to have been given (a) upon personal delivery thereof, including by
overnight courier service, five (5) days after delivery to the courier or, if
earlier, upon delivery against a signed receipt therefor or (b) upon
transmission by facsimile or telecopier, which transmission is confirmed, in
either case addressed to the party to be notified at the address set forth below
or at such other address as such party shall have notified the other parties
hereto, by notice given in conformity with this Section 8.6:
(a) If to the Company:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners Circle East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6840
- 38 -
<PAGE> 39
with a required copy to:
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Attention: G. Donald Johnson, Esq.
Telecopy: (404) 888-7490
(b) If to Acma or Rinzai:
Acma Limited
17 Jurong Port Road
Singapore 619092
Attention: President
Telecopy: 011 65 2640125
If to Guthrie GTS Limited or Lao Hotel (H.K.) Limited:
Guthrie GTS Limited
115 Amoy Street # 02-00
Singapore 069935
Attention: Mr. Arthur Tan
Telecopy: 011 65 466-2555
If to GK Goh Holdings Limited or Saliendra Pte Ltd.:
GK Goh Holdings Limited
50 Raffles Place
#33-00 Shell Tower
Singapore 048623
Attention: Mr. Lee Teong Sang
Telecopy: 011 65 538-6189
If to S.P. Quek Investments:
c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Attention: President
Telecopy: 011 65 264-0125
with a required copy in any such case to:
Jackson Tufts Cole & Black, LLP
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Richard Scudellari, Esq.
Telecopy: (408) 998-4889
(c) If to Kaifa Technology (H.K.) Limited:
- 39 -
<PAGE> 40
Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Mills Industrial Building
31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Attention: Mr. Tam Man Chi, President
Telecopy: (852) 2480-4723
with a required copy to:
Vivien Chan & Company
15/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Attention: Mr. George Riberio
Telecopy: (852) 2845-9160
(d) If to RPH: If to Wong's:
<TABLE>
<S> <C>
Rolling Profits Holdings, Ltd. Wong's International (Holdings) Limited
Arion Commercial Center Wong's Industrial Centre
Third Floor, Room 304 180 Wai Yip Street
2-12 Queen's Road West Kwun Tong
Hong Kong Kowloon
Attention: President Hong Kong
Telecopy: (852) 2854-0438 Attention: President
Telecopy: (852) 2797-8076
</TABLE>
with a required copy in either case to:
Farrand, Cooper & Bruiniers
235 Montgomery, Suite 1035
San Francisco, California 94104
Attention: Wayne Cooper, Esq.
Telecopy: (415) 677-2950
8.7 Finder's Fee. Each Investor severally agrees to indemnify and
hold harmless the Company from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which such investor or any of its
officers, partners, employees or representatives is or is alleged to be
responsible. The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a
finder's 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 or is alleged to be responsible.
8.8 Expenses. In the event the Merger is consummated, or if the
Merger is not consummated solely because of a breach of a representation,
warranty or covenant of the Company or Dennis Hayes, the Company shall bear the
expenses incurred by the parties hereto
- 40 -
<PAGE> 41
in connection with the negotiation, preparation, execution and consummation of
this Agreement, including the fees, expenses and disbursements of their legal
counsel incurred in connection herewith.
8.9 Amendments and Waivers. Except as otherwise provided with
respect to the Investors purchasing a majority of the Preferred Shares, 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 the Investors.
8.10 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 this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Entire Agreement. This Agreement, the respective
Confidentiality Agreements between the Company and the Investors (or their
affiliates) dated June 4, 1995, March 29, 1996 and October 1, 1995 (the
"Confidentiality Agreements), the Exhibits and Schedules attached hereto, the
Schedule of Exceptions and the other documents and agreements delivered pursuant
hereto constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof and supersedes any prior
agreements (including any memorandum of understanding or letters of intent)
between the parties regarding the subject matter hereof. Notwithstanding the
foregoing, the parties agree that Section 7 entitled "Standstill" of the
Confidentiality Agreements shall automatically terminate at the Effective Time,
and any provision in any such agreement which would prohibit any public
announcements which would be permitted under Section 8.12 hereof is hereby
terminated. Any other confidentiality or nondisclosure agreements or letters
between the Company and any of the Investors are hereby terminated as of the
date hereof. The parties further agree that any and all provisions contained in
any of the above referenced Confidentiality Agreements which would prohibit the
disclosure of the fact that any investigations, discussions or negotiations are
taking place between the parties concerning the transactions contemplated hereby
are hereby terminated as of the date hereof. The letter agreement of Hayes in
favor of Acma, dated on or about March 30, 1996, is not superseded by and
expressly survives this Agreement and the closing of this transaction.
8.12 Public Announcements. No party shall make any public
announcement of the execution of this Agreement or the transactions contemplated
hereby without first obtaining the prior consent of the other parties hereto (or
in the case of the Investors' prior consent, the consent of the Investors
purchasing a majority of the Preferred Shares); provided however, that nothing
contained herein shall prohibit any party hereto from making any public
announcement that such party determines in good faith, is required by applicable
law or the rules or regulations of any applicable securities exchange; provided,
that in such event, such party shall use its reasonable efforts to consult with
the other parties hereto prior to making such disclosure and in any case will
promptly notify all other parties of such disclosure.
8.13 Further Assurances. Each party covenants that at any time, and
from time to time, after the date of Closing, it will execute such additional
instruments and take such
- 41 -
<PAGE> 42
actions as may be reasonably requested by the other parties to confirm or
perfect or otherwise to carry out the intent and purposes of this Agreement.
8.14 No Third Party Beneficiaries. This Agreement is not intended
for the benefit of and shall not create rights in any persons other than the
parties hereto and their respective successors and permitted assigns, except as
expressly contemplated otherwise in Section 1.1 hereof.
8.15 Tax Consequences of the Parties. The parties agree that no
parties make any representations or warranties herein as to the tax consequences
of this Agreement and in the events and the actions contemplated hereby.
8.16 Schedules and Exhibits Incorporated. All Schedules and
Exhibits attached hereto are incorporated herein by reference.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
- 42 -
<PAGE> 43
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
HAYES MICROCOMPUTER PRODUCTS, INC.,
a Georgia corporation
By: /s/ Dennis C. Hayes
----------------------------------------
Name: Dennis C. Hayes
Title: President and Chairman
DENNIS HAYES
/s/ Dennis C. Hayes
-------------------------------------------
Dennis C. Hayes
"INVESTOR"
RINZAI LIMITED
By: /s/ Chou Kong Seng
----------------------------------------
Name: Chou Kong Seng
--------------------------------------
Title: Authorized Signatory
-------------------------------------
FINANCIAL SUB, INC.
By: /s/ Shane Byrne
----------------------------------------
Name: Shane Byrne
--------------------------------------
Title: President
-------------------------------------
"INVESTOR"
KAIFA TECHNOLOGY (H.K.) LIMITED
By: /s/ Tam Man Chi
----------------------------------------
Name: Tam Man Chi
--------------------------------------
Title: President
-------------------------------------
[EXECUTION CONTINUED ON FOLLOWING PAGE]
<PAGE> 44
[EXECUTION CONTINUED FROM PREVIOUS PAGE]
"INVESTOR"
ROLLING PROFIT HOLDINGS, LTD.
By: /s/ Gabriel T. W. Chan
-------------------------------------------
Name: Gabriel T. W. Chan
-----------------------------------------
Title: Director and Group Financial Controller
----------------------------------------
LAO HOTEL (H.K.) LIMITED
By: /s/ Low Check Kwang
-------------------------------------------
Name: Low Check Kwang
-----------------------------------------
Title: Director
----------------------------------------
SALIENDRA PTE LTD.
By: /s/ Mr. Lee Teong Sang
-------------------------------------------
Name: Mr. Lee Teong Sang
-----------------------------------------
Title: Director
----------------------------------------
S.P. QUEK INVESTMENTS:
By: /s/ Sim Pin Quek
-------------------------------------------
Name: Sim Pin Quek
-----------------------------------------
Title: Director
----------------------------------------
<PAGE> 45
The undersigned, Acma Limited, the sole shareholder of Rinzai
Limited, is made a party hereto as the guarantor and joint obligor of all
obligations, covenants and agreements of Rinzai Limited hereunder.
ACMA LIMITED
By: /s/ Rai Rajen
----------------------------------------
Name: Rai Rajen
----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned, Wong's International (Holdings) Limited, the
sole shareholder of Rolling Profit Holdings, Ltd., is made a party hereto as the
guarantor and joint obligor of all obligations, covenants and agreements of
Rolling Profit Holdings, Ltd. hereunder.
WONG'S INTERNATIONAL (HOLDINGS) LIMITED
By: /s/ Gabriel T. W. Chan
-------------------------------------------
Name: Gabriel T. W. Chan
-----------------------------------------
Title: Director and Group Financial Controller
----------------------------------------
The undersigned G.K. Goh Holdings Limited, the sole
shareholder of Saliendra Pte Ltd., is made a party hereto as the guarantor and
joint obligor of all obligations, covenants and agreements of Saliendra Pte Ltd.
hereunder.
G.K. GOH HOLDINGS LIMITED
By: /s/ Mr. Goh Geok Khim
-------------------------------------------
Name: Mr. Goh Geok Khim
-----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned Guthrie GTS Limited, the sole shareholder of
Lao Hotel (H.K.) Limited, is made a party hereto as the guarantor and joint
obligor of all obligations, covenants and agreements of Lao Hotel (H.K.) Limited
hereunder.
GUTHRIE GTS LIMITED
By: /s/ Arthur Tan Keng Hock
-------------------------------------------
Name: Arthur Tan Keng Hock
-----------------------------------------
Title: Director
----------------------------------------
<PAGE> 46
SCHEDULE 1
SCHEDULE OF INVESTORS
Series A Preferred Stock and Warrant
<TABLE>
<CAPTION>
"INVESTORS" Percentage of Capital
the Company's Number of Contribution
capital stock issued Preferred to Financial
and outstanding Shares to Sub/Preferred
immediately after be issued Stock
the Closing at Closing Purchase Price
------------------------- ---------- --------------
SERIES A PREFERRED STOCK:
- -------------------------
<S> <C> <C> <C>
Rinzai Limited 28.175% 2,817,500 $20,125,000
Kaifa Technology (H.K.) Limited 8.167% 816,667 $ 5,833,333
Rolling Profit Holdings, Ltd. 4.083% 408,333 $ 2,916,666
Lao Hotel (H.K.) Limited 3.675% 367,500 $ 2,625,000
Saliendra Pte Ltd. 2.450% 245,000 $ 1,750,000
S.P. Quek Investments Pte Ltd. 2.450% 245,000 $ 1,750,000
</TABLE>
WARRANT
Rinzai Limited Anti-Dilution Warrants to purchase capital
stock sufficient to maintain ownership at
20.2%
INVESTOR SUBS:
- - Financial Sub, Inc., a Georgia corporation and wholly-owned subsidiary
of Rinzai Limited
<PAGE> 1
EXHIBIT 10.27
HAYES MICROCOMPUTER PRODUCTS, INC.
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT ("Shareholders' Agreement"), is made as of
the 16th day of April, 1996, by and among DENNIS C. HAYES, a resident of the
State of Georgia (individually, and not including any successor, the "Principal
Shareholder"), the persons or entities listed on Schedule 1 hereto (the
"Investors") (hereinafter the Principal Shareholder and the Investors are
sometimes referred to collectively as the "Shareholders" and individually as a
"Shareholder"), and HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation
(hereinafter referred to as the "Company").
R E C I T A L S:
WHEREAS, the Company is a duly organized and existing corporation under
the laws of the State of Georgia;
WHEREAS, the Shareholders, contemporaneously with the execution and
delivery of this Shareholders' Agreement, acquired and have voting control in
respect of (A) an aggregate of 4,943,221 shares of the Common Stock, no par
value, of the Company (the "Common Stock"), which constitute 96.9% of the issued
and outstanding shares of Common Stock of the Company on the date hereof and (B)
an aggregate of 4,900,000 shares of Series A Preferred Stock of the Company (the
"Series A Preferred Stock") which constitute all of the issued and outstanding
preferred stock of the Company on the date hereof, in each case as set forth
with respect to each Shareholder on Schedule 1 to this Shareholders' Agreement;
and
WHEREAS, the Shareholders wish to enter into this Shareholders'
Agreement pursuant to Section 14-2-731 of the Georgia Business Corporation Code
for the purposes of defining their respective rights and obligations with
respect to the Stock (as hereinafter defined) and making certain provisions for
the regulation of the Company's affairs;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by all parties, it is agreed as
follows:
1. DEFINITIONS AND OWNERSHIP.
1.1 DEFINITIONS. As used in this Shareholders' Agreement, the following
terms shall have the following meanings:
(a) "Acquisition Offer" shall mean a bona fide offer
to the Company, on arm's length terms, subject to conditions
and obligations on the part of the seller(s) that are usual
and customary in similar transactions, that provides for
ratable treatment of the Shareholders (but may take into
account the rights and
<PAGE> 2
preferences of the Preferred Shares), and which would result
in the sale of the Company, including by a sale of stock or
exchange of shares or acquisition of all or substantially all
of the assets, subject to all or substantially all
liabilities, of the Company, or the merger, consolidation or
reorganization of the Company with or into any other
corporation or corporations in which the Company would not be
the surviving entity (other than a mere reincorporation
transaction).
(b) "Affiliate" shall mean with respect to a Person,
any other Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under
common control with such first Person.
(c) "Anti-Dilution Warrant" shall mean the warrant
issued to Rinzai pursuant to the Merger Agreement and referred
to therein as the "Warrant."
(d) "Balance" shall have the meaning ascribed to that
term in Section 2.4 of this Shareholders' Agreement.
(e) "Board of Directors" shall mean the board of
directors of the Company, as constituted from time to time.
(f) "Board Warrants" shall mean any warrants for the
purchase of Common Stock of to up to six percent (6%) of the
Stock of the Company issued and outstanding immediately after
the Closing Date on a fully diluted basis (but without giving
effect to the Board Warrants or the options provided for in
Section 10.4 of this Shareholders' Agreement) issued from time
to time pursuant to the Company's existing Directors'
Incentive Stock Plan or any successor warrant issuance plan.
(g) "CEO" shall have the meaning ascribed to that
term in Section 10.6(a) of this Shareholders' Agreement.
(h) "Chairman" shall mean the Chairman of the Board
of Directors of the Company.
(i) "Closing Date" shall mean the date on which the
transactions contemplated by the Merger Agreement are
consummated and shall have the same meaning as the phrase
"date of the Closing" used in the Merger Agreement.
(j) "Common Stock" shall mean the $0.01 par value per
share voting common stock of the Company.
(k) "Convertible Promissory Note" shall have the
meaning ascribed to that term in Section 10.5 of this
Shareholders' Agreement.
-2-
<PAGE> 3
(l) "Director" shall mean a Person who is at the time
in question a member of the Board of Directors.
(m) "Employee Plan" shall mean the Company's Profit
Sharing, Savings and Stock Plan.
(n) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(o) "Exercise Notice" shall mean written notice,
which shall be irrevocable, by or on behalf of any Shareholder
or the Company, as applicable, entitled to exercise an option
or election to purchase all or any Offered Shares pursuant to
Article 2 hereof or to exercise such Shareholder's co-sale
rights pursuant to Article 3 hereof, given to any Transferor
or selling Shareholder, or its representative, within the
acceptance period, specifying a date for the closing of the
purchase, if applicable, which closing date shall conform to
the applicable requirements of Article 2 or 3, as the case may
be, and such notice shall specify the number of Offered Shares
which the purchasing Shareholder or the Company, as the case
may be, elects to purchase or in respect of which such
Shareholder wishes to exercise co-sale rights.
(p) "Expiration Date" shall have the meaning ascribed
to that term in Section 2.2 of this Shareholders' Agreement.
(q) "GAAP" shall have the meaning ascribed to that
term in Section 10.1 of this Shareholders' Agreement.
(r) "Holder" shall mean any Person owning or having
the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 9.12 hereof.
(s) "Hong Kong Group" shall mean the group of
Shareholders consisting of Rolling Profit Holdings Limited,
and Kaifa Technology (H.K.) Limited, and any Permitted
Transferee of such Shareholder.
(t) "Initial Public Offering" shall mean the first
public offering of Common Stock, which shall be pursuant to an
effective registration statement under the Securities Act
covering the offer and sale of the Common Stock and shall be
underwritten on a firm commitment basis.
(u) "Initiating Holders" shall have the meaning
ascribed to that term in Section 9.1 of this Shareholders'
Agreement.
-3-
<PAGE> 4
(v) "Investors" shall mean those persons or entities
set forth on Schedule 1 hereto, who are sometimes individually
referred to herein as an "Investor."
(w) "Liquidity Notice" shall have the meaning
ascribed to that term in Section 8.2(a) of this Shareholders'
Agreement.
(x) "Merger Agreement" shall mean that certain Hayes
Microcomputer Products, Inc. Agreement and Plan of Merger
dated as of April 12, 1996, by and among the Company, the
Principal Shareholder, and the Investors, as amended on the
date hereof, and as the same may be modified or amended from
time to time hereafter.
(y) "New Securities" shall mean any Stock whether
now authorized or not, and rights, options, or warrants to
purchase Stock, and securities of any type whatsoever that
are, or may become, convertible into Stock; PROVIDED, HOWEVER,
that the term "New Securities" does not include (1) the
Preferred Shares, the Convertible Promissory Notes or the
Warrants; (2) securities issuable upon conversion or exercise
of the Preferred Shares, the Convertible Promissory Notes or
the Warrants; (3) securities offered to the public pursuant to
a registration statement filed under the Securities Act; (4)
securities issued pursuant to the acquisition by the Company
of another corporation, whether by merger, purchase of
substantially all of the assets of such corporation, purchase
or exchange of shares of such corporation, or other
reorganization whereby the Company owns not less than
fifty-one percent (51%) of the voting power of such
corporation; (5) securities issued to lending or leasing
institutions approved by the Board of Directors; (6) an
aggregate of 6% of the number (as of the date of this
Shareholders' Agreement) of outstanding shares of Stock issued
to employees and officers of the Company or to others pursuant
to plans, arrangements and agreements approved by the Board of
Directors; or (7) shares of Stock issued in connection with
any stock split, stock dividend, or recapitalization by the
Company.
(z) "Non-Offering Shareholders" shall have the
meaning ascribed to that term in Section 2.2 of this
Shareholders' Agreement.
(aa) "Offer" shall have the meaning ascribed to that
term in Section 2.1 of this Shareholders' Agreement.
(bb) "Offer Date" shall have the meaning ascribed to
that term in Section 2.2 of this Shareholders' Agreement.
(cc) "Offered Shares" shall mean any and all shares
of Stock required or desired to be offered for sale by a
Shareholder to any other Shareholder or
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Shareholders or the Company pursuant to the terms of this
Shareholders' Agreement and, if the "Offered Shares"
constitute all of the shares owned by an Investor, such term
may include and refer to any Anti-Dilution Warrant held by
such Person.
(dd) The phrase "owned or controlled" (or corollary
phrases) when used in this Shareholders' Agreement to describe
a Person's rights with respect to shares of Stock shall mean
that such Person has voting control over such shares, PROVIDED
that shares of Stock held in the Employee Plan shall not be
deemed to be "owned or controlled" by the trustee of the
Employee Plan at any time when the Principal Shareholder is
such trustee.
(ee) "Permitted Transferee" shall mean (i) as to the
Principal Shareholder, any transferee contemplated by Section
7.2, 7.3 or 7.4 and (ii) as to the Investors, any respective
transferee contemplated by Section 7.5, 7.6 or 7.7, PROVIDED
that in each case any other provisions of Article 7 applicable
to such transferee or to a transfer to such transferee are
complied with.
(ff) "Person" shall mean any natural person,
corporation, partnership, venture, joint venture, association,
or other entity whatsoever.
(gg) "Plan" shall mean the Second Amended and
Restated Plan of Reorganization dated July 20, 1995, as
modified, as confirmed by an order of the United States
Bankruptcy Court for the Northern District of Georgia entered
March 8, 1996 and an Order in Aid of Confirmation entered
April __, 1996.
(hh) "Preferred Shares" shall mean the issued and
outstanding shares of Series A Preferred Stock.
(ii) "Principal Shareholder Successor" shall mean for
purposes of Article 12, the single natural person who is a
Permitted Transferee of the Principal Shareholder and who at
the time in question exercises voting control over all shares
owned or controlled by the Principal Shareholder and his
Permitted Transferees.
(jj) "Proportion" shall mean, with respect to any
Shareholder entitled to purchase Offered Shares, the
proportion of the total number of such Offered Shares which
the total number of shares of Stock owned by each Shareholder
(or by the Principal Shareholder and his Permitted
Transferees) entitled to purchase Offered Shares bears to the
total number of shares of Stock owned by all Shareholders (or
by the Principal Shareholder and his Permitted Transferees)
entitled to purchase Offered Shares.
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<PAGE> 6
(kk) "Register," "registered," and "registration"
shall mean a registration effected by preparing and filing a
registration statement or similar document in compliance with
the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(ll) "Registrable Securities" shall mean (1) the
Common Stock issuable or issued upon conversion of the
Preferred Shares or upon exercise of the Warrants, (2) shares
of Common Stock held by the Principal Shareholder as of the
date of this Shareholders' Agreement, and (3) any Common Stock
of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such securities,
excluding in all cases, however, any Registrable Securities
sold by a Person in a transaction in which its registration
rights are not assigned.
(mm) "Registrable Securities then outstanding" shall
mean the number of shares of Common Stock outstanding which
are Registrable Securities and the number of shares of Common
Stock issuable pursuant to the exercise of warrants, options
or other rights and the conversion of convertible securities
which are exercisable for or convertible into Registrable
Securities.
(nn) "Rinzai" shall mean Rinzai Limited, a Hong Kong
company, and any Permitted Transferee;
(oo) "SEC" shall mean the Securities and Exchange
Commission.
(pp) "Securities Act" shall mean the Securities Act
of 1933, as amended.
(qq) "Singapore Group" shall mean the group of
Shareholders consisting of Lao Hotel (H.K.) Limited, Saliendra
Pte. Ltd. and S.P. Quek Investments, and any Permitted
Transferee of such Shareholders.
(rr) "Senior Financing" shall have the meaning
ascribed to that term in Section 10.5(a)(v) of this
Shareholders' Agreement.
(ss) "Stock" shall mean the Common Stock, the
Preferred Shares (on an as-converted basis) and any other
capital stock of the Company issued hereafter.
(tt) "Target IPO" shall mean an Initial Public
Offering initiated on the basis of a pre-offering valuation of
the Company by the underwriter engaged to manage the offering
of not less than One Hundred Fifty Million Dollars (US
$150,000,000) and estimated aggregate gross proceeds to the
Company of not less than Twenty Five Million Dollars (US
$25,000,000).
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(uu) "Terms" shall have the meaning ascribed to that
term in Section 2.2 of this Shareholders' Agreement.
(vv) "Transfer" shall have the meaning ascribed to
that term in Section 2.1 of this Shareholders' Agreement.
(ww) "Transferee" shall have the meaning ascribed to
that term in Section 2.2 of this Shareholders' Agreement.
(xx) "Transferor" shall have the meaning ascribed to
that term in Section 2.1 of this Shareholders' Agreement.
(yy) "Violation" shall have the meaning ascribed to
that term in Section 9.9 of this Shareholders' Agreement.
(zz) "Voting Trust" shall mean the Hayes
Microcomputer Products, Inc. Voting Trust Agreement dated
April 16, 1996, by and among the Principal Shareholder, the
Company, the Trustee named therein (the "Trustee") and such
other Shareholders (as defined therein) as may from time to
time be parties thereto, as such agreement may be amended,
modified, supplemented, or restated in accordance with the
terms thereof and hereof and in effect from time to time.
(aaa) "Warrants" shall mean the Anti-Dilution Warrant
and the Board Warrants.
1.2 CAPITALIZATION OF THE COMPANY. Unless changed by action of the
requisite majority of the Shareholders in accordance with Section 10.3 of this
Shareholders' Agreement, the authorized capital stock of the Company shall
consist of 10,000,000 shares of Series A Preferred Stock and 100,000,000 shares
of Common Stock.
2. REQUIRED OFFER PRIOR TO SALE AND OTHER RESTRICTIONS.
2.1 REQUIRED OFFER PRIOR TO SALE. No Shareholder may sell, give,
bequeath, pledge, assign, transfer or encumber in any manner whatsoever (all
such dispositions being hereinafter referred to as a "transfer" or "disposition"
and shall be deemed included in the verb "to dispose") any share of Stock or any
Anti-Dilution Warrant to any Person for a period of two (2) years after the date
of this Shareholders' Agreement, except for dispositions permitted under Section
7. After the expiration of such two (2) year period, no Shareholder may transfer
any share of Stock or any Anti-Dilution Warrant to any Person, except for
transfers or dispositions permitted under Section 7, unless the Shareholder
seeking to make the transfer (the "Transferor") shall first have made the
written offer to sell described in Section 2.2 below (the "Offer") and that
Offer has not
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<PAGE> 8
been accepted pursuant to the terms of this Shareholders' Agreement, nor shall
any Investor transfer any Anti-Dilution Warrant other than in connection with a
transfer of Offered Shares.
2.2 OFFER BY TRANSFEROR. The Offer referred to in Section 2.1 shall be
given by the Transferor to the Company and to each of the other Shareholders
(herein the "Non-Offering Shareholders") and shall consist of a written Offer to
sell all the Offered Shares of Stock which the Transferor then intends to
dispose of, to which Offer shall be attached a statement of intention to dispose
of the Offered Shares pursuant to a bona fide offer from a prospective purchaser
or purchasers (the "Transferee"), a description of the contemplated disposition,
the name and address of each bona fide Transferee, the number of shares of Stock
involved in and other terms (the "Terms") of the proposed disposition. The Terms
shall include, without limitation, the purchase price per Offered Share offered
by each Transferee and the manner in which such purchase price shall be paid to
the Transferor. Such Offer shall be signed by the Transferor and shall remain
irrevocable until the earlier of (a) the time at which all of the Offered Shares
are accepted by the Company or the Non-Offering Shareholders, as provided in
Sections 2.3 and 2.4 or (b) one hundred twenty (120) days after the "Offer
Date," which date shall be the date on which a notice is given to the Company
and such Non-Offering Shareholders in accordance with the terms of Section 14.2
of this Shareholders' Agreement. The date on which the Offer becomes revocable
is referred to herein as the "Expiration Date."
2.3 ACCEPTANCE OF OFFER BY THE COMPANY. The Company may, at its option
exercised within sixty (60) days after the Offer Date, elect to purchase all or
any portion of the Offered Shares on the Terms (with the designees of the
selling Shareholder abstaining on any vote of the Board of Directors of the
Company with respect to such purchase). If and to the extent the Company does
not accept the Offer in accordance with this Section 2.3 with respect to all of
the Offered Shares, the Offered Shares may be disposed of in accordance with
Section 2.4. The Company shall exercise its option under this Section 2.3 by
giving an Exercise Notice. The Exercise Notice shall be in accordance with the
Terms. Any purchase by the Company of one hundred percent (100%) of the Offered
Shares shall be completed not later than ninety (90) days after the Offer Date
(subject to any extension of time required to permit necessary governmental or
regulatory filings, notices or approvals).
2.4 ACCEPTANCE OF OFFER BY SHAREHOLDERS. If and to the extent the
Company does not accept the Offer with respect to all of the Offered Shares in
accordance with the provisions of Section 2.3, the remaining Offered Shares
shall be deemed to be offered to the Non-Offering Shareholders and each
Non-Offering Shareholder may, at its option exercised within ten (10) days after
(i) the last day of the exercise period pursuant to Section 2.3 or, if earlier
(ii) the date on which the Company notifies the Shareholders of its election to
purchase less than all (or none) of the Offered Shares, elect to purchase not
more than its Proportion of the remaining Offered Shares. Each Non-Offering
Shareholder who exercises its option to purchase its Proportion of the Offered
Shares shall do so by giving an Exercise Notice. In the event that any such
Non-Offering Shareholder gives an Exercise Notice covering less than its
Proportion of the Offered Shares available to be purchased by Non-Offering
Shareholders (such shares not covered by Exercise Notices being referred to as
the "Balance"), each of the Non-Offering Shareholders that
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<PAGE> 9
timely delivered an Exercise Notice covering its full Proportion of the Offered
Shares available to be purchased by Non-Offering Shareholders, may, by a second
Exercise Notice delivered within ten (10) days after the expiration of the first
ten (10) day period referred to above, elect to purchase up to that number of
Offered Shares that is equal to the product of the Balance multiplied by a
fraction, the numerator of which shall be such Non-Offering Shareholder's
Proportion of the number of Offered Shares first made available for purchase by
Non-Offering Shareholders pursuant to this Section 2.4, and the denominator of
which shall be the total number of such Offered Shares covered by the first
Exercise Notices timely delivered by all Non-Offering Shareholders which
purchased their respective full Proportions. If, after the expiration of the
second ten (10) day period any Offered Shares remain available to be purchased,
any Non-Offering Shareholder which has timely delivered Exercise Notices
covering the maximum number of Offered Shares available to it, may notify the
Company, within five (5) days after the expiration of such second ten (10) day
period of its desire to purchase additional Offered Shares, specifying the
maximum number of such Offered Shares it is willing to purchase. If more than
one such notice is received by the Company, the number of additional Offered
Shares shall be allocated to the Non-Offering Shareholders delivering such
notices in the same proportion as their respective offers bear to the total
number of Offered Shares available in the third and final round.
2.5 PURCHASES BY COMPANY AND SHAREHOLDERS. If the Company and the
Non-Offering Shareholders together, or the Non-Offering Shareholders (or any of
them) alone, elect to purchase 100% of the Offered Shares, the sale and purchase
of such shares shall be completed not later than one hundred and five (105) days
after the Offer Date (subject to any extension of time required to permit
necessary governmental or regulatory filings, notices or approvals). The
Transferor shall not be obligated to sell any Offered Shares to the Company or
to any Non-Offering Shareholder unless the Company and/or the Non-Offering
Shareholders have agreed to purchase, and purchase, 100% of the Offered Shares.
"Completion" of any sale pursuant to this Article 2 shall mean, at a minimum,
delivery by the selling Shareholder to each purchaser of certificate(s)
representing the number of shares of Stock to be sold, in form for transfer by
delivery, and payment by each purchaser of the purchase price therefor in
accordance with the Terms, or as may otherwise be agreed by the parties.
3. CO-SALE RIGHTS.
3.1 CO-SALE RIGHTS OF NON-OFFERING SHAREHOLDER. If the Company and the
Non-Offering Shareholders do not accept the Offer with respect to all of the
Offered Shares in accordance with the provisions of Sections 2.3 and 2.4, each
Non-Offering Shareholder may, by an Exercise Notice given to the Transferor not
earlier than ninety (90) days and not later than one hundred and twenty (120)
days after the Offer Date, elect to participate in such sale on the same terms
and conditions as the Terms pursuant to the formula set forth in Section 3.2 of
this Shareholders' Agreement. To the extent that a Non-Offering Shareholder
elects so to participate in such sale, the number of shares of Stock that the
Transferor may sell in the transaction shall be correspondingly reduced.
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<PAGE> 10
3.2 SHARES ELIGIBLE FOR CO-SALE. Each Non-Offering Shareholder may sell
all or any part of that number of shares of Stock held by it or him, equal to
the product obtained by multiplying (i) the aggregate number of shares of Stock
covered by the Offer by (ii) a fraction (A) the numerator of which is the number
of shares of Stock (on an as-converted basis for all Preferred Shares) owned by
such Non-Offering Shareholder at the date of the Offer and (B) the denominator
of which shall be the sum of the total number of shares of Stock owned by the
Transferor at the date of the Offer and the total number of shares of Common
Stock (on an as-converted basis for all Preferred Shares) owned at the date of
the Offer by all Non-Offering Shareholders that desire to participate in such
sale pursuant to this Article 3.
3.3 PARTICIPATION. Each Non-Offering Shareholder shall effect its
participation in a sale by promptly delivering to Transferor for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent the number of shares of Common Stock which such Non-Offering
Shareholder elects to sell or that number of Preferred Shares which (on an
as-converted basis) is convertible into the number of shares of Common Stock
which such Non-Offering Shareholder elects to sell. The Transferor shall hold
such shares for such Non-Offering Shareholder pending the consummation of the
sale transaction.
3.4 TRANSFER OF STOCK. The stock certificate or certificates that each
Non-Offering Shareholder delivers to the Transferor pursuant to Section 3.3
shall be transferred to the prospective purchaser upon the consummation of the
sale of the Stock pursuant to the Terms and any and all purchase agreements
agreed to by the parties, and the Transferor shall concurrently therewith remit
to such Non-Offering Shareholder that portion of the sale proceeds to which such
Non-Offering Shareholder is entitled by reason of its participation in such
sale. To the extent that any prospective purchaser refuses to purchase Stock
from a Non-Offering Shareholder, the Transferor shall not sell to such
prospective purchaser any shares of Stock unless and until, simultaneously with
such sale, the Transferor shall purchase from such Non-Offering Shareholder
(pursuant to the Terms) that number of shares of Stock which such Non-Offering
Shareholder had the right, pursuant to this Article 3, to sell to such
prospective purchaser.
4. SALE OF OFFERED SHARES TO TRANSFEREE.
If the Non-Offering Shareholders and the Company do not elect to
purchase all of the Offered Shares in accordance with the terms of Sections 2.3
and 2.4 and the Non-Offering Shareholders do not elect to exercise their co-sale
rights in accordance with the terms of Article 3, the Transferor shall not be
obligated to sell any of the Offered Shares to the Non-Offering Shareholders or
the Company or to reduce the number of Offered Shares which such Transferor may
sell in accordance with Article 3 and shall be entitled to dispose of all of the
Offered Shares to the Transferee on the Terms, PROVIDED that such disposition is
consummated within one hundred fifty (150) days (subject to any extension of
time required to permit necessary governmental or regulatory filings, notices or
approvals) after the Offer Date and the Transferee executes a counterpart of
this Shareholders' Agreement and agrees to remain bound by all terms of this
Shareholders' Agreement. Any proposed transfer on terms and conditions other
than the Terms, as well as any subsequent proposed transfer of any Stock by such
Shareholder, shall again
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be subject to the rights of the Company and the Non-Offering Shareholders and
shall require compliance by Transferor with the procedures described in Articles
2 and 3.
5. RIGHT OF FIRST REFUSAL WITH RESPECT TO NEW SECURITIES.
The Company hereby grants to each Shareholder, the right of first
refusal to purchase, pro rata, all (or any part) of any New Securities that the
Company may from time to time propose to sell and issue. Such Shareholder's pro
rata share, for purposes of this right of first refusal, is the ratio of the
number of shares of Stock (on an as-converted basis) held by such Shareholder as
compared to the total number of outstanding shares of Stock (on an as-converted
basis). This right of first refusal shall be subject to the following
provisions:
(a) In the event that the Company proposes to
undertake an issuance of New Securities, it shall give each
Shareholder written notice of its intention, describing the
type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Each Shareholder
shall have twenty (20) days from the date such notice is given
to agree to purchase its pro rata share of such New Securities
for the price and upon the general terms specified in the
notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. Each
purchasing Shareholder shall have a right of overallotment
such that if any Shareholder fails to exercise its right
hereunder to purchase its pro rata portion of New Securities,
the Company shall so notify the purchasing Shareholders and
the purchasing Shareholders may, upon notice given within ten
(10) days after the date on which they are notified that
additional New Securities are available, purchase the New
Securities otherwise allocable to any nonpurchasing
Shareholder on a pro rata basis (based on the number of shares
of Stock (on an as converted basis) held by such
Shareholders).
(b) If the Shareholders fail timely to exercise such
right of first refusal as to 100% of the New Securities
proposed to be issued, then the Company shall have one hundred
twenty (120) days after the expiration of the applicable
exercise period(s) provided in subsection (a) above to sell
the New Securities at a price and upon general terms no more
favorable to the purchasers thereof than were specified in the
Company's notice to the Shareholders of such proposed
issuance. In the event the Company has not sold the New
Securities within such one hundred twenty (120) day period,
the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the
Shareholders in the manner provided above.
6. EFFECTS OF NON-PARTICIPATION
The exercise or non-exercise of the rights of any Shareholder or the
Company under Article 2, 3 or 5 to participate in one or more sales of shares of
Stock made by the Company or
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any Shareholder shall not adversely affect such Shareholder's or the Company's
right, as applicable, to participate in subsequent sales of shares of Stock
subject to Article 2, 3 or 5.
7. PERMITTED TRANSFERS.
The restrictions on transfer provided in Articles 2 and 3 shall be
inapplicable to:
7.1 Transfers involving public sales pursuant to a registration
statement filed under the Securities Act;
7.2 Transfers of shares of Stock by a Shareholder to his spouse or
children, or to one or more trusts revocable only by him, limited partnerships,
limited liability companies or similar entities established by such Shareholder,
in each case created for the direct benefit of himself, his spouse or his
children and in which he, his spouse and children are the only interest holders;
7.3 Transfers of shares of Stock between a Shareholder and his guardian
or conservator;
7.4 Transfers of shares of Stock of a deceased Shareholder to his heirs
or legal representatives;
7.5 Transfers of shares of Stock from a Shareholder to an Affiliate of
such Shareholder;
7.6 Transfers of shares of Stock from one member of the Hong Kong Group
to another member of the Hong Kong Group; or
7.7 Transfers of shares of Stock from Rinzai or one member of the
Singapore Group to another member of the Singapore Group or to Rinzai.
PROVIDED, that any such transfer is to a "Permitted Transferee" of such Person;
and PROVIDED FURTHER, HOWEVER, that, in the case of any such transfer other than
under Section 7.1, (a) the shares of Stock in the hands of such transferees
shall remain subject to the terms of this Shareholders' Agreement and, as a
condition precedent to such transfer, such transferee, if requested by the
Company or by any other party hereto, shall sign a counterpart of this
Shareholders' Agreement, (b) all such transfers of shares by the Principal
Shareholder shall be to, or shall result in voting control of all transferred
shares being exercisable by, a single natural person and (c) all such transfers
of shares by an Investor may, if of one hundred percent (100%) of its shares,
include any Anti-Dilution Warrant then held by it, and shall be to, or shall
result in voting control of all transferred shares being exercisable by, a
single Affiliate of such Investor, respectively.
In addition, any Shareholder may transfer shares of Common Stock to
a tax-exempt charitable organization subsequent to the second anniversary of the
date of this Shareholders'
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Agreement and such shares in the hands of any such transferee shall not be
subject to the terms of this Shareholders' Agreement other than the provisions
of Article 2 as applicable to any proposed sale of shares of Stock by such
organization, of Section 8.2 insofar as the provisions of either such Section
require a sale of shares of Stock by such shareholder, and of Section 14.1
hereof.
Any Shareholder making any such transfer will promptly notify
the Company and each other Shareholder thereof, and Schedule 1 hereto shall be
amended promptly after the giving of any such notice.
8. CERTAIN RIGHTS OF INVESTORS AND THE PRINCIPAL SHAREHOLDER.
8.1 At any time after the fourth (4th) anniversary of the date of this
Shareholders' Agreement, when Rinzai is a shareholder of the Company and an
Initial Public Offering has not been completed, Rinzai may, with the full
cooperation of the Company and the other Shareholders, and utilizing the
resources of the Company, retain, subject to the approval of the Board of
Directors of the Company, which approval shall not be unreasonably withheld, a
reputable investment banker or other appropriate professional advisor on behalf
of the Company to seek an Acquisition Offer from a third party (the customary
fees of which investment banker or other professional will be paid by the
Company) and in the event that such investment banker or other professional is
successful in soliciting an Acquisition Offer then the terms of Section 8.2 of
this Shareholders' Agreement shall apply; PROVIDED, HOWEVER, that the customary
fees of such investment banker or professional, which may be based on a
successful sale of the Company as an entirety, shall be borne by each
Shareholder ratably according to its respective shareholdings if the shares of
Stock held by Rinzai are purchased by other Shareholders pursuant to Section 8.2
of this Shareholders' Agreement.
8.2 (a) If at any time after the fourth (4th) anniversary of the date
of this Shareholders' Agreement, when Rinzai is a shareholder of the Company and
no Initial Public Offering has been completed, an Acquisition Offer (whether or
not solicited as contemplated by Section 8.1) is made by a third party and
Rinzai desires to accept such Acquisition Offer in accordance with its terms, it
shall notify the Company and the other Shareholders in writing (a "Liquidity
Notice") of such desire and shall provide to the Company and the other
Shareholders any and all information as to such Acquisition Offer that Rinzai
may have that has not been delivered to the other parties by the offeror. Any
Liquidity Notice shall include a prominent caption or other conspicuous
reference to this Section 8.2(a) and state that it is a "Liquidity Notice."
(b) Within thirty (30) days after the giving of a Liquidity Notice,
each of the other Shareholders shall advise the Company and Rinzai of his or its
desire to accept such Acquisition Offer or to reject it. Unless all of the other
Shareholders desire to accept such Acquisition Offer, then within forty (40)
days after the giving of the Liquidity Notice, the Company shall advise Rinzai
and the other Shareholders of the number of shares, if any, of Stock held by
Rinzai that the Company desires to purchase. If this number of shares is less
than one
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hundred percent (100%) of the number of shares of Stock owned by Rinzai, then
each of the other Shareholders may purchase any remaining shares of Rinzai
ratably in accordance with their ownership of Stock. If any of the other
Shareholders is entitled to but declines so to purchase Rinzai's shares of
Stock, the purchasing Shareholders, as the case may be, may purchase all such
remaining shares. The Shareholders shall advise Rinzai of his or its election so
to purchase shares from Rinzai by written notice given not later than fifty (50)
days after the giving of the Liquidity Notice.
(c) If the Company and the other Shareholders do not,
collectively, so elect to purchase one hundred percent (100%) of the shares of
Stock owned by Rinzai, then all Shareholders will be deemed to have accepted the
Acquisition Offer and each of the Shareholders will, if Board of Directors
approval is required for the transaction, cause the members of the Board of
Directors of the Company appointed by them, respectively, to vote in favor of
acceptance of the Acquisition Offer, and, together with any Shareholder
transferee that is a charitable organization subject to the provisions of
Article 7, will sell the shares of Stock or otherwise perform the obligations of
shareholders of the Company under and pursuant to such documents as may govern
the consummation of the Acquisition Offer.
8.3 Each sale pursuant to Section 8.2 of this Shareholders'
Agreement shall be on the following terms and conditions:
(a) The purchase price shall be a price per share
equal to that of the Acquisition Offer (PROVIDED that Rinzai
agrees to accept cash in lieu of non-cash property
contemplated by such Acquisition Offer to be transferred as
part of the purchase price thereunder, in an amount equivalent
to the fair market value of any such non-cash property, as
such fair market value is determined by a reputable,
qualified, independent appraiser, selected by Rinzai and
acceptable to the purchasing Shareholder(s) in their
reasonable judgment);
(b) The obligations of Rinzai with respect to such
sale shall be substantially similar to those contained in the
Acquisition Offer;
(c) The sale shall be consummated within sixty (60)
days (subject to any extension of time required to permit
necessary governmental or regulatory filings, notices or
approvals) after the date of the Liquidity Notice (or on or
before such later closing date as may be contemplated by the
Acquisition Offer); and
(d) Any or all of the Shareholders, as applicable,
shall and shall cause the Company to (if applicable),
simultaneously with the receipt of the certificate or
certificates for the shares to be sold by Rinzai pursuant to
this Article 8, pay the aggregate purchase price therefor, as
specified in this Article 8, in immediately available funds by
wire transfer to an account maintained with a United States
bank, as designated by Rinzai, or by other means acceptable to
Rinzai and such purchasers.
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8.4 No Shareholder shall have any obligation to solicit or accept,
other than from Dennis C. Hayes as Principal Shareholder or from his guardian or
the executor or administrator of his estate, in either case, as the Person who
has succeeded to the Principal Shareholder's rights and obligations hereunder,
any request or instruction under this Shareholders' Agreement, including,
without being limited to, this Article 8 or Article 9.
9. REGISTRATION RIGHTS.
9.1 Request for Registration. If the Company shall receive at any time
after the completion of an Initial Public Offering, a written request from
Holders holding at least twenty percent (20%) of the Registrable Securities then
outstanding (the "Initiating Holders") that the Company file a registration
statement under the Securities Act on Form S-1 covering the registration of the
Registrable Securities then outstanding and such registration would cover sales
having an anticipated aggregate offering price, net of underwriting discounts
and commissions, equal to or more than Ten Million Dollars (US $10,000,000),
then the Company shall, within twenty-one (21) days after receipt thereof, give
written notice of such request to all Holders and shall, subject to the
limitations of subsections 9.1(a), (b) and (c), file as soon as practicable a
registration statement under the Securities Act covering all Registrable
Securities which the Holders request to be registered within twenty (20) days
after the date such notice is given by the Company in accordance with Section
14.2.
(a) Notwithstanding the foregoing, the Company shall
not be obligated to take any action to effect any such
registration pursuant to this Section 9.1:
(i) in any particular jurisdiction in
which the Company would be required to execute a
general consent to service of process in effecting
such registration, unless the Company is already
subject to service in such jurisdiction and except as
may be required by the Securities Act;
(ii) if the Company shall have initiated a
registration pursuant to this Section 9.1 within the
preceding six (6) month period;
(iii) if the Company shall have initiated at
the request of such Initiating Holder(s) at least one
such registration pursuant to this Section 9.1 which
has been declared or ordered effective;
(iv) if the Initiating Holders propose to
dispose of shares of Registrable Securities which may
be immediately registered on Form S-3 pursuant to a
request made under Section 9.11 hereof; or
(v) at any time after five (5) years
immediately following completion of the Initial
Public Offering.
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(b) Subject to the foregoing subsection 9.1(a), the
Company shall file a registration statement as soon as
possible after receipt of the request or requests of the
Initiating Holders under this Section 9.1 and the Company
shall have the right, subject to the other provisions of this
Section 9.1, to participate therein; PROVIDED, HOWEVER, that
if the Company shall furnish to such Initiating Holders within
thirty (30) days of receipt of such request a certificate
signed by the CEO of the Company stating that in the good
faith judgment of the Board of Directors of the Company it
would be detrimental to the Company and its shareholders for
such registration statement to be filed on or before the date
filing would be required and it is therefore essential to
defer the filing of such registration statement, the Company
shall have the right to defer such filing to a date not later
than one hundred eighty (180) days after receipt of such
request; PROVIDED, FURTHER, that notwithstanding anything to
the contrary herein, the Company shall not be obligated to
effect a registration pursuant to this Section 9.1 during the
period starting with the date of the Initial Public Offering
and ending on the date one hundred eighty (180) days following
the Initial Public Offering, PROVIDED that the Company employs
all reasonable efforts to cause such registration statement to
become effective and the Company's estimate of the date of
filing such registration statement is made in good faith.
(c) The underwriting shall be managed by a reputable
underwriter or underwriters selected by the Initiating
Holders, which selection shall be subject to the consent of
the Company, which consent shall not be unreasonably withheld,
and the Company shall have the right, subject to the other
provisions of this subsection (c), to participate therein. The
right of any Holder to registration pursuant to Section 9.1
shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting. The Company shall (together
with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting
agreement in customary form with the underwriter or
underwriters selected as provided above. Notwithstanding any
other provision of this Section 9.1, if the underwriters
advise the Initiating Holders and the Company in writing that
marketing factors require a limitation of the number of shares
to be underwritten and that the total amount of securities
that all Holders (Initiating and non-Initiating) and the
Company request pursuant to this Section 9.1(c) to be included
in such offering exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of
the offering, the Company shall so advise all Holders and all
of the shares to be included in the registration shall be
allocated among all Holders requesting inclusion (Initiating
and non-Initiating) pro rata according to the total amount of
securities requested to be included in such registration owned
by each Holder requesting inclusion (Initiating or
non-Initiating) or in such other proportions as shall be
mutually agreed by such selling shareholders, and only if all
of the shares requested to be included by Holders are
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included after giving effect to such allocation shall any
shares requested by the Company to be included be included.
If any Person does not agree to the terms of any such underwriting, it
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration, the Company shall then offer to
all Persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the Persons requesting additional inclusion pro rata
according to the total amount of securities requested to be included in such
registration owned by each such Person or in such other proportions as shall be
mutually agreed by such selling shareholders.
9.2 COMPANY REGISTRATION. If at any time after the date of this
Shareholders' Agreement the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holders) 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, or a registration relating to shares to be issued in
connection with the acquisition of another company, or a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder made within thirty (30) days after the Company shall have given such
notice in accordance with Section 14.2, the Company shall, subject to the
provisions of Section 9.7, use all reasonable efforts to cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered.
9.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Article 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use
all reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to one
hundred twenty (120) days;
(b) 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;
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(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned
by them;
(d) Use all reasonable 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,
PROVIDED, HOWEVER, 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; and
(e) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
9.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Article 9 that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be reasonably and customarily required
to effect the registration of the Registrable Securities.
9.5 EXPENSES OF DEMAND REGISTRATION. All expenses in connection with
the registrations initiated pursuant to Section 9.1 hereof and made or ordered
effective, other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Section
9.1, including (without limitation) all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements (not to exceed US $50,000) of
one counsel for the selling Holders, shall be borne by the Company; PROVIDED,
HOWEVER, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 9.1 if the registration
request is subsequently withdrawn at the request of the Holders (Initiating or
non-Initiating) holding a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses).
9.6 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 9.2 for each Holder (which right may be assigned as provided
in Section 9.12), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements (not to exceed US $50,000) of
one counsel for the selling Holders selected by them, but excluding underwriting
discounts and commissions relating to Registrable Securities.
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9.7 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 9.2 to include any of the Holders'
securities in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in an offering (other than a registration effected
pursuant to Section 9.1) exceeds the amount of securities to be sold other than
by the Company that the underwriters reasonably believe compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of Registrable Securities which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities requested to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders).
If any Person does not agree to the terms of any such underwriting, it
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration, the Company shall then offer to all Persons who
have retained the right to include securities in the registration the right to
include additional securities in the registration in an aggregate amount equal
to the number of shares so withdrawn, with such shares to be allocated among the
Persons requesting additional inclusion pro rata according to the total amount
of securities requested to be included in such registration owned by each such
Person or in such other proportions as shall be mutually agreed by such selling
shareholders.
For purposes of the immediately preceding paragraph concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners, and any trusts for the benefit of any of
the foregoing Persons shall be deemed to be a single "selling shareholder," and
any pro rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
9.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 9.
9.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Article 9:
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(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers,
directors, partners, employees and legal counsel of each
Holder, and each Person, if any, who controls such Holder
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 any other federal or state law, rule
or regulation 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"): (i) any untrue
statement or alleged untrue statement of a material fact
contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, (ii) 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 in light of the circumstances in which they
were made, or (iii) 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 reimburse each such Holder, officer,
director, partner, employee, legal counsel, underwriter or
controlling Person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action or enforcing
these indemnification provisions, as such expenses are
incurred; PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection 9.9(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, 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.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of
its directors and officers, its legal counsel, each Person, if
any, who controls the Company within the meaning of the
Securities Act, and any other Holder selling securities in
such registration statement or any of such other Holder's
directors, officers, employees, legal counsel or any Person
who controls such Holder, against any losses, claims, damages
or liabilities (joint or several) to which the Company or any
such director, officer, employee, legal counsel, or
controlling Person, or other such Holder or director, officer,
employee, legal counsel or controlling Person of such other
Holder 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
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
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<PAGE> 21
expressly for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director,
officer, employee, legal counsel, controlling Person, other
Holder, or officer, director, employee, legal counsel, or
controlling Person of such other Holder in connection with
investigating or defending any such loss, claim, damage,
liability, or action or enforcing these indemnification
provisions, as such expenses are incurred; PROVIDED, HOWEVER,
that the indemnity agreement contained in this subsection
9.9(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 indemnifying
Holder.
(c) Promptly after receipt by an indemnified party
under this Section 9.9 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 9.9, give 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 shall have the right to retain its own
counsel at its own expense if it so desires. Notwithstanding
the foregoing, if the indemnified party and the indemnifying
party have conflicting interests with respect to the action so
that joint counsel for them would be inappropriate (as
determined by counsel to the indemnified party and counsel to
the indemnifying party), then the indemnifying party shall pay
reasonable fees and expenses of one counsel to the indemnified
party. Each indemnified party shall give reasonably prompt
notice to each indemnifying party or parties of any action or
proceeding commenced against it in respect of which indemnity
may be sought hereunder, but the failure to deliver written
notice to the indemnifying party within a reasonable time of
the commencement of any such action, shall not relieve such
indemnifying party of any liability to the indemnified party
under this Section 9.9, unless the indemnifying party is
materially prejudiced by such failure to give notice.
(d) If the indemnification provided for in this
Section 9.9 is held by a court of competent jurisdiction to be
unavailable to an indemnified party or insufficient to hold
harmless an indemnified party under subsection (a), (b), or
(c) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred
to in subsection (a), (b), or (c) above, 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 action, statement or
omission that resulted in such claims, as well as other
equitable considerations. The relative fault shall be
determined with reference to, among other things, whether the
untrue statement or alleged omission to state a material fact
relates to
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information supplied by the indemnifying party or such
indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing
provisions of this Section 9.9, a Holder of Registrable
Securities shall not, as an indemnifying party, be required to
contribute any amount in excess of (x) the amount by which the
total price at which the Registrable Securities sold by such
indemnifying party were offered to the public exceeds (y) the
amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such action,
untrue or alleged untrue statement or omission or alleged
omission. The Company and each Holder of Registrable
Securities agrees that it would not be just and equitable if
contribution pursuant to this Section 9.9(d) were determined
by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations
referred to above in this Section 9.9(d). The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to above in this
Section 9.9(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigation or defense of any such action or
claim which is the subject of this subsection (d) or
enforcement of these contribution provisions.
(e) The obligations of the Company and Holders under
this Section 9.9 shall survive the completion of any offering
of Registrable Securities in a registration statement under
this Article 9, and otherwise.
9.10 REPORTS UNDER SECURITIES EXCHANGE ACT. 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 securities of the Company to the public without
registration, the Company agrees that if it becomes a reporting company under
the Exchange Act, to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all
times after ninety (90) days after the effective date of the
first registration statement filed by the Company for the
offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144 (at any time after
ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities
Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), and (ii) a copy of
the most recent
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annual or quarterly report of the Company and such other
reports and documents so filed by the Company.
9.11 FORM S-3 REGISTRATION. In case the Company shall receive
written request or requests from a Holder that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to
all other Holders; and
(b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and
distribution of all such portion of such Holder's or Holders'
Registrable Securities as are specified in such request,
together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such
request as are specified in a written request made within
thirty (30) days after the Company shall have given such
notice pursuant to Section 14.2 hereof; PROVIDED, HOWEVER,
that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this
Section 9.11: (i) if Form S-3 is not available for such
offering by the Holders; (ii) if the Holders, together with
the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at any aggregate
price to the public of less than Five Million Dollars (US
$5,000,000); (iii) if the Company shall furnish to the Holders
a certificate signed by the CEO stating that in the good faith
judgment of the Board of Directors it would be seriously
detrimental to the Company and its stockholders for such Form
S-3 Registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the
Form S-3 Registration Statement for a period of not more than
one hundred eighty (180) days after receipt of the request of
the Holder or Holders under this Section 9.11; PROVIDED,
HOWEVER, that the Company shall not utilize this right more
than once in any 12 month period; (iv) if the Company within
the nine month period preceding the date of such request,
already has effected one registration on Form S-3 for the
Holders pursuant to this Section 9.11 or within the 48 month
period preceding the date of such request already has effected
five such registrations and other similar provisions granting
rights to the registration on Form S-3; or (v) in any
particular jurisdiction in which the Company would be required
to qualify to do business or to execute a general consent to
service of process in effecting such registration,
qualification or compliance.
Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered (including securities which the Company wishes to
issue), as soon as practicable after receipt of the request or requests
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of the Holders. All expenses, other than underwriting discounts and commissions,
incurred in connection with the registrations pursuant to this Section 9.11,
including (without limitation) all other registration, filing, qualification,
printer's and accounting fees shall be borne by the Company. Registrations
effected pursuant to this Section 9.11 shall not be counted as demands for
registration effected pursuant to Section 9.1 of this Shareholders' Agreement.
9.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Article 9 may be assigned by
a Holder to a transferee or assignee who has lawfully received the shares in
accordance with all applicable laws and regulations and with respect to
Registrable Securities other than Board Warrants, the terms of this
Shareholders' Agreement and, if applicable, is a Shareholder as defined
hereunder or a partner or equity holder of a Shareholder (or a third party duly
authorized to act on behalf of a Shareholder or its partners or equity holders),
PROVIDED that such partner or equity holder has appointed such Shareholder (or
such duly authorized third party) as its lawful attorney-in-fact to receive
notices, vote and otherwise make binding decisions under the terms of this
Article 9; PROVIDED, HOWEVER, in each case, the Company is, within a reasonable
period of time after such transfer, given written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and PROVIDED, FURTHER, that such
assignment shall be effective only if (i) immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and (ii) the transferee agrees to be bound
by the terms of this Article 9. Any provisions of this Shareholders' Agreement
to the contrary notwithstanding, a transferee shall have no rights of a Holder
under Section 9.1 of this Shareholders' Agreement unless such transferee
receives from a Shareholder that is a party to this Shareholders' Agreement as
of its date, one hundred percent (100%) of the shares of Stock held by such
Shareholder as of the date of this Shareholders' Agreement (as diluted, other
than by disposition by such Shareholder).
9.13 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Article 9
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of at least seventy percent (70
%) of the Registrable Securities. Any amendment or waiver effected in accordance
therewith shall be binding upon each holder of any securities purchased under
this Shareholders' Agreement at the time outstanding (including securities into
which such securities are convertible), each future holder of all such
securities, and the Company.
9.14 TERMINATION OF REGISTRATION RIGHTS. The Company's obligations
pursuant to this Article 9 shall terminate five (5) years after the date of
consummation of the Initial Public Offering.
9.15 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
shall not, to the extent requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, sell or otherwise transfer or
dispose of any securities of the Company (other than securities registered in
the offering) whether or not acquired by such Holder under this Shareholders'
Agreement during a reasonable and customary period of time (not to exceed
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one hundred eighty (180) days), as agreed to by the Company and the
underwriters, following the effective date of a registration statement of the
Company filed under the Securities Act; PROVIDED, HOWEVER, that:
(a) such agreement shall be applicable only to the
first registration statement of the Company which covers
shares (or securities) to be sold on its behalf to the public
in an underwritten offering; and
(b) all officers and directors of the Company,
holders of 5% or more of the Company's issued and outstanding
capital stock and all other Persons with registration rights
(whether or not pursuant to this Shareholders' Agreement)
similarly agree not to sell or transfer.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other Person subject to the foregoing restriction)
until the end of such reasonable and customary period.
10. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS.
10.1 FINANCIAL STATEMENTS. The Company shall deliver to each
Shareholder (i) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company as of the end of such year, and a
cash flow statement, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and certified by an independent public accounting firm
selected by the Company's Board of Directors, and a copy of such independent
public accounting firm's auditor's letter to the management of the Company; (ii)
within thirty (30) days after the end of each month, an unaudited statement of
operations, cash flow analysis and balance sheet for and as of the end of such
month; (iii) within thirty (30) days of the end of each quarter, an unaudited
statement of operations, cash flow analysis and balance sheet for and as of the
end of such quarter, in reasonable detail; such quarterly statements shall also
compare actual performance to budget and to the prior year's comparable period;
and (iv) not later than a date to be determined by the Board of Directors of the
Company for each fiscal year, the annual business plan of the Company, prepared
on a monthly basis, approved by the Board of Directors of the Company.
10.2 SHAREHOLDER INSPECTION. The Company shall permit each Shareholder,
at such Shareholder's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Shareholder; PROVIDED, HOWEVER, that the Company shall not be
obligated pursuant to this Section 10.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information unless a non-disclosure agreement, satisfactory to the Company in
its reasonable judgment, has been executed and delivered by the relevant
Shareholder.
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10.3 NEGATIVE COVENANTS.
(a) The Company shall not, without the prior consent
or approval of the holders of at least seventy percent (70%)
of the Stock then outstanding:
(i) amend the Company's Articles of
Incorporation or Bylaws; or
(ii) take any action which results in the
merger, consolidation or reorganization with or into
any other corporation or corporations (other than a
mere reincorporation transaction) or a sale of all or
substantially all of the assets of the Company; or
(iii) take any action which results in the
voluntary dissolution or liquidation of the Company;
or
(iv) redeem any shares of the Company's
capital stock (other than as contemplated in
connection with the Employee Plan or Article 2 or 8
of this Shareholders' Agreement) or create or
reclassify any obligation or security convertible
into or exchangeable for, or having any option rights
to purchase, any equity security or in any manner
issue any additional shares of capital stock of the
Company other than in the Target IPO, upon conversion
of any Convertible Promissory Note, or upon exercise
of any Warrant or any option granted under the
employee option plan contemplated by Section 10.4
hereof; or
(v) approve an Initial Public Offering,
other than a Target IPO; or
(vi) select the Company's outside auditor;
or
(vii) declare or pay any dividend (other
than a dividend payable ratably to all shareholders
in shares of Stock) in respect of any Stock.
(b) The Company shall not, without the prior consent
or approval of the holders of at least seventy percent (70%)
of the Stock then outstanding:
(i) approve the establishment or the
closing of any facility having (or to employ) more
than twenty (20) employees; or
(ii) purchase, sell, license or lease any
asset of the Company having a value in excess of the
greater of Three Million Dollars (US $3,000,000) or
one percent (1%) of the consolidated net revenue of
the
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Company for the twelve (12) months preceding such
purchase, sale or lease.
10.4 INCENTIVE OPTIONS. As soon as practicable after the Closing
Date, the Company will adopt an incentive option plan for officers and employees
(other than the Principal Shareholder) and shall reserve for issuance under such
plan options covering an aggregate of six percent (6%) of the Stock of the
Company issued and outstanding immediately after the Closing Date on a fully
diluted basis (but without giving effect to any Board Warrants or the options
provided for in this Section 10.4). The detailed terms and provisions of such
option plan and options shall be as set forth in the operative documents as
approved by the Board of Directors; PROVIDED that, at a minimum, no such options
shall be exercisable other than for Common Stock or other than in connection
with an Initial Public Offering or a merger of the Company in which the Company
is not the surviving entity.
10.5 SHAREHOLDER LOANS.
(a) Subject to the right of the Principal Shareholder
to participate pursuant to the terms of Section 10.5(b) of
this Shareholders' Agreement, the Investors agree to lend to
the Company in the aggregate up to Thirteen Million Dollars
(US $13,000,000) with each Investor agreeing to lend the
amount indicated on Schedule 2 hereto within thirty (30) days
after receipt of a request in writing from the Chairman
specifying the amount of the loan required by the Company;
PROVIDED, HOWEVER, that:
(i) the Company shall be permitted to make
no more than three such requests and that the
aggregate amount outstanding at any one time in
respect of all such requests shall in no event exceed
the amount set forth on Schedule 2 with respect to
each Investor;
(ii) all amounts in respect of which the
Company requests loans pursuant to this Section 10.5
shall be allocated ratably to the Investors (and to
the Principal Shareholder, to the extent that the
Principal Shareholder participates in such loan
pursuant to Section 10.5(b) of this Shareholders'
Agreement);
(iii) each loan made pursuant to this
Section 10.5 shall be evidenced by a Convertible
Subordinated Promissory Note which shall be (A) as to
Seven Million Dollars ($7,000,000) in aggregate
principal amount borrowed, substantially in the form
attached as Exhibit B-1 to this Shareholders'
Agreement and (B) as to Six Million Dollars
($6,000,000) in aggregate principal amount borrowed,
substantially in the form of Exhibit B-2 to this
Shareholders' Agreement (each a "Convertible
Promissory Note") and shall be subject to the terms
and conditions, including, without limitation, the
conversion rights, set forth therein;
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<PAGE> 28
(iv) no material breach of any agreement,
obligation or condition contained in this
Shareholders' Agreement to be performed or observed
by the Company or the Principal Shareholder shall
have occurred and be continuing, PROVIDED that, if
the existence of such a material breach is to be
asserted as excusing the obligation to make loans
hereunder, then the Investor asserting a breach shall
have given the Company and each other party to this
Shareholders' Agreement notice of the existence of
such breach and requested that such breach be cured
as a condition to such Person's obligations under
this Section 10.5 and more than twenty (20) days
shall have elapsed without such breach being remedied
(or the effect thereof waived by such Investor);
(v) no "event of default" under and as
defined in the Company's principal working capital
financing agreement (with the CIT Group/Credit
Finance, Inc. in an amount available to be borrowed
of up to Seventy Million U.S. Dollars ($70,000,000)
(the "Senior Financing"), arising out of the
financial condition or performance of the Company,
and that cannot be remedied by application of the
total amount then available to be borrowed by the
Company pursuant to this Section 10.5, shall have
occurred and be continuing;
(vi) the execution, delivery and
performance of each Convertible Promissory Note by
the Company shall have been duly authorized by all
necessary corporate action on the part of the
Company;
(vii) the proceeds of such loans will be
applied exclusively to (A) pay claims of creditors
against the Company in accordance with the Plan
including "disputed claims" as such disputed claims
are resolved and liquidated, (B) pay any amount then
due and payable to Melita Hayes arising out of the
purchase or redemption of her shares of Common Stock,
or (C) provide working capital and for other general
business purposes of the Company (other than
repayment of the Convertible Promissory Notes),
PROVIDED that in the case of loans evidenced by
Convertible Promissory Notes in the form of Exhibit
B-1, use of proceeds for such purposes shall be
subject to the approval of the Board of Directors of
the Company (which approval shall not be unreasonably
withheld); and
(viii) upon the making of each such loan,
the Chairman shall deliver to each Investor a
certificate dated as of the date of funding
certifying that the conditions set forth in
subparagraphs (ii) through (vii) of this Section 10.5
have been fulfilled as of the date of the making of
each such loan.
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(b) The Principal Shareholder shall have the right,
but not the obligation to participate with the Investors
ratably in accordance with the number of shares of Stock then
owned or controlled by each of them in any loan the proceeds
of which are to be applied (and are applied) as provided in
subsection 10.5(a)(vii)(C) of this Shareholders' Agreement.
(c) Notwithstanding any other provision of this
Shareholders' Agreement, no Investor shall have any obligation
to make any loans pursuant to this Section 10.5 after the
first anniversary of the Closing Date.
(d) The discretion to determine, consistent with
applicable standards of conduct and subject to the other terms
of this Agreement,
(i) that any loan requested hereunder
evidenced by a Convertible Promissory Note shall be
evidenced by such a Note in the form of Exhibit B-1
or B-2 and
(ii) whether repayment of all or any part of
the principal of loans evidenced by Convertible
Promissory Notes shall be made in accordance with the
terms of such Notes, including whether such repayment
shall be applied to Notes in the form of Exhibit B-1
or B-2,
is expressly delegated to the Chairman acting in complete
compliance with his fiduciary duties as an officer of the
Company in making such determinations (which fiduciary duties
to the Company shall not be altered or influenced in any way
by such Chairman's position as a shareholder of the Company),
PROVIDED that the Shareholders acknowledge that no such
repayment shall be made if an "event of default" exists at the
time such repayment is to be made (or would exist after giving
effect to such repayment) under the Senior Financing.
10.6 CHIEF EXECUTIVE OFFICER.
The Shareholders will implement the following procedure as
promptly as is practicable after the Closing Date:
(a) Promptly (and in any event within ten (10) days
after the Closing Date if no chief executive officer ("CEO")
has been appointed by the Board), a committee of the Board of
Directors of the Company, consisting of three members, with
one member appointed by each of Rinzai, the Principal
Shareholder and a majority of the other Board members, shall
be appointed to assist in recruiting and interviewing
prospective president and CEO candidates to be formally
nominated by the Chairman to the Board, subject to the prior
approval of the Investors holding a majority of the Preferred
Shares, which approval will not be unreasonably withheld, for
appointment by the Board to such position. The
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qualifications, objectives and responsibilities of the CEO
will include at least the items set forth on the description
attached hereto as Exhibit C.
(b) If a CEO has not been appointed by the Board
acting on a nomination initiated by the Chairman within ninety
(90) days after the Closing Date, then the Investors, acting
jointly, shall thereafter have the right, subject to approval
by the Chairman, to determine which CEO candidates are
formally nominated for appointment by the Board. Such
candidates may be identified by the Board committee, any
Shareholder, the Chairman, or any executive recruiter employed
by or on behalf of any of the foregoing, PROVIDED only that if
the Investors owning a majority of the Preferred Shares have
agreed on a candidate who substantially fulfills the
requirements inherent in the description attached as Exhibit C
and whom they wish formally to nominate, they will first
advise the Chairman and request his approval (which approval
shall not be unreasonably withheld). If the Chairman rejects
the first two such candidates, he shall approve any third
candidate so selected to be nominated or, if he prefers one of
the two candidates previously rejected and that candidate is
still available and willing to accept such position, the
Chairman may approve such previously rejected candidate.
(c) The Company shall enter into an employment
agreement with the CEO, the terms of such employment agreement
to be subject to the approval of the Investors owning a
majority of the Preferred Shares, which approval shall not be
unreasonably withheld PROVIDED that the description of the
position of CEO set forth in such contract is substantially
identical to the description attached hereto as Exhibit C, and
the prior approval of the Investors owning a majority of the
Preferred Shares shall be required for any amendment or
modification of such contract (or any contract with any
successor CEO during the 24-month period following the Closing
Date) the effect of which is to reduce the objectives and
responsibilities of such position.
(d) Any CEO appointed pursuant to this procedure may
be removed only by the Board of Directors.
(e) In the event of a vacancy in the CEO position
(including any vacancy existing on the Closing Date), so long
as Rinzai is a Shareholder of the Company, Rinzai shall in its
sole discretion be entitled to appoint an interim CEO until
such position can be filled either in accordance with the
terms of this Section 10.6 or by a vote of the Board of
Directors of the Company in the event that the terms of this
Section 10.6 are no longer applicable.
If a chief financial officer of the Company is appointed at any time after the
Closing Date, the foregoing procedure (but with reference to an appropriate
position profile for chief financial
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<PAGE> 31
officer) shall apply also to such appointment. The above procedure shall apply
to the first and any successor CEO and CFO appointed during the term hereof.
10.7 CERTAIN OTHER SHAREHOLDER AGREEMENTS. Without limiting any
agreements between the Shareholders contained elsewhere in this Shareholders'
Agreement or in any other document entered into after the date hereof, the
Shareholders agree expressly as follows:
(a) Each Shareholder will cause the members of the
Board of Directors designated by it or him to vote in favor of
a Target IPO, if requested by either of Rinzai or the
Principal Shareholder (or their Permitted Transferees), and to
vote to adopt the employee incentive option plan as set forth
in Section 10.4 hereof;
(b) Each Shareholder will cause the members of the
Board designated by it or him to vote in favor of retention of
any reputable investment banker or other appropriate
professional proposed by Rinzai in accordance with the
provisions of Section 8.1 of this Shareholders' Agreement.
(c) Each Shareholder will cause the members of the
Board of Directors designated by it or him to vote in favor of
and/or ratify the appointment of any interim CEO appointed by
Rinzai in accordance with Section 10.6(e) hereof.
(d) In connection with the completion of any Initial
Public Offering, vote in favor of amending the articles or
certificate of incorporation of the Company and the bylaws of
the Company to delete any "supermajority" voting provisions
contained therein.
(e) Immediately following the closing on the Closing
Date, the Shareholders will hold a meeting at which, among
other things, Directors will be elected, and immediately
thereafter, the Directors will hold their initial meeting at
which, among other things, Dennis C. Hayes' resignation as
President of the Company will be accepted, he will be
appointed as the Chairman and the employment agreement between
him and the Company in the form attached to the Merger
Agreement as Exhibit F will be ratified and confirmed, and any
other officers of the Company will be appointed or reappointed
or confirmed in their positions, as appropriate.
(f) So long as Rinzai is a Shareholder, the Voting
Trust will not be terminated (other than in accordance with
its terms) nor the terms thereof amended or modified without
the prior approval of Rinzai.
(g) The Principal Shareholder and the Company agree
that effective upon Melita Easters Hayes (or any successor)
ceasing to be a shareholder of the Company, the 1988
Shareholder Agreement (as defined in the Merger Agreement)
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<PAGE> 32
shall without further action by any party hereto, terminate
and be of no further force or effect.
11. LEGEND.
Upon execution of this Shareholders' Agreement, each Shareholder shall
deliver to the Secretary of the Company all certificates evidencing shares of
Stock then owned by him or it, which certificates shall be stamped or endorsed
with a legend in substantially the following form:
TRANSFER RESTRICTED
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN A SHAREHOLDERS' AGREEMENT DATED AS OF APRIL 16, 1996 (THE
"AGREEMENT") AMONG HAYES MICROCOMPUTER PRODUCTS, INC. (THE "COMPANY") AND THE
SHAREHOLDERS (AS DEFINED THEREIN) AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH. A COPY OF
THE AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY AND MAY BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE PRESIDENT OF THE COMPANY.
IN ADDITION, THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR OFFERED FOR SALE AND NO TRANSFER OF THEM WILL BE MADE BY THE COMPANY OR
ITS TRANSFER AGENT IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
and the Secretary of the Company shall further cause all certificates evidencing
issued shares of Stock not owned by Shareholders to be stamped or endorsed with
a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED
FOR SALE AND NO TRANSFER OF THEM WILL BE MADE BY THE COMPANY OR ITS TRANSFER
AGENT IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Any legend endorsed on a certificate pursuant to this Section 11 shall be
removed (i) if Stock represented by such certificate shall have been registered
or otherwise lawfully sold in a public transaction or (ii) if the holder of such
Stock shall have provided the Company with an opinion
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<PAGE> 33
from counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that a public sale, transfer or
assignment of such Stock may be made without registration.
12. BOARD OF DIRECTORS.
12.1 ELECTION. The Board of Directors shall initially consist of
seven (7) members. Directors shall be elected as hereinafter set forth. Subject
to the provisions of Section 12.2 of this Shareholders' Agreement, each of the
Shareholders shall vote (or cause to be voted) all of the shares of Stock owned
or controlled by him or it so as to provide for the election to the Board of
Directors, at any annual or special meeting called for such purpose, of (i) the
Principal Shareholder and one individual designated by the Principal Shareholder
or the Principal Shareholder Successor (or two (2) individuals designated by the
Principal Shareholder Successor if the Principal Shareholder is deceased or
incompetent); (ii) two (2) individuals designated by Rinzai; (iii) one (1)
individual designated jointly by the Singapore Group; (iv) one (1) individual
designated by the Hong Kong Group who shall be nominated by Kaifa Technology
(H.K.) Limited as long as it is a Shareholder; and (v) the CEO of the Company
(but not any interim CEO). Each Shareholder and the Principal Shareholder
Successor agrees to vote to remove any Director at the request of the
Shareholder or the Principal Shareholder Successor that designated such
Director. The rights of the Principal Shareholder and each Investor so to
designate Directors shall inure to the benefit of any transferee pursuant to
Article 4 hereof from such Shareholder (or from the Principal Shareholder
Successor or, as to the Investor, from any Permitted Transferee) of all (but not
less than all) of the shares of Stock originally issued to such Shareholder (as
the same may have been converted and adjusted for stock splits, combinations and
other similar events). Any Shareholder who owns at least two percent (2%) of the
issued and outstanding Stock, calculated on a fully diluted basis, and who does
not have the right to nominate a Board member as provided above, shall have the
right to receive notice of and attend all Board meetings for observation
purposes, but shall not have the right to vote or otherwise participate therein
nor to attend any meeting, or portion thereof, declared by the Board, upon
advice of counsel, to be a closed meeting for executive session; and provided,
further, that any such Shareholder who does not attend any such meeting shall
have the right to receive copies of any minutes or resolutions approved by the
Board at such meeting.
12.2 ALTERATION OR TERMINATION OF PROVISIONS UNDER CERTAIN
CIRCUMSTANCES.
(a) If at any time the number of shares of Stock
owned or controlled by any of the Principal Shareholder, the
Principal Shareholder Successor or Rinzai (or by any Article 4
transferee of any thereof who is entitled, pursuant to the
provisions of Section 12.1, to designate Directors) shall be
less than twenty percent (20%) of the then outstanding shares
of Stock by reason of any sale or other disposition made by
such Shareholder or the Principal Shareholder Successor, as
the case may be, then (i) such Shareholder or the Principal
Shareholder Successor, as the case may be, shall be entitled
to designate only one Director in accordance with Section 12.1
and shall forthwith cause the resignation of one of the two
Directors at the time holding office in the Company by reason
of the designation thereof by such Shareholder or the
Principal Shareholder Successor, respectively, and (ii) the
Bylaws of the Company shall promptly be amended so as to
implement the foregoing provisions. If at any time the number
of shares of Stock owned or controlled by any of the Principal
Shareholder, the Principal Shareholder Successor, Rinzai, the
Hong Kong Group or the Singapore Group (or by any Article 4
transferee of any thereof who is entitled, pursuant to the
provisions of Section 12.1, to designate Directors) shall be
less than eight percent (8%) of the then outstanding shares of
Stock by reason of any sale or other disposition made by such
Shareholder or the
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<PAGE> 34
Principal Shareholder Successor, as the case may be, then (i)
such Shareholder or the Principal Shareholder Successor, as
the case may be, shall not be entitled to designate any
Directors in accordance with Section 12.1 and shall forthwith
cause the resignation of the Director or Directors at the time
holding office in the Company by reason of the designation
thereof by such Shareholder or the Principal Shareholder
Successor, respectively, and (ii) the Bylaws of the Company
shall promptly be amended so as to implement the foregoing
provisions.
(b) If at any time the Principal Shareholder and his
Permitted Transferees, the Employee Plan and Rinzai, or any
Investor (or the Hong Kong Group or the Singapore Group) if
such Investor (or group of Investors) has acquired more than
twenty percent (20%) of the Company's outstanding Stock, are
the only shareholders of the Company, then the number of
Directors shall be reduced to five (5), a quorum of the
Directors shall be reduced to three (3), and each of the
Principal Shareholder and Rinzai, or such Investor or group of
Investors, as the case may be, shall be entitled in accordance
with Section 12.1 to designate two (2) members of the Board of
Directors and such members acting jointly shall designate the
fifth (5th) member, PROVIDED that from and after such time as
any Investor or group of Investors owns at least fifty-five
percent (55%) of the outstanding shares (and the Principal
Shareholder and his Permitted Transferees and the Employee
Plan own the remainder), such Investor or group of Investors
shall be entitled to designate three (3) such Directors and
the Principal Shareholder shall be entitled to designate two
(2) such directors. The Bylaws of the Company shall be
promptly amended so as to implement the foregoing provisions.
12.3 INDEMNIFICATION. The Articles of Incorporation or Bylaws of
the Company shall, at all times during which any Affiliate or employee of any
Shareholder serves as a member of the Board provide for limitations on the
liability of the Directors and indemnification of the Directors to the fullest
extent permitted under applicable law. To the extent not prohibited by law, in
the event that any Shareholder who is a Director or any Affiliate or employee of
a Shareholder who is a Director shall be made or threatened to be made a party
to any action, suit or proceeding with respect to which any such Shareholder or
Director may be entitled to indemnification solely in such capacity by the
Company pursuant to this Shareholders' Agreement or the Bylaws, or otherwise,
all such Directors, as a group, shall be entitled to be represented in such
action, suit or proceeding by one counsel of their choice and the expenses of
such representation shall be reimbursed by the Company on a monthly basis upon
submission of such invoices. Promptly after election of any director, the
Company will enter into an appropriate indemnification agreement with such
Director; PROVIDED, HOWEVER, that except with respect to proceedings to enforce
rights of indemnification, the Company shall indemnify any such Director for his
expenses incurred in connection with a successful proceeding (or part thereof)
initiated by such Director in such capacity only if such proceeding (or part
thereof) was authorized by the Board of Directors.
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<PAGE> 35
13. SPECIFIC PERFORMANCE.
The Shareholders and the Company acknowledge and agree that the
recovery of money damages will not constitute an adequate remedy for breach of
the provisions of this Shareholders' Agreement. Accordingly, the parties agree
that the provisions of this Shareholders' Agreement may be specifically enforced
against them and transferees of securities of the Company which are subject to
this Shareholders' Agreement (in addition to any other remedies available for
breach of this Shareholders' Agreement), and the parties (for themselves and, in
the case of the Shareholders, transferees of their securities of the Company),
hereby waive the defense in any equitable proceeding that there is an adequate
remedy at law for any such breach.
14. MISCELLANEOUS.
14.1 TERMINATION. This Shareholders' Agreement shall continue until the
first to occur of (a) the tenth (10th) anniversary of this Shareholders'
Agreement or (b) the completion of the Initial Public Offering; PROVIDED,
HOWEVER, that the provisions of Articles 2 and 3 shall survive the occurrence of
an Initial Public Offering until the tenth (10th) anniversary of the date hereof
with respect to private sales (or series of related sales) of Stock for amounts
in the aggregate greater than Ten Million Dollars (US$10,000,000) and the
provisions of Article 9 shall survive the occurrence of an Initial Public
Offering until the fifth (5th) anniversary thereof.
14.2 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the party to be notified at the address
set forth below or at such other address as such party shall have notified the
other parties hereto, by notice given in conformity with this Section 14.2:
The Company: Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
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with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E.,
Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
Kaifa: Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Mills Industrial Building
31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Attention: Mr. Tam Man Chi, President
Telecopy: (852) 2480-4723
with a required copy to:
Vivien Chan & Company
15/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Attention: Mr. George Riberio
Telecopy: (852) 2845-9160
<TABLE>
<S> <C> <C> <C>
RPH: Rolling Profit Holdings Limited Wongs: Wong's International (Holdings) Limited
Arion Commercial Center Wong's Industrial Centre
Third Floor, Room 304 180 Wai Yip Street
2-12 Queen's Road West Kwun Tong
Hong Kong Kowloon
Attention: President Hong Kong
Telecopy: (852) 2854-0438 Attention: President
Telecopy: (852) 2797-8076
with a required copy in either case to:
Farrand, Cooper & Bruiniers
235 Montgomery, Suite 1035
San Francisco, California 94104
Attention: Wayne Cooper, Esq.
Telecopy: (415) 677-2950
Acma: Acma Limited Rinzai Limited
or Rinzai 17 Jurong Port Road c/o Acma Limited
Singapore 2261 17 Jurong Port Road
Attention: President Singapore 2661
Telecopy: 011 65 264-0125 Attention: President
Telecopy: 011 65 264-0125
</TABLE>
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<PAGE> 37
<TABLE>
<S> <C> <C> <C>
Guthrie: Guthrie GTS Limited Lao Hotel (H.K.) Limited
or Lao 115 Amoy Street # 02-00 c/o Guthrie GTS Limited
Hotel: Singapore 059935 115 Amoy Street # 02-00
Attention: Mr. Arthur Tan Singapore 059935
Telecopy: 011 65 224-9211 Attention: Mr. Arthur Tan
Telecopy: 011 65 224-9211
GK: GK Goh Holdings Limited Saliendra Pte Ltd.
or 50 Raffles Place c/o GK Goh Holdings Limited
Saliendra Pte #33-00 Shell Tower 50 Raffles Place
Singapore 048623 #33-00 Shell Tower
Attention: Mr. Lee Teong Sang Singapore 048623
Telecopy: 011 65 538-6189 Attention: Mr. Lee Teong Sang
Telecopy: 011 65 538-6189
S.P.: S.P. Quek Investments Limited
c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Attention: President
Telecopy: 011 65 224-9933
</TABLE>
with a required copy in the case of any notice to Rinzai, Leo Hotel (H.K.)
Limited, Guthrie GTS Limited, GK Goh Holdings Limited, Saliendra Pte Ltd., or
S.P. Quek Investments Limited to:
Jackson Tufts Cole & Black, LLP
60 South Market Street, 10th Floor
San Jose, California 95113
Attention: Richard Scudellari, Esq.
Telecopy: (408) 998-4889
Dennis Hayes: Dennis C. Hayes
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
14.3 GOVERNING LAW. This Shareholders' Agreement shall be governed by
and construed under the laws of the State of Georgia without reference to its
conflicts of law principles. Any action brought hereunder shall be heard by a
court sitting in Fulton County, Georgia.
14.4 COUNTERPARTS. This Shareholders' Agreement may be executed in one
or more counterparts, including counterparts transmitted by telecopier or
telefax, all of which shall be considered one and the same agreement. Facsimile
copies with signatures of the parties to this Shareholders' Agreement, or their
duly authorized representatives, shall be legally binding and enforceable. All
such facsimile copies are declared as originals and accordingly admissible in
any jurisdiction or tribunal having jurisdiction over any matter relating to
this Shareholders' Agreement.
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<PAGE> 38
14.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Shareholders' Agreement are used for convenience only and are not to be
considered in construing or interpreting this Shareholders' Agreement.
14.6 AMENDMENTS AND WAIVERS. Except as expressly provided in Section
9.13 hereof, no amendment to this Shareholders' Agreement shall be effective
unless it is in writing and is signed by all the parties hereto, and no waiver
of any provision of this Shareholders' Agreement or consent to any departure by
any party from the terms hereof, shall in any event be effective unless in
writing and signed by the party or parties against whom such waiver or consent
is asserted and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose recited therein.
14.7 SEVERABILITY. If one or more provisions of this Shareholders'
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Shareholders' Agreement and the balance of this
Shareholders' Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
14.8 ENTIRE AGREEMENT. This Shareholders' Agreement, the Merger
Agreement and the other documents and agreements delivered pursuant hereto and
thereto constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof and supersedes any prior
agreements (including any memorandum of understanding or letters of intent)
between the parties regarding the subject matter hereof.
-38-
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have set forth their hand and
seal effective as of the date first above written.
SHAREHOLDERS:
/s/ G. Donald Johnson /s/ Dennis C. Hayes
- ------------------------------- -----------------------------------
Witness Dennis C. Hayes
RINZAI LIMITED:
By: /s/ Chou Kong Seng
--------------------------------
Name: Chou Kong Seng
------------------------------
Title: Authorized Signatory
-----------------------------
KAIFA TECHNOLOGY (H.K.) LIMITED:
By: /s/ Tam Man Chi
--------------------------------
Name: Tam Man Chi
------------------------------
Title: President
-----------------------------
ROLLING PROFIT HOLDINGS LIMITED
By: /s/ Gabriel T. W. Chan
--------------------------------
Name: Gabriel T. W. Chan
------------------------------
Title: Director
-----------------------------
LAO HOTEL (H.K.) LIMITED
By: /s/ Low Check Kwang
--------------------------------
Name: Low Check Kwang
------------------------------
Title: Director
-----------------------------
-39-
<PAGE> 40
SALIENDRA PTE LTD.
By: /s/ Mr. Lee Teong Sang
--------------------------------
Name: Mr. Lee Teong Sang
------------------------------
Title: Director
-----------------------------
S.P. QUEK INVESTMENTS LIMITED
By: /s/ Sim Pin Quek
--------------------------------
Name: Sim Pin Quek
------------------------------
Title: Director
-----------------------------
"COMPANY"
[CORPORATE SEAL]
ATTEST: HAYES MICROCOMPUTER PRODUCTS, INC.
By: By: /s/ Dennis C. Hayes
------------------------- --------------------------------
Secretary Name: Dennis C. Hayes
Title: President
-40-
<PAGE> 41
The undersigned, Acma Limited, the sole shareholder of Rinzai
Limited, is made a party hereto as the guarantor and joint obligor of all
obligations, covenants and agreements of Rinzai Limited hereunder.
ACMA LIMITED
By: /s/ Rai Rajen
-------------------------------------------
Name: Rai Rajen
-----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned, Wong's International (Holdings) Limited, the
sole shareholder of Rolling Profit Holdings, Ltd., is made a party hereto as the
guarantor and joint obligor of all obligations, covenants and agreements of
Rolling Profit Holdings, Ltd. hereunder.
WONG'S INTERNATIONAL (HOLDINGS) LIMITED
By: /s/ Gabriel T. W. Chan
-------------------------------------------
Name: Gabriel T. W. Chan
-----------------------------------------
Title: Director and Group Financial Controller
----------------------------------------
The undersigned G.K. Goh Holdings Limited, the sole
shareholder of Saliendra Pte Ltd., is made a party hereto as the guarantor and
joint obligor of all obligations, covenants and agreements of Saliendra Pte Ltd.
hereunder.
G.K. GOH HOLDINGS LIMITED
By: /s/ Mr. Goh Geok Khim
-------------------------------------------
Name: Mr. Goh Geok Khim
-----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned Guthrie GTS Limited, the sole shareholder of
Lao Hotel (H.K.) Limited, is made a party hereto as the guarantor and joint
obligor of all obligations, covenants and agreements of Lao Hotel (H.K.) Limited
hereunder.
GUTHRIE GTS LIMITED
By: /s/ Arthur Tan Keng Hock
-------------------------------------------
Name: Arthur Tan Keng Hock
-----------------------------------------
Title: Director
----------------------------------------
-41-
<PAGE> 42
SCHEDULE 1
List of Investors
Rinzai Limited
Kaifa Technology (H.K.)Limited
Rolling Profit Holdings, Limited
Lao Hotel (H.K.) Limited
Saliendra Pte Ltd.
S.P. Quek Investments Limited
List of Shareholders
<TABLE>
<CAPTION>
Number
Shareholder Name Class of Shares of Shares
- ---------------- ---------------- ---------
<S> <C> <C>
Dennis C. Hayes Common Stock 4,943,221
Rinzai Limited Preferred Shares 2,817,500
Kaifa Technology Preferred Shares 816,667
(H.K.) Limited
Rolling Profit Holdings Preferred Shares 408,333
Limited
Lao Hotel (H.K.) Limited Preferred Shares 367,500
Saliendra Pte Ltd. Preferred Shares 245,000
S.P. Quek Investments Preferred Shares 245,000
Pte Ltd.
</TABLE>
-42-
<PAGE> 43
SCHEDULE 2
Shareholder Loans
<TABLE>
<CAPTION>
Aggregate Convertible Convertible
Amount Note B-1 Note B-2
-------------------------------------------
<S> <C> <C> <C>
Rinzai Limited $7,475,000 $4,025,000 $3,450,000
Lao Hotel (H.K.) Limited $ 975,000 $ 525,000 $ 450,000
Saliendra Pte Ltd. $ 650,000 $ 350,000 $ 300,000
S.P. Quek Investments Pte Ltd. $ 650,000 $ 350,000 $ 300,000
Kaifa Technology (H.K.) Limited $2,166,667 $1,166,667 $1,000,000
Rolling Profit Holdings Limited $1,083,333 $ 583,333 $ 500,000
</TABLE>
-43-
<PAGE> 44
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Intentionally Omitted
Exhibit B-1 Form of Convertible Subordinated Promissory Note ($7,000,000 Aggregate)
Exhibit B-2 Form of Convertible Subordinated Promissory Note ($6,000,000 Aggregate)
Exhibit C CEO Position Profile
</TABLE>
-44-
<PAGE> 1
EXHIBIT 10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement") is made this 16th day of April, 1996, between HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia corporation (the "Company"), and DENNIS C. HAYES, a
resident of Gwinnett County, Georgia (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the business of developing,
manufacturing, marketing and distributing certain computer component products,
software and systems (the "Business of the Company"); and
WHEREAS, the Executive is presently a shareholder, corporate
officer and key executive of the Company; and
WHEREAS, since the inception of the Company, the Executive has
been instrumental in creating, developing and effecting the day-to-day, current
and long-term business, operating, product, personnel, management, finance and
marketing philosophies and plans of the Company; and
WHEREAS, the Company, Executive and certain investors have
entered into an Agreement and Plan of Merger dated as of April 12, 1996 ("Merger
Agreement"); and
WHEREAS, the Company and Executive entered into that certain
Employment Agreement dated July 1, 1983, which is currently in force, and which
the Company and Executive desire to amend and restate pursuant to this Agreement
in order to set forth the terms under which Executive's employment with the
Company shall be continued and certain arrangements with respect to Executive's
activities and obligations following the termination of Executive's employment
with the Company; and
WHEREAS, it is a condition precedent to the closing of the
transactions contemplated by the Merger Agreement that the Company and the
Executive enter into this Agreement;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Executive and the Company agree as follows:
<PAGE> 2
1. EMPLOYMENT AND DUTIES.
1.1 Appointment as Chairman. For the Term of this Agreement as set
forth in Section 2 hereof, the Executive shall be employed, hold the position,
perform the duties, and have the authority and responsibilities of the Chairman
of the Board of Directors ("Chairman") of the Company as set forth herein.
1.2 Duties of the Chairman. The Executive shall have the following
authority, responsibilities and duties as Chairman of the Company:
1.2.1 The Chairman shall direct the Office of Chairman which will
develop initiatives for the Board of Directors ("Board") and shareholders in
connection with current and long-term operating and strategic planning, policy
development, new technology strategy and corporate business development for the
Company.
1.2.2 The Chairman shall act as a Company spokesperson and shall
exert his best efforts to interface and maintain relations with the industrial,
political, business, financial, academic, investment and research communities.
1.3 Other Duties. The Chairman shall perform such other duties as may
be reasonably assigned from time to time by the Board consistent with the
position of Chairman.
1.4 Duties of CEO. To the extent that the responsibilities of the
Chairman duplicate duties assigned to the CEO, the Chairman shall advise the CEO
on those responsibilities. The responsibilities set forth in Exhibit C to the
Investors Shareholders' Agreement (as defined in the Merger Agreement) are
specifically delegated by the Board of Directors of the Company to the CEO.
1.5 Outside Activities. During the Term, the Executive shall devote his
full time and efforts to the execution of his duties and responsibilities
hereunder. Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to prohibit Executive from serving on other boards of directors, whether
or not for compensation (subject to Board approval and opinion of Company
counsel, as may be appropriate) and from consulting for other non-Competing
Businesses, as defined in Section 5.1, on non-company time, or from owning
copyrights, royalties, or other rights with respect to books, historical
accounts, speeches, presentations, or other works of authorship by or in
collaboration with Executive, whether or not they relate to the Company or its
affairs to the extent that such activities do not interfere with his performance
of his duties and responsibilities as Chairman and are permitted by Sections 5,
6, and 7 of this Agreement.
1.6 Other Positions. As of the Commencement Date, as defined in Section
2, the Executive shall hold only the office of Chairman. The employment by the
Company of the Executive hereunder as the Chairman shall not preclude
appointment or election of the Executive by the Board to any other corporate
office of the Company.
- 2 -
<PAGE> 3
2. TERM.
The term of the Executive's employment hereunder shall commence on the
"date of the Closing" under the Merger Agreement ("Commencement Date"), and
shall continue for a period of five (5) years from such date unless either
terminated or extended as provided by this Agreement ("Term").
3. COMPENSATION AND OTHER BENEFITS.
3.1 Salary. As compensation for his services to the Company rendered
pursuant hereto, the Executive shall be paid a base salary at the rate of not
less than One Million Dollars ($1,000,000.00) per annum (hereinafter referred to
as "Base Salary") with increases on each anniversary date of the Commencement
Date to Base Salary directly proportional to any increase (but not decrease) in
the cost of living as reflected by the "Consumer Price Index for Urban Wage
Earners and Clerical Workers-All Items" ("CPI") published by the Bureau of Labor
Statistics of the U.S. Department of Labor (or the official successor to such
index) in effect on such anniversary date as compared to the CPI in effect on
the preceding anniversary date or Commencement Date, as appropriate. The Base
Salary shall accrue and be due and payable in equal, or as nearly equal as
practicable, semi-monthly installments, and the Company may deduct from each
such installment all amounts required to be deducted and withheld in accordance
with the provisions of any applicable law now in effect or hereafter in effect
including without limitation federal and state income, FICA and other
withholding tax requirements, and such other deductions permitted by the Company
which Executive may authorize from time to time.
If the Commencement Date is on other than the first business day of a
calendar month or if the Executive's employment hereunder shall terminate on
other than the last day of a calendar month, the Executive's Base Salary for
such month shall be prorated according to the number of days during such month
that the Executive was employed hereunder.
3.2 Bonus. Executive shall be eligible for such annual bonus as may be
established annually by the Board for all executives of the Company based on
meeting or exceeding the Company's annual business plan approved by the Board
and such other individual or corporate performance factors as may be established
from time to time by the Board. Within ninety (90) days of the Commencement
Date, a bonus in the gross amount of Two Hundred Fifty Thousand Dollars
($250,000.00) shall be paid by the Company to the Executive. The Company shall
deduct from the net amount of such bonus an amount equal to Executive's unpaid
principal and interest ("Outstanding Loan") under the Revolving Loan Agreement
and Revolving Loan Promissory Note dated May 15, 1991, between the Company and
the Executive, and the amendments thereto dated February 28, 1993 and February
28, 1995 ("Revolving Loan Agreement") or, if such net bonus amount is less than
the Outstanding Loan, all of the net bonus amount to be applied to the
Outstanding Loan.
- 3 -
<PAGE> 4
3.3 Line of Credit. The Executive shall continue to be eligible for
loans in accordance with the Revolving Loan Agreement. Any amendment to such
Revolving Loan Agreement shall be subject to the approval of the Board.
3.4 Incentive Plans. If the Company now maintains or during the Term
establishes, an incentive or other compensation plan (however described or
denominated), benefit or perquisite, excluding incentive options for employees
as described in Section 10.4 of the Investors Shareholders' Agreement, for the
corporate officers or executives of the Company, the Executive shall fully
participate to the extent consistent with his membership on the Board, as
determined by the Board, in each such plan, benefit, or perquisite, excluding
incentive options for employees as described in Section 10.4 of said Investors
Shareholders' Agreement, on the same terms generally applicable to other such
participants, adjusted as necessary to reflect the Executive's positions with
the Company.
3.5 Civic and Club Dues. Subject to approval of the Board, the Company
shall pay for or reimburse the Executive for dues paid in connection with his
membership in civic organizations which promote the image or Business of the
Company or establish, maintain or expand the interface and relationship between
the Company and various communities. The Company shall reimburse the Executive
for all dues paid by him as a result of his membership in the Atlanta Athletic
Club, Ashford Club and Buckhead Club. The Company shall pay for or reimburse the
Executive for a Club Box at Grant Field (Georgia Institute of Technology,
Atlanta, Georgia) which shall be utilized primarily for business purposes.
3.6 Professional or Trade Associations. The Company shall pay for or
reimburse the Executive for dues incurred by him as a result of his current and
future membership in Chambers of Commerce, "COMPTIA," "AOP," and the "GHTA." Any
reasonable dues for the Executive's membership in any other professional or
trade associations shall be paid so long as such dues are included within the
Company's approved annual budget. The Company shall pay required fees and
expenses in accordance with Section 3.13 for the Executive to attend seminars
and professional meetings (including, when appropriate to the performance of the
Executive's duties, those related to the Executive's spouse) which maintain and
expand his knowledge and technical, financial and management skills relating to
the Business of the Company and its competitors and further the image and
Business of the Company.
3.7 Vacation. The Executive shall receive not less than six (6) weeks
(thirty (30) working days) paid vacation during each twelve (12) month period of
the Term. The Executive shall give the Board members at least five (5) days
prior written or oral notice before commencing each vacation period. To the
extent that any annual vacation provided herein is not taken during the year in
which it accrued, such unused vacation time shall be carried forward to the
following year not to exceed four (4) weeks (twenty (20) working days) per year,
and provided that Executive shall not have more than ten (10) weeks (fifty (50)
working days) of accrued and unused vacation at any one time.
3.8 Fringe Benefits, Health and Disability Plans. The Executive shall
be eligible to participate in those health, disability, life, and other fringe
benefit plans, in accordance with
- 4 -
<PAGE> 5
their terms, which the Company now or hereafter has in effect and which are
generally made available to the Company's other employees, and the Company shall
make contributions for Executive's participation in such plans as it generally
makes for its other employees. The Company reserves the right to modify, add to
or eliminate any or all of its fringe benefit plans at any time and for any
reason.
3.9 Insurance.
3.9.1 Life Insurance. The Company shall continue to maintain
at no cost to the Executive, except as provided in this Section 3.9.1, those
life insurance policies with respect to the Executive which are set forth on
Schedule 3.9. The Executive may borrow such amounts as are permitted under the
terms of such life insurance policies; provided, however, that on and after the
Commencement Date the Executive shall be solely responsible for repayment of
such borrowed amounts, interest thereon and payment of any resulting increase(s)
in the Company's premium payment and shall give advance written notice to the
Board of his intention to borrow such amounts.
3.9.2 Errors and Omissions. The Company shall provide
directors' and officers' liability and errors and omissions coverage for the
Executive in an amount and under terms consistent with those provided other
Company officers and directors.
3.9.3 Disability. If the Executive is determined to be
disabled under the Company's short-term disability plan or long-term disability
plan ("Disability Plan"):
(a) The Company shall pay to the Executive, through
insurance or otherwise, an amount equal to one
hundred percent (100%) of the Executive's Base
Salary for a period of one year from and after the
occurrence of the disability as determined under
the Disability Plan. The sum of amounts paid by
the Company under this Section 3.9.3(a) shall be
reduced by the Executive's total income during
such period from: social security, workers'
compensation, compensation from the Company or any
other business entity which controls, or is
controlled by, or is under common control with the
Company including, but not limited to, any
Disability Plan benefits and earned income from
employment in any capacity ("Offset Amount").
(b) Commencing on the three hundred sixty-sixth
(366th) consecutive calendar day from and after
the Executive's disability as determined under the
Disability Plan, the Company shall pay to the
Executive, through insurance or otherwise, an
amount equal to sixty-six and two-thirds percent
(662/3%) of the Executive's Base Salary. The sum
of amounts paid by the Company under this Section
3.9.3(b) shall be reduced by the Offset Amount
plus all of the Executive's proceeds from the sale
of Company stock and, if
- 5 -
<PAGE> 6
an IPO as defined in Section 4.3.5 occurs and the
Executive is permitted to sell his Company stock,
those proceeds from the sale of Company stock
which the Executive could receive.
(c) The Company's obligation to make payments, as set
forth in Sections 3.9.3(a) and (b), to the
Executive during the Executive's period of
disability shall cease upon the earlier of the
fifth (5th) anniversary of the Commencement Date
or upon the termination of the Term.
(d) The Executive's Base Salary and vacation accrual
shall cease during payments under Section 3.9.3(a)
and (b), but all other benefits of this Agreement
shall continue. The Executive's Base Salary and
vacation accrual shall recommence upon the
cessation of the Executive's disability during the
Term, and said Base Salary shall be the amount as
set forth in Section 3.1 of this Agreement.
3.10 Security. The Company shall provide security consulting and alarm
monitoring services at the Executive's primary place of residence comparable to
such services provided as of the Commencement Date through such means as the
Board determines to be appropriate.
3.11 Driver. The Company shall provide the Executive with a driver and
a car of similar quality and status as a Mercedes Benz, 4 door sedan, model
420SEL, or successor model, as available in North America. Such services and car
shall be paid for or provided by the Company, directly or indirectly, by such
method deemed appropriate by the Board.
3.12 Administrative Assistant. The Company shall provide as necessary
the services of a personal administrative assistant who is paid consistent with
a clerical level Company position to assist the Executive in personal finances,
social functions and other matters in order to enhance Executive's ability to
focus on the Business of the Company.
3.13 Reimbursement of Expenses. The Company shall reimburse the
Executive for all reasonable expenses incurred by the Executive in performing
his duties hereunder, including without limitation, expenditures for
entertainment, travel, lodging, and meals; provided, however, the Executive
shall submit to the Company verification of the nature and amount of such
expenses in accordance with Company policies and procedures, including audit,
related to expense reimbursement of employees.
3.14 Miscellaneous. The salary, compensation and benefits set forth in
this Section 3 shall not preclude or exclude the payment of any other or
additional compensation to the Executive by the Company (as determined by the
Board of Directors of the Company) for serving as an officer, director, Board
committee member or in any other capacity for the Company to which he is
appointed or elected by the Board and which is not specifically covered by this
Agreement.
- 6 -
<PAGE> 7
3.15 Repayment Upon Disallowance. Any salary, commission, expense,
reimbursement or other payment to the Executive by the Company pursuant to this
Section 3 which is disallowed in whole or in part as a deductible expense to the
Company for federal or state income tax purposes shall be promptly repaid to the
Company by the Executive to the full extent of such disallowance, but without
the payment by the Executive of any interest or penalty incurred by the Company
in connection with the disallowance of any such payment as a deductible expense
for the Company.
4. TERMINATION/EXTENSION.
4.1 Definition of "Cause." For purposes of this Agreement, Cause shall
mean: (i) felony conviction of the Executive in connection with his employment,
judgment against the Executive in a civil action brought by the Company relating
to fraud or diversion or conversion of Company assets by the Executive, or other
felony conviction of the Executive involving moral turpitude; (ii) failure by
the Executive to perform the duties of his employment set forth in this
Agreement or failure to follow lawful policies of the Company or lawful and
reasonable directives of the Board; (iii) unless expressly authorized by the
Board of Directors of the Company, the performance or attempted performance by
the Executive of any of the responsibilities which have been delegated by the
Board of Directors of the Company to the CEO; or (iv) violation of Section 5, 6
or 7 of this Agreement. The Executive shall be given sixty (60) days written
notice by the Board of an occurrence of a failure or violation of Section 4.1
(ii), (iii) or (iv) and shall be provided an opportunity to cure, if possible,
and/or to cease and desist, as appropriate; provided, however, that if such
failure or violation (or a substantially related failure or violation) occurs
more than three (3) times during any six (6) month period, there shall be no
further notice.
4.2 Definition of "Total Disability." For the purposes of this Section
4 only, "Total Disability" shall mean the Executive's disability pursuant to the
Company's Disability Plan for a period of at least one hundred eighty (180)
consecutive calendar days. Total Disability shall be deemed to have occurred on
the first (1st) day following said one hundred eighty (180) calendar day period.
4.3 Termination Events.
The Term shall be terminated with respect to Executive's
employment as set forth below and only for the following reasons:
4.3.1 By mutual agreement of the Board and the Executive;
4.3.2 At the election of and by the Executive, upon a breach
of the Agreement by the Company;
4.3.3 At the election of and by the Board for Cause, as
defined in Section 4.1, with an opportunity to cure
and/or cease and desist, as appropriate, as provided
by said Section 4.1;
- 7 -
<PAGE> 8
4.3.4 Automatically five (5) years after the Commencement Date;
4.3.5 Automatically upon the Executive's death;
4.3.6 At the election of and by the Board upon the Executive's
Total Disability as defined in Section 4.2 of this
Agreement; or
4.3.7 In the event that, after completion of an Initial Public
Offering for the sale of capital stock of the Company
("IPO"), the Executive is not elected to serve as the
Chairman of the Company, then Executive's title as
Chairman of the Board of Directors shall cease and
Executive shall for the remainder of the Term be deemed an
employee of the Company with such title, responsibility
and authority as may be delegated to him by the Board of
Directors; provided, however, that all other aspects of
this Agreement shall continue to be in effect.
4.4 Severance Payments Upon Termination Events. The Executive shall
receive no severance payment upon the occurrence of the termination of the
Executive's employment pursuant to Section 4.3; provided, however, in the event
of termination in accordance with Section 4.3.5, the Executive's estate shall
receive an amount equal to three-twelfths (3/12ths) of Executive's Base Salary.
5. RESTRICTIVE COVENANTS.
5.1 During the Term. During the Term, the Executive shall not, either
directly or indirectly, on his own behalf or as a partner, officer, director,
employee, consultant, agent or trustee of any person, firm, corporation,
partnership or other entity, engage in or be employed by any business or
enterprise which is the same as, or substantially the same as, the Business of
the Company ("Competing Business").
5.2 After the Term. For a period of eighteen (18) months after the Term
(the "Restricted Period"), the Executive shall keep, observe and abide by each
of the following separate covenants:
5.2.1 Except on behalf of the Company, the Executive shall not,
either directly or indirectly, on his own behalf or as a partner, officer,
director, employee, consultant, agent or trustee of any person, firm,
corporation, partnership or other entity, within the Area, as defined in Section
5.3, engage in or be employed by or have any interest in any business
organization of whatever form engaged, either directly or indirectly, in a
Competing Business in a capacity that requires him to perform services on behalf
of such Competing Business substantially similar to those performed by him on
behalf of the Company; provided, however, that the Executive may during the
Restricted Period interview and seek to make arrangements for such employment,
engagement or interest that commences after the Restricted Period.
- 8 -
<PAGE> 9
5.2.2 During the Restricted Period, except on behalf of the
Company, the Executive shall not, either directly or indirectly, on his own
behalf or in the service or on behalf of others, solicit, divert or hire away,
to any Competing Business or attempt to solicit, divert or hire away, to any
Competing Business any person or persons employed by the Company as of the
termination of the Term or within the six (6) months preceding or subsequent to
the termination of the Term, whether or not such employee is a full-time
employee or a temporary employee of the Company, and whether or not such
employment is pursuant to a written contract with the Company or is for a
determined period or at will, until such employee has ceased his employment with
the Company for at least six (6) months.
5.3 Definition of "Area". The "Area" is defined as the geographic
territory included in a radius of fifty (50) miles from the Company's business
locations in Norcross, Georgia and Thousand Oaks, California.
5.4 No Prior Restrictions. The Executive affirms and represents that he
is under no obligation to any former employer or third party which is
inconsistent with, or which imposes any restriction upon, the continued
employment of the Executive by the Company or the Executive's undertakings under
this Agreement.
5.5 Survival. The provisions of this Section 5 shall continue after the
Term as set forth herein and shall survive irrespective of the reason the
Executive's employment terminates.
6. OWNERSHIP, NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
6.1 Definition of Confidential Information. For purposes of this
Section 6, "Confidential Information" shall mean any and all data and
information relating to the Business of the Company (whether constituting a
trade secret or not), (i) which is or has been disclosed to the Executive, or of
which the Executive becomes aware as a consequence of or through his employment
relationship with the Company, or which was developed in whole or in part by him
during the term of his employment with the Company; and (ii) which has value to
the Company and is not generally known by its competitors. Confidential
Information shall not include any data or information (A) that has been
voluntarily disclosed to the public by the Company or has become generally known
to the public (except where such public disclosure has been made by the
Executive or another person or entity without authorization by the Company), or
(B) that has been independently developed and disclosed by parties other than
the Executive or the Company to the public generally or to the Executive without
breach of any obligation of confidentiality by any such parties running directly
or indirectly to the Company, or (C) that otherwise enters the public domain
through lawful means. Confidential Information may include, but is not limited
to, information relating to the Company's financial affairs (including the
Company's relationship with its investors and lenders), products, processes,
services, customers, employees, executives' compensation, research, development,
inventions, manufacturing, purchasing, accounting, engineering and marketing.
6.2 Definition of Trade Secrets. For the purposes of this Section 6,
Trade Secrets shall mean, in addition to the information described in the
Georgia Trade Secrets Act, (i) any
- 9 -
<PAGE> 10
Invention, as defined herein, which is being used or studied by the Company and
is not described in a printed patent, described in any literature already
published and distributed externally by the Company, and which is not readily
ascertainable from inspection of a product of the Company, (ii) any engineering,
technical, or product specifications including those of features to be used, or
use of which is contemplated, in a future product of the Company; and (iii) any
machine, process or method of manufacturing employed by the Company, whether
patentable or not, which is not generally known to competitors of the Company.
Trade Secrets shall not include any data or information (A) that has been
voluntarily disclosed to the public by the Company or has become generally known
to the public (except when such public disclosure has been made by Executive or
another person or entity without authorization by the Company), or (B) that has
been independently developed and disclosed by parties other than the Executive
or the Company to the public generally or to the Executive without a breach of
any obligation of non-disclosure by any such parties running directly or
indirectly to the Company, or (C) that otherwise enters the public domain
through lawful means.
6.3 Ownership. The Executive acknowledges and agrees that all
Confidential Information and Trade Secrets, and all physical embodiments
thereof, are confidential to and are and shall remain the sole and exclusive
property of the Company, and that any of the Confidential Information or Trade
Secrets produced by him shall be considered proprietary to the Company. The
Executive agrees: (i) immediately to disclose solely to the Company all
Confidential Information and Trade Secrets developed in whole or in part by him
during the term of his employment with the Company; (ii) to assign to the
Company any right, title or interest he may have in such Confidential
Information and Trade Secrets, and (iii) at the request and expense of the
Company, to do all things and sign all documents or instruments reasonably
necessary in the opinion of the Company to eliminate any ambiguity as to the
ownership by and rights of the Company in such Confidential Information and
Trade Secrets including, without limitation, providing to the Company his full
cooperation in any litigation, unless between the Executive and the Company
after termination of Executive's employment, or other proceeding to establish,
protect or obtain such ownership and rights. Upon request by the Company, and in
any event upon termination of his employment with the Company for any reason,
the Executive shall promptly deliver to the Company all property belonging to
the Company, including, without limitation, all Confidential Information and
Trade Secrets (and all embodiments thereof) then in his custody, control or
possession.
6.4 Non-Disclosure. The Executive agrees that, during the term of his
employment by the Company and (i) at all times following the termination of such
employment for any reason whatsoever, with respect to Trade Secrets under the
Georgia Trade Secrets Act and (ii) during the Restricted Period with respect to
other Confidential Information, he will not use, disclose or make available,
directly or indirectly, any Confidential Information or Trade Secrets to any
person, concern or entity, except in the performance of his duties and
responsibilities hereunder or with the prior written consent of the Company. The
provisions of this Section 6 shall continue after the Term as provided herein
and shall survive irrespective of the reason the Executive's employment
terminates.
- 10 -
<PAGE> 11
7. INVENTIONS AND TRADEMARKS.
7.1 Definition of Invention and Executive Invention.
7.1.1 For the purposes of this Section 7, Invention shall mean
any discovery, whether or not patentable, including, but not limited to, any
useful process, method, formula, technique, machine, manufacture, composition of
matter, algorithm or computer program, as well as improvements thereto, which is
new or which the Executive has a reasonable basis to believe may be new.
7.1.2 For the purposes of this Section 7, Executive Invention
shall mean any Invention which is conceived by the Executive or conceived by the
Executive in a joint effort with others during the Executive's employment by the
Company which (i) may be reasonably expected to be used in a current product of
the Company, a projected future product of the Company, or a product similar to
a Company product; (ii) results from work that the Executive has been assigned
as part of his duties as an employee, officer or director of the Company; (iii)
is in an area of technology which is the same or substantially related to the
areas of technology with which the Executive is involved in the performance of
the Executive's duties as an employee, officer or director of the Company; (iv)
is useful, or which may reasonably be expected to be useful, in any
manufacturing process, product design or internal control system of the Company;
or (v) is in an area of technology which includes machinery or processes with
which the Executive normally works in performing his duties as an employee,
officer or director of the Company.
7.2 Property of the Company. The Executive hereby agrees that all
Executive Inventions shall become the property of the Company. The Company makes
no claim of rights to any Inventions of the Executive which are not Executive
Inventions, except to the extent that, by operation of law, the "shop rights
doctrine" provides the Company with any such rights.
7.3 Conception of Invention. The Executive hereby agrees that if he
conceives any Invention during his employment, for which there is a reasonable
basis to believe that the conceived Invention may be an Executive Invention, the
Executive will provide notice containing a written description of the Invention
to each Board member, adequate to allow evaluation thereof by the Board for a
determination of whether the Invention is an Executive Invention.
7.4 Patent Registration. The Executive hereby agrees that should the
Company elect to file any application for patent protection either in the United
States or in any foreign country on an Executive Invention, the Executive will
execute all necessary papers and documents, including formal assignments to the
Company, relating to such patent application. The Executive further agrees that
he will cooperate with any attorneys or other persons designated by the Company
by explaining the nature of the Executive Invention, reviewing applications and
other papers, and providing any other assistance reasonably required for the
orderly prosecution of the patent applications.
- 11 -
<PAGE> 12
7.5 Discontinuance of Use. On or after the termination of the Term, the
Executive may request that the Board approve the transfer or assignment to the
Executive of a (i) patent or an Executive invention which existed during the
Term but has not been practiced or used for a period of one (1) year or more
prior to the Executive's request therefor or (ii) trademark, service mark or
tradename which was owned by the Company during the Term but has not been used
for a period of one (1) year or more prior to the Executive's request therefor.
The Board shall make a determination with respect to such transfer or assignment
and the value thereof in its sole discretion.
7.6 Survival. The provisions of this Section 7 shall continue after the
Term as provided herein and shall survive irrespective of the reason for the
Executive's termination.
8. BREACH OF COVENANTS BY EXECUTIVE.
The Executive agrees that the covenants and agreements contained in
Sections 5, 6 and 7 of this Agreement are of the essence of this Agreement and
that each of such covenants is reasonable and necessary to protect and preserve
the interests and properties of the Company and the Business of the Company. The
Executive further agrees that the Company is engaged in and through the Area in
the Business of the Company and that irreparable loss and damage will be
suffered by the Company should the Executive breach any of such covenants and
agreements. Each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement and the unenforceability of
any such covenant or agreement shall not affect the validity or enforceability
of any other such covenants or agreements or any other provision or provisions
of this Agreement. The Executive acknowledges that damages are inadequate for
any breach of Sections 5, 6 or 7, and that the Company shall, whether or not it
is pursuing any potential remedies at law, be entitled to equitable relief in
the form of both temporary and permanent injunctions to prevent a breach or
contemplated breach by the Executive of any of such covenants or agreements. The
Executive shall further be liable for damages, if any, resulting from any breach
of such covenants and agreements.
9. RESOLUTION OF DISPUTES.
9.1 Resolution of Disputes and Mediation. Except for the matters set
forth in Sections 5, 6, and 7 hereof, any dispute between the parties either
with respect to the interpretation of any provision of this Agreement or with
respect to the performance by the Executive or by the Company hereunder (the
"Dispute") shall be resolved in accordance with this Section 9 as follows:
9.1.1 Upon the written request of either party hereto, each
of the parties shall appoint a designated
representative, whose task it shall be to meet for
the purpose of endeavoring to resolve the Dispute.
The Company's designated representative shall be a
member of the Board excluding (i) the Executive and
(ii) the Board member selected by the Executive to be
a Board member.
- 12 -
<PAGE> 13
9.1.2 The designated representatives shall meet as often as
necessary to gather and furnish to the other all
information with respect to the Dispute which is
appropriate and germane in connection with its
resolution.
9.1.3 Such representatives shall discuss the Dispute and
negotiate in good faith in an effort to resolve the
Dispute without the necessity of any formal
proceeding relating thereto.
9.1.4 During the course of such negotiations all reasonable
requests made by one party to the other for
non-privileged information reasonably related to the
Dispute, shall be honored in order that each of the
parties may be fully advised of the other's position.
9.1.5 The specific format for such discussions shall be
left to the discretion of the designated
representatives but may include the preparation of
agreed upon statements of fact or written statements
of position furnished to the other party.
9.2 Judicial Resolution. If the parties hereto are not able to resolve
the Dispute concerning this Agreement as set forth in Section 9.1 above within
sixty (60) calendar days, upon the initial written request as provided in
Section 9.1.1, then the parties shall have the option and right to resolve such
Dispute by judicial or other equitable resolution.
10. MISCELLANEOUS.
10.1 Key Man Insurance. The Executive agrees that during the Term, the
Company in its sole discretion may purchase in addition to those specified in
Section 3.9.1 insurance policies on the Executive's life with the Company as the
primary beneficiary, provided that all costs of such insurance are paid by the
Company.
10.2 Assignment. This Agreement may not be assigned by any party hereto
without the prior written agreement of the other party hereto.
10.3 Severability. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, such provision shall be enforced to the
maximum extent permissible so as to effect the intent of the parties, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
10.4 Beneficiary. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors, heirs, executors, administrators
and permitted assigns.
10.5 Entire Agreement. This Agreement embodies the entire agreement of
the parties hereto relating to the subject matter hereof. Except with respect to
the Revolving Loan Agreement, this Agreement supersedes all prior and
contemporaneous agreements,
- 13 -
<PAGE> 14
understandings, negotiations and discussions, written or oral, of the parties
hereto, relating to the subject matter of this Agreement. Nothing in this
Agreement is intended or shall confer upon or give any person other than the
parties hereto any rights or remedies under or by reason of this Agreement.
10.6 No Amendments. No amendments or modifications of this Agreement
shall be valid or binding upon the Company unless made in writing and approved
by the Board and signed by a Board member duly authorized by the Board (other
than a Board member designated by the Executive or the Executive), or upon the
Executive unless made in writing and signed by the Executive.
10.7 Waiver. The waiver by either party hereto of a breach by the other
party of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision by the
breaching party.
10.8 Notices. Any notice required or permitted to be given hereunder
shall be in writing and delivered personally or by facsimile/telecopy
transmission. Any notice delivered personally shall be deemed given as of the
date of delivery. Notice given by facsimile/telecopy shall be evidenced by the
facsimile/telecopy verification confirming that the notice was satisfactorily
transmitted and received and shall be deemed given as of the date of
confirmation; provided, however, that its receipt shall be confirmed by
telephone and all notices sent by facsimile/telecopy transmission must be
thereafter transmitted to the party to be notified by an overnight express mail
delivery service within three (3) days of said facsimile/telecopy transmission.
AS TO EXECUTIVE: AS TO THE BOARD OF DIRECTORS:
Dennis C. Hayes Rinzai Limited and
5835 Peachtree Corners Circle East S.P. Quek Investments Pte Ltd.
Norcross, Georgia 30092 c/o Acma Limited
Private Fax: (404) 840-6830 17 Jurong Port
Singapore
AS TO THE COMPANY: Attn: Managing Director
Fax: 011 65 264-0125
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners Circle East Kaifa Technology (H.K.) Limited
Norcross, Georgia 30092 2201 Hong Kong Worsted Mills
Attn: Chief Executive Officer Industrial Building
Fax: (404) 441-1238 31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Dennis C. Hayes
110 Bellacree Road
Duluth, Georgia 30155
Fax: (770) 476-4713
- 14 -
<PAGE> 15
10.9 Headings. The enumeration and headings contained in this Agreement
are for convenience of reference only and are not intended to have any
substantive significance in interpreting this Agreement.
10.10 Number. Unless the context otherwise requires, whenever used in
this Agreement, the singular shall include the plural and the plural shall
include the singular.
10.11 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
10.12 Counterparts. This Agreement may be executed in four (4)
counterparts and each of such counterparts, when duly executed, shall be deemed
an original document.
IN WITNESS WHEREOF, Dennis C. Hayes, the Executive, and Hayes
Microcomputer Products, Inc., the Company, acting by and through its duly
authorized officers, have hereunto executed, delivered and sealed this Agreement
effective as of the commencement date.
EXECUTIVE:
/s/ Dennis C. Hayes (SEAL)
----------------------------------------
DENNIS C. HAYES
5835 Peachtree Corners Circle East
Norcross, Georgia 30092
Private Fax: (404) 840-6830
COMPANY:
ATTEST: HAYES MICROCOMPUTER PRODUCTS, INC.
[CORPORATE SEAL] BY: /s/ Dennis C. Hayes
-------------------------------------
DENNIS C. HAYES, Chairman
/s/
- -------------------------- ADDRESS:
Secretary
5835 Peachtree Corners Circle East
Norcross, Georgia 30092
Fax: (404) 441-1238
- 15 -
<PAGE> 16
SCHEDULE 3.9 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
LIFE INSURANCE POLICIES
<TABLE>
<CAPTION>
Policy Number
& Company Policy Date Policy Owner Beneficiary
--------- ----------- ------------ -----------
<C> <C> <C> <C>
1. Amer. United Life 04/18/84 Company Company
# 6-002-1742
2. Amer. United Life 08/18/86 Executive Estate of Executive
# 6-026-4910
3. Amer. United Life 04/18/84 Company Company
# 1-516-163
4. Confederation Life 06/28/92 Company Estate of Executive
# 542 0411
5. Security Life 07/08/92 Company Estate of Executive
# 001045302
</TABLE>
<PAGE> 1
EXHIBIT 10.29
DENNIS C. HAYES
110 BELLACREE ROAD
DULUTH, GEORGIA U.S.A.
April 12, 1996
CONFIDENTIAL
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Rinzai Limited
c/o Acma Limited
17 Jurong Port Road
Singapore 619092
And the Investors Shown on Schedule 1 hereto
RE: INDEMNIFICATION AGREEMENT
Dear Sirs:
This letter will set forth my personal binding obligation and
agreement ("Agreement") to provide indemnification to Rinzai Limited ("Rinzai")
and the other Investors under that certain Agreement and Plan of Merger dated
April 12, 1996 (the "Agreement"), related to any actions, suits, proceedings,
claims or demands of Gary J. Franza, John Stuckey and Mikhail Drabkin ("Employee
Actions") as set forth below.
1. I acknowledge that Hayes Microcomputer Products, Inc.
("Hayes") has undertaken to indemnify the Investors
against Employee Actions as provided in Section
7.1(d) of the Agreement. It is my intention by virtue
of this Agreement to provide further indemnification
to the Investors for Employee Actions as stated
below.
2. In the event that the Employee Actions as finally
adjudicated pursuant to a nonappealable order results
in an aggregate liability to the Company, or if the
Employee Actions are settled for an amount, in excess
of $2,000,000 (the "Excess Amount"), then I hereby
agree to indemnify the Investors for such Excess
Amount in the following manner. I will transfer to
each of the Investors a number of shares of my stock
in Hayes equal in value to each Investor's
proportional share (based on their relative
<PAGE> 2
Hayes Microcomputer Products, Inc.
Rinzai Limited
April 12, 1996
Page 2
shareholdings in Hayes) of the Excess Amount. The
number of shares of stock shall be determined by
dividing the Excess Amount by the value per share of
the Hayes stock at the time of final adjudication of
liability or settlement of the Employee Actions. The
value per share of Hayes stock shall be determined as
follows:
(i) If the Company has completed an initial
public offering ("IPO") and its stock is
publicly traded, the value per share shall
be deemed to be the average closing price
per share for each of the twenty (20) days
prior to the final adjudication of liability
or settlement, on NASDAQ/NMS or other
exchange where Hayes shares are traded; or
(ii) If Hayes has not completed an IPO at the
time of the final adjudication of liability
or settlement, then the value per share of
Hayes stock shall be (i) for a period of six
(6) months from the date of the Closing
under the Agreement, US$7.14 and (ii)
thereafter the total value of Hayes divided
by the total number of issued and
outstanding shares (on a fully diluted basis
taking into account any then-exercisable
options and warrants). The total value of
Hayes shall be determined by the average of
two (2) reputable nationally recognized
appraisers, one selected by Rinzai and one
selected by Dennis C. Hayes. The two
appraisers' determinations shall be made in
accordance with appropriate procedures and
protocols to be established by Rinzai and
Dennis C. Hayes at the time. For example,
Rinzai and Dennis C. Hayes may instruct the
appraisers to give full market value to the
intellectual property estate and patent
estate of Hayes for purposes of performing
their valuation of Hayes. The appraisers
shall complete their valuation within thirty
(30) days after the date of appointment of
both appraisers and the arithmetic average
of the two valuations determined by the two
appraisers shall be final, binding and
conclusive on the parties.
The total value as established in (ii) above shall be
divided by the total issued and outstanding shares
(on a fully diluted basis taking into account any
then-exercisable options and warrants) of Hayes to
arrive at the value per share. The Excess Amount
shall then be divided by the value per share of the
Hayes stock determined by either paragraph 2(i) or
(ii) above,
<PAGE> 3
Hayes Microcomputer Products, Inc.
Rinzai Limited
April 12, 1996
Page 3
and the resulting number of shares shall be
distributed to the Investors in proportion to their
shareholdings as a percentage of all issued and
outstanding shares of Hayes.
3. In the event that any shares of stock in Hayes are
required to be transferred pursuant to any Employee
Action to any one of the Employees pursuant to a
final, nonappealable court order or settlement, then
I agree to transfer such shares to the Employees from
my own shares and neither the Company nor the
Investors shall have any responsibility for issuing
any new shares to the Employees.
It is understood that the Company will defend all Employee
Actions and will bear the cost of defense of such Employee Actions. It is my
further understanding that I, as Chairman of the Company in complete compliance
with my fiduciary duties as an officer of the Company (which fiduciary duties
shall not be altered or influenced in any way by my obligations under this
agreement), will be responsible for overall direction of the litigation of the
Employee Actions, although any settlement will be subject to approval of the
Board of Directors.
This letter constitutes my binding obligation to indemnify the
Investors as above stated. It is given for valuable consideration in the amount
of Ten Dollars ($10.00), as an inducement to the Investors to enter into the
Agreement and other good and valuable consideration and is given without any
undue influence or duress.
Very truly yours,
/s/ Dennis C. Hayes
Dennis C. Hayes, Individually
<PAGE> 4
Schedule 1
Kaifa Technology (H.K.) Limited
Lao Hotel (H.K.) Limited
S.P. Quek Investments Pte Ltd.
Saliendra Pte Ltd.
Rolling Profit Holdings, Limited
<PAGE> 1
EXHIBIT 10.30
HAYES MICROCOMPUTER PRODUCTS, INC.
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT (the "Voting Trust") is made and
entered into this 16th day of April, 1996, by and among DENNIS C. HAYES, an
individual resident of Georgia ("Dennis C. Hayes"), HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia corporation (the "Corporation"), and G. DONALD
JOHNSON, as Trustee herein (hereinafter, along with any successors, referred to
as "Trustee").
W I T N E S S E T H :
WHEREAS, Dennis C. Hayes owns voting stock in the Corporation; and
WHEREAS, pursuant to the terms of that certain Shareholders' Agreement
dated April 16, 1996, by and between the Corporation, Dennis C. Hayes, Rinzai
Limited, ("Rinzai"), Kaifa Technology (H.K.) Limited, Rolling Profit Holdings
Limited, Saliendra Pte. Ltd., Lao Hotel (H.K.) Limited, and S.P. Quek
Investments Pte Ltd., (as amended from time to time in accordance with the terms
thereof, the "Shareholders' Agreement,"), and the parties have agreed that
494,322 shares of the Corporation's stock owned by Dennis C. Hayes shall be held
in a nonvoting trust on the terms and conditions herein set forth; and
WHEREAS, capitalized terms herein shall have the same meaning as
defined in the Shareholders' Agreement unless specified otherwise.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the sum of Ten Dollars ($10.00) in hand paid, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. TRANSFER OF SHARES BY DENNIS C. HAYES. Upon the execution of this Voting
Trust, Dennis C. Hayes shall transfer and deposit with the Trustee 494,322
shares of the Common Stock, which constitutes ten percent (10%) of the total
number of shares of Common Stock "owned or controlled" (as such terms are
defined in the Shareholders' Agreement) by him on the date hereof, by
delivering to the Trustee the certificates for such stock, duly endorsed in
blank or accompanied by proper instruments of assignment and transfer thereof
duly executed in blank, said shares to be held by the Voting Trust. All
shares of the Common Stock so transferred to the Trustee shall be registered
on the books and records of the Corporation as follows: "G. Donald Johnson as
Trustee of the HAYES MICROCOMPUTER PRODUCTS, INC. VOTING TRUST under
agreement
<PAGE> 2
dated April 16, 1996." If G. Donald Johnson or any subsequent Trustee
ceases serving as Trustee herein, the shares of Common Stock held
herein shall be so registered in the name of the applicable successor
Trustee on behalf of the Voting Trust.
2. VOTING TRUST CERTIFICATES. Upon the receipt by the Trustee of the
certificates evidencing Dennis C. Hayes' Common Stock, the Trustee
shall issue to Dennis C. Hayes a certificate evidencing his interest in
the Voting Trust, said certificate to be in substantially the form set
forth on Exhibit "A" attached hereto and by this reference incorporated
herein (hereinafter referred to as the "Trust Certificate").
3. VOTING BY TRUSTEE. During the term of this Voting Trust, all shares
of Common Stock or any other interest in the Corporation with voting
rights held in the Voting Trust (such Common Stock or other interests
shall be referred to as the "Voting Interests") shall confer upon the
Trustee the full and complete right to vote on all applicable matters
of the Corporation for which such Voting Interests are entitled to
vote; however, the Trustee shall not vote the Voting Interests and
shall only abstain from voting on all such matters. Furthermore, the
Trustee shall not grant a proxy to anyone for such vote during the term
of this Voting Trust. It is expressly understood and agreed that no
voting right shall pass to any person or entity other than the Trustee
by or under the Trust Certificates or by or under this Voting Trust, or
by or under any other agreement, express or implied, until the
termination of the Voting Trust with respect to any Trust Property as
defined below in Section 4.
4. OTHER SHAREHOLDER ACTION. Subject to the restriction on exercising
any and all rights to vote associated with any of the property held in
the Voting Trust (all such property held in the Voting Trust herein
shall be referred to as the "Trust Property"), the Trustee shall be
entitled to all of the rights and privileges conferred upon an owner
of the Trust Property ("Nonvoting Rights"). With respect to the
Nonvoting Rights, the Trustee shall act or fail to act with respect to
the specific Trust Property which was contributed by, issued or
delivered on behalf of the respective holders of the Trust
Certificates, in accordance with the written instructions by such
holder (or his/its successors or permitted assigns) to the Trustee.
However, the Trustee shall not be required to act or fail to act with
respect to the Nonvoting Rights which the Trustee reasonably believes
will expose the Trustee to damages, claims, investigations, charges
(civil or criminal), costs or will otherwise result in any harm to the
Trustee. In the event the Trustee acts in accordance with such
instructions, then the holder of the Trust Certificate that provided
such instructions shall indemnify and hold the Trustee harmless against
damages, losses and costs of any kind (including costs of investigation
and attorneys fees) from any such action or omission by the Trustee. In
the event the Trustee shall not receive such written instructions with
respect to the exercise or failure to exercise Nonvoting Rights, the
Trustee may act or not act with respect to the Nonvoting Rights and
with respect to all other duties of the Trustee not specifically
addressed hereunder, in accordance with the exercise of the Trustee's
reasonable judgment. However, the Trustee shall assume no
2
<PAGE> 3
responsibility with respect to and shall not be liable for any action
taken or any omission by him or his agents and no Trustee shall incur
any responsibility by reason of any error of law or of any thing done
or omitted unless such act or omission was (i) grossly negligent, or
(ii) the result of willful misconduct. In the event the Trustee acts or
fails to act with respect to Nonvoting Rights without instruction by
the applicable holder of the Trust Certificate, and if the Trustee has
acted or failed to act in accordance with the preceding two sentences,
then the Holder of the applicable Trust Certificate shall indemnify and
hold the Trustee harmless against damages, losses and costs of any kind
(including costs of investigation and attorneys fees) from any such
action or omission by the Trustee. No Trustee shall be required to post
or give a bond or other security for the discharge of his or her
duties. In the event the Trustee, in his capacity as Trustee of the
Voting Trust, becomes party to, prosecutes, defends or intervenes in
any legal action or proceeding pertaining to the Trust Property, then
the holders of the Trust Certificates shall indemnify and hold the
Trustee harmless against damages, losses and costs of any kind
(including costs of investigation and attorneys fees) from any such
action or proceeding so long as the Trustee's participation in such
action or proceeding was in good faith and/or on the advice of counsel
and was neither grossly negligent nor constituted willful misconduct.
The Trustee shall not be an officer, director, shareholder, agent,
consultant (other than legal counsel) or employee of the Corporation.
5. DIVIDENDS. Throughout the term of this Voting Trust, the Trustee
shall, within ten (10) days of the date received, distribute to the
holders of the Trust Certificates ("Certificate Holders") all cash
dividends received by the Trustee with respect to the interests of each
such Certificate Holder in the Voting Trust. Such cash dividends shall
be distributed to each such Certificate Holder in an amount equal to
the amount the Certificate Holder would have received had such
Certificate Holder been the record owner of the interests represented
by the Trust Certificate. All stock dividends received by the Trustee
with respect to the Trust Property (including any stock splits) shall
be retained by the Trustee and all such stock shall be subject to the
terms of this Voting Trust as fully as if originally deposited by the
Shareholders pursuant to the terms of this Voting Trust; provided,
however, that upon the receipt of a stock dividend or following a stock
split, the Trustee shall issue to the Certificate Holders such
additional Trust Certificates as may be necessary to reflect the change
in the number of shares of stock being held by the Trustee.
6. COMPENSATION OF TRUSTEE. The Trustee shall receive reimbursement
for all expenses reasonably incurred in carrying out the provisions of
the Voting Trust and shall receive compensation for acting as Trustee
hereunder in a reasonable amount if the Trustee is not an attorney at
law and if the Trustee is an attorney at law, the Trustee shall receive
as compensation the standard hourly rate charged by such attorney at
law for all time expended herewith as Trustee. The Trustee may employ
counsel (and the Trustee shall be entitled to employ on behalf of the
Voting Trust attorneys at the law firm in which Trustee is a partner or
is employed) and such reasonable professional and other assistance as
may be convenient for the fulfillment of the purposes of the Voting
Trust. The cost
3
<PAGE> 4
of such compensation, expense reimbursement, counsel or other
assistance shall be borne by the Corporation.
7. SUCCESSOR TRUSTEE. In the event of the removal, death or resignation of
the Trustee, or the continued failure of the Trustee to act as Trustee,
the Certificate Holders shall select a successor Trustee by unanimous
vote. The Certificate Holders may by unanimous vote remove a Trustee.
8. TRANSFERS AND RECORD OWNERSHIP. Subject to the restrictions on
transfer of shares set forth in the Shareholders' Agreement, which
restrictions shall apply, mutatis mutandis, to the Trust Certificates,
the Trust Certificates shall be transferable at the office of the
Trustee by the registered holder thereof either in person or by
attorney duly authorized. Upon surrender thereof, according to such
rules as the Trustee may from time to time establish, and until so
transferred, the Trustee may treat the registered holder as the owner
thereof for all purposes whatsoever. Every transferee of a Trust
Certificate hereunder shall upon acceptance thereof become a party to
this Voting Trust with the same force and effect as if such transferee
had signed this Voting Trust and shall be included with the meaning of
the term "Dennis C. Hayes" whenever used herein. The Trustee may, in
its sole discretion, appoint a registrar for the Trust Certificates and
may provide that Trust Certificates shall not be valid unless
registered and countersigned by such registrar.
9. TERM. This Voting Trust shall continue for a period of ten (10) years
from the date hereof, unless sooner terminated in accordance with the
following and if terminated, the Trust Property pertaining to the
applicable Certificate Holder shall be released from the Voting Trust
and promptly delivered to such Certificate Holder, along with such
other documents as may be necessary to transfer the ownership of the
Trust Property into the name of the Certificate Holder, in exchange for
such Trust Certificate:
(a) Upon the first to occur of the following:
(i) The total voting capital stock owned or
controlled by Dennis C. Hayes, after giving
effect to such termination, constitutes less
than forty five percent (45%) of the total
voting capital stock of the Corporation;
(ii) At the time of the closing of an Initial
Public Offering;
(iii) at the time of the share exchange pursuant
to a merger of the Corporation (where the
Corporation is not the survivor);
(iv) upon the sale of the Corporation by the sale
of substantially all of its assets or any
other method of such sale;
4
<PAGE> 5
(v) upon the complete liquidation of the Corporation;
or
(vi) upon Rinzai or its Permitted Transferees (as such
term is defined in the Shareholders' Agreement)
ceasing to be a shareholder with Voting Rights in
the Company.
10. MISCELLANEOUS.
(a) Governing Law. This Voting Trust shall be
governed by and construed in accordance with the
laws of the State of Georgia.
(b) Binding Effect. This Voting Trust shall be
binding upon and inure to the benefit of the
parties hereto and their respective heirs,
successors and assigns.
(c) Headings. The headings used in this Voting Trust
are used for administrative purposes only and do
not constitute substantive matters to be
considered in construing the terms of this Voting
Trust.
(d) Legal Construction. If any one or more of the
provisions contained in this Voting Trust for any
reason are held to be invalid, illegal or
unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect
any other provision thereof and this Voting Trust
shall be construed as if such invalid, illegal or
unenforceable provision had never been contained
herein.
(e) Other Instruments. The parties agree that they
will execute such other and further instruments
and documents as are or may become necessary or
convenient to effectuate and carry out this
Voting Trust.
(f) Amendment. This Voting Trust may be amended or
modified by the parties from time to time but
only by a written instrument signed by all of the
parties hereto and only in accordance with
Section 10.7 of the Shareholders' Agreement.
(g) Notices. All notices required or permitted
hereunder shall be in writing and shall be deemed
to be delivered when deposited in the United
States mail, postage prepaid, certified mail,
return receipt requested and addressed to the
parties as follows:
5
<PAGE> 6
Dennis C. Hayes
c/o Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Telecopy: (770) 840-6830
G. Donald Johnson, Esq.
Parker, Johnson, Cook & Dunlevie
Suite 700
1275 Peachtree Street, N.E.
Atlanta, Georgia 30309-3574
Telecopy: (404) 888-7490
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: President
Telecopy: (770) 840-6830
IN WITNESS WHEREOF, the parties have hereunto set their hands
and seals as of the date first above written.
TRUSTEE:
/s/ G. Donald Johnson
----------------------------------
G. Donald Johnson, Trustee
DENNIS C. HAYES
/s/ Dennis C. Hayes
----------------------------------
DENNIS C. HAYES, Individually
HAYES MICROCOMPUTER PRODUCTS, INC.
BY: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, Chairman
6
<PAGE> 1
EXHIBIT 10.31
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBORDINATED AS SET FORTH IN PARAGRAPH 4 HEREIN
HAYES MICROCOMPUTER PRODUCTS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
(ONE-YEAR)
US $3,450,000 Atlanta, Georgia
April 16, 1996
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (the
"Company"), having its principal office located at 5835 Peachtree Corners East,
Norcross, Georgia, for value received hereby promises to pay to RINZAI LIMITED,
(the "Holder"), the sum of THREE MILLION FOUR HUNDRED FIFTY THOUSAND US Dollars
(US $3,450,000), in lawful currency of the United States of America, on the
earlier to occur of (i) April 15, 1997 or if such day is not a business day, on
the next succeeding business day, or (ii) when the unpaid principal amount of
this Note is declared due and payable by the Holder upon the occurrence of an
Event of Default (as hereinafter defined) (such earlier date, the "Maturity
Date").
This Note is a "Convertible Subordinated Promissory Note" referred to
in and issued in connection with a loan transaction contemplated by Section 10.5
of the Hayes Microcomputer Products, Inc. Shareholders' Agreement dated as of
April 16, 1996 (as amended, modified or supplemented in accordance with the
terms thereof and in effect from time to time, the "Shareholders' Agreement"),
by and among the Company, the Holder, Dennis C. Hayes and the other
Shareholders, as defined therein. In addition to the terms hereof, this Note and
the Holder are subject to certain restrictions, and entitled to certain rights
and privileges, as set forth in the Merger Agreement (as hereinafter defined)
and the Shareholders' Agreement. The principal amount of this Note, together
with the principal amount of one or more other Convertible Subordinated
Promissory Notes, dated the date hereof and substantially identical to this Note
but for the name of the payee, constitute a "Shareholder Loan."
<PAGE> 2
Notwithstanding any provisions hereof to the contrary, no payment of
principal hereof shall be made unless and except to the extent that repayment of
principal is also made by the Company in respect of each outstanding Convertible
Subordinated Promissory Note evidencing a portion of the same Shareholder Loan
that is evidenced by this Note, ratably according to the respective original
principal amounts hereof and thereof. Payment of all amounts due under this Note
shall be made by wire transfer to the Holder pursuant to the instructions set
forth below or to such other account maintained with a United States bank as the
Holder may specify to the Company in writing from time to time, referring to
this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder, by
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms have
the following meanings:
(i) "Company" means Hayes Microcomputer Products, Inc., a
Georgia corporation ("New Hayes"), the surviving corporation of the
merger of Financial Sub with and into Hayes Microcomputer Products,
Inc., a Georgia corporation, and any corporation which shall succeed to
or assume the obligations of New Hayes under this Note.
(ii) "Holder" means any person who shall at the time be the
registered holder of this Note; RINZAI LIMITED is the initial Holder.
2. Interest. Interest shall accrue on the principal amount of this Note
outstanding from time to time and shall be payable on the Maturity Date and upon
repayment or conversion, at a rate per annum equal to 1-5/8% above the interest
rate announced from time to time by Chemical Bank at its principal office in New
York, New York as its "base rate," each change in such rate to be effective with
each change in such "base rate."
3. Events of Default. If any of the events specified in this Section 3
shall occur (each an "Event of Default") and be continuing, the Holder may, by
written notice to the Company given on a business day, declare the entire
principal hereof to be immediately due and payable and upon such declaration,
the same shall be due and payable:
(i) The Company or any subsidiary shall (A) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C)
consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy
or other laws, (D) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E)
admit in writing its inability to
-2-
<PAGE> 3
pay its debts as they become due, (F) make a general assignment for the
benefit of creditors, or (F) take any corporate action for the purpose
of authorizing any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any of its subsidiaries in any court of competent
jurisdiction seeking (A) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any of its
subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of the Company or any of its subsidiaries, and such case or
proceeding shall continue undismissed or unstayed for a period of sixty
(60) consecutive days, or any order granting the relief requested in
such case or proceeding against the Company or any of its subsidiaries
shall be entered; or
(iii) Any default or "event of default" shall occur under any
Senior Indebtedness (as hereinafter defined) that gives the holder
thereof the right to accelerate, and such holder shall have
accelerated, the obligations of the Company thereunder; or
(iv) The Company shall fail to perform or observe any material
term of (A) the Hayes Microcomputer Products, Inc. Agreement and Plan
of Merger by and among the Company, Dennis C. Hayes, and the Investors
(as defined therein), dated as of April 12, 1996 (as currently amended
and as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Merger Agreement"), (B) the
Warrants (as defined in the Merger Agreement), or (C) the Shareholders'
Agreement, in each case to be performed or observed by the Company and
such failure shall continue beyond any applicable grace period.
4. Subordination. The indebtedness evidenced by this Note is
hereby expressly subordinated in right of payment, to the extent and in the
manner set forth in that certain Debt Subordination Agreement among the Company,
The CIT Group/Credit Finance, Inc., and Rinzai Limited, dated April 16, 1996, to
payment in full of the Superior Debt (as defined therein).
4.1. Subrogation. Notwithstanding the subordination
provided for in the foregoing provisions of this Section 4, the Holder's right
to receive shares of Series A Preferred Stock of the Company ("Series A
Preferred Stock") (and any cash in lieu of fractional shares) upon conversion of
this Note shall be the Holder's sole remedy following the occurrence of an Event
of Default and neither such right of conversion nor any shares issuable or
issued upon exercise of such right by the Holder shall be exercisable by or
payable to or receivable by the holder of any Senior Indebtedness.
4.2. Undertaking. By its acceptance of this Note, the
Holder agrees to execute and deliver such documents as may reasonably be
requested from time to time by the Company
-3-
<PAGE> 4
on its own behalf or on behalf of the holder of any Senior Indebtedness to give
effect to the foregoing provisions of this Section 4.
5. Prepayment. This Note may be prepaid in whole or in part,
without penalty, at any time prior to its conversion in accordance with Section
6 hereof.
6. Conversion.
6.1. Automatic Conversion. At the close of business on the
Maturity Date the entire unpaid principal amount of this Note and any accrued
and unpaid interest thereon shall be automatically converted into shares of
Series A Preferred Stock. The conversion shall be effected in accordance with
the formula attached hereto as Annex 1.
6.2. Conversion Procedure.
6.2.1. Notice of Conversion Pursuant to Section 6.1.
If this Note is automatically converted, written notice in the
form attached hereto as Annex 2 shall be delivered to the
Holder of this Note at the address last shown on the records
of the Company for the Holder or given by the Holder to the
Company for the purpose of notice or, if no such address
appears or has been given, at the place where the principal
executive office or residence of the Holder is located,
notifying the Holder of the conversion to be effected,
specifying the principal amount of this Note to be converted
and the date on which such conversion will occur (or has
occurred), and calling upon the Holder to surrender to the
Company, in the manner and at the place designated, this Note.
As promptly as practicable after the automatic conversion of
this Note, the Company at its expense will issue and deliver
to the Holder of this Note a certificate or certificates for
the number of full shares of Series A Preferred Stock issuable
upon such conversion.
6.2.2. Mechanics and Effect of Conversion. No
fractional shares of Series A Preferred Stock shall be issued
upon conversion of this Note. In lieu of the Company issuing
any fractional shares to the Holder upon the conversion of
this Note, the Company shall pay to the Holder the amount of
outstanding principal that is not so converted, such payment
to be in the form of a check payable to the Holder. Upon
conversion of this Note and payment of any cash in lieu of
fractional shares, the Company shall be forever released from
all its obligations and liabilities under this Note.
6.3. No Impairment. The Company will not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in carrying out all the provisions of this Section 6 and in taking all such
action as may be necessary or appropriate in order to protect the conversion
rights of the Holder of this Note against impairment.
-4-
<PAGE> 5
7. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Series A Preferred Stock solely for the purpose of effecting the conversion
of this Note such number of shares of Series A Preferred Stock (and shares of
Common Stock of the Company ("Common Stock") for issuance on conversion of such
Series A Preferred Stock) as shall from time to time be sufficient to effect the
conversion of this Note; and if at any time the number of authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the Holder,
the Company will use all reasonable efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) to the number of shares
that is sufficient for such purposes.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The rights and obligations of the
Company under this Note may not be assigned by the Company without the prior
written consent of the Holder.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written consent of the Company and the Holder;
PROVIDED, HOWEVER, that the Company hereby waives (i) presentment for payment,
protest and demand, notice of protest, demand and dishonor and nonpayment of
this Note and (ii) the defense of the statute of limitations in any action on
this Note to the extent permitted by law.
10. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the provisions of Section 7 of the
Shareholders' Agreement shall apply, mutatis mutandis, to the same extent as if
this Note and such securities were "Stock" (as defined in the Shareholders'
Agreement). Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. All notices, requests and other communications that any
party is required or elects to give hereunder shall be in writing and shall be
deemed to have been given (a) upon personal delivery thereof, including by
appropriate courier service, five (5) days after delivery
-5-
<PAGE> 6
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the Company at the address set forth
below, to the Holder at the address set forth on the signature page of this
Note, or to either of them at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 12:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
14. Expenses. The Company will pay all costs and expenses incurred by
the Holder in connection with any amendments, waivers or consents (including any
amendment, waiver or consent that is requested but does not become effective) or
the enforcement by the Holder of its rights under or in respect of this Note.
Such costs and expenses include, but are not limited to:
(a) the reasonable fees, expenses and disbursements of any special
counsel or reasonably required local counsel in connection with any
amendments, waivers or consents of this Note and all out-of-pocket
expenses incurred by the Holder in connection with any such amendments
or waivers;
(b) all costs and expenses, including attorneys' fees, incurred in
enforcing (or determining whether or how to enforce) any rights under
this Note or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Note, or
by reason of being a Holder of this Note; and
(c) all costs and expenses, including attorneys' fees and financial
advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any subsidiary or in connection with any
work-out or restructuring with respect to the Company or any
subsidiary.
-6-
<PAGE> 7
The Company will pay, and will save the Holder harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by the Holder).
15. No Setoff. This Note shall not be subject to any right of setoff,
recoupment, counterclaim or otherwise in respect of any claims by the Company
against the Holder.
16. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Georgia, excluding that body of law
relating to conflict of laws.
17. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Note to be issued this 16th day
of April, 1996.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
-----------------------------
Name: Dennis C. Hayes
Title: Chairman
Name of Holder: RINZAI LIMITED
Address: c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Wire instructions:
-8-
<PAGE> 9
ANNEX 1
Conversion Formula
Total Shares = Other Shares x Holders' %age ownership PLUS Change
-------------------------------------
Others' %age ownership MINUS Change
New Shares = (Total Shares - Existing Shares) x Loan %age
where:
Total Shares = Total number of shares outstanding and held by Holders
of Convertible Subordinated Promissory Notes entitled
to conversion in respect of the Shareholder Loan of
which this Note evidences a part, as determined
immediately after conversion
Other = Aggregate number of shares of Stock (Common and
Preferred)
Shares owned or controlled by all shareholders that are not
Holders of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as
determined immediately prior to conversion
Holders' = Aggregate ownership of Stock of the Company,
%age expressed as a percentage, by Holders of Convertible
ownership Subordinated Promissory Notes entitled to conversion
in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to
conversion
Others' %age = 100% MINUS Holders' %age ownership
ownership
Change = The percentage obtained by (1) dividing the
aggregate principal amount of the Shareholder Loan that is
subject to conversion (and of which this Note
evidences a part) by $1,000,000, and (2) multiplying
the result by 1.4.
New Shares = The number of shares of Series A Preferred Stock
issuable to the Holder of this Note upon conversion
of such Holder's ratable share of the aggregate
Shareholder Loan amount converted (and used to
determine "Change")
-9-
<PAGE> 10
Existing = The aggregate number of shares of Stock (Common and Preferred)
Shares owned by all Holders of Convertible Subordinated Promissory
Notes entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as determined
immediately prior to conversion
Loan %age = The result, expressed as a percentage, obtained by dividing the
principal amount of this Note entitled to conversion by the
aggregate amount of the Shareholder Loan entitled to conversion
as part of the same conversion event
By way of example, if the number of Existing Shares owned by all Holders of
Convertible Subordinated Promissory Notes is 4,900,000 and the Other Shares
owned or controlled by all Shareholders that are not Holders of Convertible
Subordinated Promissory Notes is 5,100,000, and if the aggregate principal
amount of the Shareholder Loan that is subject to conversion is $13,000,000:
then Total Shares = 5,100,000 x (49.0 + 18.2) / (51.0 - 18.2)
= 5,100,000 x 67.2 / 32.8
= 10,448,780 shares
After such conversion, Total shares outstanding and held by Holders of
Convertible Subordinated Promissory Notes, as determined immediately after
conversion, would represent
10,448,780 / (10,448,780 + 5,100,000) = 0.672 or 67.2% of all
outstanding shares in the corporation.
-10-
<PAGE> 11
ANNEX 2
TO HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned, the Holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Series A Preferred Stock of HAYES
MICROCOMPUTER PRODUCTS, INC., to the extent of $________________ unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to,
____________________________________________________, whose address is:
_________________________________________________________, and who is a
"Permitted Transferee" under and as defined in the Shareholders' Agreement.
Dated:___________________________________
___________________________________________________
(Signature must conform in all respects to the name
of Holder as specified on the face of the Note)
___________________________________________________
___________________________________________________
(Address)
-11-
<PAGE> 1
EXHIBIT 10.32
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBORDINATED AS SET FORTH IN PARAGRAPH 4 HEREIN
HAYES MICROCOMPUTER PRODUCTS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
(ONE-YEAR)
US $1,000,000 Atlanta, Georgia
April 16, 1996
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (the
"Company"), having its principal office located at 5835 Peachtree Corners East,
Norcross, Georgia, for value received hereby promises to pay to KAIFA TECHNOLOGY
(H.K.) LIMITED, (the "Holder"), the sum of ONE MILLION US Dollars (US
$1,000,000), in lawful currency of the United States of America, on the earlier
to occur of (i) April 15, 1997 or if such day is not a business day, on the next
succeeding business day, or (ii) when the unpaid principal amount of this Note
is declared due and payable by the Holder upon the occurrence of an Event of
Default (as hereinafter defined) (such earlier date, the "Maturity Date").
This Note is a "Convertible Subordinated Promissory Note" referred to
in and issued in connection with a loan transaction contemplated by Section 10.5
of the Hayes Microcomputer Products, Inc. Shareholders' Agreement dated as of
April 16, 1996 (as amended, modified or supplemented in accordance with the
terms thereof and in effect from time to time, the "Shareholders' Agreement"),
by and among the Company, the Holder, Dennis C. Hayes and the other
Shareholders, as defined therein. In addition to the terms hereof, this Note and
the Holder are subject to certain restrictions, and entitled to certain rights
and privileges, as set forth in the Merger Agreement (as hereinafter defined)
and the Shareholders' Agreement. The principal amount of this Note, together
with the principal amount of one or more other Convertible Subordinated
Promissory Notes, dated the date hereof and substantially identical to this Note
but for the name of the payee, constitute a "Shareholder Loan."
<PAGE> 2
Notwithstanding any provisions hereof to the contrary, no payment of
principal hereof shall be made unless and except to the extent that repayment of
principal is also made by the Company in respect of each outstanding Convertible
Subordinated Promissory Note evidencing a portion of the same Shareholder Loan
that is evidenced by this Note, ratably according to the respective original
principal amounts hereof and thereof. Payment of all amounts due under this Note
shall be made by wire transfer to the Holder pursuant to the instructions set
forth below or to such other account maintained with a United States bank as the
Holder may specify to the Company in writing from time to time, referring to
this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder, by
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms have
the following meanings:
(i) "Company" means Hayes Microcomputer Products, Inc., a
Georgia corporation ("New Hayes"), the surviving corporation of the
merger of Financial Sub with and into Hayes Microcomputer Products,
Inc., a Georgia corporation, and any corporation which shall succeed to
or assume the obligations of New Hayes under this Note.
(ii) "Holder" means any person who shall at the time be the
registered holder of this Note; KAIFA TECHNOLOGY (H.K.) LIMITED is the
initial Holder.
2. Interest. Interest shall accrue on the principal amount of this Note
outstanding from time to time and shall be payable on the Maturity Date and upon
repayment or conversion, at a rate per annum equal to 1-5/8% above the interest
rate announced from time to time by Chemical Bank at its principal office in New
York, New York as its "base rate," each change in such rate to be effective with
each change in such "base rate."
3. Events of Default. If any of the events specified in this Section 3
shall occur (each an "Event of Default") and be continuing, the Holder may, by
written notice to the Company given on a business day, declare the entire
principal hereof to be immediately due and payable and upon such declaration,
the same shall be due and payable:
(i) The Company or any subsidiary shall (A) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C)
consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy
or other laws, (D) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E)
admit in writing its inability to
-2-
<PAGE> 3
pay its debts as they become due, (F) make a general assignment for the
benefit of creditors, or (F) take any corporate action for the purpose
of authorizing any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any of its subsidiaries in any court of competent
jurisdiction seeking (A) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any of its
subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of the Company or any of its subsidiaries, and such case or
proceeding shall continue undismissed or unstayed for a period of sixty
(60) consecutive days, or any order granting the relief requested in
such case or proceeding against the Company or any of its subsidiaries
shall be entered; or
(iii) Any default or "event of default" shall occur under any
Senior Indebtedness (as hereinafter defined) that gives the holder
thereof the right to accelerate, and such holder shall have
accelerated, the obligations of the Company thereunder; or
(iv) The Company shall fail to perform or observe any material
term of (A) the Hayes Microcomputer Products, Inc. Agreement and Plan
of Merger by and among the Company, Dennis C. Hayes, and the Investors
(as defined therein), dated as of April 12, 1996 (as currently amended
and as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Merger Agreement"), (B) the
Warrants (as defined in the Merger Agreement), or (C) the Shareholders'
Agreement, in each case to be performed or observed by the Company and
such failure shall continue beyond any applicable grace period.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated in right of payment, to the extent and in the manner set
forth in that certain Debt Subordination Agreement among the Company, The CIT
Group/Credit Finance, Inc., and Kaifa Technology (H.K.) Limited, dated April 16,
1996, to payment in full of the Superior Debt (as defined therein).
4.1. Subrogation. Notwithstanding the subordination provided for in
the foregoing provisions of this Section 4, the Holder's right to receive shares
of Series A Preferred Stock of the Company ("Series A Preferred Stock") (and any
cash in lieu of fractional shares) upon conversion of this Note shall be the
Holder's sole remedy following the occurrence of an Event of Default and neither
such right of conversion nor any shares issuable or issued upon exercise of such
right by the Holder shall be exercisable by or payable to or receivable by the
holder of any Senior Indebtedness.
4.2. Undertaking. By its acceptance of this Note, the Holder
agrees to execute and deliver such documents as may reasonably be requested
from time to time by the Company
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<PAGE> 4
on its own behalf or on behalf of the holder of any Senior Indebtedness to give
effect to the foregoing provisions of this Section 4.
5. Prepayment. This Note may be prepaid in whole or in part,
without penalty, at any time prior to its conversion in accordance with Section
6 hereof.
6. Conversion.
6.1. Automatic Conversion. At the close of business on the
Maturity Date the entire unpaid principal amount of this Note and any accrued
and unpaid interest thereon shall be automatically converted into shares of
Series A Preferred Stock. The conversion shall be effected in accordance with
the formula attached hereto as Annex 1.
6.2. Conversion Procedure.
6.2.1. Notice of Conversion Pursuant to Section 6.1.
If this Note is automatically converted, written notice in the
form attached hereto as Annex 2 shall be delivered to the
Holder of this Note at the address last shown on the records
of the Company for the Holder or given by the Holder to the
Company for the purpose of notice or, if no such address
appears or has been given, at the place where the principal
executive office or residence of the Holder is located,
notifying the Holder of the conversion to be effected,
specifying the principal amount of this Note to be converted
and the date on which such conversion will occur (or has
occurred), and calling upon the Holder to surrender to the
Company, in the manner and at the place designated, this Note.
As promptly as practicable after the automatic conversion of
this Note, the Company at its expense will issue and deliver
to the Holder of this Note a certificate or certificates for
the number of full shares of Series A Preferred Stock issuable
upon such conversion.
6.2.2. Mechanics and Effect of Conversion. No
fractional shares of Series A Preferred Stock shall be issued
upon conversion of this Note. In lieu of the Company issuing
any fractional shares to the Holder upon the conversion of
this Note, the Company shall pay to the Holder the amount of
outstanding principal that is not so converted, such payment
to be in the form of a check payable to the Holder. Upon
conversion of this Note and payment of any cash in lieu of
fractional shares, the Company shall be forever released from
all its obligations and liabilities under this Note.
6.3. No Impairment. The Company will not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in carrying out all the provisions of this Section 6 and in taking all such
action as may be necessary or appropriate in order to protect the conversion
rights of the Holder of this Note against impairment.
-4-
<PAGE> 5
7. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Series A Preferred Stock solely for the purpose of effecting the conversion
of this Note such number of shares of Series A Preferred Stock (and shares of
Common Stock of the Company ("Common Stock") for issuance on conversion of such
Series A Preferred Stock) as shall from time to time be sufficient to effect the
conversion of this Note; and if at any time the number of authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the Holder,
the Company will use all reasonable efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) to the number of shares
that is sufficient for such purposes.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The rights and obligations of the
Company under this Note may not be assigned by the Company without the prior
written consent of the Holder.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written consent of the Company and the Holder;
PROVIDED, HOWEVER, that the Company hereby waives (i) presentment for payment,
protest and demand, notice of protest, demand and dishonor and nonpayment of
this Note and (ii) the defense of the statute of limitations in any action on
this Note to the extent permitted by law.
10. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the provisions of Section 7 of the
Shareholders' Agreement shall apply, mutatis mutandis, to the same extent as if
this Note and such securities were "Stock" (as defined in the Shareholders'
Agreement). Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. All notices, requests and other communications that any
party is required or elects to give hereunder shall be in writing and shall be
deemed to have been given (a) upon personal delivery thereof, including by
appropriate courier service, five (5) days after delivery
-5-
<PAGE> 6
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the Company at the address set forth
below, to the Holder at the address set forth on the signature page of this
Note, or to either of them at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 12:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
14. Expenses. The Company will pay all costs and expenses incurred by
the Holder in connection with any amendments, waivers or consents (including any
amendment, waiver or consent that is requested but does not become effective) or
the enforcement by the Holder of its rights under or in respect of this Note.
Such costs and expenses include, but are not limited to:
(a) the reasonable fees, expenses and disbursements of any
special counsel or reasonably required local counsel in connection with
any amendments, waivers or consents of this Note and all out-of-pocket
expenses incurred by the Holder in connection with any such amendments
or waivers;
(b) all costs and expenses, including attorneys' fees,
incurred in enforcing (or determining whether or how to enforce) any
rights under this Note or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Note, or by reason of being a Holder of this Note; and
(c) all costs and expenses, including attorneys' fees and
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any subsidiary or in connection with any
work-out or restructuring with respect to the Company or any
subsidiary.
-6-
<PAGE> 7
The Company will pay, and will save the Holder harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by the Holder).
15. No Setoff. This Note shall not be subject to any right of setoff,
recoupment, counterclaim or otherwise in respect of any claims by the Company
against the Holder.
16. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Georgia, excluding that body of law
relating to conflict of laws.
17. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Note to be issued this 16th day
of April, 1996.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
-------------------------------
Name: Dennis C. Hayes
Title: Chairman
Name of Holder: KAIFA TECHNOLOGY (H.K.) LIMITED
Address: 2210 Hong Kong Worsted Mills Industrial Building
31-39 Wo Tong Tsui Street
Kwai Chung, New Territories
Hong Kong
Wire instructions:
-8-
<PAGE> 9
ANNEX 1
Conversion Formula
Total Shares = Other Shares x Holders' %age ownership PLUS Change
-------------------------------------
Others' %age ownership MINUS Change
New Shares = (Total Shares - Existing Shares) x Loan %age
where:
Total Shares = Total number of shares outstanding and held by Holders
of Convertible Subordinated Promissory Notes entitled
to conversion in respect of the Shareholder Loan of
which this Note evidences a part, as determined
immediately after conversion
Other = Aggregate number of shares of Stock (Common and
Preferred)
Shares owned or controlled by all shareholders that are not
Holders of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as
determined immediately prior to conversion
Holders' = Aggregate ownership of Stock of the Company,
%age expressed as a percentage, by Holders of Convertible
ownership Subordinated Promissory Notes entitled to conversion
in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to
conversion
Others' %age = 100% MINUS Holders' %age ownership
ownership
Change = The percentage obtained by (1) dividing the
aggregate principal amount of the Shareholder Loan
that is subject to conversion (and of which this Note
evidences a part) by $1,000,000, and (2) multiplying
the result by 1.4.
New Shares = The number of shares of Series A Preferred Stock
issuable to the Holder of this Note upon conversion
of such Holder's ratable share of the aggregate
Shareholder Loan amount converted (and used to
determine "Change")
-9-
<PAGE> 10
Existing = The aggregate number of shares of Stock (Common and Preferred)
Shares owned by all Holders of Convertible Subordinated Promissory
Notes entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as determined
immediately prior to conversion
Loan %age = The result, expressed as a percentage, obtained by dividing the
principal amount of this Note entitled to conversion by the
aggregate amount of the Shareholder Loan entitled to conversion
as part of the same conversion event
By way of example, if the number of Existing Shares owned by all Holders of
Convertible Subordinated Promissory Notes is 4,900,000 and the Other Shares
owned or controlled by all Shareholders that are not Holders of Convertible
Subordinated Promissory Notes is 5,100,000, and if the aggregate principal
amount of the Shareholder Loan that is subject to conversion is $13,000,000:
then Total Shares = 5,100,000 x (49.0 + 18.2) / (51.0 - 18.2)
= 5,100,000 x 67.2 / 32.8
= 10,448,780 shares
After such conversion, Total shares outstanding and held by Holders of
Convertible Subordinated Promissory Notes, as determined immediately after
conversion, would represent
10,448,780 / (10,448,780 + 5,100,000) = 0.672 or 67.2% of all
outstanding shares in the corporation.
-10-
<PAGE> 11
ANNEX 2
TO HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned, the Holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Series A Preferred Stock of HAYES
MICROCOMPUTER PRODUCTS, INC., to the extent of $________________ unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to,
____________________________________________________, whose address is:
_________________________________________________________, and who is a
"Permitted Transferee" under and as defined in the Shareholders' Agreement.
Dated:___________________________________
___________________________________________________
(Signature must conform in all respects to the name
of Holder as specified on the face of the Note)
___________________________________________________
___________________________________________________
(Address)
-11-
<PAGE> 1
EXHIBIT 10.33
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBORDINATED AS SET FORTH IN PARAGRAPH 4 HEREIN
HAYES MICROCOMPUTER PRODUCTS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
(ONE-YEAR)
US $500,000 Atlanta, Georgia
April 16, 1996
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (the
"Company"), having its principal office located at 5835 Peachtree Corners East,
Norcross, Georgia, for value received hereby promises to pay to ROLLING PROFIT
HOLDINGS LIMITED, (the "Holder"), the sum of FIVE HUNDRED THOUSAND US Dollars
(US $500,000), in lawful currency of the United States of America, on the
earlier to occur of (i) April 15, 1997 or if such day is not a business day, on
the next succeeding business day, or (ii) when the unpaid principal amount of
this Note is declared due and payable by the Holder upon the occurrence of an
Event of Default (as hereinafter defined) (such earlier date, the "Maturity
Date").
This Note is a "Convertible Subordinated Promissory Note" referred to
in and issued in connection with a loan transaction contemplated by Section 10.5
of the Hayes Microcomputer Products, Inc. Shareholders' Agreement dated as of
April 16, 1996 (as amended, modified or supplemented in accordance with the
terms thereof and in effect from time to time, the "Shareholders' Agreement"),
by and among the Company, the Holder, Dennis C. Hayes and the other
Shareholders, as defined therein. In addition to the terms hereof, this Note and
the Holder are subject to certain restrictions, and entitled to certain rights
and privileges, as set forth in the Merger Agreement (as hereinafter defined)
and the Shareholders' Agreement. The principal amount of this Note, together
with the principal amount of one or more other Convertible Subordinated
Promissory Notes, dated the date hereof and substantially identical to this Note
but for the name of the payee, constitute a "Shareholder Loan."
<PAGE> 2
Notwithstanding any provisions hereof to the contrary, no payment of
principal hereof shall be made unless and except to the extent that repayment of
principal is also made by the Company in respect of each outstanding Convertible
Subordinated Promissory Note evidencing a portion of the same Shareholder Loan
that is evidenced by this Note, ratably according to the respective original
principal amounts hereof and thereof. Payment of all amounts due under this Note
shall be made by wire transfer to the Holder pursuant to the instructions set
forth below or to such other account maintained with a United States bank as the
Holder may specify to the Company in writing from time to time, referring to
this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder, by
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms have the
following meanings:
(i) "Company" means Hayes Microcomputer Products, Inc., a
Georgia corporation ("New Hayes"), the surviving corporation of the
merger of Financial Sub with and into Hayes Microcomputer Products,
Inc., a Georgia corporation, and any corporation which shall succeed to
or assume the obligations of New Hayes under this Note.
(ii) "Holder" means any person who shall at the time be the
registered holder of this Note; ROLLING PROFIT HOLDINGS LIMITED is the
initial Holder.
2. Interest. Interest shall accrue on the principal amount of this Note
outstanding from time to time and shall be payable on the Maturity Date and upon
repayment or conversion, at a rate per annum equal to 1-5/8% above the interest
rate announced from time to time by Chemical Bank at its principal office in New
York, New York as its "base rate," each change in such rate to be effective with
each change in such "base rate."
3. Events of Default. If any of the events specified in this Section 3
shall occur (each an "Event of Default") and be continuing, the Holder may, by
written notice to the Company given on a business day, declare the entire
principal hereof to be immediately due and payable and upon such declaration,
the same shall be due and payable:
(i) The Company or any subsidiary shall (A) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C)
consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy
or other laws, (D) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E)
admit in writing its inability to
-2-
<PAGE> 3
pay its debts as they become due, (F) make a general assignment for the
benefit of creditors, or (F) take any corporate action for the purpose
of authorizing any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any of its subsidiaries in any court of competent
jurisdiction seeking (A) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any of its
subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of the Company or any of its subsidiaries, and such case or
proceeding shall continue undismissed or unstayed for a period of sixty
(60) consecutive days, or any order granting the relief requested in
such case or proceeding against the Company or any of its subsidiaries
shall be entered; or
(iii) Any default or "event of default" shall occur under any
Senior Indebtedness (as hereinafter defined) that gives the holder
thereof the right to accelerate, and such holder shall have
accelerated, the obligations of the Company thereunder; or
(iv) The Company shall fail to perform or observe any material
term of (A) the Hayes Microcomputer Products, Inc. Agreement and Plan
of Merger by and among the Company, Dennis C. Hayes, and the Investors
(as defined therein), dated as of April 12, 1996 (as currently amended
and as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Merger Agreement"), (B) the
Warrants (as defined in the Merger Agreement), or (C) the Shareholders'
Agreement, in each case to be performed or observed by the Company and
such failure shall continue beyond any applicable grace period.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated in right of payment, to the extent and in the manner set
forth in that certain Debt Subordination Agreement among the Company, The CIT
Group/Credit Finance, Inc., and Rolling Profit Holdings Limited, dated April 16,
1996, to payment in full of the Superior Debt (as defined therein).
4.1. Subrogation. Notwithstanding the subordination provided for in
the foregoing provisions of this Section 4, the Holder's right to receive shares
of Series A Preferred Stock of the Company ("Series A Preferred Stock") (and any
cash in lieu of fractional shares) upon conversion of this Note shall be the
Holder's sole remedy following the occurrence of an Event of Default and neither
such right of conversion nor any shares issuable or issued upon exercise of such
right by the Holder shall be exercisable by or payable to or receivable by the
holder of any Senior Indebtedness.
4.2. Undertaking. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may reasonably be requested from time
to time by the Company
-3-
<PAGE> 4
on its own behalf or on behalf of the holder of any Senior Indebtedness to give
effect to the foregoing provisions of this Section 4.
5. Prepayment. This Note may be prepaid in whole or in part, without
penalty, at any time prior to its conversion in accordance with Section 6
hereof.
6. Conversion.
6.1. Automatic Conversion. At the close of business on the Maturity
Date the entire unpaid principal amount of this Note and any accrued and unpaid
interest thereon shall be automatically converted into shares of Series A
Preferred Stock. The conversion shall be effected in accordance with the formula
attached hereto as Annex 1.
6.2. Conversion Procedure.
6.2.1. Notice of Conversion Pursuant to Section 6.1. If this
Note is automatically converted, written notice in the form attached
hereto as Annex 2 shall be delivered to the Holder of this Note at
the address last shown on the records of the Company for the Holder
or given by the Holder to the Company for the purpose of notice or,
if no such address appears or has been given, at the place where the
principal executive office or residence of the Holder is located,
notifying the Holder of the conversion to be effected, specifying
the principal amount of this Note to be converted and the date on
which such conversion will occur (or has occurred), and calling upon
the Holder to surrender to the Company, in the manner and at the
place designated, this Note. As promptly as practicable after the
automatic conversion of this Note, the Company at its expense will
issue and deliver to the Holder of this Note a certificate or
certificates for the number of full shares of Series A Preferred
Stock issuable upon such conversion.
6.2.2. Mechanics and Effect of Conversion. No fractional
shares of Series A Preferred Stock shall be issued upon conversion
of this Note. In lieu of the Company issuing any fractional shares
to the Holder upon the conversion of this Note, the Company shall
pay to the Holder the amount of outstanding principal that is not so
converted, such payment to be in the form of a check payable to the
Holder. Upon conversion of this Note and payment of any cash in lieu
of fractional shares, the Company shall be forever released from all
its obligations and liabilities under this Note.
6.3. No Impairment. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all the provisions of this Section 6 and in taking all such action as may be
necessary or appropriate in order to protect the conversion rights of the Holder
of this Note against impairment.
-4-
<PAGE> 5
7. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Series A Preferred Stock solely for the purpose of effecting the conversion
of this Note such number of shares of Series A Preferred Stock (and shares of
Common Stock of the Company ("Common Stock") for issuance on conversion of such
Series A Preferred Stock) as shall from time to time be sufficient to effect the
conversion of this Note; and if at any time the number of authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the Holder,
the Company will use all reasonable efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) to the number of shares
that is sufficient for such purposes.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The rights and obligations of the
Company under this Note may not be assigned by the Company without the prior
written consent of the Holder.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written consent of the Company and the Holder;
PROVIDED, HOWEVER, that the Company hereby waives (i) presentment for payment,
protest and demand, notice of protest, demand and dishonor and nonpayment of
this Note and (ii) the defense of the statute of limitations in any action on
this Note to the extent permitted by law.
10. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the provisions of Section 7 of the
Shareholders' Agreement shall apply, mutatis mutandis, to the same extent as if
this Note and such securities were "Stock" (as defined in the Shareholders'
Agreement). Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. All notices, requests and other communications that any
party is required or elects to give hereunder shall be in writing and shall be
deemed to have been given (a) upon personal delivery thereof, including by
appropriate courier service, five (5) days after delivery
-5-
<PAGE> 6
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the Company at the address set forth
below, to the Holder at the address set forth on the signature page of this
Note, or to either of them at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 12:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
14. Expenses. The Company will pay all costs and expenses incurred by
the Holder in connection with any amendments, waivers or consents (including any
amendment, waiver or consent that is requested but does not become effective) or
the enforcement by the Holder of its rights under or in respect of this Note.
Such costs and expenses include, but are not limited to:
(a) the reasonable fees, expenses and disbursements of any
special counsel or reasonably required local counsel in connection with
any amendments, waivers or consents of this Note and all out-of-pocket
expenses incurred by the Holder in connection with any such amendments
or waivers;
(b) all costs and expenses, including attorneys' fees, incurred in
enforcing (or determining whether or how to enforce) any rights under
this Note or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Note, or
by reason of being a Holder of this Note; and
(c) all costs and expenses, including attorneys' fees and financial
advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any subsidiary or in connection with any
work-out or restructuring with respect to the Company or any
subsidiary.
-6-
<PAGE> 7
The Company will pay, and will save the Holder harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by the Holder).
15. No Setoff. This Note shall not be subject to any right of setoff,
recoupment, counterclaim or otherwise in respect of any claims by the Company
against the Holder.
16. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Georgia, excluding that body of law
relating to conflict of laws.
17. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Note to be issued this 16th day
of April, 1996.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
--------------------------------
Name: Dennis C. Hayes
Title: Chairman
Name of Holder: ROLLING PROFIT HOLDINGS LIMITED
Address: Arion Commercial Centre
Third Floor, Room 304
2-12 Queen's Road West
Hong Kong
Wire instructions:
-8-
<PAGE> 9
ANNEX 1
<TABLE>
<CAPTION>
Conversion Formula
<S> <C> <C>
Total Shares = Other Shares x Holders' %age ownership PLUS Change
---------------------------------------
Others' %age ownership MINUS Change
New Shares = (Total Shares - Existing Shares) x Loan %age
where:
Total Shares = Total number of shares outstanding
and held by Holders of Convertible
Subordinated Promissory Notes entitled to
conversion in respect of the Shareholder
Loan of which this Note evidences a part, as
determined immediately after conversion
Other = Aggregate number of shares of Stock (Common
and Preferred)
Shares owned or controlled by all shareholders that
are not Holders of Convertible Subordinated
Promissory Notes entitled to conversion in
respect of the Shareholder Loan of which
this Note evidences a part, as determined
immediately prior to conversion
Holders' = Aggregate ownership of Stock of the Company,
%age expressed as a percentage, by Holders of
ownership Convertible Subordinated Promissory Notes
entitled to conversion in respect of the
Shareholder Loan of which this Note
evidences a part, as determined immediately
prior to conversion
Others' %age = 100% MINUS Holders' %age ownership
ownership
Change = The percentage obtained by (1) dividing the
aggregate principal amount of the
Shareholder Loan that is subject to
conversion (and of which this Note evidences
a part) by $1,000,000, and (2) multiplying
the result by 1.4.
New Shares = The number of shares of Series A Preferred
Stock issuable to the Holder of this Note
upon conversion of such Holder's ratable
share of the aggregate Shareholder Loan
amount converted (and used to determine
"Change")
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C> <C>
Existing = The aggregate number of shares of Stock
Shares (Common and Preferred) owned by all Holders
of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the
Shareholder Loan of which this Note
evidences a part, as determined immediately
prior to conversion
Loan %age = The result, expressed as a percentage,
obtained by dividing the principal amount of
this Note entitled to conversion by the
aggregate amount of the Shareholder Loan
entitled to conversion as part of the same
conversion event
</TABLE>
By way of example, if the number of Existing Shares owned by all Holders of
Convertible Subordinated Promissory Notes is 4,900,000 and the Other Shares
owned or controlled by all Shareholders that are not Holders of Convertible
Subordinated Promissory Notes is 5,100,000, and if the aggregate principal
amount of the Shareholder Loan that is subject to conversion is $13,000,000:
then Total Shares = 5,100,000 x (49.0 + 18.2) / (51.0 - 18.2)
= 5,100,000 x 67.2 / 32.8
= 10,448,780 shares
After such conversion, Total shares outstanding and held by Holders of
Convertible Subordinated Promissory Notes, as determined immediately after
conversion, would represent
10,448,780/(10,448,780 + 5,100,000) = 0.672 or 67.2% of all
outstanding shares in the corporation.
-10-
<PAGE> 11
ANNEX 2
TO HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned, the Holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Series A Preferred Stock of HAYES
MICROCOMPUTER PRODUCTS, INC., to the extent of $________________ unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to, ___________________________,
whose address is: _________________________________________________________, and
who is a "Permitted Transferee" under and as defined in the Shareholders'
Agreement.
Dated:
-----------------------------
---------------------------------------------------
(Signature must conform in all respects to the name
of Holder as specified on the face of the Note)
---------------------------------------------------
---------------------------------------------------
(Address)
-11-
<PAGE> 1
EXHIBIT 10.34
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBORDINATED AS SET FORTH IN PARAGRAPH 4 HEREIN
HAYES MICROCOMPUTER PRODUCTS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
(ONE-YEAR)
US $450,000 Atlanta, Georgia
April 16, 1996
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (the
"Company"), having its principal office located at 5835 Peachtree Corners East,
Norcross, Georgia, for value received hereby promises to pay to LAO HOTEL (H.K.)
LIMITED (the "Holder"), the sum of FOUR HUNDRED FIFTY THOUSAND US Dollars (US
$450,000), in lawful currency of the United States of America, on the earlier to
occur of (i) April 15, 1997 or if such day is not a business day, on the next
succeeding business day, or (ii) when the unpaid principal amount of this Note
is declared due and payable by the Holder upon the occurrence of an Event of
Default (as hereinafter defined) (such earlier date, the "Maturity Date").
This Note is a "Convertible Subordinated Promissory Note" referred to
in and issued in connection with a loan transaction contemplated by Section 10.5
of the Hayes Microcomputer Products, Inc. Shareholders' Agreement dated as of
April 16, 1996 (as amended, modified or supplemented in accordance with the
terms thereof and in effect from time to time, the "Shareholders' Agreement"),
by and among the Company, the Holder, Dennis C. Hayes and the other
Shareholders, as defined therein. In addition to the terms hereof, this Note and
the Holder are subject to certain restrictions, and entitled to certain rights
and privileges, as set forth in the Merger Agreement (as hereinafter defined)
and the Shareholders' Agreement. The principal amount of this Note, together
with the principal amount of one or more other Convertible Subordinated
Promissory Notes, dated the date hereof and substantially identical to this Note
but for the name of the payee, constitute a "Shareholder Loan."
<PAGE> 2
Notwithstanding any provisions hereof to the contrary, no payment of
principal hereof shall be made unless and except to the extent that repayment of
principal is also made by the Company in respect of each outstanding Convertible
Subordinated Promissory Note evidencing a portion of the same Shareholder Loan
that is evidenced by this Note, ratably according to the respective original
principal amounts hereof and thereof. Payment of all amounts due under this Note
shall be made by wire transfer to the Holder pursuant to the instructions set
forth below or to such other account maintained with a United States bank as the
Holder may specify to the Company in writing from time to time, referring to
this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder, by
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms have the
following meanings:
(i) "Company" means Hayes Microcomputer Products, Inc., a
Georgia corporation ("New Hayes"), the surviving corporation of the
merger of Financial Sub with and into Hayes Microcomputer Products,
Inc., a Georgia corporation, and any corporation which shall succeed to
or assume the obligations of New Hayes under this Note.
(ii) "Holder" means any person who shall at the time be the
registered holder of this Note; LAO HOTEL (H.K.) LIMITED is the initial
Holder.
2. Interest. Interest shall accrue on the principal amount of this Note
outstanding from time to time and shall be payable on the Maturity Date and upon
repayment or conversion, at a rate per annum equal to 1-5/8% above the interest
rate announced from time to time by Chemical Bank at its principal office in New
York, New York as its "base rate," each change in such rate to be effective with
each change in such "base rate."
3. Events of Default. If any of the events specified in this Section 3
shall occur (each an "Event of Default") and be continuing, the Holder may, by
written notice to the Company given on a business day, declare the entire
principal hereof to be immediately due and payable and upon such declaration,
the same shall be due and payable:
(i) The Company or any subsidiary shall (A) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C)
consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy
or other laws, (D) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E)
admit in writing its inability to
-2-
<PAGE> 3
pay its debts as they become due, (F) make a general assignment for the
benefit of creditors, or (F) take any corporate action for the purpose
of authorizing any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any of its subsidiaries in any court of competent
jurisdiction seeking (A) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any of its
subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of the Company or any of its subsidiaries, and such case or
proceeding shall continue undismissed or unstayed for a period of sixty
(60) consecutive days, or any order granting the relief requested in
such case or proceeding against the Company or any of its subsidiaries
shall be entered; or
(iii) Any default or "event of default" shall occur under any
Senior Indebtedness (as hereinafter defined) that gives the holder
thereof the right to accelerate, and such holder shall have
accelerated, the obligations of the Company thereunder; or
(iv) The Company shall fail to perform or observe any material
term of (A) the Hayes Microcomputer Products, Inc. Agreement and Plan
of Merger by and among the Company, Dennis C. Hayes, and the Investors
(as defined therein), dated as of April 12, 1996 (as currently amended
and as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Merger Agreement"), (B) the
Warrants (as defined in the Merger Agreement), or (C) the Shareholders'
Agreement, in each case to be performed or observed by the Company and
such failure shall continue beyond any applicable grace period.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated in right of payment, to the extent and in the manner set
forth in that certain Debt Subordination Agreement among the Company, The CIT
Group/Credit Finance, Inc., and Lao Hotel (H.K.) Limited, dated April 16, 1996,
to payment in full of the Superior Debt (as defined therein).
4.1. Subrogation. Notwithstanding the subordination provided
for in the foregoing provisions of this Section 4, the Holder's right to receive
shares of Series A Preferred Stock of the Company ("Series A Preferred Stock")
(and any cash in lieu of fractional shares) upon conversion of this Note shall
be the Holder's sole remedy following the occurrence of an Event of Default and
neither such right of conversion nor any shares issuable or issued upon exercise
of such right by the Holder shall be exercisable by or payable to or receivable
by the holder of any Senior Indebtedness.
4.2. Undertaking. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may reasonably be requested from time
to time by the Company
-3-
<PAGE> 4
on its own behalf or on behalf of the holder of any Senior Indebtedness to give
effect to the foregoing provisions of this Section 4.
5. Prepayment. This Note may be prepaid in whole or in part, without
penalty, at any time prior to its conversion in accordance with Section 6
hereof.
6. Conversion.
6.1. Automatic Conversion. At the close of business on the Maturity
Date the entire unpaid principal amount of this Note and any accrued and unpaid
interest thereon shall be automatically converted into shares of Series A
Preferred Stock. The conversion shall be effected in accordance with the formula
attached hereto as Annex 1.
6.2. Conversion Procedure.
6.2.1. Notice of Conversion Pursuant to Section 6.1. If this
Note is automatically converted, written notice in the form attached
hereto as Annex 2 shall be delivered to the Holder of this Note at
the address last shown on the records of the Company for the Holder
or given by the Holder to the Company for the purpose of notice or,
if no such address appears or has been given, at the place where the
principal executive office or residence of the Holder is located,
notifying the Holder of the conversion to be effected, specifying the
principal amount of this Note to be converted and the date on which
such conversion will occur (or has occurred), and calling upon the
Holder to surrender to the Company, in the manner and at the place
designated, this Note. As promptly as practicable after the automatic
conversion of this Note, the Company at its expense will issue and
deliver to the Holder of this Note a certificate or certificates for
the number of full shares of Series A Preferred Stock issuable upon
such conversion.
6.2.2. Mechanics and Effect of Conversion. No fractional shares
of Series A Preferred Stock shall be issued upon conversion of this
Note. In lieu of the Company issuing any fractional shares to the
Holder upon the conversion of this Note, the Company shall pay to the
Holder the amount of outstanding principal that is not so converted,
such payment to be in the form of a check payable to the Holder. Upon
conversion of this Note and payment of any cash in lieu of fractional
shares, the Company shall be forever released from all its
obligations and liabilities under this Note.
6.3. No Impairment. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all the provisions of this Section 6 and in taking all such action as may be
necessary or appropriate in order to protect the conversion rights of the Holder
of this Note against impairment.
-4-
<PAGE> 5
7. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Series A Preferred Stock solely for the purpose of effecting the conversion
of this Note such number of shares of Series A Preferred Stock (and shares of
Common Stock of the Company ("Common Stock") for issuance on conversion of such
Series A Preferred Stock) as shall from time to time be sufficient to effect the
conversion of this Note; and if at any time the number of authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the Holder,
the Company will use all reasonable efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) to the number of shares
that is sufficient for such purposes.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The rights and obligations of the
Company under this Note may not be assigned by the Company without the prior
written consent of the Holder.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written consent of the Company and the Holder;
PROVIDED, HOWEVER, that the Company hereby waives (i) presentment for payment,
protest and demand, notice of protest, demand and dishonor and nonpayment of
this Note and (ii) the defense of the statute of limitations in any action on
this Note to the extent permitted by law.
10. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the provisions of Section 7 of the
Shareholders' Agreement shall apply, mutatis mutandis, to the same extent as if
this Note and such securities were "Stock" (as defined in the Shareholders'
Agreement). Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. All notices, requests and other communications that any
party is required or elects to give hereunder shall be in writing and shall be
deemed to have been given (a) upon personal delivery thereof, including by
appropriate courier service, five (5) days after delivery
-5-
<PAGE> 6
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the Company at the address set forth
below, to the Holder at the address set forth on the signature page of this
Note, or to either of them at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 12:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
14. Expenses. The Company will pay all costs and expenses incurred by
the Holder in connection with any amendments, waivers or consents (including any
amendment, waiver or consent that is requested but does not become effective) or
the enforcement by the Holder of its rights under or in respect of this Note.
Such costs and expenses include, but are not limited to:
(a) the reasonable fees, expenses and disbursements of any
special counsel or reasonably required local counsel in connection with
any amendments, waivers or consents of this Note and all out-of-pocket
expenses incurred by the Holder in connection with any such amendments
or waivers;
(b) all costs and expenses, including attorneys' fees, incurred in
enforcing (or determining whether or how to enforce) any rights under
this Note or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Note, or
by reason of being a Holder of this Note; and
(c) all costs and expenses, including attorneys' fees and
financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any subsidiary or in connection with
any work-out or restructuring with respect to the Company or any
subsidiary.
-6-
<PAGE> 7
The Company will pay, and will save the Holder harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by the Holder).
15. No Setoff. This Note shall not be subject to any right of setoff,
recoupment, counterclaim or otherwise in respect of any claims by the Company
against the Holder.
16. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Georgia, excluding that body of law
relating to conflict of laws.
17. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
16th day of April, 1996.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
---------------------------------
Name: Dennis C. Hayes
Title: Chairman
Name of Holder: LAO HOTEL (H.K.) LIMITED
Address: c/o Guthrie GTS Limited
115 Amoy Street # 02-00
Singapore 059935
Wire instructions:
-8-
<PAGE> 9
ANNEX 1
Conversion Formula
<TABLE>
<S> <C>
Total Shares = Other Shares x Holders' %age ownership PLUS Change
------------------------------------
Others' %age ownership MINUS Change
New Shares = (Total Shares - Existing Shares) x Loan %age
where:
Total Shares = Total number of shares outstanding and held by
Holders of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as
determined immediately after conversion
Other = Aggregate number of shares of Stock (Common and
Preferred)
Shares owned or controlled by all shareholders that
are not Holders of Convertible Subordinated
Promissory Notes entitled to conversion in
respect of the Shareholder Loan of which
this Note evidences a part, as determined
immediately prior to conversion
Holders' = Aggregate ownership of Stock of the Company,
%age expressed as a percentage, by Holders of Convertible
ownership Subordinated Promissory Notes entitled to conversion
in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to
conversion
Others' %age = 100% MINUS Holders' %age ownership
ownership
Change = The percentage obtained by (1) dividing the aggregate
principal amount of the Shareholder Loan that is
subject to conversion (and of which this Note
evidences a part) by $1,000,000, and (2) multiplying
the result by 1.4.
New Shares = The number of shares of Series A Preferred Stock
issuable to the Holder of this Note upon conversion
of such Holder's ratable share of the aggregate
Shareholder Loan amount converted (and used to
determine "Change")
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C> <C>
Existing = The aggregate number of shares of Stock (Common and
Shares Preferred) owned by all Holders of Convertible
Subordinated Promissory Notes entitled to conversion
in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to
conversion
Loan %age = The result, expressed as a percentage, obtained by
dividing the principal amount of this Note entitled
to conversion by the aggregate amount of the
Shareholder Loan entitled to conversion as part of
the same conversion event
</TABLE>
By way of example, if the number of Existing Shares owned by all Holders of
Convertible Subordinated Promissory Notes is 4,900,000 and the Other Shares
owned or controlled by all Shareholders that are not Holders of Convertible
Subordinated Promissory Notes is 5,100,000, and if the aggregate principal
amount of the Shareholder Loan that is subject to conversion is $13,000,000:
then Total Shares = 5,100,000 x (49.0 + 18.2) / (51.0 - 18.2)
= 5,100,000 x 67.2 / 32.8
= 10,448,780 shares
After such conversion, Total shares outstanding and held by Holders of
Convertible Subordinated Promissory Notes, as determined immediately after
conversion, would represent
10,448,780 / (10,448,780 + 5,100,000) = 0.672 or 67.2% of all
outstanding shares in the corporation.
-10-
<PAGE> 11
ANNEX 2
TO HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned, the Holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Series A Preferred Stock of HAYES
MICROCOMPUTER PRODUCTS, INC., to the extent of $________________ unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to, _________________________,
whose address is: _________________________________________________________, and
who is a "Permitted Transferee" under and as defined in the Shareholders'
Agreement.
Dated:
-------------------------------
---------------------------------------------------
(Signature must conform in all respects to the name
of Holder as specified on the face of the Note)
---------------------------------------------------
---------------------------------------------------
(Address)
-11-
<PAGE> 1
EXHIBIT 10.35
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBORDINATED AS SET FORTH IN PARAGRAPH 4 HEREIN
HAYES MICROCOMPUTER PRODUCTS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
(ONE-YEAR)
US $300,000 Atlanta, Georgia
April 16, 1996
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (the
"Company"), having its principal office located at 5835 Peachtree Corners East,
Norcross, Georgia, for value received hereby promises to pay to S.P. QUEK
INVESTMENTS LTD., (the "Holder"), the sum of THREE HUNDRED THOUSAND US Dollars
(US $300,000), in lawful currency of the United States of America, on the
earlier to occur of (i) April 15, 1997 or if such day is not a business day, on
the next succeeding business day, or (ii) when the unpaid principal amount of
this Note is declared due and payable by the Holder upon the occurrence of an
Event of Default (as hereinafter defined) (such earlier date, the "Maturity
Date").
This Note is a "Convertible Subordinated Promissory Note" referred to
in and issued in connection with a loan transaction contemplated by Section 10.5
of the Hayes Microcomputer Products, Inc. Shareholders' Agreement dated as of
April 16, 1996 (as amended, modified or supplemented in accordance with the
terms thereof and in effect from time to time, the "Shareholders' Agreement"),
by and among the Company, the Holder, Dennis C. Hayes and the other
Shareholders, as defined therein. In addition to the terms hereof, this Note and
the Holder are subject to certain restrictions, and entitled to certain rights
and privileges, as set forth in the Merger Agreement (as hereinafter defined)
and the Shareholders' Agreement. The principal amount of this Note, together
with the principal amount of one or more other Convertible Subordinated
Promissory Notes, dated the date hereof and substantially identical to this Note
but for the name of the payee, constitute a "Shareholder Loan."
<PAGE> 2
Notwithstanding any provisions hereof to the contrary, no payment of
principal hereof shall be made unless and except to the extent that repayment of
principal is also made by the Company in respect of each outstanding Convertible
Subordinated Promissory Note evidencing a portion of the same Shareholder Loan
that is evidenced by this Note, ratably according to the respective original
principal amounts hereof and thereof. Payment of all amounts due under this Note
shall be made by wire transfer to the Holder pursuant to the instructions set
forth below or to such other account maintained with a United States bank as the
Holder may specify to the Company in writing from time to time, referring to
this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder, by
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms have the
following meanings:
(i) "Company" means Hayes Microcomputer Products, Inc., a
Georgia corporation ("New Hayes"), the surviving corporation of the
merger of Financial Sub with and into Hayes Microcomputer Products,
Inc., a Georgia corporation, and any corporation which shall succeed to
or assume the obligations of New Hayes under this Note.
(ii) "Holder" means any person who shall at the time be the
registered holder of this Note; S.P. QUEK INVESTMENTS LTD. is the
initial Holder.
2. Interest. Interest shall accrue on the principal amount of this
Note outstanding from time to time and shall be payable on the Maturity Date and
upon repayment or conversion, at a rate per annum equal to 1-5/8% above the
interest rate announced from time to time by Chemical Bank at its principal
office in New York, New York as its "base rate," each change in such rate to be
effective with each change in such "base rate."
3. Events of Default. If any of the events specified in this
Section 3 shall occur (each an "Event of Default") and be continuing, the Holder
may, by written notice to the Company given on a business day, declare the
entire principal hereof to be immediately due and payable and upon such
declaration, the same shall be due and payable:
(i) The Company or any subsidiary shall (A) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C)
consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy
or other laws, (D) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E)
admit in writing its inability to
-2-
<PAGE> 3
pay its debts as they become due, (F) make a general assignment for the
benefit of creditors, or (F) take any corporate action for the purpose
of authorizing any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any of its subsidiaries in any court of competent
jurisdiction seeking (A) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any of its
subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of the Company or any of its subsidiaries, and such case or
proceeding shall continue undismissed or unstayed for a period of sixty
(60) consecutive days, or any order granting the relief requested in
such case or proceeding against the Company or any of its subsidiaries
shall be entered; or
(iii) Any default or "event of default" shall occur under any
Senior Indebtedness (as hereinafter defined) that gives the holder
thereof the right to accelerate, and such holder shall have
accelerated, the obligations of the Company thereunder; or
(iv) The Company shall fail to perform or observe any material
term of (A) the Hayes Microcomputer Products, Inc. Agreement and Plan
of Merger by and among the Company, Dennis C. Hayes, and the Investors
(as defined therein), dated as of April 12, 1996 (as currently amended
and as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Merger Agreement"), (B) the
Warrants (as defined in the Merger Agreement), or (C) the Shareholders'
Agreement, in each case to be performed or observed by the Company and
such failure shall continue beyond any applicable grace period.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated in right of payment, to the extent and in the manner set
forth in that certain Debt Subordination Agreement among the Company, The CIT
Group/Credit Finance, Inc., and S.P. Quek Investments Ltd., dated April 16,
1996, to payment in full of the Superior Debt (as defined therein).
4.1. Subrogation. Notwithstanding the subordination provided for
in the foregoing provisions of this Section 4, the Holder's right to receive
shares of Series A Preferred Stock of the Company ("Series A Preferred Stock")
(and any cash in lieu of fractional shares) upon conversion of this Note shall
be the Holder's sole remedy following the occurrence of an Event of Default and
neither such right of conversion nor any shares issuable or issued upon exercise
of such right by the Holder shall be exercisable by or payable to or receivable
by the holder of any Senior Indebtedness.
4.2. Undertaking. By its acceptance of this Note, the Holder
agrees to execute and deliver such documents as may reasonably be requested from
time to time by the Company
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<PAGE> 4
on its own behalf or on behalf of the holder of any Senior Indebtedness to give
effect to the foregoing provisions of this Section 4.
5. Prepayment. This Note may be prepaid in whole or in part,
without penalty, at any time prior to its conversion in accordance with Section
6 hereof.
6. Conversion.
6.1. Automatic Conversion. At the close of business on the
Maturity Date the entire unpaid principal amount of this Note and any accrued
and unpaid interest thereon shall be automatically converted into shares of
Series A Preferred Stock. The conversion shall be effected in accordance with
the formula attached hereto as Annex 1.
6.2. Conversion Procedure.
6.2.1. Notice of Conversion Pursuant to Section 6.1. If this
Note is automatically converted, written notice in the form
attached hereto as Annex 2 shall be delivered to the Holder of this
Note at the address last shown on the records of the Company for
the Holder or given by the Holder to the Company for the purpose of
notice or, if no such address appears or has been given, at the
place where the principal executive office or residence of the
Holder is located, notifying the Holder of the conversion to be
effected, specifying the principal amount of this Note to be
converted and the date on which such conversion will occur (or has
occurred), and calling upon the Holder to surrender to the Company,
in the manner and at the place designated, this Note. As promptly
as practicable after the automatic conversion of this Note, the
Company at its expense will issue and deliver to the Holder of this
Note a certificate or certificates for the number of full shares of
Series A Preferred Stock issuable upon such conversion.
6.2.2. Mechanics and Effect of Conversion. No fractional
shares of Series A Preferred Stock shall be issued upon conversion
of this Note. In lieu of the Company issuing any fractional shares
to the Holder upon the conversion of this Note, the Company shall
pay to the Holder the amount of outstanding principal that is not
so converted, such payment to be in the form of a check payable to
the Holder. Upon conversion of this Note and payment of any cash in
lieu of fractional shares, the Company shall be forever released
from all its obligations and liabilities under this Note.
6.3. No Impairment. The Company will not avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all the provisions of this Section 6 and in taking all such action as may be
necessary or appropriate in order to protect the conversion rights of the Holder
of this Note against impairment.
-4-
<PAGE> 5
7. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Series A Preferred Stock solely for the purpose of effecting the conversion
of this Note such number of shares of Series A Preferred Stock (and shares of
Common Stock of the Company ("Common Stock") for issuance on conversion of such
Series A Preferred Stock) as shall from time to time be sufficient to effect the
conversion of this Note; and if at any time the number of authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the Holder,
the Company will use all reasonable efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) to the number of shares
that is sufficient for such purposes.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The rights and obligations of the
Company under this Note may not be assigned by the Company without the prior
written consent of the Holder.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written consent of the Company and the Holder;
PROVIDED, HOWEVER, that the Company hereby waives (i) presentment for payment,
protest and demand, notice of protest, demand and dishonor and nonpayment of
this Note and (ii) the defense of the statute of limitations in any action on
this Note to the extent permitted by law.
10. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the provisions of Section 7 of the
Shareholders' Agreement shall apply, mutatis mutandis, to the same extent as if
this Note and such securities were "Stock" (as defined in the Shareholders'
Agreement). Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. All notices, requests and other communications that any
party is required or elects to give hereunder shall be in writing and shall be
deemed to have been given (a) upon personal delivery thereof, including by
appropriate courier service, five (5) days after delivery
-5-
<PAGE> 6
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the Company at the address set forth
below, to the Holder at the address set forth on the signature page of this
Note, or to either of them at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 12:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
14. Expenses. The Company will pay all costs and expenses incurred by
the Holder in connection with any amendments, waivers or consents (including any
amendment, waiver or consent that is requested but does not become effective) or
the enforcement by the Holder of its rights under or in respect of this Note.
Such costs and expenses include, but are not limited to:
(a) the reasonable fees, expenses and disbursements of any special
counsel or reasonably required local counsel in connection with any
amendments, waivers or consents of this Note and all out-of-pocket
expenses incurred by the Holder in connection with any such amendments
or waivers;
(b) all costs and expenses, including attorneys' fees, incurred in
enforcing (or determining whether or how to enforce) any rights under
this Note or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Note, or
by reason of being a Holder of this Note; and
(c) all costs and expenses, including attorneys' fees and financial
advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any subsidiary or in connection with any
work-out or restructuring with respect to the Company or any
subsidiary.
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<PAGE> 7
The Company will pay, and will save the Holder harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by the Holder).
15. No Setoff. This Note shall not be subject to any right of setoff,
recoupment, counterclaim or otherwise in respect of any claims by the Company
against the Holder.
16. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Georgia, excluding that body of law
relating to conflict of laws.
17. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Note to be issued this 16th day
of April, 1996.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
-------------------------------------
Name: Dennis C. Hayes
Title: Chairman
Name of Holder: S.P. QUEK INVESTMENTS LTD.
Address: c/o Acma Limited
17 Jurong Port Road
Singapore 619092
Wire instructions:
-8-
<PAGE> 9
ANNEX 1
Conversion Formula
<TABLE>
<CAPTION>
<S> <C> <C>
Total Shares = Other Shares x Holders' %age ownership PLUS Change
-----------------------------------
Others' %age ownership MINUS Change
New Shares = (Total Shares - Existing Shares) x Loan %age
where:
Total Shares = Total number of shares outstanding and held by Holders of Convertible Subordinated Promissory
Notes entitled to conversion in respect of the Shareholder Loan of which this Note evidences a
part, as determined immediately after conversion
Other = Aggregate number of shares of Stock (Common and Preferred)
Shares owned or controlled by all shareholders that are not Holders of Convertible Subordinated
Promissory Notes entitled to conversion in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to conversion
Holders' = Aggregate ownership of Stock of the Company, expressed as a percentage, by Holders of
%age Convertible Subordinated Promissory Notes entitled to conversion in respect of the Shareholder
ownership Loan of which this Note evidences a part, as determined immediately prior to conversion
Others' %age = 100% MINUS Holders' %age ownership
ownership
Change = The percentage obtained by (1) dividing the aggregate principal amount of the Shareholder Loan
that is subject to conversion (and of which this Note evidences a part) by $1,000,000, and (2)
multiplying the result by 1.4.
New Shares = The number of shares of Series A Preferred Stock issuable to the Holder of this Note upon
conversion of such Holder's ratable share of the aggregate Shareholder Loan amount converted
(and used to determine "Change")
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C> <C>
Existing = The aggregate number of shares of Stock
Shares (Common and Preferred) owned by all Holders
of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the
Shareholder Loan of which this Note
evidences a part, as determined immediately
prior to conversion
Loan %age = The result, expressed as a percentage,
obtained by dividing the principal amount
of this Note entitled to conversion by the
aggregate amount of the Shareholder Loan
entitled to conversion as part of the same
conversion event
</TABLE>
By way of example, if the number of Existing Shares owned by all Holders of
Convertible Subordinated Promissory Notes is 4,900,000 and the Other Shares
owned or controlled by all Shareholders that are not Holders of Convertible
Subordinated Promissory Notes is 5,100,000, and if the aggregate principal
amount of the Shareholder Loan that is subject to conversion is $13,000,000:
then Total Shares = 5,100,000 x (49.0 + 18.2) / (51.0 - 18.2)
= 5,100,000 x 67.2 / 32.8
= 10,448,780 shares
After such conversion, Total shares outstanding and held by Holders of
Convertible Subordinated Promissory Notes, as determined immediately after
conversion, would represent
10,448,780 / (10,448,780 + 5,100,000) = 0.672 or 67.2% of all
outstanding shares in the corporation.
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<PAGE> 11
ANNEX 2
TO HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned, the Holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Series A Preferred Stock of HAYES
MICROCOMPUTER PRODUCTS, INC., to the extent of $________________ unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to,
____________________________________________________, whose address is:
_________________________________________________________, and who is a
"Permitted Transferee" under and as defined in the Shareholders' Agreement.
Dated:
-------------------------------
---------------------------------------------------
(Signature must conform in all respects to the name
of Holder as specified on the face of the Note)
---------------------------------------------------
---------------------------------------------------
(Address)
-11-
<PAGE> 1
EXHIBIT 10.36
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBORDINATED AS SET FORTH IN PARAGRAPH 4 HEREIN
HAYES MICROCOMPUTER PRODUCTS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
(ONE-YEAR)
US $300,000 Atlanta, Georgia
April 16, 1996
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (the
"Company"), having its principal office located at 5835 Peachtree Corners East,
Norcross, Georgia, for value received hereby promises to pay to SALIENDRA PTE.
LTD., (the "Holder"), the sum of THREE HUNDRED THOUSAND US Dollars (US
$300,000), in lawful currency of the United States of America, on the earlier to
occur of (i) April 15, 1997 or if such day is not a business day, on the next
succeeding business day, or (ii) when the unpaid principal amount of this Note
is declared due and payable by the Holder upon the occurrence of an Event of
Default (as hereinafter defined) (such earlier date, the "Maturity Date").
This Note is a "Convertible Subordinated Promissory Note" referred to
in and issued in connection with a loan transaction contemplated by Section 10.5
of the Hayes Microcomputer Products, Inc. Shareholders' Agreement dated as of
April 16, 1996 (as amended, modified or supplemented in accordance with the
terms thereof and in effect from time to time, the "Shareholders' Agreement"),
by and among the Company, the Holder, Dennis C. Hayes and the other
Shareholders, as defined therein. In addition to the terms hereof, this Note and
the Holder are subject to certain restrictions, and entitled to certain rights
and privileges, as set forth in the Merger Agreement (as hereinafter defined)
and the Shareholders' Agreement. The principal amount of this Note, together
with the principal amount of one or more other Convertible Subordinated
Promissory Notes, dated the date hereof and substantially identical to this Note
but for the name of the payee, constitute a "Shareholder Loan."
<PAGE> 2
Notwithstanding any provisions hereof to the contrary, no payment of
principal hereof shall be made unless and except to the extent that repayment of
principal is also made by the Company in respect of each outstanding Convertible
Subordinated Promissory Note evidencing a portion of the same Shareholder Loan
that is evidenced by this Note, ratably according to the respective original
principal amounts hereof and thereof. Payment of all amounts due under this Note
shall be made by wire transfer to the Holder pursuant to the instructions set
forth below or to such other account maintained with a United States bank as the
Holder may specify to the Company in writing from time to time, referring to
this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder, by
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms have the
following meanings:
(i) "Company" means Hayes Microcomputer Products, Inc., a
Georgia corporation ("New Hayes"), the surviving corporation of the
merger of Financial Sub with and into Hayes Microcomputer Products,
Inc., a Georgia corporation, and any corporation which shall succeed to
or assume the obligations of New Hayes under this Note.
(ii) "Holder" means any person who shall at the time be the
registered holder of this Note; SALIENDRA PTE. LTD. is the initial
Holder.
2. Interest. Interest shall accrue on the principal amount of this Note
outstanding from time to time and shall be payable on the Maturity Date and upon
repayment or conversion, at a rate per annum equal to 1-5/8% above the interest
rate announced from time to time by Chemical Bank at its principal office in New
York, New York as its "base rate," each change in such rate to be effective with
each change in such "base rate."
3. Events of Default. If any of the events specified in this Section 3
shall occur (each an "Event of Default") and be continuing, the Holder may, by
written notice to the Company given on a business day, declare the entire
principal hereof to be immediately due and payable and upon such declaration,
the same shall be due and payable:
(i) The Company or any subsidiary shall (A) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, (C)
consent to or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such bankruptcy
or other laws, (D) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its property, domestic or foreign, (E)
admit in writing its inability to
-2-
<PAGE> 3
pay its debts as they become due, (F) make a general assignment for the
benefit of creditors, or (F) take any corporate action for the purpose
of authorizing any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Company or any of its subsidiaries in any court of competent
jurisdiction seeking (A) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any of its
subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of the Company or any of its subsidiaries, and such case or
proceeding shall continue undismissed or unstayed for a period of sixty
(60) consecutive days, or any order granting the relief requested in
such case or proceeding against the Company or any of its subsidiaries
shall be entered; or
(iii) Any default or "event of default" shall occur under any
Senior Indebtedness (as hereinafter defined) that gives the holder
thereof the right to accelerate, and such holder shall have
accelerated, the obligations of the Company thereunder; or
(iv) The Company shall fail to perform or observe any material
term of (A) the Hayes Microcomputer Products, Inc. Agreement and Plan
of Merger by and among the Company, Dennis C. Hayes, and the Investors
(as defined therein), dated as of April 12, 1996 (as currently amended
and as the same may be amended, modified or supplemented from time to
time in accordance with its terms, the "Merger Agreement"), (B) the
Warrants (as defined in the Merger Agreement), or (C) the Shareholders'
Agreement, in each case to be performed or observed by the Company and
such failure shall continue beyond any applicable grace period.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated in right of payment, to the extent and in the manner set
forth in that certain Debt Subordination Agreement among the Company, The CIT
Group/Credit Finance, Inc., and Saliendra Pte. Ltd., dated April 16, 1996, to
payment in full of the Superior Debt (as defined therein).
4.1. Subrogation. Notwithstanding the subordination provided
for in the foregoing provisions of this Section 4, the Holder's right to receive
shares of Series A Preferred Stock of the Company ("Series A Preferred Stock")
(and any cash in lieu of fractional shares) upon conversion of this Note shall
be the Holder's sole remedy following the occurrence of an Event of Default and
neither such right of conversion nor any shares issuable or issued upon exercise
of such right by the Holder shall be exercisable by or payable to or receivable
by the holder of any Senior Indebtedness.
4.2. Undertaking. By its acceptance of this Note, the Holder
agrees to execute and deliver such documents as may reasonably be requested from
time to time by the Company
-3-
<PAGE> 4
on its own behalf or on behalf of the holder of any Senior Indebtedness to give
effect to the foregoing provisions of this Section 4.
5. Prepayment. This Note may be prepaid in whole or in part, without
penalty, at any time prior to its conversion in accordance with Section 6
hereof.
6. Conversion.
6.1. Automatic Conversion. At the close of business on the
Maturity Date the entire unpaid principal amount of this Note and any accrued
and unpaid interest thereon shall be automatically converted into shares of
Series A Preferred Stock. The conversion shall be effected in accordance with
the formula attached hereto as Annex 1.
6.2. Conversion Procedure.
6.2.1. Notice of Conversion Pursuant to Section 6.1. If
this Note is automatically converted, written notice in the form
attached hereto as Annex 2 shall be delivered to the Holder of this
Note at the address last shown on the records of the Company for the
Holder or given by the Holder to the Company for the purpose of
notice or, if no such address appears or has been given, at the
place where the principal executive office or residence of the
Holder is located, notifying the Holder of the conversion to be
effected, specifying the principal amount of this Note to be
converted and the date on which such conversion will occur (or has
occurred), and calling upon the Holder to surrender to the Company,
in the manner and at the place designated, this Note. As promptly as
practicable after the automatic conversion of this Note, the Company
at its expense will issue and deliver to the Holder of this Note a
certificate or certificates for the number of full shares of Series
A Preferred Stock issuable upon such conversion.
6.2.2. Mechanics and Effect of Conversion. No fractional
shares of Series A Preferred Stock shall be issued upon conversion
of this Note. In lieu of the Company issuing any fractional shares
to the Holder upon the conversion of this Note, the Company shall
pay to the Holder the amount of outstanding principal that is not so
converted, such payment to be in the form of a check payable to the
Holder. Upon conversion of this Note and payment of any cash in lieu
of fractional shares, the Company shall be forever released from all
its obligations and liabilities under this Note.
6.3. No Impairment. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all the provisions of this Section 6 and in taking all such action as may be
necessary or appropriate in order to protect the conversion rights of the Holder
of this Note against impairment.
-4-
<PAGE> 5
7. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Series A Preferred Stock solely for the purpose of effecting the conversion
of this Note such number of shares of Series A Preferred Stock (and shares of
Common Stock of the Company ("Common Stock") for issuance on conversion of such
Series A Preferred Stock) as shall from time to time be sufficient to effect the
conversion of this Note; and if at any time the number of authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the Holder,
the Company will use all reasonable efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Series A Preferred Stock (and shares of Common Stock for
issuance on conversion of such Series A Preferred Stock) to the number of shares
that is sufficient for such purposes.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The rights and obligations of the
Company under this Note may not be assigned by the Company without the prior
written consent of the Holder.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified only upon the written consent of the Company and the Holder;
PROVIDED, HOWEVER, that the Company hereby waives (i) presentment for payment,
protest and demand, notice of protest, demand and dishonor and nonpayment of
this Note and (ii) the defense of the statute of limitations in any action on
this Note to the extent permitted by law.
10. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the provisions of Section 7 of the
Shareholders' Agreement shall apply, mutatis mutandis, to the same extent as if
this Note and such securities were "Stock" (as defined in the Shareholders'
Agreement). Each Note thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
12. Notices. All notices, requests and other communications that any
party is required or elects to give hereunder shall be in writing and shall be
deemed to have been given (a) upon personal delivery thereof, including by
appropriate courier service, five (5) days after delivery
-5-
<PAGE> 6
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the Company at the address set forth
below, to the Holder at the address set forth on the signature page of this
Note, or to either of them at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 12:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes
Telecopy: (770) 840-6830
with a required copy to:
G. Donald Johnson
Parker, Johnson, Cook & Dunlevie
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Telecopy: (404) 888-7490
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company.
14. Expenses. The Company will pay all costs and expenses incurred by
the Holder in connection with any amendments, waivers or consents (including any
amendment, waiver or consent that is requested but does not become effective) or
the enforcement by the Holder of its rights under or in respect of this Note.
Such costs and expenses include, but are not limited to:
(a) the reasonable fees, expenses and disbursements of any
special counsel or reasonably required local counsel in connection with
any amendments, waivers or consents of this Note and all out-of-pocket
expenses incurred by the Holder in connection with any such amendments
or waivers;
(b) all costs and expenses, including attorneys' fees,
incurred in enforcing (or determining whether or how to enforce) any
rights under this Note or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Note, or by reason of being a Holder of this Note; and
(c) all costs and expenses, including attorneys' fees and
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any subsidiary or in connection with any
work-out or restructuring with respect to the Company or any
subsidiary.
-6-
<PAGE> 7
The Company will pay, and will save the Holder harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by the Holder).
15. No Setoff. This Note shall not be subject to any right of setoff,
recoupment, counterclaim or otherwise in respect of any claims by the Company
against the Holder.
16. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Georgia, excluding that body of law
relating to conflict of laws.
17. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Note to be issued this 16th day
of April, 1996.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
----------------------------------
Name: Dennis C. Hayes
Title: Chairman
Name of Holder: SALIENDRA PTE. LTD.
Address: c/o GK Goh Holdings Limited
50 Raffles Place
# 33-00 Shell Tower
Singapore 048623
Wire instructions:
-8-
<PAGE> 9
ANNEX 1
Conversion Formula
<TABLE>
<S> <C> <C>
Total Shares = Other Shares x Holders' %age ownership PLUS Change
------------------------------------
Others' %age ownership MINUS Change
New Shares = (Total Shares - Existing Shares) x Loan %age
where:
Total Shares = Total number of shares outstanding and held by
Holders of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as
determined immediately after conversion
Other = Aggregate number of shares of Stock (Common and
Preferred)
Shares owned or controlled by all shareholders that are not
Holders of Convertible Subordinated Promissory Notes
entitled to conversion in respect of the Shareholder
Loan of which this Note evidences a part, as
determined immediately prior to conversion
Holders' = Aggregate ownership of Stock of the Company,
%age expressed as a percentage, by Holders of Convertible
ownership Subordinated Promissory Notes entitled to conversion
in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to
conversion
Others' %age = 100% MINUS Holders' %age ownership
ownership
Change = The percentage obtained by (1) dividing the
aggregate principal amount of the Shareholder Loan
that is subject to conversion (and of which this
Note evidences a part) by $1,000,000, and (2)
multiplying the result by 1.4.
New Shares = The number of shares of Series A Preferred Stock
issuable to the Holder of this Note upon conversion
of such Holder's ratable share of the aggregate
Shareholder Loan amount converted (and used to
determine "Change")
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C> <C>
Existing = The aggregate number of shares of Stock (Common and
Shares Preferred) owned by all Holders of Convertible
Subordinated Promissory Notes entitled to conversion
in respect of the Shareholder Loan of which this Note
evidences a part, as determined immediately prior to
conversion
Loan %age = The result, expressed as a percentage, obtained by
dividing the principal amount of this Note entitled
to conversion by the aggregate amount of the
Shareholder Loan entitled to conversion as part of
the same conversion event
</TABLE>
By way of example, if the number of Existing Shares owned by all Holders of
Convertible Subordinated Promissory Notes is 4,900,000 and the Other Shares
owned or controlled by all Shareholders that are not Holders of Convertible
Subordinated Promissory Notes is 5,100,000, and if the aggregate principal
amount of the Shareholder Loan that is subject to conversion is $13,000,000:
then Total Shares = 5,100,000 x (49.0 + 18.2) / (51.0 - 18.2)
= 5,100,000 x 67.2 / 32.8
= 10,448,780 shares
After such conversion, Total shares outstanding and held by Holders of
Convertible Subordinated Promissory Notes, as determined immediately after
conversion, would represent
10,448,780 / (10,448,780 + 5,100,000) = 0.672 or 67.2% of all
outstanding shares in the corporation.
-10-
<PAGE> 11
ANNEX 2
TO HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned, the Holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Series A Preferred Stock of HAYES
MICROCOMPUTER PRODUCTS, INC., to the extent of $________________ unpaid
principal amount of such Note, and requests that the certificates for such
shares be issued in the name of, and delivered to, _________________________,
whose address is: ______________________________________, and who is a
"Permitted Transferee" under and as defined in the Shareholders' Agreement.
Dated:___________________________________
---------------------------------------------------
(Signature must conform in all respects to the name
of Holder as specified on the face of the Note)
---------------------------------------------------
---------------------------------------------------
(Address)
-11-
<PAGE> 1
EXHIBIT 10.37
HAYES MICROCOMPUTER PRODUCTS, INC.
BOARD INCENTIVE WARRANT PLAN
1. PURPOSE. The purpose of this HAYES MICROCOMPUTER
PRODUCTS, INC. BOARD INCENTIVE WARRANT PLAN (the "Plan") is to advance the
interests of HAYES MICROCOMPUTER PRODUCTS, Inc., a Georgia corporation (the
"Company"), by strengthening the ability of the Company to attract qualified
directors by providing them with an opportunity to receive warrants to purchase
common stock of the Company and thereby permitting them to share in the
Company's success (the "Board Warrants"). Capitalized terms used but not defined
herein shall have the meanings assigned to them in that certain Agreement and
Plan of Merger with Financial Sub, Inc. and certain Investors presented to the
Board herewith (the "Agreement").
2. EFFECTIVE DATE. This Plan was adopted by the Board of
Directors of the Company (the "Board") on April 11, 1996 and is effective upon
the Effective Time of the Merger.
3. STOCK COVERED BY THE PLAN. The shares of common stock
that may be made subject to Board Warrants (as defined in the Investors
Shareholders' Agreement) under this Plan ("Shares") shall equal an aggregate of
six percent (6%) of the common stock, $.01 par value, of the Company ("Common
Stock") issued and outstanding as of the Effective Time of the Merger on a fully
diluted basis (but without giving effect to the Board Warrants or the options
provided for pursuant to Section 10.4 of the Investors Shareholders' Agreement)
(the "Maximum Amount"). The Shares purchased pursuant to Board Warrants under
this Plan shall be authorized but unissued Shares.
4. ADMINISTRATION. This Plan shall be administered by the
Board, whose construction and interpretation of the Plan's terms and provisions
shall be final and conclusive. The Board shall have authority, subject to the
express provisions of the Plan, to construe the Plan, any Board Warrant
agreement and any related agreements, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of a
Board Warrant agreement and related agreements, and to make all other
determinations in the judgment of the Board necessary or desirable for the
administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan, in any Board Warrant
agreement, or in any related agreement in the manner and to the extent it shall
deem expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency. No director shall be liable for any action or
determination made in good faith.
5. ELIGIBLE RECIPIENTS. Board Warrants shall be issued by
the Secretary of the Company acting on behalf of the Company to members of the
Board of Directors of the Company on the date of the first meeting of the Board
following the Merger without the need
<PAGE> 2
for any further action on the part of the Board and shall be granted equally to
the Board members (considered as a unit) appointed by (a) the Principal
Shareholder and (b) Rinzai in any proportion with respect to the directors
appointed by such shareholders that the Secretary is instructed to issue the
Board Warrants by such shareholders, respectively; provided, however, that in
each case the Board Warrants issued to each such unit shall be exercisable in
respect of an aggregate of 200,000 shares of Common Stock. Additional Board
Warrants may be issued from time to time to members of the Board as determined
by the Board; provided, however, that the total amount of Board Warrants issued
shall not exceed the Maximum Amount.
6. DURATION OF THE PLAN. This Plan shall terminate ten (10)
years from the effective date hereof, unless terminated earlier pursuant to
Section 3 hereafter, and no Board Warrants may be granted or made thereafter.
7. TERMS AND CONDITIONS OF BOARD WARRANTS. Board Warrants
granted under this Plan shall be evidenced by a Board Warrant, a form of which
is attached hereto as Exhibit "A", the terms and conditions of which are hereby
incorporated herein by this reference.
8. TERMINATION OR AMENDMENT OF PLAN. The Board may at any
time terminate the Plan or make such changes in or additions to the Plan as it
deems advisable without further action on the part of the shareholders of the
Company, provided that no such termination or amendment shall adversely affect
or impair any then outstanding Board Warrant without the consent of the holder
thereof.
2
<PAGE> 1
EXHIBIT 10.38
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED IN SECTION 14 HEREOF. NEITHER THE RIGHTS
REPRESENTED BY THIS WARRANT NOR THE SHARES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 14 HEREOF.
No. 1
HAYES MICROCOMPUTER PRODUCTS, INC.
WARRANT TO PURCHASE COMMON STOCK
Hayes Microcomputer Products, Inc., a Georgia corporation (the
"Company"), hereby certifies that in consideration of cash payment of US $5.00,
CHIANG LAM, the registered holder hereof, or its permitted registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company upon surrender of this Warrant, at any time or times on or after the
Exercise Date hereof but not after 5:00 P.M., Atlanta, Georgia time, on the
Expiration Date (as defined herein), up to 200,000 fully paid nonassessable
shares, as adjusted pursuant to this Warrant (the "Warrant Shares"), of Common
Stock (as defined herein) of the Company by payment of the applicable aggregate
Warrant Exercise Price (as defined herein) in lawful money of the United States.
1. Definitions. The following words and terms as used in this Warrant
shall have the following meanings:
(a) "Common Stock" means (i) the Company's common stock and (ii)
any capital stock into which such "Common Stock" shall have been changed or any
capital stock resulting from a reclassification of such "Common Stock."
(b) "Convertible Securities" means any securities issued by the
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
(c) "Exercise Date" means the earlier to occur of (i) the date on
which the Company files a registration statement on Form S-1 (or any similar
form) with the Securities and Exchange Commission in connection with a proposed
Initial Public Offering, or (ii) the date of the closing of a Significant
Transaction.
(d) "Expiration Date" means the date five (5) years after the
Exercise Date.
<PAGE> 2
(e) "Initial Public Offering" means the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of the Company's
Common Stock.
(f) "Market Price" means the fair market value of one share
determined as follows: (i) where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share shall
be the average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the last reported sale price of the
Common Stock or the closing price quoted on the NASDAQ National Market System or
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in The Wall Street Journal for the five (5) trading days (or such
fewer number of trading days as the Company's Common Stock may have been
publicly traded) ending on the trading day prior to the date of determination of
fair market value and (ii) if at any time the Common Stock is not listed on any
domestic exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the higher of (A) the book value thereof, as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors, as at the last day as of which such determination shall
have been made, or (B) the fair value thereof determined in good faith by the
Board of Directors as of the date which is within 15 days of the date as of
which the determination is to be made (in determining the fair value thereof,
the Board of Directors shall consider stock market valuations and price to
earnings ratios of comparable companies in similar industries). Notwithstanding
the foregoing, in the event the Warrant is exercised in connection with the
Initial Public Offering, the fair market value per share shall be the per share
price at which registered shares are sold to the public in the Initial Public
Offering. If the holder shall purchase such shares in conjunction with the
closing of any Significant Transaction, then the fair market value per share
shall mean the value received by the holders of the Company's Common Stock
pursuant to such Significant Transaction for each share of Common Stock, subject
to the closing of such Significant Transaction.
(g) "Securities Act" means the Securities Act of 1933, as amended.
(h) "Significant Transaction" means the closing of a merger,
consolidation or reorganization of the Company with or into any other
corporation or corporations in which the Company is not the surviving entity
(other than a mere reincorporation transaction), a sale of all or substantially
all of the assets of the Company or a transaction or series of related
transactions in which the Company issues shares representing more than 50% of
the voting power of the Company, immediately after giving effect to such
transaction, to a person or persons who were not Shareholders (as defined in the
Shareholders' Agreement) immediately prior to such transaction.
(i) "Warrant Exercise Price" shall initially be US$0.714 per share
and shall be adjusted and readjusted from time to time as provided in this
Warrant.
(j) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein (A) to any person other than the Company, shall be deemed to
include such person's successors and
-2-
<PAGE> 3
permitted assigns, (B) to the Company shall be deemed to include the
Company's successors and (C) to any applicable law defined or referred
to herein, shall be deemed references to such applicable law as the
same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the
words "Section," "Schedule," and "Exhibit" shall refer to Sections of,
and Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes
the plural, and vice versa.
(iv) Any capitalized term not otherwise defined in this
Warrant shall have the meaning ascribed to such term in that certain
Shareholders' Agreement dated as of April 16, 1996 (the "Shareholders'
Agreement"), by and among the Company, Dennis C. Hayes and the
Shareholders.
2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised in whole or in part, at any time during normal business hours
on or after the Exercise Date and prior to 5:00 p.m., Atlanta, Georgia time, on
the Expiration Date. The rights represented by this Warrant may be exercised by
the holder hereof then registered on the books of the Company, in whole or from
time to time in part (except that this Warrant shall not be exercisable as to a
fractional share), by (i) delivery of a written notice, in the form of the
Subscription Notice attached as Exhibit A hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in
cash, by wire transfer or by certified or official bank check, for the number of
Warrant Shares as to which this Warrant shall have been exercised, and (iii) the
surrender of this Warrant, properly endorsed, at the principal office of the
Company in Atlanta, Georgia (or at such other agency or office of the Company as
the Company may designate by notice to the Holder); provided, that if such
Warrant Shares are to be issued in any name other than that of the Holder, such
issuance shall be deemed a transfer and the provisions of Section 14 shall be
applicable. In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Shares so purchased,
registered in the name of, or as directed by, the Holder, shall be delivered to,
or as directed by the Holder within a reasonable time, not exceeding 15 days (if
the Company's Common Stock is not then publicly traded) or five (5) business
days (if the Company's Common Stock is then publicly traded), after such rights
shall have been so exercised.
(b) Unless the rights represented by this Warrant shall have
expired or have been fully exercised, the Company shall issue, within such 15
day or 5 business day period, as applicable,
-3-
<PAGE> 4
a new Warrant identical in all respects to the Warrant exercised except (x) such
new Warrant shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under the warrant exercised, less
the number of Warrant Shares with respect to which such original Warrant was
exercised, and (y) the Warrant Exercise Price thereof shall be the Warrant
Exercise Price of the Warrant exercised. The person in whose name any
certificate for Warrant Shares is issued upon exercise of this Warrant shall for
all purposes be deemed to have become the holder of record of such Warrant
Shares immediately prior to the close of business on the date on which the
Warrant was surrendered and payment of the amount due in respect of such
exercise and any applicable taxes was made, irrespective of the date of delivery
of such share certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the stock
transfer books are open.
(c) In lieu of the Holder exercising this Warrant (or any
portion hereof) for cash, it may, in connection with such exercise, elect to
satisfy the Warrant Exercise Price by exchanging solely (x) this Warrant (or
such portion hereof) for (y) that number of Warrant Shares equal to the product
of (i) the number of shares of Common Stock issuable upon such exercise of the
Warrant (or, if only a portion of this Warrant is being exercised, issuable upon
the exercise of such portion) for cash multiplied by (ii) a fraction, (A) the
numerator of which is the Market Price per share of the Common Stock at the time
of such exercise minus the Warrant Exercise Price per share of the Common Stock
at the time of such exercise, and (B) the denominator of which is the Market
Price per share of the Common Stock at the time of such exercise, such number of
shares so issuable upon such exercise to be rounded up or down to the nearest
whole number of Warrant Shares.
3. Covenants as to Common Stock.
(a) The Company covenants and agrees that all Warrant Shares
which may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable. The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of the rights then represented by this Warrant and
that the par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price.
(b) If any shares of Common Stock reserved or to be reserved
to provide for the exercise of the rights then represented by this Warrant
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued to the Holder,
then the Company covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
-4-
<PAGE> 5
4. Adjustment of Warrant Exercise Price Upon Stock Splits,
Dividends, Distributions and Combinations; and Adjustment of Number of Shares.
(a) In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares or issue a
stock dividend (including any distribution of stock without consideration) or
make a distribution with respect to outstanding shares of Common Stock or
convertible securities payable in Common Stock or in convertible securities, the
Warrant Exercise Price in effect immediately prior to such subdivision or stock
dividend or distribution shall be proportionately reduced and conversely, in
case the outstanding shares of Common Stock of the Company shall be combined
into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately increased in each
case by multiplying the then effective Warrant Exercise Price by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such subdivision, stock dividend, distribution
or combination (determined on a fully diluted basis), and the denominator of
which shall be the total number of shares of Common Stock, immediately after
such subdivision, stock dividend, distribution or combination (determined on a
fully diluted basis), and the product so obtained shall be thereafter the
Warrant Exercise Price.
(b) Upon each adjustment of the Warrant Exercise Price as
provided above in this Section 4, the Holder shall thereafter be entitled to
purchase, at the Warrant Exercise Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the Warrant Exercise
Price immediately after such adjustment.
5. Adjustment of Warrant Exercise Price Upon Certain Issuances
or Sales of Common Stock. Whenever the Company shall issue, sell or otherwise
distribute any shares of its Common Stock (except for the Preferred Shares
issuable upon the conversion of the Convertible Promissory Notes, options issued
to officers and employees of the Company pursuant to plans adopted by the Board
of Directors of the Company, and shares of Common Stock issuable upon the
exercise of such options, shares of Common Stock issuable upon the conversion of
the Preferred Shares or the Warrants and except as provided in Section 6 of this
Warrant) and the amount of consideration per share is less than the Warrant
Exercise Price in effect immediately prior to the time of such issuance or sale,
then, forthwith upon such issue or sale, and thereafter successively upon each
such issue, the Warrant Exercise Price shall be reduced to the amount
(calculated to the nearest one hundredth of a cent) determined by dividing (i)
an amount equal to the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Warrant Exercise Price, and (y) the consideration, if any, received by
the Company upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
Whenever the Warrant Exercise Price is adjusted under this
Section 5, the Holder shall thereafter be entitled to purchase at the new
Warrant Exercise Price the number of shares of Common Stock obtained by
multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the new
Warrant Exercise Price.
-5-
<PAGE> 6
For the purposes of this Section 5, the following clauses (i)
to (vii), inclusive, shall also be applicable:
(i) in case at any time the Company shall in any
manner grant any rights to subscribe for, or any rights or options to
purchase, any Common Stock or any Convertible Securities, whether or
not such rights or options or the rights to convert or exchange any
such Convertible Securities are immediately exercisable, and the
purchase price per share for which Common Stock is issuable upon the
exercise of such rights or options or upon conversion or exchange of
such Convertible Securities (determined by dividing (x) the total
amount, if any, received or receivable by the Company as consideration
for the granting of all such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company
upon the exercise of all such rights or options, plus, in the case of
such Convertible Securities, if any, payable upon, the conversion or
exchange thereof, by (y) the maximum aggregate number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less
than or the Warrant Exercise Price in effect immediately prior to the
time of the granting of such rights or options, then the maximum
aggregate number of shares of Common Stock issuable upon the exercise
of such rights or options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of granting of
such rights or options) be deemed to be outstanding and to have been
issued for such price per share. No further adjustments of the Warrant
Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, except as
otherwise provided in clause (iii) below;
(ii) in case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable,
and the purchase price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (x) the total
amount received or receivable by the Company as consideration for the
issue or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (y) the maximum
aggregate number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Warrant Exercise Price in effect immediately prior to the time of such
issue or sale, then the maximum aggregate number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed outstanding and to have been issued
for such price per share, provided that, except as otherwise specified
in clause (iii) below, (a) no further adjustments of the Warrant
Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (b) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or upon exercise
of any option to purchase any such Convertible Securities for which
adjustments of the Warrant Exercise Price have been or are to be made
pursuant to other
-6-
<PAGE> 7
provisions of this Section 5, no further adjustment of the Warrant
Exercise Price shall be made by reason of such issue or sale;
(iii) if the purchase price or number of shares
purchasable provided for in any right or option referred to in clause
(i) above, or the rate at which any Convertible Securities referred to
in clause (i) or (ii) above are convertible into or exchangeable for
Common Stock, shall change at any time (other than under or by reason
of provisions designed to protect against dilution for which provision
for adjustments in the Warrant Exercise Price are provided for under
this Warrant), the Warrant Exercise Price then in effect hereunder
shall forthwith be readjusted to such Warrant Exercise price as would
have obtained had the adjustments made upon the issuance of such
rights, options or Convertible Securities been made upon the basis of
the changed terms; and on the expiration of any such option or right
referred to in clause (i) above or the termination of any such right to
convert or exchange such Convertible Securities referred to in clause
(i) or (ii) above, the Warrant Exercise Price then in effect hereunder
shall forthwith be readjusted to such Warrant Exercise Price as would
have obtained had the adjustments made upon the issuance of such rights
or options or Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock, if any,
theretofore actually delivered upon the exercise of such rights or
options or upon the conversion or exchange of such Convertible
Securities;
(iv) in case the Company shall distribute to all
holders of its Common Stock evidences of its indebtedness or assets,
then in each such case the Warrant Exercise Price in effect immediately
prior to such distribution shall be adjusted so that the same shall
equal the price determined by multiplying the Warrant Exercise Price in
effect immediately prior to the date of such distribution by a fraction
whose numerator shall be (i) the Market Price per share of Common Stock
immediately prior to the effective date of distribution multiplied by
the total number of shares of Common Stock outstanding immediately
prior to such effective date less (ii) the then fair market value (as
reasonably determined by the Board of Directors) of the assets or
evidences of indebtedness so distributed and whose denominator shall be
such Market Price per share of the Common Stock multiplied by the total
number of shares of Common Stock outstanding immediately prior to such
effective date. Such adjustment shall be made whenever any such
distribution is made and shall be retroactively effective as of
immediately after the record date for the determination of stockholders
entitled to receive such distribution;
(v) the consideration received for any shares of
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities issued or sold
shall be deemed to be the amount received therefor, before deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed in connection therewith; in case any shares
of Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash (including any non-cash consideration
received in
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<PAGE> 8
respect of any acquisition by the Company of substantially all of the
stock or assets of another entity) received by the Company for such
shares shall be deemed to be the value of such consideration as
determined reasonably and in good faith by the Board of Directors;
(vi) in case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (x) to
receive a dividend or other distribution, or (y) to receive rights or
options to subscribe for Common Stock or Convertible Securities, then
such record date shall be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right or option of subscription or
purchase; and
(vii) the number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company; but the disposition of any shares so
owned or held shall be considered an issue or sale of Common Stock for
the purposes of this Section 5.
6. Reorganization, Reclassification, Etc. In case of any capital
reorganization, or of any reclassification of the capital stock of the Company
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a split-up or combination) or in case
of the consolidation or merger of the Company with or into any other corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in the Common Stock being changed into or
exchanged for stock or other securities or property of any other person), or of
the sale of the properties and assets of the Company as, or substantially as, an
entirety to any other corporation, this Warrant shall, after such capital
reorganization, reclassification of capital stock, consolidation, merger or
sale, entitle the Holder hereof to purchase the kind and number of shares of
stock or other securities or property of the Company or of the corporation
resulting from such consolidation or surviving such merger or to which such sale
shall be made, as the case may be, to which the holder hereof would have been
entitled if he had held the Common Stock issuable upon the exercise hereof
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger or sale, and in any such case appropriate provision
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions thereof (including without limitation
provisions for adjustment of the Warrant Exercise Price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be in relation to any shares of stock, securities,
or assets thereafter deliverable upon the exercise of the rights represented
hereby. The Company shall not effect any such consolidation, merger or sale,
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the registered holder hereof at
the address of such holder appearing on the books of the Company, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase.
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<PAGE> 9
7. Notice of Adjustment of Warrant Exercise Price. Upon any
adjustment of the Warrant Exercise Price, then the Company shall give notice
thereof to the Holder of this Warrant, which notice shall state the Warrant
Exercise Price in effect after such adjustment and the increase, or decrease, if
any, in the number of Warrant Shares purchasable at the Warrant Exercise Price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
8. Computation of Adjustments. Upon each computation of an
adjustment in the Warrant Exercise Price and the number of shares which may be
subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise
Price shall be computed to the nearest cent (i.e. fraction of .5 of a cent, or
greater, shall be rounded to the next highest cent) and the number of shares
which may be subscribed for and purchased upon exercise of this Warrant shall be
calculated to the nearest whole share (i.e. fractions of less than one half of a
share shall be disregarded and fractions of one half of a share, or greater,
shall be treated as being a whole share). No such adjustment shall be made
however, if the change in the Warrant Exercise Price would be less than $.001
per share, but any such lesser adjustment shall be made (i) at the time and
together with the next subsequent adjustment which, together with any
adjustments carried forward, shall amount to $.001 per share or more, or (ii) if
earlier, upon the third anniversary of the event for which such adjustment is
required.
9. Notice of Certain Events. In case at any time:
(a) the Company shall pay any dividend upon, or make any
distribution in respect of, its Common Stock;
(b) the Company shall propose to register any of its Common
Stock under the Securities Act in connection with a public offering of such
Common Stock (other than with respect to a registration statement filed on Form
S-8 or such other similar form then in effect under the Securities Act);
(c) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(d) there shall be any capital reorganization, or
reclassification of the capital stock, of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation; or
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in one or more of said cases,
the Company shall give notice to the registered holder of this Warrant of the
date on which (i) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall be given not less than ten (10) days prior to the record date or the date
on which the transfer books of the Company are to be closed in respect
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<PAGE> 10
thereto in the case of an action specified in clause (i) and at least ten (10)
days prior to the action in question in the case of an action specified in
clause (ii).
10. No Change in Warrant Terms on Adjustment. Irrespective of any
adjustment in the Warrant Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Warrant, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Warrant Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
11. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any transfer
involved in the issue or delivery of any certificates for Warrant Shares of
Common Stock in a name other than that of the registered holder hereof or upon
any transfer of this Warrant.
12. Warrant Holder Not Deemed a Shareholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance of record to the holder of this Warrant of the
Warrant Shares which he is then entitled to receive upon the due exercise of
this Warrant.
13. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Articles of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
14. Transfer; Opinions of Counsel; Restrictive Legends. To the
extent applicable, each certificate or other document evidencing any of the
Warrant Shares shall be endorsed with the legends set forth below, and Holder
covenants that, except to the extent such restrictions are waived by the
Company, Holder shall not transfer the Warrant Shares without complying with the
restrictions on transfer described in the legends endorsed thereon;
(a) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF
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<PAGE> 11
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Warrant Shares, the legend required by such
state authority.
(c) The Company shall not be required (i) to transfer on its
books either this Warrant or any Warrant Shares which shall have been
transferred in violation of any of the provisions set forth in this Section 14,
or (ii) to treat as owner of such Warrant Shares or to accord the right to vote
as such owner or to pay dividends to any transferee to whom such Warrant Shares
shall have been so transferred.
(d) Any legend endorsed on a certificate pursuant to
subsection (a) or (b) of this Section 14 shall be removed (i) if the Warrant
Shares represented by such certificate shall have been effectively registered
under the Securities Act or otherwise lawfully sold in a public transaction, or
(ii) if the holder of such Warrant Shares shall have provided the Company with
an opinion from counsel, in form and acceptable to the Company and from
attorneys reasonably acceptable to the Company, stating that a public sale,
transfer or assignment of the Warrant or the Warrant Shares may be made without
registration.
(e) Any legend endorsed on a certificate pursuant to
subsection (b) of this Section 14 shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal or if the
holder of the Warrant or the Warrant Shares provides the Company with an opinion
of counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that such state legend may be
removed.
(f) Without in any way limiting the representations set forth
above, Holder further agrees not to make any disposition of all or any portion
of the Warrant or the Warrant Shares unless:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (A) if requested by the Company, Holder shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Warrant or any Warrant Shares under the Securities
Act and (B) if requested by the Company, the transferee shall have
furnished to the Company its agreement to abide by the restrictions on
transfer set forth herein as if it were a purchaser hereunder.
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<PAGE> 12
(g) Notwithstanding the other provisions of this Section 14,
no such registration statement or opinion of counsel shall be required for any
transfer by a Holder, (i) if it is a partnership or a corporation, to a partner
or pro rata to its equity holder(s) of such Holder (or a third party duly
authorized to act on behalf of such Holder or its partners or equity holders),
or (ii) if he or she is an individual, to members of such individual's family
for estate planning purposes; provided, however, that the transferee agrees in
writing to be subject to the terms of this Section 14.
(h) Upon delivery of the foregoing opinion of counsel and the
surrender of this Warrant to the Company at its principal office with the
Assignment Form annexed hereto as Exhibit B duly executed and funds sufficient
to pay any transfer tax, the Company shall, in the event that it determines such
transfer is permitted by the terms of this Warrant, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be cancelled.
(i) Except as set forth in this Section 14, the Warrant and
the Warrant Shares shall be freely assignable by the Holder and its assignees.
15. Registration Rights. The Holder shall have the same
registration rights and related obligations with respect to the Warrant Shares
as those set forth in Article 9 (other than Section 9.1) of the Shareholders'
Agreement with respect to Registrable Securities (as defined therein) as if the
Holder were a party to such Shareholders' Agreement with respect only to such
Article 9.
16. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (except in the event
of loss, theft, mutilation or destruction while this Warrant is in possession of
the Company's Escrow Agent, in which events the Company shall be solely
responsible) (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as the
Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant hall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by anyone.
17. Representation of Holder. The Holder, by the acceptance
hereof, represents that it is acquiring this Warrant for its own account for
investment and not with a view to, or sale in connection with, any distribution
hereof or of any of the shares of Common Stock or other securities issuable upon
the exercise thereof, nor with any present intention of distributing any of the
same. Upon exercise of this Warrant, the Holder will confirm in writing, in form
reasonably satisfactory to the Company, such Holder's investment intent.
18. Notices. All Notices, requests and other communications that
the Holder or the Company is required or elects to give hereunder shall be in
writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed
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<PAGE> 13
to the party to be notified at the address set forth below or at such other
address as such party shall have notified the other parties hereto, by notice
given in conformity with this Section 18.
(a) If to the Company:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: President
Telecopy: (770) 840-6830
(b) If to the Holder:
Mr. Chiang Lam
620 Dundee Avenue
Milpitas, California 95035
Telecopy: (408) 262-8907
19. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
20. Date. The date of this Warrant is April 16, 1996, This
Warrant, in all events, shall be wholly void and of no effect after 5:00 p.m.,
Georgia time, on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 14 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
21. Severability. If any provision of this Warrant is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way and shall be construed in
accordance with the purposes and tenor and effect of this Warrant.
22. Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia,
without reference to its conflicts of law principles.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
------------------------------------
Name: Dennis C. Hayes
Title: Chairman
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<PAGE> 14
EXHIBIT A TO
WARRANT
SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH REGISTERED HOLDER
DESIRES TO EXERCISE THIS WARRANT
HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned hereby exercises the right to purchase Warrant
Shares covered by this Warrant according to the conditions thereof and herewith
[makes payment of $_______________, the aggregate Warrant Exercise Price of such
Warrant Shares in full] [tenders solely this Warrant, or applicable portion
hereof, in full satisfaction of the Warrant Exercise Price upon the terms and
conditions set forth herein.]
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
------------------------------------------------------------------------
HOLDER NAME:
By:
-------------------------------------
Name:
Title:
[Net] Number of Warrant Shares Being
Purchased
-------------------------------
Dated: ______________, 19__
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<PAGE> 15
EXHIBIT B TO
WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED,__________________________________________
hereby sells, assigns and transfers unto
Name___________________________________________________________________________
(Please typewrite or print in block letters)
Address________________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ____________ Attorney, to transfer the same
on the books of the Company with full power of substitution in the premises.
Date _____________________________, 19____
Signature_________________________________
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<PAGE> 1
EXHIBIT 10.39
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT AS SPECIFIED IN SECTION 14 HEREOF. NEITHER THE RIGHTS
REPRESENTED BY THIS WARRANT NOR THE SHARES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAW.
SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN
WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 14 HEREOF.
No. 2
HAYES MICROCOMPUTER PRODUCTS, INC.
WARRANT TO PURCHASE COMMON STOCK
Hayes Microcomputer Products, Inc., a Georgia corporation (the
"Company"), hereby certifies that in consideration of cash payment of US $5.00,
MINA HAYES, the registered holder hereof, or its permitted registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company upon surrender of this Warrant, at any time or times on or after the
Exercise Date hereof but not after 5:00 P.M., Atlanta, Georgia time, on the
Expiration Date (as defined herein), up to 200,000 fully paid nonassessable
shares, as adjusted pursuant to this Warrant (the "Warrant Shares"), of Common
Stock (as defined herein) of the Company by payment of the applicable aggregate
Warrant Exercise Price (as defined herein) in lawful money of the United States.
1. Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(a) "Common Stock" means (i) the Company's common stock and
(ii) any capital stock into which such "Common Stock" shall have been changed or
any capital stock resulting from a reclassification of such "Common Stock."
(b) "Convertible Securities" means any securities issued by
the Company which are convertible into or exchangeable for, directly or
indirectly, shares of Common Stock.
(c) "Exercise Date" means the earlier to occur of (i) the date
on which the Company files a registration statement on Form S-1 (or any similar
form) with the Securities and Exchange Commission in connection with a proposed
Initial Public Offering, or (ii) the date of the closing of a Significant
Transaction.
(d) "Expiration Date" means the date five (5) years after the
Exercise Date.
<PAGE> 2
(e) "Initial Public Offering" means the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of the Company's
Common Stock.
(f) "Market Price" means the fair market value of one share
determined as follows: (i) where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share shall
be the average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the last reported sale price of the
Common Stock or the closing price quoted on the NASDAQ National Market System or
on any exchange on which the Common Stock is listed, whichever is applicable, as
published in The Wall Street Journal for the five (5) trading days (or such
fewer number of trading days as the Company's Common Stock may have been
publicly traded) ending on the trading day prior to the date of determination of
fair market value and (ii) if at any time the Common Stock is not listed on any
domestic exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the higher of (A) the book value thereof, as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors, as at the last day as of which such determination shall
have been made, or (B) the fair value thereof determined in good faith by the
Board of Directors as of the date which is within 15 days of the date as of
which the determination is to be made (in determining the fair value thereof,
the Board of Directors shall consider stock market valuations and price to
earnings ratios of comparable companies in similar industries). Notwithstanding
the foregoing, in the event the Warrant is exercised in connection with the
Initial Public Offering, the fair market value per share shall be the per share
price at which registered shares are sold to the public in the Initial Public
Offering. If the holder shall purchase such shares in conjunction with the
closing of any Significant Transaction, then the fair market value per share
shall mean the value received by the holders of the Company's Common Stock
pursuant to such Significant Transaction for each share of Common Stock, subject
to the closing of such Significant Transaction.
(g) "Securities Act" means the Securities Act of 1933, as
amended.
(h) "Significant Transaction" means the closing of a merger,
consolidation or reorganization of the Company with or into any other
corporation or corporations in which the Company is not the surviving entity
(other than a mere reincorporation transaction), a sale of all or substantially
all of the assets of the Company or a transaction or series of related
transactions in which the Company issues shares representing more than 50% of
the voting power of the Company, immediately after giving effect to such
transaction, to a person or persons who were not Shareholders (as defined in the
Shareholders' Agreement) immediately prior to such transaction.
(i) "Warrant Exercise Price" shall initially be US$0.714 per
share and shall be adjusted and readjusted from time to time as provided in this
Warrant.
(j) Other Definitional Provisions.
(i) Except as otherwise specified herein, all
references herein (A) to any person other than the Company, shall be
deemed to include such person's successors and
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<PAGE> 3
permitted assigns, (B) to the Company shall be deemed to include the
Company's successors and (C) to any applicable law defined or referred
to herein, shall be deemed references to such applicable law as the
same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein,"
"hereof," and "hereunder," and words of similar import, shall refer to
this Warrant as a whole and not to any provision of this Warrant, and
the words "Section," "Schedule," and "Exhibit" shall refer to Sections
of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
(iii) Whenever the context so requires the neuter
gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
(iv) Any capitalized term not otherwise defined in this
Warrant shall have the meaning ascribed to such term in that certain
Shareholders' Agreement dated as of April 16, 1996 (the "Shareholders'
Agreement"), by and among the Company, Dennis C. Hayes and the
Shareholders.
2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised in whole or in part, at any time during normal business hours
on or after the Exercise Date and prior to 5:00 p.m., Atlanta, Georgia time, on
the Expiration Date. The rights represented by this Warrant may be exercised by
the holder hereof then registered on the books of the Company, in whole or from
time to time in part (except that this Warrant shall not be exercisable as to a
fractional share), by (i) delivery of a written notice, in the form of the
Subscription Notice attached as Exhibit A hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of Warrant Shares
to be purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in
cash, by wire transfer or by certified or official bank check, for the number of
Warrant Shares as to which this Warrant shall have been exercised, and (iii) the
surrender of this Warrant, properly endorsed, at the principal office of the
Company in Atlanta, Georgia (or at such other agency or office of the Company as
the Company may designate by notice to the Holder); provided, that if such
Warrant Shares are to be issued in any name other than that of the Holder, such
issuance shall be deemed a transfer and the provisions of Section 14 shall be
applicable. In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Shares so purchased,
registered in the name of, or as directed by, the Holder, shall be delivered to,
or as directed by the Holder within a reasonable time, not exceeding 15 days (if
the Company's Common Stock is not then publicly traded) or five (5) business
days (if the Company's Common Stock is then publicly traded), after such rights
shall have been so exercised.
(b) Unless the rights represented by this Warrant shall have
expired or have been fully exercised, the Company shall issue, within such 15
day or 5 business day period, as applicable,
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<PAGE> 4
a new Warrant identical in all respects to the Warrant exercised except (x) such
new Warrant shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under the warrant exercised, less
the number of Warrant Shares with respect to which such original Warrant was
exercised, and (y) the Warrant Exercise Price thereof shall be the Warrant
Exercise Price of the Warrant exercised. The person in whose name any
certificate for Warrant Shares is issued upon exercise of this Warrant shall for
all purposes be deemed to have become the holder of record of such Warrant
Shares immediately prior to the close of business on the date on which the
Warrant was surrendered and payment of the amount due in respect of such
exercise and any applicable taxes was made, irrespective of the date of delivery
of such share certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the stock
transfer books are open.
(c) In lieu of the Holder exercising this Warrant (or any
portion hereof) for cash, it may, in connection with such exercise, elect to
satisfy the Warrant Exercise Price by exchanging solely (x) this Warrant (or
such portion hereof) for (y) that number of Warrant Shares equal to the product
of (i) the number of shares of Common Stock issuable upon such exercise of the
Warrant (or, if only a portion of this Warrant is being exercised, issuable upon
the exercise of such portion) for cash multiplied by (ii) a fraction, (A) the
numerator of which is the Market Price per share of the Common Stock at the time
of such exercise minus the Warrant Exercise Price per share of the Common Stock
at the time of such exercise, and (B) the denominator of which is the Market
Price per share of the Common Stock at the time of such exercise, such number of
shares so issuable upon such exercise to be rounded up or down to the nearest
whole number of Warrant Shares.
3. Covenants as to Common Stock.
(a) The Company covenants and agrees that all Warrant Shares
which may be issued upon the exercise of the rights represented by this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable. The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of the rights then represented by this Warrant and
that the par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price.
(b) If any shares of Common Stock reserved or to be reserved
to provide for the exercise of the rights then represented by this Warrant
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued to the Holder,
then the Company covenants that it will in good faith and as expeditiously as
possible endeavor to secure such registration or approval, as the case may be.
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<PAGE> 5
4. Adjustment of Warrant Exercise Price Upon Stock Splits,
Dividends, Distributions and Combinations; and Adjustment of Number of Shares.
(a) In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares or issue a
stock dividend (including any distribution of stock without consideration) or
make a distribution with respect to outstanding shares of Common Stock or
convertible securities payable in Common Stock or in convertible securities, the
Warrant Exercise Price in effect immediately prior to such subdivision or stock
dividend or distribution shall be proportionately reduced and conversely, in
case the outstanding shares of Common Stock of the Company shall be combined
into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately increased in each
case by multiplying the then effective Warrant Exercise Price by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such subdivision, stock dividend, distribution
or combination (determined on a fully diluted basis), and the denominator of
which shall be the total number of shares of Common Stock, immediately after
such subdivision, stock dividend, distribution or combination (determined on a
fully diluted basis), and the product so obtained shall be thereafter the
Warrant Exercise Price.
(b) Upon each adjustment of the Warrant Exercise Price as
provided above in this Section 4, the Holder shall thereafter be entitled to
purchase, at the Warrant Exercise Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the Warrant Exercise
Price immediately after such adjustment.
5. Adjustment of Warrant Exercise Price Upon Certain Issuances or
Sales of Common Stock. Whenever the Company shall issue, sell or otherwise
distribute any shares of its Common Stock (except for the Preferred Shares
issuable upon the conversion of the Convertible Promissory Notes, options issued
to officers and employees of the Company pursuant to plans adopted by the Board
of Directors of the Company, and shares of Common Stock issuable upon the
exercise of such options, shares of Common Stock issuable upon the conversion of
the Preferred Shares or the Warrants and except as provided in Section 6 of this
Warrant) and the amount of consideration per share is less than the Warrant
Exercise Price in effect immediately prior to the time of such issuance or sale,
then, forthwith upon such issue or sale, and thereafter successively upon each
such issue, the Warrant Exercise Price shall be reduced to the amount
(calculated to the nearest one hundredth of a cent) determined by dividing (i)
an amount equal to the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Warrant Exercise Price, and (y) the consideration, if any, received by
the Company upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
Whenever the Warrant Exercise Price is adjusted under this
Section 5, the Holder shall thereafter be entitled to purchase at the new
Warrant Exercise Price the number of shares of Common Stock obtained by
multiplying the Warrant Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the new
Warrant Exercise Price.
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<PAGE> 6
For the purposes of this Section 5, the following clauses (i)
to (vii), inclusive, shall also be applicable:
(i) in case at any time the Company shall in any
manner grant any rights to subscribe for, or any rights or options to
purchase, any Common Stock or any Convertible Securities, whether or
not such rights or options or the rights to convert or exchange any
such Convertible Securities are immediately exercisable, and the
purchase price per share for which Common Stock is issuable upon the
exercise of such rights or options or upon conversion or exchange of
such Convertible Securities (determined by dividing (x) the total
amount, if any, received or receivable by the Company as consideration
for the granting of all such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company
upon the exercise of all such rights or options, plus, in the case of
such Convertible Securities, if any, payable upon, the conversion or
exchange thereof, by (y) the maximum aggregate number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less
than or the Warrant Exercise Price in effect immediately prior to the
time of the granting of such rights or options, then the maximum
aggregate number of shares of Common Stock issuable upon the exercise
of such rights or options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of granting of
such rights or options) be deemed to be outstanding and to have been
issued for such price per share. No further adjustments of the Warrant
Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, except as
otherwise provided in clause (iii) below;
(ii) in case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable,
and the purchase price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (x) the total
amount received or receivable by the Company as consideration for the
issue or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (y) the maximum
aggregate number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Warrant Exercise Price in effect immediately prior to the time of such
issue or sale, then the maximum aggregate number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed outstanding and to have been issued
for such price per share, provided that, except as otherwise specified
in clause (iii) below, (a) no further adjustments of the Warrant
Exercise Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (b) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or upon exercise
of any option to purchase any such Convertible Securities for which
adjustments of the Warrant Exercise Price have been or are to be made
pursuant to other
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<PAGE> 7
provisions of this Section 5, no further adjustment of the Warrant
Exercise Price shall be made by reason of such issue or sale;
(iii) if the purchase price or number of shares
purchasable provided for in any right or option referred to in clause
(i) above, or the rate at which any Convertible Securities referred to
in clause (i) or (ii) above are convertible into or exchangeable for
Common Stock, shall change at any time (other than under or by reason
of provisions designed to protect against dilution for which provision
for adjustments in the Warrant Exercise Price are provided for under
this Warrant), the Warrant Exercise Price then in effect hereunder
shall forthwith be readjusted to such Warrant Exercise price as would
have obtained had the adjustments made upon the issuance of such
rights, options or Convertible Securities been made upon the basis of
the changed terms; and on the expiration of any such option or right
referred to in clause (i) above or the termination of any such right to
convert or exchange such Convertible Securities referred to in clause
(i) or (ii) above, the Warrant Exercise Price then in effect hereunder
shall forthwith be readjusted to such Warrant Exercise Price as would
have obtained had the adjustments made upon the issuance of such rights
or options or Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock, if any,
theretofore actually delivered upon the exercise of such rights or
options or upon the conversion or exchange of such Convertible
Securities;
(iv) in case the Company shall distribute to all
holders of its Common Stock evidences of its indebtedness or assets,
then in each such case the Warrant Exercise Price in effect immediately
prior to such distribution shall be adjusted so that the same shall
equal the price determined by multiplying the Warrant Exercise Price in
effect immediately prior to the date of such distribution by a fraction
whose numerator shall be (i) the Market Price per share of Common Stock
immediately prior to the effective date of distribution multiplied by
the total number of shares of Common Stock outstanding immediately
prior to such effective date less (ii) the then fair market value (as
reasonably determined by the Board of Directors) of the assets or
evidences of indebtedness so distributed and whose denominator shall be
such Market Price per share of the Common Stock multiplied by the total
number of shares of Common Stock outstanding immediately prior to such
effective date. Such adjustment shall be made whenever any such
distribution is made and shall be retroactively effective as of
immediately after the record date for the determination of stockholders
entitled to receive such distribution;
(v) the consideration received for any shares of
Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities issued or sold
shall be deemed to be the amount received therefor, before deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed in connection therewith; in case any shares
of Common Stock or Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash (including any non-cash consideration
received in
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<PAGE> 8
respect of any acquisition by the Company of substantially all of the
stock or assets of another entity) received by the Company for such
shares shall be deemed to be the value of such consideration as
determined reasonably and in good faith by the Board of Directors;
(vi) in case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (x) to
receive a dividend or other distribution, or (y) to receive rights or
options to subscribe for Common Stock or Convertible Securities, then
such record date shall be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right or option of subscription or
purchase; and
(vii) the number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company; but the disposition of any shares so
owned or held shall be considered an issue or sale of Common Stock for
the purposes of this Section 5.
6. Reorganization, Reclassification, Etc. In case of any capital
reorganization, or of any reclassification of the capital stock of the Company
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a split-up or combination) or in case
of the consolidation or merger of the Company with or into any other corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in the Common Stock being changed into or
exchanged for stock or other securities or property of any other person), or of
the sale of the properties and assets of the Company as, or substantially as, an
entirety to any other corporation, this Warrant shall, after such capital
reorganization, reclassification of capital stock, consolidation, merger or
sale, entitle the Holder hereof to purchase the kind and number of shares of
stock or other securities or property of the Company or of the corporation
resulting from such consolidation or surviving such merger or to which such sale
shall be made, as the case may be, to which the holder hereof would have been
entitled if he had held the Common Stock issuable upon the exercise hereof
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger or sale, and in any such case appropriate provision
shall be made with respect to the rights and interests of the holder of this
Warrant to the end that the provisions thereof (including without limitation
provisions for adjustment of the Warrant Exercise Price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be in relation to any shares of stock, securities,
or assets thereafter deliverable upon the exercise of the rights represented
hereby. The Company shall not effect any such consolidation, merger or sale,
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the registered holder hereof at
the address of such holder appearing on the books of the Company, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase.
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<PAGE> 9
7. Notice of Adjustment of Warrant Exercise Price. Upon any
adjustment of the Warrant Exercise Price, then the Company shall give notice
thereof to the Holder of this Warrant, which notice shall state the Warrant
Exercise Price in effect after such adjustment and the increase, or decrease, if
any, in the number of Warrant Shares purchasable at the Warrant Exercise Price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
8. Computation of Adjustments. Upon each computation of an
adjustment in the Warrant Exercise Price and the number of shares which may be
subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise
Price shall be computed to the nearest cent (i.e. fraction of .5 of a cent, or
greater, shall be rounded to the next highest cent) and the number of shares
which may be subscribed for and purchased upon exercise of this Warrant shall be
calculated to the nearest whole share (i.e. fractions of less than one half of a
share shall be disregarded and fractions of one half of a share, or greater,
shall be treated as being a whole share). No such adjustment shall be made
however, if the change in the Warrant Exercise Price would be less than $.001
per share, but any such lesser adjustment shall be made (i) at the time and
together with the next subsequent adjustment which, together with any
adjustments carried forward, shall amount to $.001 per share or more, or (ii) if
earlier, upon the third anniversary of the event for which such adjustment is
required.
9. Notice of Certain Events. In case at any time:
(a) the Company shall pay any dividend upon, or make any
distribution in respect of, its Common Stock;
(b) the Company shall propose to register any of its Common
Stock under the Securities Act in connection with a public offering of such
Common Stock (other than with respect to a registration statement filed on Form
S-8 or such other similar form then in effect under the Securities Act);
(c) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(d) there shall be any capital reorganization, or
reclassification of the capital stock, of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation; or
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in one or more of said cases,
the Company shall give notice to the registered holder of this Warrant of the
date on which (i) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall be given not less than ten (10) days prior to the record date or the date
on which the transfer books of the Company are to be closed in respect
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<PAGE> 10
thereto in the case of an action specified in clause (i) and at least ten (10)
days prior to the action in question in the case of an action specified in
clause (ii).
10. No Change in Warrant Terms on Adjustment. Irrespective of any
adjustment in the Warrant Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Warrant, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Warrant Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
11. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any transfer
involved in the issue or delivery of any certificates for Warrant Shares of
Common Stock in a name other than that of the registered holder hereof or upon
any transfer of this Warrant.
12. Warrant Holder Not Deemed a Shareholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance of record to the holder of this Warrant of the
Warrant Shares which he is then entitled to receive upon the due exercise of
this Warrant.
13. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Articles of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
14. Transfer; Opinions of Counsel; Restrictive Legends. To the
extent applicable, each certificate or other document evidencing any of the
Warrant Shares shall be endorsed with the legends set forth below, and Holder
covenants that, except to the extent such restrictions are waived by the
Company, Holder shall not transfer the Warrant Shares without complying with the
restrictions on transfer described in the legends endorsed thereon;
(a) The following legend under the Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF
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<PAGE> 11
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Warrant Shares, the legend required by such
state authority.
(c) The Company shall not be required (i) to transfer on its
books either this Warrant or any Warrant Shares which shall have been
transferred in violation of any of the provisions set forth in this Section 14,
or (ii) to treat as owner of such Warrant Shares or to accord the right to vote
as such owner or to pay dividends to any transferee to whom such Warrant Shares
shall have been so transferred.
(d) Any legend endorsed on a certificate pursuant to
subsection (a) or (b) of this Section 14 shall be removed (i) if the Warrant
Shares represented by such certificate shall have been effectively registered
under the Securities Act or otherwise lawfully sold in a public transaction, or
(ii) if the holder of such Warrant Shares shall have provided the Company with
an opinion from counsel, in form and acceptable to the Company and from
attorneys reasonably acceptable to the Company, stating that a public sale,
transfer or assignment of the Warrant or the Warrant Shares may be made without
registration.
(e) Any legend endorsed on a certificate pursuant to
subsection (b) of this Section 14 shall be removed if the Company receives an
order of the appropriate state authority authorizing such removal or if the
holder of the Warrant or the Warrant Shares provides the Company with an opinion
of counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that such state legend may be
removed.
(f) Without in any way limiting the representations set forth
above, Holder further agrees not to make any disposition of all or any portion
of the Warrant or the Warrant Shares unless:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(ii) Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, (A) if requested by the Company, Holder shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require
registration of the Warrant or any Warrant Shares under the Securities
Act and (B) if requested by the Company, the transferee shall have
furnished to the Company its agreement to abide by the restrictions on
transfer set forth herein as if it were a purchaser hereunder.
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<PAGE> 12
(g) Notwithstanding the other provisions of this Section 14,
no such registration statement or opinion of counsel shall be required for any
transfer by a Holder, (i) if it is a partnership or a corporation, to a partner
or pro rata to its equity holder(s) of such Holder (or a third party duly
authorized to act on behalf of such Holder or its partners or equity holders),
or (ii) if he or she is an individual, to members of such individual's family
for estate planning purposes; provided, however, that the transferee agrees in
writing to be subject to the terms of this Section 14.
(h) Upon delivery of the foregoing opinion of counsel and the
surrender of this Warrant to the Company at its principal office with the
Assignment Form annexed hereto as Exhibit B duly executed and funds sufficient
to pay any transfer tax, the Company shall, in the event that it determines such
transfer is permitted by the terms of this Warrant, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be cancelled.
(i) Except as set forth in this Section 14, the Warrant and
the Warrant Shares shall be freely assignable by the Holder and its assignees.
15. Registration Rights. The Holder shall have the same
registration rights and related obligations with respect to the Warrant Shares
as those set forth in Article 9 (other than Section 9.1) of the Shareholders'
Agreement with respect to Registrable Securities (as defined therein) as if the
Holder were a party to such Shareholders' Agreement with respect only to such
Article 9.
16. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (except in the event
of loss, theft, mutilation or destruction while this Warrant is in possession of
the Company's Escrow Agent, in which events the Company shall be solely
responsible) (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as the
Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall
constitute an original contractual obligation of the Company, whether or not the
allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time
enforceable by anyone.
17. Representation of Holder. The Holder, by the acceptance
hereof, represents that it is acquiring this Warrant for its own account for
investment and not with a view to, or sale in connection with, any distribution
hereof or of any of the shares of Common Stock or other securities issuable upon
the exercise thereof, nor with any present intention of distributing any of the
same. Upon exercise of this Warrant, the Holder will confirm in writing, in form
reasonably satisfactory to the Company, such Holder's investment intent.
18. Notices. All Notices, requests and other communications that
the Holder or the Company is required or elects to give hereunder shall be in
writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed
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<PAGE> 13
to the party to be notified at the address set forth below or at such other
address as such party shall have notified the other parties hereto, by notice
given in conformity with this Section 18.
(a) If to the Company:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: President
Telecopy: (770) 840-6830
(b) If to the Holder:
Mr. MINA HAYES
110 Bellacree Road
Duluth, Georgia U.S.A.
19. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
20. Date. The date of this Warrant is April 16, 1996, This
Warrant, in all events, shall be wholly void and of no effect after 5:00 p.m.,
Georgia time, on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 14 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
21. Severability. If any provision of this Warrant is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way and shall be construed in
accordance with the purposes and tenor and effect of this Warrant.
22. Governing Law. This Warrant shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia,
without reference to its conflicts of law principles.
HAYES MICROCOMPUTER PRODUCTS, INC.
By: /s/ Dennis C. Hayes
-------------------------------------
Name: Dennis C. Hayes
Title: Chairman
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<PAGE> 14
EXHIBIT A TO
WARRANT
SUBSCRIPTION NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH REGISTERED HOLDER
DESIRES TO EXERCISE THIS WARRANT
HAYES MICROCOMPUTER PRODUCTS, INC.
The undersigned hereby exercises the right to purchase Warrant
Shares covered by this Warrant according to the conditions thereof and herewith
[makes payment of $_______________, the aggregate Warrant Exercise Price of such
Warrant Shares in full] [tenders solely this Warrant, or applicable portion
hereof, in full satisfaction of the Warrant Exercise Price upon the terms and
conditions set forth herein.]
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
--------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-----------------------------------------------------------------------
HOLDER NAME:
By:
-------------------------------------
Name:
Title:
[Net] Number of Warrant Shares Being
Purchased
------------------------------
Dated: ______________, 19__
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<PAGE> 15
EXHIBIT B TO
WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________ hereby
sells, assigns and transfers unto
Name__________________________________________________________________________
(Please typewrite or print in block letters)
Address_______________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ____________ Attorney, to transfer the same
on the books of the Company with full power of substitution in the premises.
Date____________________________ , 19_______
Signature___________________________________
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<PAGE> 1
EXHIBIT 10.40
49,944 Square Feet
5923 Peachtree Industrial Boulevard
Norcross, Georgia 30092
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between PEACHTREE
CROSSINGS BUSINESS PARK ASSOCIATES hereinafter referred to as "Landlord" and
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation, hereinafter referred
to as "Tenant."
WITNESETH
1. Premises and Term. In consideration of the obligation of
Tenant to pay rent as herein provided, and in consideration of the other terms,
provisions and covenants hereof, Landlord hereby demises and leases to Tenant,
and Tenant hereby accepts and leases from landlord certain premises situated
within the County of Gwinnett, State of Georgia, more particularly described on
Exhibit "A" attached hereto and incorporated herein by reference, together with
all rights, privileges, easements, appurtenances, and immunities belonging to or
in any way pertaining to the premises and together with the buildings and other
improvements situated or to be situated upon said premises (said real property,
building and improvements being hereinafter referred to as the "premises.")
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date," as hereinafter defined, and ending on the last day of the month that is
sixty (60) months after the commencement date.
A. The "commencement date" shall be January 1, 1991, and ending
December 31, 1995. Tenant acknowledges that it has inspected and accepts the
premises, and specifically the buildings and improvements comprising the same,
in their present condition, as suitable for the purpose for which the premises
are leased. Taking of possession by Tenant shall be deemed conclusively to
establish that said buildings and other improvements are in good and
satisfactory condition as of when possession was taken. Tenant further
acknowledges that no representations as to the repair of the premises, nor
promises to alter, remodel or improve the premises have been made by Landlord,
unless such are expressly set forth in this lease. If this lease is executed
before the premises become vacant or otherwise available and ready for
occupancy, or if any present tenant or occupant of the premises holds ver, the
Landlord cannot acquire possession of the premises prior to said "commencement
date." Landlord shall not be deemed to be in default hereunder, and Tenant
agrees to accept possession of the premises at such time as Landlord is able to
tender the same, which date shall thenceforth be deemed the "commencement date,"
and Landlord hereby waives payment of rent covering any period prior to the
tendering of possession to Tenant hereunder. After the commencement date the
Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the premises.
<PAGE> 2
B. Omitted.
2. Base Rent and Security Deposit. See Additional Provision #29.
A. Omitted.
B. In addition, Tenant has deposited with Landlord the sum of
TWENTY-SIX THOUSAND THIRTEEN AND NO/100 DOLLARS ($26,013.00), which sum shall be
held by Landlord, without obligation for interest, as security for the
performance of Tenant's covenants and obligations under this lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payments due Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default, and Tenant shall pay to Landlord on
demand the amount so applied in order to restore the security deposit to its
original amount. Although the security deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this lease that all of Tenant's
obligations under this lease have been fulfilled.
3. Use. The demised premises shall be used only for the purpose
of general office, receiving, storing, manufacturing, repairing, shipping and
selling (other than retail) products, materials and merchandise made and or
distributed by Tenant and for such other lawful purposes as may be incidental
thereto, and subject to any building or building complex rules and regulations
which shall not impair Tenant's use of the premises. Outside storage, including
without limitation, trucks and other vehicles, is prohibited without Landlord's
prior written consent. Tenant shall at its own cost and expense obtain any and
all licenses and permits necessary for any such use. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the use of the
premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with the premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
building in which their premises are situated or unreasonably interfere with
their use of their respective premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly flammable. Tenant will not
permit the premises to be used for any purpose or in any manner, including,
without limitation, any method of storage which would render the insurance
thereon void or the insurance risk more hazardous or cause the State Board of
insurance or other insurance authority to disallow any sprinkler credits. If any
increase in the fire and extended coverage insurance premiums paid by Landlord
or other tenants for the building in which Tenant occupies space is caused by
Tenant's use and occupancy of the premises, or if Tenant vacates the premises
and causes an increase in such premiums, then Tenant shall pay as additional
rental the amount of such increase to Landlord.
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Tenant agrees that the point pressure resulting from Tenant's racking
system, inventory, forklifts and equipment pertaining to Tenant's use of the
premises shall not exceed allowable design floor loading for floor slabs on
grade. Tenant shall hold harmless Landlord from any loss, liability, and
expenses, both real and alleged, arising out of such damage or repair caused by
Tenant's negligence or failure to comply with this paragraph.
4. Taxes.
A. Landlord agrees to pay before they become delinquent all
taxes, assessments and governmental charges of any kind and nature whatsoever
thereinafter collectively referred to as "taxes" lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys around
the building; provided, however, that the maximum amount of taxes to be paid by
Landlord hereunder during any one real estate tax year shall be ZERO AND NO/100
DOLLARS ($0.00). If in any real estate tax year during the term hereof or any
renewal or extension the taxes levied or assessed against the building and the
grounds, parking areas, driveways and alleys around the building during such tax
year shall exceed the sum set forth in the preceding sentence, Tenant shall pay
to Landlord as additional rental, upon demand, the amount of such excess. In the
event any such amount is not paid within twenty (20) days after the date of
Landlord's invoice to Tenant, the unpaid amount shall bear interest at the rate
of twenty (20%) percent per annum from the date of such invoice until payment by
Tenant. In the event the premises constitute a portion of a multiple occupancy
building, Tenant agrees to pay to Landlord as additional rental, upon demand,
the amount of Tenant's "proportionate share" (as defined in subparagraph 27B) of
the excess taxes referred to in this subparagraph above.
B. If at any time during the term of this lease, the present
method of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments, or governmental charges levied, assessed or imposed on
real estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents for the present or any future
building or buildings on the premises, then all such taxes, assessments, levies
or charges, or the part thereof so measured or based shall be deemed to be
included within the term "taxes" for the purposes hereof.
C. The Landlord shall have the right to engage a tax consulting
firm to attempt to assure a fair tax burden for the building and grounds within
the applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand,
from time to time, as additional rent, the amount of Tenant's proportionate
share of the cost of such service.
D. Any payment to be made pursuant to this Paragraph 4 with
respect to the real estate tax year in which this lease commences or terminates
shall be prorated.
5. Landlord's Repairs and Obligations. Landlord shall at his
expense maintain only the roof, foundation and the structural soundness of the
exterior walls of the building in good repair, reasonable wear and tear
excepted. Tenant shall repair and pay for any damage caused by the
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negligence of Tenant, or Tenant's employees, agents or invitees, or caused by
Tenant's default hereunder. The term "walls' as used herein shall not include
windows, glass or plate glass, doors, store fronts or office entries. Tenant
shall immediately give Landlord written notice of defect or need for repairs,
after which Landlord shall have reasonable opportunity to repair same or cure
such defect. Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the provisions of
this lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect.
6. Tenant's Repairs and Obligations.
A. Tenant shall at its own cost and expense keep and maintain all
parts of the premises (except those for which Landlord is expressly responsible
under the terms of this lease) in good condition, promptly making all necessary
repairs, repainting, and replacements, including but not limited to, windows,
glass and plate glass, doors, any office entries, interior walls and finish
work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems, dock boards, truck doors, dock bumpers, paving, plumbing
work and fixtures, termites and pest extermination, regular removal of trash and
debris, grounds maintenance, common sewage line plumbing, common exterior
lighting (if applicable), common dumpster removal (if applicable) and other
obligations of the building, including, but not limited to, keeping the parking
areas, driveways, alleys and the whole of the premises in a clean and sanitary
condition. Tenant shall not be obligated to repair any damage caused by fire,
tornado or other casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 12A below, except that Tenant shall be obligated to
repair all wind damage to glass except with respect to tornado or hurricane
damage.
B. The cost of maintenance and repair of any common party walls
(any wall, divider, partition or any other structure separating the premises
from any adjacent premises) shall be shared equally by Tenant and the tenant or
tenants occupying adjacent premises. Tenant shall not damage any demising wall
or disturb the integrity and support provided by any demising wall and shall, at
its sole cost and expense, promptly repair any damage or injury to any demising
wall caused by Tenant or its employees, agents or invitees.
C. In the event the premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers and licensees shall have
the exclusive right to use the parking areas, if any, as may be designated by
Landlord in writing, subject to such reasonable rules and regulations as
Landlord may from time to time prescribe and subject to rights of ingress and
egress of other tenants. Landlord shall not be responsible for enforcing
Tenant's exclusive parking rights against any third parties. Parking spaces have
been provided in accordance with applicable local building codes and anticipated
needs of tenants. Tenant agrees not to use more than its proportionate share as
so provided.
D. Landlord reserves the right to perform and provide all of
Tenant's repairs and obligations under subparagraph 6A above, and Tenant shall,
in lieu of the obligations set forth under subparagraph 6A above with respect to
such items, pay monthly as additional rent due under Paragraph 2A for its
proportionate share of the cost and expense, including overhead, for those
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<PAGE> 5
items; provided, however, that Landlord shall have the right to require Tenant
to pay such other reasonable proportions of said repairs and obligations as may
be determined by Landlord in its sole discretion; and further provided that if
Tenant or any other particular tenant of the building can be clearly identified
as being responsible for obstructions or stoppage of the common sanitary sewage
line, then Tenant, if Tenant is responsible, shall pay the entire cost thereof,
upon demand, as additional rent.
E. Omitted.
F. Tenant shall, at its own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor and the contract must be approved by Landlord. The service contract
must include all services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes
possession of the premises.
7. Alterations. Tenant shall not make any alterations, additions
or improvements to the premises (including, but not limited to, roof and wall
penetrations) without the prior written consent of Landlord. Such consent will
not be denied provided the improvements are building standard office/warehouse
finishes. In the event Landlord consents to the making of any such alterations,
additions or improvements by Tenant, the same shall be made by Tenant, at
Tenant's sole cost and expense, in accordance with all applicable laws,
ordinances and regulations, and all requirements of Landlord's and Tenant's
insurance policies and only in accordance with plans and specifications approved
by Landlord; and any contractor or person selected by Tenant to make the same
and all subcontractors must first be approved in writing by Landlord. Tenant
may, without the consent of Landlord, but at its own cost and expense and in a
good workmanlike manner erect such shelves, bins, machinery and trade fixtures
as it may deem advisable, without altering the basic character of the building
or improvements and without overloading or damaging such building or
improvements, and in each case complying with all applicable governmental laws,
ordinances, regulations and other requirements. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this lease and Tenant shall, unless Landlord
otherwise elects as hereinafter provided, remove all alterations, additions,
improvements and partitions erected by Tenant and restore the premises to their
original condition by the date of termination of this lease or upon earlier
vacating of the premises; provided, however, that if Landlord so elects prior to
termination of this lease or upon earlier vacating of the premises, such
alterations, additions, improvements and partitions shall become the property of
Landlord as of the date of termination of this lease or upon earlier vacating of
the premises and shall be delivered up to the Landlord with the premises. All
shelves, bins, machinery and trade fixtures installed by Tenant may be removed
by Tenant prior to the termination of this lease if Tenant so elects, and shall
be removed by the date of termination of this lease or upon earlier vacating of
the premises if required by Landlord; upon any such removal Tenant shall restore
the premises to their original condition with consideration for normal wear and
tear. All such removals and restoration shall be accomplished in a good
workmanlike manner so as not to damage the primary structure or structural
qualities of the building and other improvements situated on the premises.
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<PAGE> 6
8. Signs. Tenant agrees to conform to Landlord's signage program
for the building; however, all costs and expense of the sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall only have the right to
install standard signs upon the premises where first approved in writing by
Landlord and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all signs prior to the
termination of this lease. Such installations and removals shall be made in such
a manner as to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury or defacement, including,
without limitation, discoloration caused by installation and/or removal.
9. Inspection and Right of Entry. Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any time in
the event of an emergency and to enter and inspect the premises at any
reasonable time during business hours, for the purpose of ascertaining the
condition of the premises in order to make such repairs as may be required or
permitted to be made by Landlord under the terms of this lease. During the
period that is six (6) months prior to the end of the term hereof, Landlord and
Landlord's agents and representatives shall have the right to enter the premises
at any reasonable time during business hours for the purpose of showing the
premises and shall have the right to erect on the premises a suitable sign
indicating the premises are available. Tenant shall arrange to meet with
Landlord for a joint inspection of the premises prior to vacating. In the event
of Tenant's failure to arrange such joint inspection, Landlord's inspection at
or after Tenant's vacating the premises shall be conclusively deemed correct for
purposes of determining Tenant's responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide at its cost water,
electricity and gas (when applicable) service connections into the premises; but
Tenant shall pay for all water, gas, heat, light, power, telephone, sewer,
sprinkler charges and other utilities and services used on or from the premises,
together with any taxes, penalties, surcharges or the like pertaining thereto
and any maintenance charges for utilities and shall furnish all electric light
bulbs and tubes. If any such services are not separately metered to Tenant,
Tenant shall pay a reasonable proportion as determined by Landlord of all
charges jointly metered with other premises, provided, however, Landlord shall
have the right to require Tenant to pay such other reasonable proportion of said
jointly metered charges as may be determined by Landlord in its sole discretion.
Landlord shall in no event by liable for any interruption or failure of utility
services on the premises.
11. Assignment and Subletting.
A. Tenant shall not have the right to assign, sublet, transfer or
encumber this lease, or any interest therein, without the prior written consent
of Landlord. Any attempted assignment, subletting, transfer or encumbrance by
Tenant in violation of the terms and covenants of this Paragraph shall be void.
All cash or other proceeds of any assignment, such proceeds as exceed the
rentals called for hereunder in the case of a subletting and all cash or other
proceeds of any other transfer of Tenant's interest in this lease shall be paid
to Landlord, whether such assignment, subletting or other transfer is consented
to by Landlord or not, unless Landlord agrees to the contrary in writing, and
Tenant hereby assigns all rights it might have or ever acquire in any such
proceeds to Landlord. Any assignment, subletting or other transfer of Tenant's
interest in this lease shall be
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<PAGE> 7
for an amount equal to the then fair market value of such interest. These
covenants shall run with the land and shall bind Tenant and Tenant's heirs,
executors, administrators, personal representatives, representatives in any
bankruptcy proceeding, successors and assigns. any assignee, sublessee or
transferee of Tenant's interest in this lease (all such assignees, sublessees
and transferees being hereinafter referred to as "successors"), by assuming
Tenant's obligations hereunder shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such successors in contravention
of this Paragraph. No assignments, subletting or other transfer, whether
consented to by Landlord or not, shall relieve Tenant of its liability
hereunder. Upon the occurrence of an "event of default" as hereinafter defined,
if the premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided, or provided by law, may at its
option collect directly form such assignee or subtenant all rents becoming due
to Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
B. If this lease is assigned to any person or entity pursuant to
the provisions of the Bankruptcy Code 11 U.S.C. ss. 101, et seq. (the
"Bankruptcy Code"), any and all monies or other considerations payable or
otherwise to be delivered in connection with such assignment shall be paid or
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any and all monies or other considerations
constituting Landlord's property under the preceding sentence not paid or
delivered to Landlord shall be held in trust for the benefit of the Landlord and
promptly paid or delivered to Landlord.
C. Any person or entity to which this lease is assigned pursuant
to the provisions of the Bankruptcy Code, shall be deemed, without further act
or deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain insurance covering the building of
which the premises are a part (including building standard office/warehouse
finishes which are constructed by Tenant) in an amount not less than eighty
percent (80%) (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the replacement costs
thereof, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other regulatory authority for the state in
which the premises are situated for use by insurance companies admitted in such
state for the writing of such insurance on risks located within such state.
Subject to the provisions of subparagraphs 12C, 12D and 12E below, such
insurance shall be for the sole benefit of Landlord and under its sole control.
If, during the second calendar year after the commencement date of this lease,
or during any subsequent calendar year of the primary term or any renewal or
extension, Landlord's cost of maintaining such insurance shall exceed Landlord's
cost of maintaining such insurance for the first calendar year or the term
hereof, Tenant agrees to pay to Landlord, as
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additional rental, the amount of such excess not to exceed $3,996.00 per year
(or in the event the premises constitute a portion of a multiple occupancy
building, Tenant's full proportionate share of such excess). The first calendar
year shall be the year in which the lease commences. Said payments shall be made
to Landlord within ten (10) days after presentation to Tenant of Landlord's
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph A with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
lease bears to a full year.
B. If the buildings situated upon the premises should be damaged
or destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's reasonable estimation be
completed within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, this lease shall terminate and
the rent shall be abated during the unexpired portion of this lease, effective
upon the date of the occurrence of such damage.
D. If the buildings situated upon the premises should be damaged
by any peril covered by the insurance to be provided by Landlord under
subparagraph 12A above, but only to such extent that rebuilding or repairs can
in Landlord's reasonable estimation be completed within one hundred twenty (120)
days after the date upon which Landlord is notified by Tenant of such damage,
this lease shall not terminate, and Landlord shall at its sole cost and expense
thereupon proceed with reasonable diligence to rebuild and repair such buildings
to substantially the condition in which they existed prior to such damage,
except that Landlord shall not be required to rebuild, repair or replace any
part of the partitions, fixtures, additions and other improvements which may
have been placed in, on or about the premises by Tenant and except that Landlord
may elect not to rebuild if such damage occurs during the last year of the term
of the lease exclusive of any option which is unexercised at the time of such
damage. If the premises are untenantable in whole or in part following such
damage, the rent payable hereunder during the period in which they are
untenantable shall be reduced to such extent as may be fair and reasonable under
all of the circumstances. In the event that Landlord should fail to complete
such repairs and rebuilding within one hundred twenty (120) days after the date
upon which Landlord is notified by Tenant of such damage, Tenant may at its
option terminate this lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights and obligations
hereunder shall cease and terminate.
E. Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust covering
the premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
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<PAGE> 9
F. Each of Landlord and Tenant hereby releases the other from any
loss or damage to property caused by fire or any other perils insured in
policies of insurance covering such property, even if such loss or damage shall
have been caused by the fault or negligence of the other party, or anyone for
whom such other party may be responsible. Each of the Landlord and Tenant agrees
that it will request its insurance carriers to include in its policies such a
clause or endorsement. If extra cost shall be charged therefore, each party
shall advise the other thereof and of the amount of the extra cost, and the
other party, at its election, may pay the same, but it shall not be obligated to
do so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employee or any other person entering upon the premises,
or caused by the buildings and improvements located on the premises becoming out
of repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold safe and
harmless the property, the Landlord (including without limitation the trustee
and beneficiaries if Landlord is a trust). landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, arising out of
any such damage or injury, except injury to persons or damage to property the
cause of which is the negligence of Landlord or the failure of Landlord to
repair any part of the premises which Landlord is obligated to repair and
maintain hereunder within a reasonable time after the receipt of written notice
from Tenant of needed repairs. Tenant shall procure and maintain throughout the
term of this lease a policy or policies of insurance, at its sole cost and
expense, insuring both Landlord and Tenant against all claims, demands or
actions arising out of or in connection with: (i) the premises; (ii) the
condition of the premises; (iii) Tenant operations in and maintenance and use of
the premises; and (iv) Tenant's liability assumed under this lease, the limits
of such policy or policies to be in the amount of not less than $1,000,000.00
per occurrence in respect to injury to persons (including death), and in the
amount of not less than $100,000 per occurrence in respect to property damage or
destruction, including loss of use thereof. All such policies shall be procured
by Tenant from responsible insurance companies satisfactory to Landlord.
Certificates evidencing such policies, together with receipt evidencing payment
of premiums therefor, shall be delivered to Landlord prior to the commencement
date of this lease. Not less than fifteen (15) days prior to the expiration date
of any such policies, certificates evidencing the renewals thereof (bearing
notations evidencing the payment of renewal premiums) shall be delivered to
Landlord. Such policies shall further provide that not less than thirty (30)
days written notice shall be given to Landlord before such policy may be
cancelled or changed to reduce insurance provided thereby.
14. Condemnation.
A. If the whole or any substantial part of the premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the
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use of the premises for the purposes for which they are being used, this lease
shall terminate and the rent shall be abated during the unexpired portion of
this lease, effective when the physical taking of said premises shall occur.
B. If part of the premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this lease
is not terminated as provided in the subparagraph above, this lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
C. All compensation awarded for any taking (or the proceeds of
private sale in lieu thereof) of the premises, buildings or other improvements,
or any part thereof, shall be the property of Landlord and Tenant hereby assigns
its interest in any such award to Landlord; provided, however, Landlord shall
have no interest in any award made to Tenant for loss of business or for the
taking of Tenant's fixtures and improvements if a separate award for such items
is made to Tenant.
15. Holding Over. Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than five (5) days advance
written notice, or by Tenant at any time upon not less than thirty (30) days
advance written notice, and all of the other terms and provisions of this lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to double the rent in effect on the termination date, computed on a
daily basis for each day of the hold over period. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this lease
except as otherwise expressly provided. The preceding provisions of this
paragraph 15 shall not be construed as consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has good title
to the premises, free and clear of all liens and encumbrances, excepting only
the lien for current taxes not yet due, such mortgage or mortgages as are
permitted by the terms of this lease, zoning ordinances and other building and
fire ordinances and governmental regulations relating to the use of such
property, and easements, restrictions and other conditions of record. Landlord
represents and warrants that it has full right and authority to enter into this
lease and that Tenant, upon paying the rental herein set forth and performing
its other covenants and agreements herein set forth, shall peaceably and quietly
have, hold and enjoy the premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and provisions of this lease.
17. Events of Default. The following events shall be deemed to be
events of default by Tenant under this lease:
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<PAGE> 11
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10) days
from the date such payment was due.
B. Tenant or any guarantor of Tenant's obligations hereunder
shall generally not pay its debts as they become due or shall admit in writing
its inability to pay its debts or shall make a general assignment for the
benefit of creditors, or Tenant or any such guarantor shall commence any case,
proceeding or other action seeking to have an order for relief entered on its
behalf as a debtor or to adjudicate it as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution, or
composition of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or of any
substantial part of its property, or Tenant or any such guarantor shall take any
action to authorize or in contemplation of any of the actions set forth above in
this paragraph, or
C. Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
an order for relief entered against it as debtor or to adjudicate it as bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
D. A receiver to trustee shall be appointed for all or
substantially all of the assets of Tenant.
E. Tenant shall desert or vacate any substantial portion of the
premises.
F. Tenant shall fail to discharge any lien placed upon the
premises in violation of Paragraph 22 hereof within twenty (20) days after any
such lien or encumbrance is filed against the premises.
G. Tenant shall fail to comply with any term, provision or
covenant of this lease (other than the foregoing in this Paragraph 17), and
shall not cure or commence to cure and diligently pursue to completion such
failure within twenty (20) days after written notice thereof to Tenant.
H. Tenant shall fail to continuously operate its business at the
premises for the permitted use set forth in Paragraph 3 whether or not Tenant is
in default of the rental payments due under this lease.
18. Remedies.
A. Upon the occurrence of any of such events of default described
in Paragraph 17 hereof, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever:
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<PAGE> 12
(1) Terminate this lease, in which event Tenant shall
immediately surrender the premises to Landlord, and
if Tenant fails so to do, Landlord may, without
prejudice to any other remedy which it may have for
possession or arrearage in rent, enter upon and take
possession of the premises and expel or remove Tenant
and any other person who may be occupying such
premises or any part thereof, by force it necessary,
without being liable for prosecution or any claim of
damage therefore.
(2) Enter upon and take possession of the premises and
expel or remove Tenant and any other person who may
be occupying such premises or any part thereof, by
force if necessary, without being liable for
prosecution or any claim for damages therefore.
(3) Enter upon the Premises, by force if necessary,
without being liable for prosecution or any claim for
damages therefore, and do whatever Tenant is
obligated to do under the terms of this lease; and
Tenant agrees to reimburse Landlord on demand for any
expenses which Landlord may incur in thus effecting
the compliance with Tenant's obligations under this
Lease, and Tenant further agrees that Landlord shall
not be liable for any damages resulting to the Tenant
from such action, whether caused by the negligence of
Landlord or otherwise.
(4) Alter all locks and other security devices at the
premises without terminating this lease.
B. In the event Landlord may elect to regain possession of the
premises by a forcible detainer proceeding, Tenant hereby specifically waives
any statutory notice which may be required prior to such proceeding, and agrees
that Landlord's execution of this lease is, in part, consideration of this
waiver.
C. In the event Tenant fails to pay any installment of rent
hereunder as and when such installment is due, to help defray the additional
cost to Landlord for processing such late payments Tenant shall pay to Landlord
on demand a late charge in an amount equal to five (5%) percent of such
installment; and the failure to pay such amount within five (5) days after
demand therefore shall be an event of default hereunder. The provision for such
late charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
D. In the event Tenant's check, given to Landlord in payment, is
returned by the bank for non-payment, Tenant agrees to pay all expenses incurred
by Landlord as a result thereof.
E. Exercise by Landlord of any one or more remedies hereunder
granted or otherwise available shall not be deemed to be an acceptance or
surrender of the premises by Tenant, whether by agreement or by operation of
law, it being understood that such surrender can be effected only
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<PAGE> 13
by the written agreement of Landlord and Tenant. No such alteration of locks or
other security devices and no removal or other exercise of dominion by Landlord
over the property of Tenant or others at the premises shall be deemed
unauthorized or constitute a conversion, Tenant hereby consenting, after any
event of default, to the aforesaid exercise of dominion over Tenant's property
within the premises. All claims for damages by reason of such re-entry and/or
repossession and/or alteration of locks or other security devices are hereby
waived, as are all claims for damages by reason of any distress warrant,
forcible detainer proceedings, sequestration proceedings or other legal process.
Tenant agrees that any re-entry by Landlord may be pursuant to judgment obtained
in forcible detainer proceedings or other legal proceedings or without the
necessity for any legal proceedings, as Landlord may elect, and Landlord shall
not be liable for trespass or otherwise.
F. Omitted.
G. In the event that Landlord elects to repossess the premises
without terminating the lease, or in the event Landlord elects to terminate the
lease, then Tenant, at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Paragraph 1 diminished by
any net sums thereafter received by Landlord through reletting the premises
during said period (after deducting expenses incurred by Landlord as provided in
subparagraph 18H below). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
H. In case of any event of default or breach by Tenant, or
threatened or anticipatory breach or default, Tenant shall also be liable for
and shall pay to Landlord, at the address specified for notice to Landlord
herein, in addition to any sum provided to be paid above, brokers' fees incurred
by Landlord in connection with reletting the whole or any part of the premises;
the costs of removing and storing Tenant's or other occupant's property; the
costs of repairing, altering, remodeling or otherwise putting the premises into
condition acceptable to a new tenant or tenants, and all reasonable expenses
incurred by Landlord in enforcing or defending Landlord's rights and/or remedies
including reasonable attorney's fees.
I. In the event of termination or repossession of the premises
for an event of default, Landlord shall not have any obligation to relet or to
attempt to relet the premises, or any portion thereof; and in the event of
reletting, Landlord may relet the whole or any portion of the premises for any
period to any tenant and for any use and purpose.
J. If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
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<PAGE> 14
hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
K. In the event that Landlord shall have taken possession of the
premises pursuant to the authority herein granted then Landlord shall have the
right to keep in place and use all of the furniture, fixtures and equipment at
the premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. Landlord shall also have
the right to remove from the premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any premises within the County in which
the premises is located; and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal and storage.
Landlord shall also have the right to relinquish possession of all or any
portion of such furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or any predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which Claimant purports to act; and Tenant agrees to indemnity
and hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. The rights of
Landlord herein stated shall be in addition to any and all other rights which
Landlord has or may hereafter have at law or in equity; and Tenant stipulates
and agrees that the rights herein granted Landlord are commercially reasonable.
L. Notwithstanding anything in this lease to the contrary, all
amounts payable by Tenant to or on behalf of Landlord under this lease, whether
or not expressly denominated as rent, shall constitute rent for the purposes of
the Bankruptcy Code, 11 U.S.C. ss.502(b)(7).
M. This is a contract under which applicable law excuses Landlord
from accepting performance from or rendering performance to any person or entity
other than Tenant within the meaning of the Bankruptcy Code, 11 U.S.C.
ss.365(c), 365(e)(2).
N. If this Lease is assigned to any person or entity pursuant to
the provisions of the Bankruptcy Code, any and all monies or other
considerations payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid or delivered to Landlord.
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<PAGE> 15
O. Any person or entity to which this lease is assigned pursuant
to the provisions of the Bankruptcy Code, shall be deemed, without further act
or deed, to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
19. Omitted.
20. Mortgages. Tenant accepts this lease subject and subordinate
to any mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the premises or the improvements situated
thereon, provided however, that if the mortgagee, trustee, or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this lease shall be deemed superior to such lien, whether
this lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the purpose of subjecting
and subordinating this lease to the lien of any such mortgage.
21. Landlord's Default. In the event Landlord should become in
default in any payments due on any such mortgage described in Paragraph 20
hereof or in the payment of taxes or any other items which might become a lien
upon the premises and which Tenant is not obligated to pay under the terms and
provisions of this lease, Tenant is authorized and empowered after giving
Landlord five (5) days prior written notice of such default and Landlord's
failure to cure such default, to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for or on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant; provided
however, that Tenant shall not be authorized and empowered to make any payment
under the terms of this Paragraph 21 unless the item paid shall be superior to
Tenant's interest hereunder. In the event Tenant pays any mortgage debt in full,
in accordance with this paragraph, it shall, at its election, be entitled to the
mortgage security by assignment or subrogation.
22. Mechanics Liens and Other Taxes.
A. Tenant shall have no authority, express or implied, to create
or place any lien or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind the interests of Landlord in the premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the premises or under the terms
of this lease. Tenant
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<PAGE> 16
agrees to give Landlord immediate written notice if any lien or encumbrance is
placed on the premises.
B. Tenant shall be liable for all taxes levied or assessed
against personal property, furniture or fixtures placed by Tenant in the
premises. If any such taxes for which Tenant is liable are levied or assessed
against Landlord or Landlord's property and if Landlord elects to pay the same
or if the assessed value of Landlord's property is increased by inclusion of
personal property, furniture or fixtures placed by Tenant in the premises, and
Landlord elects to pay the taxes based on such increase, Tenant shall pay to
Landlord upon demand that part of such taxes.
23. Omitted.
24. Certain Rights Reserved to Landlord. Landlord reserves and may
exercise the following rights without affecting Tenant's obligations hereunder:
(a) to change the name, street address, or suite numbers of the building; (b) to
install or maintain a sign or signs on the exterior of the building.
25. Notices. Each provision of this instrument or of any
applicable governmental laws, ordinances, regulations and other requirements
with reference to the sending, mailing or delivery of any notice or the making
of any payment by Landlord to Tenant or with reference to the sending, mailing
or delivery of any notice or the making of any payment by Tenant to Landlord
shall be deemed to be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligations to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
B. All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow set forth, or at
such other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
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<PAGE> 17
LANDLORD: TENANT:
PEACHTREE CROSSINGS BUSINESS HAYES MICROCOMPUTER PRODUCTS,
PARK ASSOCIATES INC., a Georgia Corporation
c/o Trammell Crow Company P. O. Box 105203
1575 Northside Drive, N.W. Atlanta, Georgia 30348
Building 100, Suite 200 Attention: President
Atlanta, Georgia 30318
If and when included within the term "Landlord," as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant," as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant," respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
26. Hazardous Waste. The term "Hazardous Substances," as used in
this lease shall mean pollutants, contaminants, toxic or hazardous wastes, or
any other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law or ordinance relating to pollution or
protection of the environment. Tenant hereby agrees that (i) no activity will be
conducted on the premises that will produce any Hazardous Substance, except for
such activities that are part of the ordinary course of Tenant's business
activities that are part of the ordinary course of Tenant's business (the
"Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Landlord; (ii) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Landlord; (iii) no portion of the premises will be used as a landfill
or a dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute, a public
or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be
brought onto the premises, except for the Permitted Materials described below,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. If, at any time during
or after the term of the lease, the premises is found to be so contaminated or
subject to said conditions, Tenant agrees to indemnify and hold Landlord
harmless from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from or as a result
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<PAGE> 18
of the use of the premises by Tenant. The foregoing indemnification shall
survive the termination or expiration of this lease.
27. Miscellaneous.
A. Words of any gender used in this lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
B. In the event the premises constitutes a portion of a multiple
occupancy building or building complex, Tenant's "proportionate share," as used
in this lease, shall mean a fraction, the numerator of which is the space
contained in the premises and the denominator of which is the entire space
contained in the building or building complex.
C. The terms, provisions and covenants and conditions contained
in this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this lease. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this lease.
D. The captions inserted in this lease are for convenience only
and in no way define, limit or otherwise describe the scope or intent of this
lease, or any provision hereof, or in any way affect the interpretation of this
lease.
E. Tenant agrees from time to time within ten (10) days after
request of Landlord, to deliver to Landlord, or Landlord's designee a
certificate of occupancy (if applicable) to an estoppel certificate stating that
this lease is in full force and effect, the date to which rent has been paid,
the unexpired term of this lease and such other matters pertaining to this lease
as may be requested by Landlord. It is understood and agreed that Tenant's
obligation to furnish such estoppel certificates in a timely fashion is a
material inducement for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of
the expiration or earlier termination of the term of this lease shall survive
the expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
premises, Tenant shall pay to Landlord any amount reasonably as necessary to put
the premises, including without limitation all heating and air conditioning
systems and equipment therein, in good condition and repair. Tenant shall also,
prior to vacating the premises, pay to Landlord the amount of Tenant's
obligation hereunder for real estate
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<PAGE> 19
taxes and insurance premiums for the year in which the lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefore upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Subparagraph 27G.
H. If any clause or provision of this lease is illegal, invalid
or unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the premises are on the open market and are presently
being shown, this lease shall be treated as an offer with the premises being
subject to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this lease.
K. Time is of the essence of this lease and all of its
provisions. This lease in all respect shall be governed by the laws of the State
of Georgia.
L. No animals shall be brought into or kept in or about the
building.
M. Tenant agrees to comply with subdivision regulations,
protective covenants, or other restrictions of record that are applicable to the
building or building complex.
N. The duties and obligations of Tenant herein shall be binding
upon all or any of them. The duties and obligations of Tenant shall run and
extend not only to the benefit of the Landlord, as named herein, but to the
following, at the option of the following or any of them (i) any person by,
through or under which Landlord derives the right to lease the premises; (ii)
the owner of the premises; and (ii) holders of mortgage or rent assignment
interests in the premises, as their respective interests may appear; provided,
however, nothing contained herein shall be construed to obligate Tenant to pay
rent to any person other than the Landlord until such time as Tenant has been
given written notice of either an exercise of a rent assignment or the
succession of some other party to the interests of Landlord.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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<PAGE> 20
28. Additional Provisions. See Additional Provisions Paragraphs 29
through 37 attached hereto and made a part hereof as if fully incorporated
herein and when in conflict with the printed portion of this lease, said
Additional Provisions shall prevail.
EXECUTED BY LANDLORD, this 27th day of July, 1990.
PEACHTREE CROSSINGS BUSINESS
Attest/Witness PARK ASSOCIATES
/s/ R. Dave Wood By: Crow-C #3 Limited Partnership
- -----------------------------------
Title: Marketing Principal
By: /s/
----------------------------
Title: Agent
Executed by Tenant this 27th day of July, 1990.
Attest/Witness HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia
corporation
/s/ Kim Gallagher
- ----------------------------------- By: /s/ Dennis C. Hayes
---------------------------
Title: Supervisor-Contracts Dennis Hayes
Administration
Title: President
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<PAGE> 21
ADDITIONAL PROVISIONS
29. Tenant agrees to pay to Landlord rent for the premises, in advance,
without demand, deduction or set off, for the entire term hereof the following
base monthly rentals:
(a) For each of months one (1) through twelve (12) of the term of
this lease: $12,486.00 per month.
(b) For each of months thirteen (13) through thirty-six (36) of
the term of this lease: $26,013.00 per month.
(c) For each of moths thirty-seven (37) through forty-eight (48)
of the term of this lease: $28,094.00 per month.
(d) For each of months forty-nine (49) through sixty (60) of the
term of this lease: $29,134.00 per month.
30. Tenant expressly agrees that the obligations incurred by Landlord
shall not constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, stockholders, or other principals or
representatives of the Landlord. Tenant further agrees that it shall have
recourse against Landlord only to the extent of Landlord's assets for the
satisfaction of the obligations of the Landlord created under this Lease, and
not against the assets of such entity's officers, directors, trustees, partners,
joint venturers, members, stockholders, principals or representatives.
31. Landlord covenants and agrees that if Tenant shall desert, vacate or
abandon the leased premises prior to the expiration or early termination of the
Lease Agreement, Landlord shall use reasonable efforts to lease the leased
premises to another Tenant.
32. While this Lease is in full force and effect, provided Tenant is not
in default of the terms, covenants and conditions thereof, Tenant shall have the
sole right or option to extend the original term of this Lease Agreement for a
further consecutive term of twelve (12) months. Such extension or renewal of the
original term shall be on the same terms, covenants and conditions as provided
in the original term with the rent at the current rate at the time of option.
Notice of Tenant's intention to exercise this right or option must be given in
writing to Landlord on or before March 1, 1998, or the option contained in this
provision shall become null and void and of no effect. The right of option to
extend the original term of this Lease Agreement provided to Tenant herein shall
be for the exclusive benefit of the Tenant and shall terminate upon the
subletting of all or any part of the premises or assignment of this Lease.
33. Notwithstanding any terms or provisions of this Lease which may be
construed to the contrary, Landlord and Tenant agree that Landlord will conduct
common area maintenance on the premises and grounds around the premises. Said
common area maintenance will include, but not
<PAGE> 22
ADDITIONAL PROVISIONS CONT.
be limited to, fire sprinkler water charges, irrigation, lawn maintenance,
security patrol and outside light maintenance. The cost of said common area
maintenance will be paid on a monthly basis by Tenant and will amount to
approximately EIGHT HUNDRED TWENTY-ONE AND NO/100 DOLLARS ($821.00) per month.
Landlord agrees that the monthly amount paid by Tenant shall be capped at a
compounded rate of ten percent (10%) per annum. However, in the event Landlord
elects to discontinue services or elects to provide additional services as may
be necessary under Paragraph 6 of this lease, the monthly common area
maintenance charge will be adjusted to reflect the change in services provided.
34. Landlord hereby covenants and agrees to use reasonable efforts to
cause any holder of a deed to secure debt or mortgage now or at any time
hereafter constituting a lien or charge upon the premises or the improvements
situated thereon to enter into a non-disturbance agreement pursuant to which
such holder shall agree that if it shall acquire the ownership of the premises
or the improvements situated thereon through the exercise of a power of sale or
other remedy provided for in such deed to secure debt or mortgage, it shall
permit Tenant to remain in possession of the premises in accordance with the
terms and provisions of this lease, provided that Tenant shall continue to
perform its duties and obligations hereunder.
35. Landlord and Tenant shall each provide the other with certificates
evidencing the issuance of all policies of insurance required to be maintained
by them under the terms and provisions of this Lease. Such certificates shall be
so provided prior to the commencement date and, thereafter, not less than
fifteen (15) days prior to the expiration date of such policies.
36. Notwithstanding any terms or the provisions of this Lease Agreement
which may be construed to the contrary, and provided this Lease Agreement is in
full force and effect and Tenant is not in default of the terms, covenants, and
conditions thereof, Tenant shall have the sole right or option to cancel this
Lease Agreement at the end of the thirty-sixth (36th) month of the lease term
by: (1) providing Landlord with at least one hundred twenty (120) days of prior
written notice of its desire to cancel this Lease Agreement, and (2)
simultaneously depositing with Landlord a cancellation fee to be determined by
the following formula: [(5.85 x 49,444 x N/12)-(Total base rent paid by Tenant
through the cancellation month as provided in the rent schedule in Paragraph
29)]. N is equal to the number of months of Tenant's occupancy through the
cancellation month. For example, the penalty due at the end of the 36th month
shall be [(5.85 x 49,444 x 36/12)-(774,144)] or $102,373.00. Failure by Tenant
to provide said written notice and cancellation fee shall render this right or
option null and void, thus rendering this Lease Agreement in full force through
the original sixty (60) month lease term. The right of option to cancel this
Lease Agreement shall be for the exclusive benefit of the Tenant.
37. Notwithstanding the provisions of Paragraph 7 hereof, Tenant shall
have the option to remove the following improvements from the premises by the
date of termination of this lease or upon earlier vacating of the premises
provided Tenant shall restore the premises to their original
- 2 -
<PAGE> 23
ADDITIONAL PROVISIONS CONT.
condition with consideration for normal wear and tear. All such removals and
restoration shall be accomplished in a good workmanlike manner so as not to
damage the primary structure or structural qualities of the building and other
improvements situated on the premises:
(1) Security Systems (e.g. access control units, CCTV equipment,
magnetic lock sets, internal intercoms, electric lock sets,
etc.)
(2) Computer Room raised flooring.
(3) Liebert air conditioning units for Computer Room.
(4) Motor generator set.
(5) Halon fire extinguishing systems.
(6) Uninterrupted Power Supplies.
(7) Life Safety/Fire Control Panel.
(8) Telephone switching units.
(9) Air compressor units to support operations.
(10) Specialized air conditioning units (localized small self
contained units - not roof units).
- 3 -
<PAGE> 24
EXHIBIT "A"
Approximately 49,944 square feet of office/warehouse space in a 49,944
square foot masonry and steel office/warehouse building located in Land Lot 273
of the 6th District of Gwinnett County, Georgia; being more commonly known as
5923 Peachtree Industrial Boulevard, Norcross, Georgia 30092.
A - 1
<PAGE> 25
LEASE EXTENSION AND MODIFICATION AGREEMENT
THIS LEASE EXTENSION AND MODIFICATION AGREEMENT made and entered into
this 17th day of June, 1996, by and between PEACHTREE CROSSINGS BUSINESS PARK
ASSOCIATES (hereinafter referred to as "Landlord") and HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia Corporation (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, by Lease Agreement dated July 27, 1990 attached hereto as
Exhibit "A" and made a part hereof, Landlord leased to Tenant certain premises
(the "Premises") comprised of 49,944 square feet situated at 5923 Peachtree
Industrial Boulevard, Norcross, Georgia 30092; and
NOW, THEREFORE, in consideration of the mutual promises given one to
the other, the parties hereto intending to be legally bound, do hereby covenant
and agree as follows:
1. Said Lease Agreement attached hereto as Exhibit "A" and made a
part hereof, dated July 27, 1990, is hereby extended for an
additional term of thirty-six (36) months commencing January
1, 1997 and expiring December 31, 1999.
2. Tenant's base monthly rental beginning January 1, 1997 shall
be Twenty-Nine Thousand One Hundred Thirty-Four and No/100
Dollars ($29,134.00) per month.
3. Paragraphs #32 and #36 of the original Lease dated July 27,
1990 shall be null and void.
4. Except as herein modified and extended, all terms and
conditions of the Lease Agreement attached hereto as Exhibit
"A" and made a part hereof, dated July 27, 1990 shall remain
in full force and effect.
5. The word "Landlord" herein shall be construed to include the
said Landlord, its successors and assigns and the word
"Tenant" shall be construed to include the said Tenant, its
successors and assigns.
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Amendment to Lease in
quadruplicate the day and year first written above.
WITNESS PEACHTREE CROSSINGS BUSINESS
PARK ASSOCIATES
/s/
- ----------------------------
By: Trammell Crow Asset Management, Inc.
Its: Agent
By: /s/
-----------------------------------------
Title: SVP
WITNESS HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation
/s/ Kim Gallagher By: /s/ Dennis C. Hayes
- ---------------------------- -----------------------------------------
Title: Chairman
- 2 -
<PAGE> 27
SECOND LEASE EXTENSION AND MODIFICATION AGREEMENT
THIS SECOND LEASE EXTENSION AND MODIFICATION AGREEMENT made and entered
into this 26th day of June, 1997, by and between PEACHTREE CROSSINGS BUSINESS
PARK ASSOCIATES (hereinafter referred to as "Landlord") and HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia Corporation (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, by Lease Agreement dated July 27, 1990 and Lease Modification
and Extension Agreement dated June 17, 1996, attached hereto as Exhibit "A" and
made a part hereof, Landlord leased to Tenant certain premises (hereinafter
referred to as the "Premises") situated at 5923 Peachtree Industrial Boulevard,
Norcross, Georgia 30092 containing 49,944 square feet; and
NOW, THEREFORE, in consideration of the mutual promises given one to the
other, the parties hereto intending to be legally bound, do hereby covenant and
agree as follows:
1. Said Lease Agreement dated July 27, 1990 and Lease Modification and
Extension Agreement dated June 17, 1996 attached hereto as Exhibit "A" and made
part hereof, is hereby extended for an additional nine (9) months commencing
January 1, 2000 and expiring September 30, 2000 (the "Extension Period").
2. Tenant's Base Monthly rental during the Extension Period shall be
Twenty-Nine Thousand One Hundred Thirty-Four and No/100 Dollars ($29,134.00) per
month.
3. Except as herein modified and extended, all terms and conditions of
the Lease Agreement, dated July 27, 1990 and Lease Extension and Modification
Agreement dated June 17, 1996, attached hereto as Exhibit "A" and made part
hereof, shall remain in full force and effect.
4. The word "Landlord" herein shall be construed to include the said
Landlord, its successors and assigns and the word "Tenant" shall be construed to
include the said Tenant, its successors and assigns.
5. This Agreement shall be binding upon and inure to the benefit of the
parties, their respective heirs, successors and assigns.
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Amendment to Lease in
quadruplicate the day and year first written above.
WITNESS HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation
/s/ Kim Gallagher By: /s/ Dennis C. Hayes
- ---------------------------- ---------------------------------------
Title: Chairman
WITNESS: PEACHTREE CROSSINGS BUSINESS PARK ASSOCIATES
/s/ Susan Gist By: Essex Real Estate Investors, L.P., its
- ---------------------------- general partner
By: Essex Real Estate Investors, Inc.
By: /s/
----------------------------------------
Title: President
- 2 -
<PAGE> 1
EXHIBIT 10.41
40,420 Square Feet
5953 Peachtree Industrial Boulevard
Norcross, Georgia 30092
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between PEACHTREE
CROSSINGS BUSINESS PARK ASSOCIATES hereinafter referred to as "Landlord" and
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation, hereinafter referred
to as "Tenant."
W I T N E S E T H
1. Premises and Term. In consideration of the obligation of Tenant to
pay rent as herein provided, and in consideration of the other terms, provisions
and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from landlord certain premises situated within the
County of Gwinnett, State of Georgia, more particularly described on Exhibit "A"
attached hereto and incorporated herein by reference, together with all rights,
privileges, easements, appurtenances, and immunities belonging to or in any way
pertaining to the premises and together with the buildings and other
improvements situated or to be situated upon said premises (said real property,
building and improvements being hereinafter referred to as the "premises.")
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date," as hereinafter defined, and ending on the last day of the month that is
sixty (60) months after the commencement date.
A. The "commencement date" shall be January 1, 1991, and ending
December 31, 1995. Tenant acknowledges that it has inspected and accepts the
premises, and specifically the buildings and improvements comprising the same,
in their present condition, as suitable for the purpose for which the premises
are leased. Taking of possession by Tenant shall be deemed conclusively to
establish that said buildings and other improvements are in good and
satisfactory condition as of when possession was taken. Tenant further
acknowledges that no representations as to the repair of the premises, nor
promises to alter, remodel or improve the premises have been made by Landlord,
unless such are expressly set forth in this lease. After the commencement date
the Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the premises.
B. Omitted.
2. Base Rent and Security Deposit. See Additional Provision #29.
A. Omitted.
<PAGE> 2
B. In addition, Tenant has deposited with Landlord on the date hereof
the sum of ZERO AND NO/100 DOLLARS ($0), which sum shall be held by Landlord,
without obligation for interest, as security for the performance of Tenant's
covenants and obligations under this lease, it being expressly understood and
agreed that such deposit is not an advance rental deposit or a measure of
Landlord's damages in case of Tenant's default. Upon the occurrence of any event
of default by Tenant, Landlord may, from time to time, without prejudice to any
other remedy provided herein or provided by law, use such fund to the extent
necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by such
event of default, and Tenant shall pay to Landlord on demand the amount so
applied in order to restore the security deposit to its original amount.
Although the security deposit shall be deemed the property of Landlord, any
remaining balance of such deposit shall be returned by Landlord to Tenant at
such time after termination of this lease that all of Tenant's obligations under
this lease have been fulfilled.
3. Use. The demised premises shall be used only for the purpose of
general office, receiving, storing, manufacturing, repairing, shipping and
selling (other than retail) products, materials and merchandise made and/or
distributed by Tenant and for such other lawful purposes as may be incidental
thereto, and subject to any building or building complex rules and regulations
which shall not impair Tenant's use of the premises. Outside storage, including
without limitation, trucks and other vehicles, is prohibited without Landlord's
prior written consent. Tenant shall at its own cost and expense obtain any and
all licenses and permits necessary for any such use. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the use of the
premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with the premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
building in which their premises are situated or unreasonably interfere with
their use of their respective premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly flammable. Tenant will not
permit the premises to be used for any purpose or in any manner, including,
without limitation, any method of storage which would render the insurance
thereon void or the insurance risk more hazardous or cause the State Board of
insurance or other insurance authority to disallow any sprinkler credits. If any
increase in the fire and extended coverage insurance premiums paid by Landlord
or other tenants for the building in which Tenant occupies space is caused by
Tenant's use and occupancy of the premises, or if Tenant vacates the premises
and causes an increase in such premiums, then Tenant shall pay as additional
rental the amount of such increase to Landlord.
Tenant agrees that the point pressure resulting from Tenant's racking
system, inventory, forklifts and equipment pertaining to Tenant's use of the
premises shall not exceed allowable design floor loading for floor slabs on
grade. Tenant shall hold harmless Landlord from any loss, liability, and
expenses, both real and alleged, arising out of such damage or repair caused by
Tenant's negligence or failure to comply with this paragraph.
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<PAGE> 3
4. Taxes.
A. Landlord agrees to pay before they become delinquent all taxes,
assessments and governmental charges of any kind and nature whatsoever
thereinafter collectively referred to as "taxes" lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys around
the building; provided, however, that the maximum amount of taxes to be paid by
Landlord hereunder during any one real estate tax year shall be ZERO AND NO/100
DOLLARS ($0.00). If in any real estate tax year during the term hereof or any
renewal or extension the taxes levied or assessed against the building and the
grounds, parking areas, driveways and alleys around the building during such tax
year shall exceed the sum set forth in the preceding sentence, Tenant shall pay
to Landlord as additional rental, upon demand, the amount of such excess. In the
event any such amount is not paid within twenty (20) days after the date of
Landlord's invoice to Tenant, the unpaid amount shall bear interest at the rate
of twenty (20%) percent per annum from the date of such invoice until payment by
Tenant. In the event the premises constitute a portion of a multiple occupancy
building, Tenant agrees to pay to Landlord as additional rental, upon demand,
the amount of Tenant's "proportionate share" (as defined in subparagraph 27B) of
the excess taxes referred to in this subparagraph above.
B. If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments, or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based shall be deemed to be included within
the term "taxes" for the purposes hereof.
C. The Landlord shall have the right to engage a tax consulting firm to
attempt to assure a fair tax burden for the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand, from
time to time, as additional rent, the amount of Tenant's proportionate share of
the cost of such service.
D. Any payment to be made pursuant to this Paragraph 4 with respect to
the real estate tax year in which this lease commences or terminates shall be
prorated.
5. Landlord's Repairs and Obligations. Landlord shall at his expense
maintain only the roof, foundation and the structural soundness of the exterior
walls of the building in good repair, reasonable wear and tear excepted. Tenant
shall repair and pay for any damage caused by the negligence of Tenant, or
Tenant's employees, agents or invitees, or caused by Tenant's default hereunder.
The term "walls' as used herein shall not include windows, glass or plate glass,
doors, store fronts or office entries. Tenant shall immediately give Landlord
written notice of defect or need for repairs, after which Landlord shall have
reasonable opportunity to repair same or cure such defect. Landlord's liability
with respect to any defects, repairs or maintenance for which Landlord
-3-
<PAGE> 4
is responsible under any of the provisions of this lease shall be limited to the
cost of such repairs or maintenance or the curing of such defect.
6. Tenant's Repairs and Obligations.
A. Tenant shall at its own cost and expense keep and maintain all parts
of the premises (except those for which Landlord is expressly responsible under
the terms of this lease) in good condition, promptly making all necessary
repairs, repainting, and replacements, including but not limited to, windows,
glass and plate glass, doors, any office entries, interior walls and finish
work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems, dock boards, truck doors, dock bumpers, paving, plumbing
work and fixtures, termites and pest extermination, regular removal of trash and
debris, grounds maintenance, common sewage line plumbing, common exterior
lighting (if applicable), common dumpster removal (if applicable) and other
obligations of the building, including, but not limited to, keeping the parking
areas, driveways, alleys and the whole of the premises in a clean and sanitary
condition. Tenant shall not be obligated to repair any damage caused by fire,
tornado or other casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 12A below, except that Tenant shall be obligated to
repair all wind damage to glass except with respect to tornado or hurricane
damage.
B. The cost of maintenance and repair of any common party walls (any
wall, divider, partition or any other structure separating the premises from any
adjacent premises) shall be shared equally by Tenant and the tenant or tenants
occupying adjacent premises. Tenant shall not damage any demising wall or
disturb the integrity and support provided by any demising wall and shall, at
its sole cost and expense, promptly repair any damage or injury to any demising
wall caused by Tenant or its employees, agents or invitees.
C. In the event the premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers and licensees shall have
the exclusive right to use the parking areas, if any, as may be designated by
Landlord in writing, subject to such reasonable rules and regulations as
Landlord may from time to time prescribe and subject to rights of ingress and
egress of other tenants. Landlord shall not be responsible for enforcing
Tenant's exclusive parking rights against any third parties. Parking spaces have
been provided in accordance with applicable local building codes and anticipated
needs of tenants. Tenant agrees not to use more than its proportionate share as
so provided.
D. Landlord reserves the right to perform and provide all of Tenant's
repairs and obligations under subparagraph 6A above, and Tenant shall, in lieu
of the obligations set forth under subparagraph 6A above with respect to such
items, pay monthly as additional rent due under Paragraph 2A for its
proportionate share of the cost and expense, including overhead, for those
items; provided, however, that Landlord shall have the right to require Tenant
to pay such other reasonable proportions of said repairs and obligations as may
be determined by Landlord in its sole discretion; and further provided that if
Tenant or any other particular tenant of the building can be clearly identified
as being responsible for obstructions or stoppage of the common sanitary sewage
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<PAGE> 5
line, then Tenant, if Tenant is responsible, shall pay the entire cost thereof,
upon demand, as additional rent.
E. Omitted.
F. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
and the contract must be approved by Landlord. The service contract must include
all services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes
possession of the premises.
7. Alterations. Tenant shall not make any alterations, additions or
improvements to the premises (including, but not limited to, roof and wall
penetrations) without the prior written consent of Landlord. Such consent will
not be denied provided the improvements are building standard office/warehouse
finishes. In the event Landlord consents to the making of any such alterations,
additions or improvements by Tenant, the same shall be made by Tenant, at
Tenant's sole cost and expense, in accordance with all applicable laws,
ordinances and regulations, and all requirements of Landlord's and Tenant's
insurance policies and only in accordance with plans and specifications approved
by Landlord; and any contractor or person selected by Tenant to make the same
and all subcontractors must first be approved in writing by Landlord. Tenant
may, without the consent of Landlord, but at its own cost and expense and in a
good workmanlike manner erect such shelves, bins, machinery and trade fixtures
as it may deem advisable, without altering the basic character of the building
or improvements and without overloading or damaging such building or
improvements, and in each case complying with all applicable governmental laws,
ordinances, regulations and other requirements. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this lease and Tenant shall, unless Landlord
otherwise elects as hereinafter provided, remove all alterations, additions,
improvements and partitions erected by Tenant and restore the premises to their
original condition by the date of termination of this lease or upon earlier
vacating of the premises; provided, however, that if Landlord so elects prior to
termination of this lease or upon earlier vacating of the premises, such
alterations, additions, improvements and partitions shall become the property of
Landlord as of the date of termination of this lease or upon earlier vacating of
the premises and shall be delivered up to the Landlord with the premises. All
shelves, bins, machinery and trade fixtures installed by Tenant may be removed
by Tenant prior to the termination of this lease if Tenant so elects, and shall
be removed by the date of termination of this lease or upon earlier vacating of
the premises if required by Landlord; upon any such removal Tenant shall restore
the premises to their original condition with consideration for normal wear and
tear. All such removals and restoration shall be accomplished in a good
workmanlike manner so as not to damage the primary structure or structural
qualities of the building and other improvements situated on the premises.
8. Signs. Tenant agrees to conform to Landlord's signage program for
the building; however, all costs and expense of the sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall only have the right to
install standard signs upon the premises where first approved in writing by
Landlord and subject to any applicable governmental laws, ordinances,
-5-
<PAGE> 6
regulations and other requirements. Tenant shall remove all signs prior to the
termination of this lease. Such installations and removals shall be made in such
a manner as to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury or defacement, including,
without limitation, discoloration caused by installation and/or removal.
9. Inspection and Right of Entry. Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any time in the
event of an emergency and to enter and inspect the premises at any reasonable
time during business hours, for the purpose of ascertaining the condition of the
premises in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this lease. During the period that is six
(6) months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall arrange to meet with Landlord for a joint inspection
of the premises prior to vacating. In the event of Tenant's failure to arrange
such joint inspection, Landlord's inspection at or after Tenant's vacating the
premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide at its cost water,
electricity and gas (when applicable) service connections into the premises; but
Tenant shall pay for all water, gas, heat, light, power, telephone, sewer,
sprinkler charges and other utilities and services used on or from the premises,
together with any taxes, penalties, surcharges or the like pertaining thereto
and any maintenance charges for utilities and shall furnish all electric light
bulbs and tubes. If any such services are not separately metered to Tenant,
Tenant shall pay a reasonable proportion as determined by Landlord of all
charges jointly metered with other premises, provided, however, Landlord shall
have the right to require Tenant to pay such other reasonable proportion of said
jointly metered charges as may be determined by Landlord in its sole discretion.
Landlord shall in no event by liable for any interruption or failure of utility
services on the premises.
11. Assignment and Subletting.
A. Tenant shall not have the right to assign, sublet, transfer or
encumber this lease, or any interest therein, without the prior written consent
of Landlord. Any attempted assignment, subletting, transfer or encumbrance by
Tenant in violation of the terms and covenants of this Paragraph shall be void.
All cash or other proceeds of any assignment, such proceeds as exceed the
rentals called for hereunder in the case of a subletting and all cash or other
proceeds of any other transfer of Tenant's interest in this lease shall be paid
to Landlord, whether such assignment, subletting or other transfer is consented
to by Landlord or not, unless Landlord agrees to the contrary in writing, and
Tenant hereby assigns all rights it might have or ever acquire in any such
proceeds to Landlord. Any assignment, subletting or other transfer of Tenant's
interest in this lease shall be for an amount equal to the then fair market
value of such interest. These covenants shall run with the land and shall bind
Tenant and Tenant's heirs, executors, administrators, personal representatives,
representatives in any bankruptcy proceeding, successors and assigns. any
assignee, sublessee or transferee of Tenant's interest in this lease (all such
assignees, sublessees and
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<PAGE> 7
transferees being hereinafter referred to as "successors"), by assuming Tenant's
obligations hereunder shall assume liability to Landlord for all amounts paid to
persons other than Landlord by such successors in contravention of this
Paragraph. No assignments, subletting or other transfer, whether consented to by
Landlord or not, shall relieve Tenant of its liability hereunder. Upon the
occurrence of an "event of default" as hereinafter defined, if the premises or
any part thereof are then assigned or sublet, Landlord, in addition to any other
remedies herein provided, or provided by law, may at its option collect directly
form such assignee or subtenant all rents becoming due to Tenant under such
assignment or sublease and apply such rent against any sums due to Landlord from
Tenant hereunder, and no such collection shall be construed to constitute a
novation or a release of Tenant from the further performance of Tenant's
obligations hereunder.
B. If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. ss. 101, et seq. (the "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and promptly
paid or delivered to Landlord.
C. Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain insurance covering the building of
which the premises are a part (including building standard office/warehouse
finishes which are constructed by Tenant) in an amount not less than eighty
percent (80%) (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the replacement costs
thereof, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other regulatory authority for the state in
which the premises are situated for use by insurance companies admitted in such
state for the writing of such insurance on risks located within such state.
Subject to the provisions of subparagraphs 12C, 12D and 12E below, such
insurance shall be for the sole benefit of Landlord and under its sole control.
If, during the second calendar year after the commencement date of this lease,
or during any subsequent calendar year of the primary term or any renewal or
extension, Landlord's cost of maintaining such insurance shall exceed Landlord's
cost of maintaining such insurance for the first calendar year or the term
hereof, Tenant agrees to pay to Landlord, as additional rental, the amount of
such excess not to exceed $2,425.00 per year (or in the event the premises
constitute a portion of a multiple occupancy building, Tenant's full
proportionate share of such excess). The first calendar year shall be the year
in which the lease commences. Said payments shall be made to Landlord within ten
(10) days after presentation to Tenant of Landlord's
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<PAGE> 8
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph A with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
lease bears to a full year.
B. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's reasonable estimation be
completed within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, this lease shall terminate and
the rent shall be abated during the unexpired portion of this lease, effective
upon the date of the occurrence of such damage.
D. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph 12A
above, but only to such extent that rebuilding or repairs can in Landlord's
reasonable estimation be completed within one hundred twenty (120) days after
the date upon which Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the premises by Tenant and except that Landlord may elect
not to rebuild if such damage occurs during the last year of the term of the
lease exclusive of any option which is unexercised at the time of such damage.
If the premises are untenantable in whole or in part following such damage, the
rent payable hereunder during the period in which they are untenantable shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord should fail to complete such repairs
and rebuilding within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may at its option
terminate this lease by delivering written notice of termination to Landlord as
Tenant's exclusive remedy, whereupon all rights and obligations hereunder shall
cease and terminate.
E. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.
F. Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any other perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
other party may be responsible. Each of the Landlord and Tenant agrees that
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it will request its insurance carriers to include in its policies such a clause
or endorsement. If extra cost shall be charged therefore, each party shall
advise the other thereof and of the amount of the extra cost, and the other
party, at its election, may pay the same, but it shall not be obligated to do
so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employee or any other person entering upon the premises,
or caused by the buildings and improvements located on the premises becoming out
of repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold safe and
harmless the property, the Landlord (including without limitation the trustee
and beneficiaries if Landlord is a trust). landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, arising out of
any such damage or injury, except injury to persons or damage to property the
cause of which is the negligence of Landlord or the failure of Landlord to
repair any part of the premises which Landlord is obligated to repair and
maintain hereunder within a reasonable time after the receipt of written notice
from Tenant of needed repairs. Tenant shall procure and maintain throughout the
term of this lease a policy or policies of insurance, at its sole cost and
expense, insuring both Landlord and Tenant against all claims, demands or
actions arising out of or in connection with: (i) the premises; (ii) the
condition of the premises; (iii) Tenant operations in and maintenance and use of
the premises; and (iv) Tenant's liability assumed under this lease, the limits
of such policy or policies to be in the amount of not less than $1,000,000.00
per occurrence in respect to injury to persons (including death), and in the
amount of not less than $100,000 per occurrence in respect to property damage or
destruction, including loss of use thereof. All such policies shall be procured
by Tenant from responsible insurance companies satisfactory to Landlord.
Certificates evidencing such policies, together with receipt evidencing payment
of premiums therefor, shall be delivered to Landlord prior to the commencement
date of this lease. Not less than fifteen (15) days prior to the expiration date
of any such policies, certificates evidencing the renewals thereof (bearing
notations evidencing the payment of renewal premiums) shall be delivered to
Landlord. Such policies shall further provide that not less than thirty (30)
days written notice shall be given to Landlord before such policy may be
cancelled or changed to reduce insurance provided thereby.
14. Condemnation.
A. If the whole or any substantial part of the premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of the
premises for the purposes for which they are being used, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective when the physical taking of said premises shall occur.
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B. If part of the premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this lease
is not terminated as provided in the subparagraph above, this lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
C. All compensation awarded for any taking (or the proceeds of private
sale in lieu thereof) of the premises, buildings or other improvements, or any
part thereof, shall be the property of Landlord and Tenant hereby assigns its
interest in any such award to Landlord; provided, however, Landlord shall have
no interest in any award made to Tenant for loss of business or for the taking
of Tenant's fixtures and improvements if a separate award for such items is made
to Tenant.
15. Holding Over. Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than five (5) days advance
written notice, or by Tenant at any time upon not less than thirty (30) days
advance written notice, and all of the other terms and provisions of this lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to double the rent in effect on the termination date, computed on a
daily basis for each day of the hold over period. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this lease
except as otherwise expressly provided. The preceding provisions of this
paragraph 15 shall not be construed as consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has good title to
the premises, free and clear of all liens and encumbrances, excepting only the
lien for current taxes not yet due, such mortgage or mortgages as are permitted
by the terms of this lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of such property,
and easements, restrictions and other conditions of record. Landlord represents
and warrants that it has full right and authority to enter into this lease and
that Tenant, upon paying the rental herein set forth and performing its other
covenants and agreements herein set forth, shall peaceably and quietly have,
hold and enjoy the premises for the term hereof without hindrance or molestation
from Landlord, subject to the terms and provisions of this lease.
17. Events of Default. The following events shall be deemed to be
events of default by Tenant under this lease:
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10) days
from the date such payment was due.
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B. Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
creditors, or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or of any substantial part of its property,
or Tenant or any such guarantor shall take any action to authorize or in
contemplation of any of the actions set forth above in this paragraph, or
C. Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
an order for relief entered against it as debtor or to adjudicate it as bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
D. A receiver to trustee shall be appointed for all or substantially
all of the assets of Tenant.
E. Tenant shall desert or vacate any substantial portion of the
premises.
F. Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 22 hereof within twenty (20) days after any such lien or
encumbrance is filed against the premises.
G. Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 17), and shall not cure
or commence to cure and diligently pursue to completion such failure within
twenty (20) days after written notice thereof to Tenant.
H. Tenant shall fail to continuously operate its business at the
premises for the permitted use set forth in Paragraph 3 whether or not Tenant is
in default of the rental payments due under this lease.
18. Remedies.
A. Upon the occurrence of any of such events of default described in
Paragraph 17 hereof, Landlord shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever:
(1) Terminate this lease, in which event Tenant shall
immediately surrender the premises to Landlord, and if
Tenant fails so to do, Landlord may, without prejudice
to any other remedy which it may have for possession or
arrearage
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in rent, enter upon and take possession of the premises
and expel or remove Tenant and any other person who may
be occupying such premises or any part thereof, by force
it necessary, without being liable for prosecution or
any claim of damage therefore.
(2) Enter upon and take possession of the premises and expel
or remove Tenant and any other person who may be
occupying such premises or any part thereof, by force if
necessary, without being liable for prosecution or any
claim for damages therefore.
(3) Enter upon the Premises, by force if necessary, without
being liable for prosecution or any claim for damages
therefore, and do whatever Tenant is obligated to do
under the terms of this lease; and Tenant agrees to
reimburse Landlord on demand for any expenses which
Landlord may incur in thus effecting the compliance with
Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for any
damages resulting to the Tenant from such action,
whether caused by the negligence of Landlord or
otherwise.
(4) Alter all locks and other security devices at the
premises without terminating this lease.
B. In the event Landlord may elect to regain possession of the premises
by a forcible detainer proceeding, Tenant hereby specifically waives any
statutory notice which may be required prior to such proceeding, and agrees that
Landlord's execution of this lease is, in part, consideration of this waiver.
C. In the event Tenant fails to pay any installment of rent hereunder
as and when such installment is due, to help defray the additional cost to
Landlord for processing such late payments Tenant shall pay to Landlord on
demand a late charge in an amount equal to five (5%) percent of such
installment; and the failure to pay such amount within five (5) days after
demand therefore shall be an event of default hereunder. The provision for such
late charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
D. In the event Tenant's check, given to Landlord in payment, is
returned by the bank for non-payment, Tenant agrees to pay all expenses incurred
by Landlord as a result thereof.
E. Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance or surrender of
the premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No such alteration of locks or other security devices and
no removal or other exercise of dominion by Landlord over the property of Tenant
or others at the premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby
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consenting, after any event of default, to the aforesaid exercise of dominion
over Tenant's property within the premises. All claims for damages by reason of
such re-entry and/or repossession and/or alteration of locks or other security
devices are hereby waived, as are all claims for damages by reason of any
distress warrant, forcible detainer proceedings, sequestration proceedings or
other legal process. Tenant agrees that any re-entry by Landlord may be pursuant
to judgment obtained in forcible detainer proceedings or other legal proceedings
or without the necessity for any legal proceedings, as Landlord may elect, and
Landlord shall not be liable for trespass or otherwise.
F. Omitted.
G. In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant, at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Paragraph 1 diminished by
any net sums thereafter received by Landlord through reletting the premises
during said period (after deducting expenses incurred by Landlord as provided in
subparagraph 18H below). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
H. In case of any event of default or breach by Tenant, or threatened
or anticipatory breach or default, Tenant shall also be liable for and shall pay
to Landlord, at the address specified for notice to Landlord herein, in addition
to any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the premises into condition
acceptable to a new tenant or tenants, and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
I. In the event of termination or repossession of the premises for an
event of default, Landlord shall not have any obligation to relet or to attempt
to relet the premises, or any portion thereof; and in the event of reletting,
Landlord may relet the whole or any portion of the premises for any period to
any tenant and for any use and purpose.
J. If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
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K. In the event that Landlord shall have taken possession of the
premises pursuant to the authority herein granted then Landlord shall have the
right to keep in place and use all of the furniture, fixtures and equipment at
the premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. Landlord shall also have
the right to remove from the premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any premises within the County in which
the premises is located; and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal and storage.
Landlord shall also have the right to relinquish possession of all or any
portion of such furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or any predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which Claimant purports to act; and Tenant agrees to indemnity
and hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. The rights of
Landlord herein stated shall be in addition to any and all other rights which
Landlord has or may hereafter have at law or in equity; and Tenant stipulates
and agrees that the rights herein granted Landlord are commercially reasonable.
L. Notwithstanding anything in this lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this lease, whether or not
expressly denominated as rent, shall constitute rent for the purposes of the
Bankruptcy Code, 11 U.S.C. ss.502(b)(7).
M. This is a contract under which applicable law excuses Landlord from
accepting performance from or rendering performance to any person or entity
other than Tenant within the meaning of the Bankruptcy Code, 11 U.S.C.
ss.365(c), 365(e)(2).
N. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all monies or other
considerations constituting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the benefit of Landlord
and be promptly paid or delivered to Landlord.
O. Any person or entity to which this lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or deed,
to have assumed all of the
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obligations arising under this Lease on and after the date of such assignment.
Any such assignee shall upon demand execute and deliver to Landlord an
instrument confirming such assumption.
19. Omitted.
20. Mortgages. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the premises or the improvements situated thereon, provided
however, that if the mortgagee, trustee, or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this lease shall be deemed superior to such lien, whether this lease was
executed before or after said mortgage or deed of trust. Tenant shall at any
time hereafter on demand execute any instruments, releases or other documents
which may be required by any mortgagee for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage.
21. Landlord's Default. In the event Landlord should become in default
in any payments due on any such mortgage described in Paragraph 20 hereof or in
the payment of taxes or any other items which might become a lien upon the
premises and which Tenant is not obligated to pay under the terms and provisions
of this lease, Tenant is authorized and empowered after giving Landlord five (5)
days prior written notice of such default and Landlord's failure to cure such
default, to pay any such items for and on behalf of Landlord, and the amount of
any item so paid by Tenant for or on behalf of Landlord, together with any
interest or penalty required to be paid in connection therewith, shall be
payable on demand by Landlord to Tenant; provided however, that Tenant shall not
be authorized and empowered to make any payment under the terms of this
Paragraph 21 unless the item paid shall be superior to Tenant's interest
hereunder. In the event Tenant pays any mortgage debt in full, in accordance
with this paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
22. Mechanics Liens and Other Taxes.
A. Tenant shall have no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind the interests of Landlord in the premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the premises or under the terms
of this lease. Tenant agrees to give Landlord immediate written notice if any
lien or encumbrance is placed on the premises.
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B. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
23. Omitted.
24. Certain Rights Reserved to Landlord. Landlord reserves and may
exercise the following rights without affecting Tenant's obligations hereunder:
(a) to change the name, street address, or suite numbers of the building; (b) to
install or maintain a sign or signs on the exterior of the building.
25. Notices. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligations to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
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LANDLORD: TENANT:
PEACHTREE CROSSINGS BUSINESS HAYES MICROCOMPUTER PRODUCTS,
PARK ASSOCIATES INC., a Georgia Corporation
c/o Trammell Crow Company P. O. Box 105203
1575 Northside Drive, N.W. Atlanta, Georgia 30348
Building 100, Suite 200 Attention: President
Atlanta, Georgia 30318
If and when included within the term "Landlord," as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant," as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant," respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
26. Hazardous Waste. The term "Hazardous Substances," as used in this
lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any
other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law or ordinance relating to pollution or
protection of the environment. Tenant hereby agrees that (i) no activity will be
conducted on the premises that will produce any Hazardous Substance, except for
such activities that are part of the ordinary course of Tenant's business
activities that are part of the ordinary course of Tenant's business (the
"Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Landlord; (ii) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Landlord; (iii) no portion of the premises will be used as a landfill
or a dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute, a public
or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be
brought onto the premises, except for the Permitted Materials described below,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. If, at any time during
or after the term of the lease, the premises is found to be so contaminated or
subject to said conditions, Tenant agrees to indemnify and hold Landlord
harmless from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from or as a result
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of the use of the premises by Tenant. The foregoing indemnification shall
survive the termination or expiration of this lease.
27. Miscellaneous.
A. Words of any gender used in this lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. In the event the premises constitutes a portion of a multiple
occupancy building or building complex, Tenant's "proportionate share," as used
in this lease, shall mean a fraction, the numerator of which is the space
contained in the premises and the denominator of which is the entire space
contained in the building or building complex.
C. The terms, provisions and covenants and conditions contained in
this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this lease. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this lease.
D. The captions inserted in this lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
E. Tenant agrees from time to time within ten (10) days after request
of Landlord, to deliver to Landlord, or Landlord's designee a certificate of
occupancy (if applicable) to an estoppel certificate stating that this lease is
in full force and effect, the date to which rent has been paid, the unexpired
term of this lease and such other matters pertaining to this lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
premises, Tenant shall pay to Landlord any amount reasonably as necessary to put
the premises, including without limitation all heating and air conditioning
systems and equipment therein, in good condition and repair. Tenant shall also,
prior to vacating the premises, pay to Landlord the amount of Tenant's
obligation hereunder for real estate
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taxes and insurance premiums for the year in which the lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefore upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Subparagraph 27G.
H. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this lease.
K. Time is of the essence of this lease and all of its provisions.
This lease in all respect shall be governed by the laws of the State of Georgia.
L. No animals shall be brought into or kept in or about the building.
M. Tenant agrees to comply with subdivision regulations, protective
covenants, or other restrictions of record that are applicable to the building
or building complex.
N. The duties and obligations of Tenant herein shall be binding upon
all or any of them. The duties and obligations of Tenant shall run and extend
not only to the benefit of the Landlord, as named herein, but to the following,
at the option of the following or any of them (i) any person by, through or
under which Landlord derives the right to lease the premises; (ii) the owner of
the premises; and (ii) holders of mortgage or rent assignment interests in the
premises, as their respective interests may appear; provided, however, nothing
contained herein shall be construed to obligate Tenant to pay rent to any person
other than the Landlord until such time as Tenant has been given written notice
of either an exercise of a rent assignment or the succession of some other party
to the interests of Landlord.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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<PAGE> 20
28. Additional Provisions. See Additional Provisions Paragraphs 29
through 38 attached hereto and made a part hereof as if fully incorporated
herein and when in conflict with the printed portion of this lease, said
Additional Provisions shall prevail.
EXECUTED BY LANDLORD, this 27th day of July, 1990.
PEACHTREE CROSSINGS BUSINESS
Attest/Witness PARK ASSOCIATES
/s/ R. Dave Wood By: Crow-C #3 Limited Partnership
- -----------------------------------
Title: Marketing Principal
By:/s/
------------------------------------
Title: Agent
Executed by Tenant this 27th day of July, 1990.
Attest/Witness HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia corporation
/s/ Kim Gallagher
- -----------------------------------
By:/s/ Dennis C. Hayes
------------------------------------
Title: Supervisor - Contracts
Administration Title: President
-20-
<PAGE> 21
ADDITIONAL PROVISIONS
29. Tenant agrees to pay to Landlord rent for the premises, in advance,
without demand, deduction or set off, for the entire term hereof the following
base monthly rentals:
(a) For each the first six (6) months of the term of this lease:
$0.00 per month.
(b) For each of months seven (7) through nineteen (19) of the term
of this lease: $10,115.00 per month.
(c) For each of months twenty (20) through forty-three (43) of the
term of this lease: $11,799.00 per month.
(d) For each of months forty-four (44) through fifty-five (55) of
the term of this lease: $12,069.00 per month.
(e) For each of months fifty-six (56) through sixty (60) of the term
of this Lease: $13,483.00 per month.
30. Tenant expressly agrees that the obligations incurred by Landlord
shall not constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, stockholders, or other principals or
representatives of the Landlord. Tenant further agrees that it shall have
recourse against Landlord only to the extent of Landlord's assets for the
satisfaction of the obligations of the Landlord created under this Lease, and
not against the assets of such entity's officers, directors, trustees, partners,
joint venturers, members, stockholders, principals or representatives.
31. Landlord covenants and agrees that if Tenant shall desert, vacate
or abandon the leased premises prior to the expiration or early termination of
the Lease Agreement, Landlord shall use reasonable efforts to lease the leased
premises to another Tenant.
32. While this Lease is in full force and effect, provided Tenant is
not in default of the terms, covenants and conditions thereof, Tenant shall have
the sole right or option to extend the original term of this Lease Agreement for
a further consecutive term of twelve (12) months. Such extension or renewal of
the original term shall be on the same terms, covenants and conditions as
provided in the original term with the rent at the current rate at the time of
option. Notice of Tenant's intention to exercise this right or option must be
given in writing to Landlord on or before July 1, 1995, or the option contained
in this provision shall become null and void and of no effect. The right of
option to extend the original term of this Lease Agreement provided to Tenant
herein shall be for the exclusive benefit of the Tenant and shall terminate upon
the subletting of all or any part of the premises or assignment of this Lease.
<PAGE> 22
ADDITIONAL PROVISIONS CONT.
33. Notwithstanding any terms or provisions of this Lease which may be
construed to the contrary, Landlord and Tenant agree that Landlord will conduct
common area maintenance on the premises and grounds around the premises. Said
common area maintenance will include, but not be limited to, fire sprinkler
water charges, irrigation, lawn maintenance, security patrol and outside light
maintenance. The cost of said common area maintenance will be paid on a monthly
basis by Tenant and will amount to approximately SEVEN HUNDRED FIFTY-SIXTY AND
NO/100 DOLLARS ($756.00) per month. Landlord agrees that the monthly amount paid
by Tenant shall be capped at a compounded rate of ten percent (10%) per annum.
However, in the event Landlord elects to discontinue services or elects to
provide additional services as may be necessary under Paragraph 6 of this lease,
the monthly common area maintenance charge will be adjusted to reflect the
change in services provided.
34. Landlord hereby covenants and agrees to use reasonable efforts to
cause any holder of a deed to secure debt or mortgage now or at any time
hereafter constituting a lien or charge upon the premises or the improvements
situated thereon to enter into a non-disturbance agreement pursuant to which
such holder shall agree that if it shall acquire the ownership of the premises
or the improvements situated thereon through the exercise of a power of sale or
other remedy provided for in such deed to secure debt or mortgage, it shall
permit Tenant to remain in possession of the premises in accordance with the
terms and provisions of this lease, provided that Tenant shall continue to
perform its duties and obligations hereunder.
35. Landlord and Tenant shall each provide the other with certificates
evidencing the issuance of all policies of insurance required to be maintained
by them under the terms and provisions of this Lease. Such certificates shall be
so provided prior to the commencement date and, thereafter, not less than
fifteen (15) days prior to the expiration date of such policies.
36. Notwithstanding any terms or the provisions of this Lease Agreement
which may be construed to the contrary, and provided this Lease Agreement is in
full force and effect and Tenant is not in default of the terms, covenants, and
conditions thereof, Tenant shall have the sole right or option to cancel this
Lease Agreement at the end of the thirty-sixth (36th) month of the lease term
by: (1) providing Landlord with at least one hundred twenty (120) days of prior
written notice of its desire to cancel this Lease Agreement, and (2)
simultaneously depositing with Landlord a cancellation fee to be determined by
multiplying $2,584.04 by 60 less the number of months of occupancy at the time
of cancellation. for example, the penalty at the end of the 36th month shall be
[60-36) x 2,5894.04] or $62,017.00. . Failure by Tenant to provide said written
notice and cancellation fee shall render this right or option null and void,
thus rendering this Lease Agreement in full force through the original sixty
(60) month lease term. The right of option to cancel this Lease Agreement shall
be for the exclusive benefit of the Tenant.
37. Landlord agrees that Tenant and its contractors shall have the
right to possession of the premises at all times prior to the commencement date
for the purpose of constructing and
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<PAGE> 23
ADDITIONAL PROVISIONS CONT.
installing the improvements to be made by Tenant within the premises (the
"Leasehold Improvements"). Prior the commencement date, Tenant shall perform all
of the obligation of this lease which are required to be performed by Tenant
during the term of this lease, except only for its obligations under Paragraphs
2, 4, and 29 of this lease.
38. Notwithstanding the provisions of Paragraph 7 hereof, Tenant shall
have the option to remove the following improvements from the premises by the
date of termination of this Lease or upon earlier vacating of the premises
provided Tenant shall restore the premises to their original condition with
consideration for normal wear and tear. All such removals and restoration shall
be accomplished in a good workmanlike manner so as not to damage the primary
structure or structural qualities of the building and other improvements
situated on the premises:
(1) Security Systems (e.g. access control units, CCTV
equipment, magnetic lock sets, internal intercoms,
electric lock sets, etc.)
(2) Specialized packing equipment for manufacturing.
(3) Air compressors to support warehousing operations.
(4) Paint Booth.
(5) Automatic Storage and Retrieval System.
(6) Life Safety/Fire Control Panel.
(7) Telephone switching units.
(8) Air compressor units to support operations.
(9) Specialized air conditioning units (localized small
self contained units - not roof units).
-3-
<PAGE> 24
EXHIBIT "A"
Approximately 40,420 square feet of office/warehouse space in a 40,420
square foot masonry and steel office/warehouse building located in Land Lot 273
of the 6th District of Gwinnett County, Georgia; being more commonly known as
5953 Peachtree Industrial Boulevard, Norcross, Georgia 30092.
A-1
<PAGE> 25
LEASE EXTENSION AND MODIFICATION AGREEMENT
THIS LEASE EXTENSION AND MODIFICATION AGREEMENT made and entered into
this 17th day of June, 1996, by and between PEACHTREE CROSSINGS BUSINESS PARK
ASSOCIATES (hereinafter referred to as "Landlord") and HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia Corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, by Lease Agreement dated July 27, 1990 attached hereto as
Exhibit "A" and made a part hereof, Landlord leased to Tenant certain premises
(the "Premises") comprised of 40,420 square feet situated at 5953 Peachtree
Industrial Boulevard, Norcross, Georgia 30092; and
NOW, THEREFORE, in consideration of the mutual promises given one to
the other, the parties hereto intending to be legally bound, do hereby covenant
and agree as follows:
1. Said Lease Agreement attached hereto as Exhibit "A" and made a
part hereof, dated July 27, 1990, is hereby extended for an
additional term of thirty-six (36) months commencing January
1, 1997 and expiring December 31, 1999.
2. Tenant's base monthly rental beginning January 1, 1997 shall
be Thirteen Thousand Four Hundred Eighty Three and No/100
Dollars ($13,483.00) per month.
3. Paragraphs #32 and #36 of the original Lease July 27, 1990
shall be null and void.
4. Except as herein modified and extended, all terms and
conditions of the Lease Agreement attached hereto as Exhibit
"A" and made part hereof, dated July 27, 1990 shall remain in
full force and effect.
5. The word "Landlord" herein shall be construed to include the
said Landlord, its successors and assigns and the word
"Tenant" shall be construed to include the said Tenant, its
successors and assigns.
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Lease Extension and
Modification Agreement in quadruplicate the day and year first written above.
WITNESS PEACHTREE CROSSINGS BUSINESS PARK ASSOCIATES
/s/ By: Trammell Crow Asset Management, Inc.
- -----------------------------
Its: Agent
By: /s/
----------------------------------------
Title: SVP
WITNESS HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation
/s/ Kim Gallagher By: /s/ Dennis C. Hayes
- ----------------------------- ----------------------------------------
Title: Chairman
-2-
<PAGE> 1
EXHIBIT 10.42
51,600 Square Feet
5804 Peachtree Corners East
Norcross, Georgia 30092
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between PEACHTREE
CROSSINGS BUSINESS PARK ASSOCIATES hereinafter referred to as "Landlord" and
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation, hereinafter referred
to as "Tenant."
W I T N E S E T H
1. Premises and Term. In consideration of the obligation of Tenant to
pay rent as herein provided, and in consideration of the other terms, provisions
and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from landlord certain premises situated within the
County of Gwinnett, State of Georgia, more particularly described on Exhibit "A"
attached hereto and incorporated herein by reference, together with all rights,
privileges, easements, appurtenances, and immunities belonging to or in any way
pertaining to the premises and together with the buildings and other
improvements situated or to be situated upon said premises (said real property,
building and improvements being hereinafter referred to as the "premises.")
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date," as hereinafter defined, and ending on the last day of the month that is
sixty (60) months after the commencement date.
A. The "commencement date" shall be January 1, 1991, and ending
December 31, 1995. Tenant acknowledges that it has inspected and accepts the
premises, and specifically the buildings and improvements comprising the same,
in their present condition, as suitable for the purpose for which the premises
are leased. Taking of possession by Tenant shall be deemed conclusively to
establish that said buildings and other improvements are in good and
satisfactory condition as of when possession was taken. Tenant further
acknowledges that no representations as to the repair of the premises, nor
promises to alter, remodel or improve the premises have been made by Landlord,
unless such are expressly set forth in this lease. If this lease is executed
before the premises become vacant or otherwise available and ready for
occupancy, or if any present tenant or occupant of the premises holds over, the
Landlord cannot acquire possession of the premises prior to said "commencement
date." Landlord shall not be deemed to be in default hereunder, and Tenant
agrees to accept possession of the premises at such time as Landlord is able to
tender the same, which date shall thenceforth be deemed the "commencement date,"
and Landlord hereby waives payment of rent covering any period prior to the
tendering of possession to Tenant hereunder. After the commencement date the
Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the premises.
<PAGE> 2
B. Omitted.
2. Base Rent and Security Deposit. See Additional Provision #29.
A. Omitted.
B. In addition, Tenant has deposited with Landlord the sum of
TWENTY-SIX THOUSAND EIGHT HUNDRED SEVENTY-FIVE AND NO/100 DOLLARS ($26,875.00),
which sum shall be held by Landlord, without obligation for interest, as
security for the performance of Tenant's covenants and obligations under this
lease, it being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in case of Tenant's
default. Upon the occurrence of any event of default by Tenant, Landlord may,
from time to time, without prejudice to any other remedy provided herein or
provided by law, use such fund to the extent necessary to make good any arrears
of rent or other payments due Landlord hereunder, and any other damage, injury,
expense or liability caused by such event of default, and Tenant shall pay to
Landlord on demand the amount so applied in order to restore the security
deposit to its original amount. Although the security deposit shall be deemed
the property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant at such time after termination of this lease that
all of Tenant's obligations under this lease have been fulfilled.
3. Use. The demised premises shall be used only for the purpose of
general office, receiving, storing, manufacturing, repairing, shipping and
selling (other than retail) products, materials and merchandise made and/or
distributed by Tenant and for such other lawful purposes as may be incidental
thereto, and subject to any building or building complex rules and regulations
which shall not impair Tenant's use of the premises. Outside storage, including
without limitation, trucks and other vehicles, is prohibited without Landlord's
prior written consent. Tenant shall at its own cost and expense obtain any and
all licenses and permits necessary for any such use. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the use of the
premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with the premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
building in which their premises are situated or unreasonably interfere with
their use of their respective premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly flammable. Tenant will not
permit the premises to be used for any purpose or in any manner, including,
without limitation, any method of storage which would render the insurance
thereon void or the insurance risk more hazardous or cause the State Board of
insurance or other insurance authority to disallow any sprinkler credits. If any
increase in the fire and extended coverage insurance premiums paid by Landlord
or other tenants for the building in which Tenant occupies space is caused by
Tenant's use and occupancy of the premises, or if Tenant vacates the premises
and causes an increase in such premiums, then Tenant shall pay as additional
rental the amount of such increase to Landlord.
-2-
<PAGE> 3
Tenant agrees that the point pressure resulting from Tenant's racking
system, inventory, forklifts and equipment pertaining to Tenant's use of the
premises shall not exceed allowable design floor loading for floor slabs on
grade. Tenant shall hold harmless Landlord from any loss, liability, and
expenses, both real and alleged, arising out of such damage or repair caused by
Tenant's negligence or failure to comply with this paragraph.
4. Taxes.
A. Landlord agrees to pay before they become delinquent all taxes,
assessments and governmental charges of any kind and nature whatsoever
thereinafter collectively referred to as "taxes" lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys around
the building; provided, however, that the maximum amount of taxes to be paid by
Landlord hereunder during any one real estate tax year shall be ZERO AND NO/100
DOLLARS ($0.00). If in any real estate tax year during the term hereof or any
renewal or extension the taxes levied or assessed against the building and the
grounds, parking areas, driveways and alleys around the building during such tax
year shall exceed the sum set forth in the preceding sentence, Tenant shall pay
to Landlord as additional rental, upon demand, the amount of such excess. In the
event any such amount is not paid within twenty (20) days after the date of
Landlord's invoice to Tenant, the unpaid amount shall bear interest at the rate
of twenty (20%) percent per annum from the date of such invoice until payment by
Tenant. In the event the premises constitute a portion of a multiple occupancy
building, Tenant agrees to pay to Landlord as additional rental, upon demand,
the amount of Tenant's "proportionate share" (as defined in subparagraph 27B) of
the excess taxes referred to in this subparagraph above.
B. If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments, or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based shall be deemed to be included within
the term "taxes" for the purposes hereof.
C. The Landlord shall have the right to engage a tax consulting firm to
attempt to assure a fair tax burden for the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand, from
time to time, as additional rent, the amount of Tenant's proportionate share of
the cost of such service.
D. Any payment to be made pursuant to this Paragraph 4 with respect to
the real estate tax year in which this lease commences or terminates shall be
prorated.
5. Landlord's Repairs and Obligations. Landlord shall at his expense
maintain only the roof, foundation and the structural soundness of the exterior
walls of the building in good repair, reasonable wear and tear excepted. Tenant
shall repair and pay for any damage caused by the
-3-
<PAGE> 4
negligence of Tenant, or Tenant's employees, agents or invitees, or caused by
Tenant's default hereunder. The term "walls' as used herein shall not include
windows, glass or plate glass, doors, store fronts or office entries. Tenant
shall immediately give Landlord written notice of defect or need for repairs,
after which Landlord shall have reasonable opportunity to repair same or cure
such defect. Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the provisions of
this lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect.
6. Tenant's Repairs and Obligations.
A. Tenant shall at its own cost and expense keep and maintain all parts
of the premises (except those for which Landlord is expressly responsible under
the terms of this lease) in good condition, promptly making all necessary
repairs, repainting, and replacements, including but not limited to, windows,
glass and plate glass, doors, any office entries, interior walls and finish
work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems, dock boards, truck doors, dock bumpers, paving, plumbing
work and fixtures, termites and pest extermination, regular removal of trash and
debris, grounds maintenance, common sewage line plumbing, common exterior
lighting (if applicable), common dumpster removal (if applicable) and other
obligations of the building, including, but not limited to, keeping the parking
areas, driveways, alleys and the whole of the premises in a clean and sanitary
condition. Tenant shall not be obligated to repair any damage caused by fire,
tornado or other casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 12A below, except that Tenant shall be obligated to
repair all wind damage to glass except with respect to tornado or hurricane
damage.
B. The cost of maintenance and repair of any common party walls (any
wall, divider, partition or any other structure separating the premises from any
adjacent premises) shall be shared equally by Tenant and the tenant or tenants
occupying adjacent premises. Tenant shall not damage any demising wall or
disturb the integrity and support provided by any demising wall and shall, at
its sole cost and expense, promptly repair any damage or injury to any demising
wall caused by Tenant or its employees, agents or invitees.
C. In the event the premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers and licensees shall have
the exclusive right to use the parking areas, if any, as may be designated by
Landlord in writing, subject to such reasonable rules and regulations as
Landlord may from time to time prescribe and subject to rights of ingress and
egress of other tenants. Landlord shall not be responsible for enforcing
Tenant's exclusive parking rights against any third parties. Parking spaces have
been provided in accordance with applicable local building codes and anticipated
needs of tenants. Tenant agrees not to use more than its proportionate share as
so provided.
D. Landlord reserves the right to perform and provide all of Tenant's
repairs and obligations under subparagraph 6A above, and Tenant shall, in lieu
of the obligations set forth under subparagraph 6A above with respect to such
items, pay monthly as additional rent due under Paragraph 2A for its
proportionate share of the cost and expense, including overhead, for those
-4-
<PAGE> 5
items; provided, however, that Landlord shall have the right to require Tenant
to pay such other reasonable proportions of said repairs and obligations as may
be determined by Landlord in its sole discretion; and further provided that if
Tenant or any other particular tenant of the building can be clearly identified
as being responsible for obstructions or stoppage of the common sanitary sewage
line, then Tenant, if Tenant is responsible, shall pay the entire cost thereof,
upon demand, as additional rent.
E. Omitted.
F. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
and the contract must be approved by Landlord. The service contract must include
all services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes
possession of the premises.
7. Alterations. Tenant shall not make any alterations, additions or
improvements to the premises (including, but not limited to, roof and wall
penetrations) without the prior written consent of Landlord. Such consent will
not be denied provided the improvements are building standard office/warehouse
finishes. In the event Landlord consents to the making of any such alterations,
additions or improvements by Tenant, the same shall be made by Tenant, at
Tenant's sole cost and expense, in accordance with all applicable laws,
ordinances and regulations, and all requirements of Landlord's and Tenant's
insurance policies and only in accordance with plans and specifications approved
by Landlord; and any contractor or person selected by Tenant to make the same
and all subcontractors must first be approved in writing by Landlord. Tenant
may, without the consent of Landlord, but at its own cost and expense and in a
good workmanlike manner erect such shelves, bins, machinery and trade fixtures
as it may deem advisable, without altering the basic character of the building
or improvements and without overloading or damaging such building or
improvements, and in each case complying with all applicable governmental laws,
ordinances, regulations and other requirements. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this lease and Tenant shall, unless Landlord
otherwise elects as hereinafter provided, remove all alterations, additions,
improvements and partitions erected by Tenant and restore the premises to their
original condition by the date of termination of this lease or upon earlier
vacating of the premises; provided, however, that if Landlord so elects prior to
termination of this lease or upon earlier vacating of the premises, such
alterations, additions, improvements and partitions shall become the property of
Landlord as of the date of termination of this lease or upon earlier vacating of
the premises and shall be delivered up to the Landlord with the premises. All
shelves, bins, machinery and trade fixtures installed by Tenant may be removed
by Tenant prior to the termination of this lease if Tenant so elects, and shall
be removed by the date of termination of this lease or upon earlier vacating of
the premises if required by Landlord; upon any such removal Tenant shall restore
the premises to their original condition with consideration for normal wear and
tear. All such removals and restoration shall be accomplished in a good
workmanlike manner so as not to damage the primary structure or structural
qualities of the building and other improvements situated on the premises.
-5-
<PAGE> 6
8. Signs. Tenant agrees to conform to Landlord's signage program for
the building; however, all costs and expense of the sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall only have the right to
install standard signs upon the premises where first approved in writing by
Landlord and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all signs prior to the
termination of this lease. Such installations and removals shall be made in such
a manner as to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury or defacement, including,
without limitation, discoloration caused by installation and/or removal.
9. Inspection and Right of Entry. Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any time in the
event of an emergency and to enter and inspect the premises at any reasonable
time during business hours, for the purpose of ascertaining the condition of the
premises in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this lease. During the period that is six
(6) months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall arrange to meet with Landlord for a joint inspection
of the premises prior to vacating. In the event of Tenant's failure to arrange
such joint inspection, Landlord's inspection at or after Tenant's vacating the
premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide at its cost water,
electricity and gas (when applicable) service connections into the premises; but
Tenant shall pay for all water, gas, heat, light, power, telephone, sewer,
sprinkler charges and other utilities and services used on or from the premises,
together with any taxes, penalties, surcharges or the like pertaining thereto
and any maintenance charges for utilities and shall furnish all electric light
bulbs and tubes. If any such services are not separately metered to Tenant,
Tenant shall pay a reasonable proportion as determined by Landlord of all
charges jointly metered with other premises, provided, however, Landlord shall
have the right to require Tenant to pay such other reasonable proportion of said
jointly metered charges as may be determined by Landlord in its sole discretion.
Landlord shall in no event by liable for any interruption or failure of utility
services on the premises.
11. Assignment and Subletting.
A. Tenant shall not have the right to assign, sublet, transfer or
encumber this lease, or any interest therein, without the prior written consent
of Landlord. Any attempted assignment, subletting, transfer or encumbrance by
Tenant in violation of the terms and covenants of this Paragraph shall be void.
All cash or other proceeds of any assignment, such proceeds as exceed the
rentals called for hereunder in the case of a subletting and all cash or other
proceeds of any other transfer of Tenant's interest in this lease shall be paid
to Landlord, whether such assignment, subletting or other transfer is consented
to by Landlord or not, unless Landlord agrees to the contrary in writing, and
Tenant hereby assigns all rights it might have or ever acquire in any such
proceeds to Landlord. Any assignment, subletting or other transfer of Tenant's
interest in this lease shall be
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<PAGE> 7
for an amount equal to the then fair market value of such interest. These
covenants shall run with the land and shall bind Tenant and Tenant's heirs,
executors, administrators, personal representatives, representatives in any
bankruptcy proceeding, successors and assigns. any assignee, sublessee or
transferee of Tenant's interest in this lease (all such assignees, sublessees
and transferees being hereinafter referred to as "successors"), by assuming
Tenant's obligations hereunder shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such successors in contravention
of this Paragraph. No assignments, subletting or other transfer, whether
consented to by Landlord or not, shall relieve Tenant of its liability
hereunder. Upon the occurrence of an "event of default" as hereinafter defined,
if the premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided, or provided by law, may at its
option collect directly from such assignee or subtenant all rents becoming due
to Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
B. If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. ss. 101, et seq. (the "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and promptly
paid or delivered to Landlord.
C. Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain insurance covering the building of
which the premises are a part (including building standard office/warehouse
finishes which are constructed by Tenant) in an amount not less than eighty
(80%) percent (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the replacement cost
thereof, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other regulatory authority for the state in
which the premises are situated for use by insurance companies admitted in such
state for the writing of such insurance on risks located within such state.
Subject to the provisions of subparagraphs 12C, 12D and 12E below, such
insurance shall be for the sole benefit of Landlord and under its sole control.
If, during the second calendar year after the commencement date of this lease,
or during any subsequent calendar year of the primary term or any renewal or
extension, Landlord's cost of maintaining such insurance shall exceed Landlord's
cost of maintaining such insurance for the first calendar year or the term
hereof, Tenant agrees to pay to Landlord, as
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additional rental, the amount of such excess not to exceed $4,128.00 per year
(or in the event the premises constitute a portion of a multiple occupancy
building, Tenant's full proportionate share of such excess). The first calendar
year shall be the year in which the lease commences. Said payments shall be made
to Landlord within ten (10) days after presentation to Tenant of Landlord's
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph A with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
lease bears to a full year.
B. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's reasonable estimation be
completed within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, this lease shall terminate and
the rent shall be abated during the unexpired portion of this lease, effective
upon the date of the occurrence of such damage.
D. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph 12A
above, but only to such extent that rebuilding or repairs can in Landlord's
reasonable estimation be completed within one hundred twenty (120) days after
the date upon which Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the premises by Tenant and except that Landlord may elect
not to rebuild if such damage occurs during the last year of the term of the
lease exclusive of any option which is unexercised at the time of such damage.
If the premises are untenantable in whole or in part following such damage, the
rent payable hereunder during the period in which they are untenantable shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord should fail to complete such repairs
and rebuilding within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may at its option
terminate this lease by delivering written notice of termination to Landlord as
Tenant's exclusive remedy, whereupon all rights and obligations hereunder shall
cease and terminate.
E. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.
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<PAGE> 9
F. Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any other perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
other party may be responsible. Each of the Landlord and Tenant agrees that it
will request its insurance carriers to include in its policies such a clause or
endorsement. If extra cost shall be charged therefore, each party shall advise
the other thereof and of the amount of the extra cost, and the other party, at
its election, may pay the same, but it shall not be obligated to do so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employee of any other person entering upon the premises,
or caused by the buildings and improvements located on the premises becoming out
of repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold safe and
harmless the property, the Landlord (including without limitation the trustee
and beneficiaries if Landlord is a trust), landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, arising out of
any such damage or injury, except injury to persons or damage to property the
cause of which is the negligence of Landlord or the failure of Landlord to
repair any part of the premises which Landlord is obligated to repair and
maintain hereunder within a reasonable time after the receipt of written notice
from Tenant of needed repairs. Tenant shall procure and maintain throughout the
term of this lease a policy or policies of insurance, at its sole cost and
expense, insuring both Landlord and Tenant against all claims, demands or
actions arising out of or in connection with: (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenant's liability assumed under this lease, the
limits of such policy or policies to be in the amount of not less than
$1,000,000.00 per occurrence in respect to injury to persons (including death),
and in the amount of not less than $100,000 per occurrence in respect to
property damage or destruction, including loss of use thereof. All such policies
shall be procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certificates evidencing such policies, together with receipt
evidencing payment of premiums therefor, shall be delivered to Landlord prior to
the commencement date of this lease. Not less than fifteen (15) days prior to
the expiration date of any such policies, certificates evidencing the renewals
thereof (bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be cancelled or changed to reduce insurance provided thereby.
14. Condemnation.
A. If the whole or any substantial part of the premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the
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use of the premises for the purposes for which they are being used, this lease
shall terminate and the rent shall be abated during the unexpired portion of
this lease, effective when the physical taking of said premises shall occur.
B. If part of the premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this lease
is not terminated as provided in the subparagraph above, this lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
C. All compensation awarded for any taking (or the proceeds of private
sale in lieu thereof) of the premises, buildings or other improvements, or any
part thereof, shall be the property of Landlord and Tenant hereby assigns its
interest in any such award to Landlord; provided, however, Landlord shall have
no interest in any award made to Tenant for loss of business or for the taking
of Tenant's fixtures and improvements if a separate award for such items is made
to Tenant.
15. Holding Over. Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than five (5) days advance
written notice, or by Tenant at any time upon not less than thirty (30) days
advance written notice, and all of the other terms and provisions of this lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to double the rent in effect on the termination date, computed on a
daily basis for each day of the hold over period. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this lease
except as otherwise expressly provided. The preceding provisions of this
paragraph 15 shall not be construed as consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has good title to
the premises, free and clear of all liens and encumbrances, excepting only the
lien for current taxes not yet due, such mortgage or mortgages as are permitted
by the terms of this lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of such property,
and easements, restrictions and other conditions of record. Landlord represents
and warrants that it has full right and authority to enter into this lease and
that Tenant, upon paying the rental herein set forth and performing its other
covenants and agreements herein set forth, shall peaceably and quietly have,
hold and enjoy the premises for the term hereof without hindrance or molestation
from Landlord, subject to the terms and provisions of this lease.
17. Events of Default. The following events shall be deemed to be
events of default by Tenant under this lease:
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A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10) days
from the date such payment was due.
B. Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
creditors, or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or of any substantial part of its property,
or Tenant or any such guarantor shall take any action to authorize or in
contemplation of any of the actions set forth above in this paragraph, or
C. Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
an order for relief entered against it as debtor or to adjudicate it as bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
D. A receiver to trustee shall be appointed for all or substantially
all of the assets of Tenant.
E. Tenant shall desert or vacate any substantial portion of the
premises.
F. Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 22 hereof within twenty (20) days after any such lien or
encumbrance is filed against the premises.
G. Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 17), and shall not cure
or commence to cure and diligently pursue to completion such failure within
twenty (20) days after written notice thereof to Tenant.
H. Tenant shall fail to continuously operate its business at the
premises for the permitted use set forth in Paragraph 3 whether or not Tenant is
in default of the rental payments due under this lease.
18. Remedies.
A. Upon the occurrence of any of such events of default described in
Paragraph 17 hereof, Landlord shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever:
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(1) Terminate this lease, in which event Tenant shall
immediately surrender the premises to Landlord, and if
Tenant fails so to do, Landlord may, without prejudice
to any other remedy which it may have for possession or
arrearage in rent, enter upon and take possession of the
premises and expel or remove Tenant and any other person
who may be occupying such premises or any part thereof,
by force if necessary, without being liable for
prosecution or any claim of damage therefore.
(2) Enter upon and take possession of the premises and expel
or remove Tenant and any other person who may be
occupying such premises or any part thereof, by force if
necessary, without being liable for prosecution or any
claim for damages therefore.
(3) Enter upon the Premises, by force if necessary, without
being liable for prosecution or any claim for damages
therefore, and do whatever Tenant is obligated to do
under the terms of this lease; and Tenant agrees to
reimburse Landlord on demand for any expenses which
Landlord may incur in thus effecting the compliance with
Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for any
damages resulting to the Tenant from such action,
whether caused by the negligence of Landlord or
otherwise.
(4) Alter all locks and other security devices at the
premises without terminating this lease.
B. In the event Landlord may elect to regain possession of the premises
by a forcible detainer proceeding, Tenant hereby specifically waives any
statutory notice which may be required prior to such proceeding, and agrees that
Landlord's execution of this lease is, in part, consideration of this waiver.
C. In the event Tenant fails to pay any installment of rent hereunder
as and when such installment is due, to help defray the additional cost to
Landlord for processing such late payments Tenant shall pay to Landlord on
demand a late charge in an amount equal to five (5%) percent of such
installment; and the failure to pay such amount within five (5) days after
demand therefore shall be an event of default hereunder. The provision for such
late charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
D. In the event Tenant's check, given to Landlord in payment, is
returned by the bank for non-payment, Tenant agrees to pay all expenses incurred
by Landlord as a result thereof.
E. Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance or surrender of
the premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only
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by the written agreement of Landlord and Tenant. No such alteration of locks or
other security devices and no removal or other exercise of dominion by Landlord
over the property of Tenant or others at the premises shall be deemed
unauthorized or constitute a conversion, Tenant hereby consenting, after any
event of default, to the aforesaid exercise of dominion over Tenant's property
within the premises. All claims for damages by reason of such re-entry and/or
repossession and/or alteration of locks or other security devices are hereby
waived, as are all claims for damages by reason of any distress warrant,
forcible detainer proceedings, sequestration proceedings or other legal process.
Tenant agrees that any re-entry by Landlord may be pursuant to judgment obtained
in forcible detainer proceedings or other legal proceedings or without the
necessity for any legal proceedings, as Landlord may elect, and Landlord shall
not be liable for trespass or otherwise.
F. Omitted.
G. In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant, at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Paragraph 1 diminished by
any net sums thereafter received by Landlord through reletting the premises
during said period (after deducting expenses incurred by Landlord as provided in
subparagraph 18H below). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
H. In case of any event of default or breach by Tenant, or threatened
or anticipatory breach or default, Tenant shall also be liable for and shall pay
to Landlord, at the address specified for notice to Landlord herein, in addition
to any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the premises into condition
acceptable to a new tenant or tenants, and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
I. In the event of termination or repossession of the premises for an
event of default, Landlord shall not have any obligation to relet or to attempt
to relet the premises, or any portion thereof; and in the event of reletting,
Landlord may relet the whole or any portion of the premises for any period to
any tenant and for any use and purpose.
J. If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
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hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
K. In the event that Landlord shall have taken possession of the
premises pursuant to the authority herein granted then Landlord shall have the
right to keep in place and use all of the furniture, fixtures and equipment at
the premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. Landlord shall also have
the right to remove from the premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any premises within the County in which
the premises is located; and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal and storage.
Landlord shall also have the right to relinquish possession of all or any
portion of such furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or any predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which Claimant purports to act; and Tenant agrees to indemnity
and hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. The rights of
Landlord herein stated shall be in addition to any and all other rights which
Landlord has or may hereafter have at law or in equity; and Tenant stipulates
and agrees that the rights herein granted Landlord are commercially reasonable.
L. Notwithstanding anything in this lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this lease, whether or not
expressly denominated as rent, shall constitute rent for the purposes of the
Bankruptcy Code, 11 U.S.C. ss.502(b)(7).
M. This is a contract under which applicable law excuses Landlord from
accepting performance from or rendering performance to any person or entity
other than Tenant within the meaning of the Bankruptcy Code, 11 U.S.C.
ss.365(c), 365(e)(2).
N. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all monies or other
considerations constituting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the benefit of Landlord
and be promptly paid or delivered to Landlord.
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O. Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
19. Omitted.
20. Mortgages. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the premises or the improvements situated thereon, provided
however, that if the mortgagee, trustee, or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this lease shall be deemed superior to such lien, whether this lease was
executed before or after said mortgage or deed of trust. Tenant shall at any
time hereafter on demand execute any instruments, releases or other documents
which may be required by any mortgagee for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage.
21. Landlord's Default. In the event Landlord should become in default
in any payments due on any such mortgage described in Paragraph 20 hereof or in
the payment of taxes or any other items which might become a lien upon the
premises and which Tenant is not obligated to pay under the terms and provisions
of this lease, Tenant is authorized and empowered after giving Landlord five (5)
days prior written notice of such default and Landlord's failure to cure such
default, to pay any such items for and on behalf of Landlord, and the amount of
any item so paid by Tenant for or on behalf of Landlord, together with any
interest or penalty required to be paid in connection therewith, shall be
payable on demand by Landlord to Tenant; provided however, that Tenant shall not
be authorized and empowered to make any payment under the terms of this
Paragraph 21 unless the item paid shall be superior to Tenant's interest
hereunder. In the event Tenant pays any mortgage debt in full, in accordance
with this paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
22. Mechanics Liens and Other Taxes.
A. Tenant shall have no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind the interests of Landlord in the premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the premises or under the terms
of this lease. Tenant
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agrees to give Landlord immediate written notice if any lien or encumbrance is
placed on the premises.
B. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
23. Omitted.
24. Certain Rights Reserved to Landlord. Landlord reserves and may
exercise the following rights without affecting Tenant's obligations hereunder:
(a) to change the name, street address, or suite numbers of the building; (b) to
install or maintain a sign or signs on the exterior of the building.
25. Notices. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligations to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
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LANDLORD: TENANT:
PEACHTREE CROSSINGS BUSINESS HAYES MICROCOMPUTER PRODUCTS,
PARK ASSOCIATES INC., a Georgia Corporation
c/o Trammell Crow Company P. O. Box 105203
1575 Northside Drive, N.W. Atlanta, Georgia 30348
Building 100, Suite 200 Attention: President
Atlanta, Georgia 30318
If and when included within the term "Landlord," as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant," as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant," respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
26. Hazardous Waste. The term "Hazardous Substances," as used in this
lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any
other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law or ordinance relating to pollution or
protection of the environment. Tenant hereby agrees that (i) no activity will be
conducted on the premises that will produce any Hazardous Substance, except for
such activities that are part of the ordinary course of Tenant's business
activities that are part of the ordinary course of Tenant's business (the
"Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Landlord; (ii) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Landlord; (iii) no portion of the premises will be used as a landfill
or a dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute, a public
or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be
brought onto the premises, except for the Permitted Materials described below,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. If, at any time during
or after the term of the lease, the premises is found to be so contaminated or
subject to said conditions, Tenant agrees to indemnify and hold Landlord
harmless from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from or as a result
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<PAGE> 18
of the use of the premises by Tenant. The foregoing indemnification shall
survive the termination or expiration of this lease.
27. Miscellaneous.
A. Words of any gender used in this lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. In the event the premises constitutes a portion of a multiple
occupancy building or building complex, Tenant's "proportionate share," as used
in this lease, shall mean a fraction, the numerator of which is the space
contained in the premises and the denominator of which is the entire space
contained in the building or building complex.
C. The terms, provisions and covenants and conditions contained in
this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this lease. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this lease.
D. The captions inserted in this lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
E. Tenant agrees from time to time within ten (10) days after request
of Landlord, to deliver to Landlord, or Landlord's designee a certificate of
occupancy (if applicable) to an estoppel certificate stating that this lease is
in full force and effect, the date to which rent has been paid, the unexpired
term of this lease and such other matters pertaining to this lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
premises, Tenant shall pay to Landlord any amount reasonably as necessary to put
the premises, including without limitation all heating and air conditioning
systems and equipment therein, in good condition and repair. Tenant shall also,
prior to vacating the premises, pay to Landlord the amount of Tenant's
obligation hereunder for real estate
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<PAGE> 19
taxes and insurance premiums for the year in which the lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefore upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Subparagraph 27G.
H. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this lease.
K. Time is of the essence of this lease and all of its provisions. This
lease in all respect shall be governed by the laws of the State of Georgia.
L. No animals shall be brought into or kept in or about the building.
M. Tenant agrees to comply with subdivision regulations, protective
covenants, or other restrictions of record that are applicable to the building
or building complex.
N. The duties and obligations of Tenant herein shall be binding upon
all or any of them. The duties and obligations of Tenant shall run and extend
not only to the benefit of the Landlord, as named herein, but to the following,
at the option of the following or any of them (i) any person by, through or
under which Landlord derives the right to lease the premises; (ii) the owner of
the premises; and (ii) holders of mortgage or rent assignment interests in the
premises, as their respective interests may appear; provided, however, nothing
contained herein shall be construed to obligate Tenant to pay rent to any person
other than the Landlord until such time as Tenant has been given written notice
of either an exercise of a rent assignment or the succession of some other party
to the interests of Landlord.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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<PAGE> 20
28. Additional Provisions. See Additional Provisions Paragraphs 29
through 37 attached hereto and made a part hereof as if fully incorporated
herein and when in conflict with the printed portion of this lease, said
Additional Provisions shall prevail.
EXECUTED BY LANDLORD, this 27th day of July, 1990.
Attest/Witness PEACHTREE CROSSINGS BUSINESS
PARK ASSOCIATES
/s/ R. Dave Wood By: Crow-C #3 Limited Partnership
- ------------------------------
By: /s/
---------------------------------
Title: Marketing Principal
Title: Agent
Executed by Tenant this 27th day of July, 1990.
Attest/Witness HAYES MICROCOMPUTER PRODUCTS,
INC., a Georgia corporation
/s/ Kim Gallagher By: /s/ Dennis C. Hayes
- ------------------------------ ---------------------------------
Title: Supervisor - Contracts Title: President
Administration
-20-
<PAGE> 21
ADDITIONAL PROVISIONS
29. Tenant agrees to pay to Landlord rent for the premises, in advance,
without demand, deduction or set off, for the entire term hereof the following
base monthly rentals:
(a) For each of months one (1) through twelve (12) of the term of
this lease: $12,900.00 per month.
(b) For each of months thirteen (13) through thirty-six (36) of the
term of this lease: $26,875.00 per month.
(c) For each of moths thirty-seven (37) through forty-eight (48) of
the term of this lease: $29,025.00 per month.
(d) For each of months forty-nine (49) through sixty (60) of the
term of this lease: $30,100.00 per month.
30. Tenant expressly agrees that the obligations incurred by Landlord
shall not constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, stockholders, or other principals or
representatives of the Landlord. Tenant further agrees that it shall have
recourse against Landlord only to the extent of Landlord's assets for the
satisfaction of the obligations of the Landlord created under this Lease, and
not against the assets of such entity's officers, directors, trustees, partners,
joint venturers, members, stockholders, principals or representatives.
31. Landlord covenants and agrees that if Tenant shall desert, vacate or
abandon the leased premises prior to the expiration or early termination of the
Lease Agreement, Landlord shall use reasonable efforts to lease the leased
premises to another Tenant.
32. While this Lease is in full force and effect, provided Tenant is not
in default of the terms, covenants and conditions thereof, Tenant shall have the
sole right or option to extend the original term of this Lease Agreement for a
further consecutive term of twelve (12) months. Such extension or renewal of the
original term shall be on the same terms, covenants and conditions as provided
in the original term with the rent at the current rate at the time of option.
Notice of Tenant's intention to exercise this right or option must be given in
writing to Landlord on or before July 1, 1995, or the option contained in this
provision shall become null and void and of no effect. The right of option to
extend the original term of this Lease Agreement provided to Tenant herein shall
be for the exclusive benefit of the Tenant and shall terminate upon the
subletting of all or any part of the premises or assignment of this Lease.
33. Notwithstanding any terms or provisions of this Lease which may be
construed to the contrary, Landlord and Tenant agree that Landlord will conduct
common area maintenance on the premises and grounds around the premises. Said
common area maintenance will include, but not
<PAGE> 22
ADDITIONAL PROVISIONS CONT.
be limited to, fire sprinkler water charges, irrigation, lawn maintenance,
security patrol and outside light maintenance. The cost of said common area
maintenance will be paid on a monthly basis by Tenant and will amount to
approximately SEVEN HUNDRED NINE AND NO/100 DOLLARS ($709.00) per month.
Landlord agrees that the monthly amount paid by Tenant shall be capped at a
compounded rate of ten percent (10%) per annum. However, in the event Landlord
elects to discontinue services or elects to provide additional services as may
be necessary under Paragraph 6 of this lease, the monthly common area
maintenance charge will be adjusted to reflect the change in services provided.
34. Landlord hereby covenants and agrees to use reasonable efforts to
cause any holder of a deed to secure debt or mortgage now or at any time
hereafter constituting a lien or charge upon the premises or the improvements
situated thereon to enter into a non-disturbance agreement pursuant to which
such holder shall agree that if it shall acquire the ownership of the premises
or the improvements situated thereon through the exercise of a power of sale or
other remedy provided for in such deed to secure debt or mortgage, it shall
permit Tenant to remain in possession of the premises in accordance with the
terms and provisions of this lease, provided that Tenant shall continue to
perform its duties and obligations hereunder.
35. Landlord and Tenant shall each provide the other with certificates
evidencing the issuance of all policies of insurance required to be maintained
by them under the terms and provisions of this Lease. Such certificates shall be
so provided prior to the commencement date and, thereafter, not less than
fifteen (15) days prior to the expiration date of such policies.
36. Notwithstanding any terms or the provisions of this Lease Agreement
which may be construed to the contrary, and provided this Lease Agreement is in
full force and effect and Tenant is not in default of the terms, covenants, and
conditions thereof, Tenant shall have the sole right or option to cancel this
Lease Agreement at the end of the thirty-sixth (36th) month of the lease term
by: (1) providing Landlord with at least one hundred twenty (120) days of prior
written notice of its desire to cancel this Lease Agreement, and (2)
simultaneously depositing with Landlord a cancellation fee to be determined by
the following formula: [(5.85 x 51,600 x N/12)-(Total base rent paid by Tenant
through the cancellation month as provided in the rent schedule in Paragraph
29)]. N is equal to the number of months of Tenant's occupancy through the
cancellation month. For example, the penalty due at the end of the 36th month
shall be [(5.85 x 51,600 x 36/12)-(799,800)] or $105,780.00. Failure by Tenant
to provide said written notice and cancellation fee shall render this right or
option null and void, thus rendering this Lease Agreement in full force through
the original sixty (60) month lease term. The right of option to cancel this
Lease Agreement shall be for the exclusive benefit of the Tenant.
37. Notwithstanding the provisions of Paragraph 7 hereof, Tenant shall
have the option to remove the following improvements from the premises by the
date of termination of this Lease or upon earlier vacating of the premises
provided Tenant shall restore the premises to their original
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<PAGE> 23
ADDITIONAL PROVISIONS CONT.
condition with consideration for normal wear and tear. All such removals and
restoration shall be accomplished in a good workmanlike manner so as not to
damage the primary structure or structural qualities of the building and other
improvements situated on the premises:
(1) Security Systems (e.g. access control units, CCTV equipment,
magnetic lock sets, internal intercoms, electric lock sets,
etc.)
(2) Support equipment for specializing manufacturing.
(3) Life Safety/Fire Control Panel.
(4) Telephone switching units.
(5) Air compressor units to support operations.
(6) Specialized air conditioning units (localized small self
contained units - not roof units).
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<PAGE> 24
EXHIBIT "A"
Approximately 51,600 square feet of office/warehouse space in a 51,600
square foot masonry and steel office/warehouse building located in Land Lot 273
of the 6th District of Gwinnett County, Georgia; being more commonly known as
5804 Peachtree Industrial Boulevard, Norcross, Georgia 30092.
A-1
<PAGE> 25
LEASE EXTENSION AND MODIFICATION AGREEMENT
THIS LEASE EXTENSION AND MODIFICATION AGREEMENT made and entered into
this 17th day of June, 1996, by and between PEACHTREE CROSSINGS BUSINESS PARK
ASSOCIATES (hereinafter referred to as "Landlord") and HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia Corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, by Lease Agreement dated July 27, 1990 attached hereto as
Exhibit "A" and made a part hereof, Landlord leased to Tenant certain premises
(the "Premises") comprised of 51,600 square feet situated at 5804 Peachtree
Corners East, Norcross, Georgia 30092; and
NOW, THEREFORE, in consideration of the mutual promises given one to
the other, the parties hereto intending to be legally bound, do hereby covenant
and agree as follows:
1. Said Lease Agreement attached hereto as Exhibit "A" and made a part
hereof, dated July 27, 1990, is hereby extended for an additional
term of thirty-six (36) months commencing January 1, 1997 and
expiring December 31, 1999.
2. Tenant's base monthly rental beginning January 1, 1997 shall be
Thirty Thousand One Hundred and No/100 Dollars ($30,100.00) per
month.
3. Paragraphs #32 and #36 of the original Lease July 27, 1990 shall
be null and void.
4. Except as herein modified and extended, all terms and conditions of
the Lease Agreement attached hereto as Exhibit "A" and made part
hereof, dated July 27, 1990 shall remain in full force and effect.
5. The word "Landlord" herein shall be construed to include the said
Landlord, its successors and assigns and the word "Tenant" shall be
construed to include the said Tenant, its successors and assigns.
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Lease Extension and
Modification Agreement in quadruplicate the day and year first written above.
WITNESS PEACHTREE CROSSINGS BUSINESS PARK ASSOCIATES
/s/ By: Trammell Crow Asset Management, Inc.
- -----------------------------
Its: Agent
By: /s/
----------------------------------------
Title: SVP
WITNESS HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation
/s/ Kim Gallagher By: /s/ Dennis C. Hayes
- ----------------------------- ----------------------------------------
Title: Chairman
-2-
<PAGE> 1
EXHIBIT 10.43
30,378 Square Feet
5854 Peachtree Corners East
Norcross, Georgia 30092
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between PEACHTREE
CROSSINGS BUSINESS PARK ASSOCIATES hereinafter referred to as "Landlord" and
HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia corporation, hereinafter referred
to as "Tenant."
W I T N E S E T H
1. Premises and Term. In consideration of the obligation of Tenant to
pay rent as herein provided, and in consideration of the other terms, provisions
and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from landlord certain premises situated within the
County of Gwinnett, State of Georgia, more particularly described on Exhibit "A"
attached hereto and incorporated herein by reference, together with all rights,
privileges, easements, appurtenances, and immunities belonging to or in any way
pertaining to the premises and together with the buildings and other
improvements situated or to be situated upon said premises (said real property,
building and improvements being hereinafter referred to as the "premises.")
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date," as hereinafter defined, and ending on the last day of the month that is
sixty (60) months after the commencement date.
A. The "commencement date" shall be September 1, 1993, and ending
August 31, 1998. Tenant acknowledges that it has inspected and accepts the
premises, and specifically the buildings and improvements comprising the same,
in their present condition, as suitable for the purpose for which the premises
are leased. Taking of possession by Tenant shall be deemed conclusively to
establish that said buildings and other improvements are in good and
satisfactory condition as of when possession was taken. Tenant further
acknowledges that no representations as to the repair of the premises, nor
promises to alter, remodel or improve the premises have been made by Landlord,
unless such are expressly set forth in this lease. If this lease is executed
before the premises become vacant or otherwise available and ready for
occupancy, or if any present tenant or occupant of the premises holds over, the
Landlord cannot acquire possession of the premises prior to said "commencement
date." Landlord shall not be deemed to be in default hereunder, and Tenant
agrees to accept possession of the premises at such time as Landlord is able to
tender the same, which date shall thenceforth be deemed the "commencement date,"
and Landlord hereby waives payment of rent covering any period prior to the
tendering of possession to Tenant hereunder. After the commencement date the
Tenant shall, upon demand, execute and deliver to Landlord a letter of
acceptance of delivery of the premises.
<PAGE> 2
2. Base Rent and Security Deposit.
A. Tenant agrees to pay to Landlord rent for the premises, in advance,
without demand, deduction or set off, for the entire term hereof at the rate of
ELEVEN THOUSAND SIX HUNDRED FORTY FIVE AND NO/100 DOLLARS ($11,645.00) per
month. One such monthly installment shall be due and payable on the date hereof
and a like monthly installment shall be due and payable on or before the first
day of each calendar month succeeding the commencement date recited above during
the hereby demised term, except that the rental payment for any fractional
calendar month at the commencement or end of the lease period shall be prorated.
The rental payment is subject to adjustment as provided below.
B. In addition, Tenant agrees to deposit with Landlord on the date
hereof the sum of ZERO AND NO/100 DOLLARS ($0.00), which sum shall be held by
Landlord, without obligation for interest, as security for the performance of
Tenant's covenants and obligations under this lease, it being expressly
understood and agreed that such deposit is not an advance rental deposit or a
measure of Landlord's damages in case of Tenant's default. Upon the occurrence
of any event of default by Tenant, Landlord may, from time to time, without
prejudice to any other remedy provided herein or provided by law, use such fund
to the extent necessary to make good any arrears of rent or other payments due
Landlord hereunder, and any other damage, injury, expense or liability caused by
such event of default, and Tenant shall pay to Landlord on demand the amount so
applied in order to restore the security deposit to its original amount.
Although the security deposit shall be deemed the property of Landlord, any
remaining balance of such deposit shall be returned by Landlord to Tenant at
such time after termination of this lease that all of Tenant's obligations under
this lease have been fulfilled.
3. Use. The demised premises shall be used only for the purpose of
general office, receiving, storing, manufacturing, repairing, shipping and
selling (other than retail) products, materials and merchandise made and or
distributed by Tenant and for such other lawful purposes as may be incidental
thereto, and subject to any building or building complex rules and regulations
which shall not impair Tenant's use of the premises. Outside storage, including
without limitation, trucks and other vehicles, is prohibited without Landlord's
prior written consent. Tenant shall at its own cost and expense obtain any and
all licenses and permits necessary for any such use. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the use of the
premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with the premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
building in which their premises are situated or unreasonably interfere with
their use of their respective premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly flammable. Tenant will not
permit the premises to be used for any purpose or in any manner, including,
without limitation, any method of storage which would render the insurance
thereon void or the insurance risk more hazardous or cause the State Board of
insurance or other insurance authority to disallow any sprinkler credits. If any
increase in
-2-
<PAGE> 3
the fire and extended coverage insurance premiums paid by Landlord or other
tenants for the building in which Tenant occupies space is caused by Tenant's
use and occupancy of the premises, or if Tenant vacates the premises and causes
an increase in such premiums, then Tenant shall pay as additional rental the
amount of such increase to Landlord.
Tenant agrees that the point pressure resulting from Tenant's racking
system, inventory, forklifts and equipment pertaining to Tenant's use of the
premises shall not exceed allowable design floor loading for floor slabs on
grade. Tenant shall hold harmless Landlord from any loss, liability, and
expenses, both real and alleged, arising out of such damage or repair caused by
Tenant's negligence or failure to comply with this paragraph.
4. Taxes.
A. Landlord agrees to pay before they become delinquent all taxes,
assessments and governmental charges of any kind and nature whatsoever
thereinafter collectively referred to as "taxes" lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys around
the building; provided, however, that the maximum amount of taxes to be paid by
Landlord hereunder during any one real estate tax year shall be ZERO AND NO/100
DOLLARS ($0.00). If in any real estate tax year during the term hereof or any
renewal or extension the taxes levied or assessed against the building and the
grounds, parking areas, driveways and alleys around the building during such tax
year shall exceed the sum set forth in the preceding sentence, Tenant shall pay
to Landlord as additional rental, upon demand, the amount of such excess. In the
event any such amount is not paid within twenty (20) days after the date of
Landlord's invoice to Tenant, the unpaid amount shall bear interest at the rate
of twenty percent (20%) per annum from the date of such invoice until payment by
Tenant. In the event the premises constitute a portion of a multiple occupancy
building, Tenant agrees to pay to Landlord as additional rental, upon demand,
the amount of Tenant's "proportionate share" (as defined in subparagraph 27B) of
the excess taxes referred to in this subparagraph above.
B. If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments, or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges,
or the part thereof so measured or based shall be deemed to be included within
the term "taxes" for the purposes hereof.
C. The Landlord shall have the right to engage a tax consulting firm to
attempt to assure a fair tax burden for the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand, from
time to time, as additional rent, the amount of Tenant's proportionate share of
the cost of such service.
- 3 -
<PAGE> 4
D. Any payment to be made pursuant to this Paragraph 4 with respect to
the real estate tax year in which this lease commences or terminates shall be
prorated.
5. Landlord's Repairs and Obligations. Landlord shall at his expense
maintain only the roof, foundation and the structural soundness of the exterior
walls of the building in good repair, reasonable wear and tear excepted. Tenant
shall repair and pay for any damage caused by the negligence of Tenant, or
Tenant's employees, agents or invitees, or caused by Tenant's default hereunder.
The term "walls' as used herein shall not include windows, glass or plate glass,
doors, store fronts or office entries. Tenant shall immediately give Landlord
written notice of defect or need for repairs, after which Landlord shall have
reasonable opportunity to repair same or cure such defect. Landlord's liability
with respect to any defects, repairs or maintenance for which Landlord is
responsible under any of the provisions of this lease shall be limited to the
cost of such repairs or maintenance or the curing of such defect.
6. Tenant's Repairs and Obligations.
A. Tenant shall at its own cost and expense keep and maintain all parts
of the premises (except those for which Landlord is expressly responsible under
the terms of this lease) in good condition, promptly making all necessary
repairs, repainting, and replacements, including but not limited to, windows,
glass and plate glass, doors, any office entries, interior walls and finish
work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems, dock boards, truck doors, dock bumpers, paving, plumbing
work and fixtures, termites and pest extermination, regular removal of trash and
debris, grounds maintenance, common sewage line plumbing, common exterior
lighting (if applicable), common dumpster removal (if applicable)and other
obligations of the building, including, but not limited to, keeping the parking
areas, driveways, alleys and the whole of the premises in a clean and sanitary
condition. Tenant shall not be obligated to repair any damage caused by fire,
tornado or other casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 12A below, except that Tenant shall be obligated to
repair all wind damage to glass except with respect to tornado or hurricane
damage.
B. The cost of maintenance and repair of any common party walls (any
wall, divider, partition or any other structure separating the premises from any
adjacent premises) shall be shared equally by Tenant and the tenant or tenants
occupying adjacent premises. Tenant shall not damage any demising wall or
disturb the integrity and support provided by any demising wall and shall, at
its sole cost and expense, promptly repair any damage or injury to any demising
wall caused by Tenant or its employees, agents or invitees.
C. In the event the premises constitute a portion of a multiple
occupancy building, Tenant and its employees, customers and licensees shall have
the exclusive right to use the parking areas, if any, as may be designated by
Landlord in writing, subject to such reasonable rules and regulations as
Landlord may from time to time prescribe and subject to rights of ingress and
egress of other tenants. Landlord shall not be responsible for enforcing
Tenant's exclusive parking rights against any third parties. Parking spaces have
been provided in accordance with applicable local
-4-
<PAGE> 5
building codes and anticipated needs of tenants. Tenant agrees not to use more
than its proportionate share as so provided.
D. Landlord reserves the right to perform and provide all of Tenant's
repairs and obligations under subparagraph 6A above, and Tenant shall, in lieu
of the obligations set forth under subparagraph 6A above with respect to such
items, pay monthly as additional rent due under Paragraph 2A for its
proportionate share of the cost and expense, including overhead, for those
items; provided, however, that Landlord shall have the right to require Tenant
to pay such other reasonable proportions of said repairs and obligations as may
be determined by Landlord in its sole discretion; and further provided that if
Tenant or any other particular tenant of the building can be clearly identified
as being responsible for obstructions or stoppage of the common sanitary sewage
line, then Tenant, if Tenant is responsible, shall pay the entire cost thereof,
upon demand, as additional rent.
E. Omitted.
F. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
and the contract must be approved by Landlord. The service contract must include
all services suggested by the equipment manufacturer within the
operation/maintenance manual and must become effective (and a copy thereof
delivered to Landlord) within thirty (30) days of the date Tenant takes
possession of the premises.
7. Alterations. Tenant shall not make any alterations, additions or
improvements to the premises (including, but not limited to, roof and wall
penetrations) without the prior written consent of Landlord. Such consent will
not be denied provided the improvements are building standard office/warehouse
finishes. In the event Landlord consents to the making of any such alterations,
additions or improvements by Tenant, the same shall be made by Tenant, at
Tenant's sole cost and expense, in accordance with all applicable laws,
ordinances and regulations, and all requirements of Landlord's and Tenant's
insurance policies and only in accordance with plans and specifications approved
by Landlord; and any contractor or person selected by Tenant to make the same
and all subcontractors must first be approved in writing by Landlord. Tenant
may, without the consent of Landlord, but at its own cost and expense and in a
good workmanlike manner erect such shelves, bins, machinery and trade fixtures
as it may deem advisable, without altering the basic character of the building
or improvements and without overloading or damaging such building or
improvements, and in each case complying with all applicable governmental laws,
ordinances, regulations and other requirements. All alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this lease and Tenant shall, unless Landlord
otherwise elects as hereinafter provided, remove all alterations, additions,
improvements and partitions erected by Tenant and restore the premises to their
original condition by the date of termination of this lease or upon earlier
vacating of the premises; provided, however, that if Landlord so elects prior to
termination of this lease or upon earlier vacating of the premises, such
alterations, additions, improvements and partitions shall become the property of
Landlord as of the date of termination of this lease or upon earlier vacating of
the premises, and shall be delivered up to the Landlord with the premises. All
shelves, bins, machinery and trade fixtures installed by
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Tenant may be removed by Tenant prior to the termination of this lease if Tenant
so elects, and shall be removed by the date of termination of this lease or upon
earlier vacating of the premises if required by Landlord; upon any such removal
Tenant shall restore the premises to their original condition with consideration
for normal wear and tear. All such removals and restoration shall be
accomplished in a good workmanlike manner so as not to damage the primary
structure or structural qualities of the building and other improvements
situated on the premises.
8. Signs. Tenant agrees to conform to Landlord's signage program for
the building; however, all costs and expense of the sign, sign installation,
removal and repair shall be paid by Tenant. Tenant shall only have the right to
install standard signs upon the premises where first approved in writing by
Landlord and subject to any applicable governmental laws, ordinances,
regulations and other requirements. Tenant shall remove all signs prior to the
termination of this lease. Such installations and removals shall be made in such
a manner as to avoid injury or defacement of the building and other
improvements, and Tenant shall repair any injury or defacement, including,
without limitation, discoloration caused by installation and/or removal.
9. Inspection and Right of Entry. Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any time in the
event of an emergency and to enter and inspect the premises at any reasonable
time during business hours, for the purpose of ascertaining the condition of the
premises in order to make such repairs as may be required or permitted to be
made by Landlord under the terms of this lease. During the period that is six
(6) months prior to the end of the term hereof, Landlord and Landlord's agents
and representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall arrange to meet with Landlord for a joint inspection
of the premises prior to vacating. In the event of Tenant's failure to arrange
such joint inspection, Landlord's inspection at or after Tenant's vacating the
premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide at its cost water,
electricity and gas (when applicable) service connections into the premises; but
Tenant shall pay for all water, gas, heat, light, power, telephone, sewer,
sprinkler charges and other utilities and services used on or from the premises,
together with any taxes, penalties, surcharges or the like pertaining thereto
and any maintenance charges for utilities and shall furnish all electric light
bulbs and tubes. If any such services are not separately metered to Tenant,
Tenant shall pay a reasonable proportion as determined by Landlord of all
charges jointly metered with other premises, provided, however, Landlord shall
have the right to require Tenant to pay such other reasonable proportion of said
jointly metered charges as may be determined by Landlord in its sole discretion.
Landlord shall in no event by liable for any interruption or failure of utility
services on the premises.
11. Assignment and Subletting.
A. Tenant shall not have the right to assign, sublet, transfer or
encumber this lease, or any interest therein, without the prior written consent
of Landlord. Any attempted assignment,
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subletting, transfer or encumbrance by Tenant in violation of the terms and
covenants of this Paragraph shall be void. All cash or other proceeds of any
assignment, such proceeds as exceed the rentals called for hereunder in the case
of a subletting and all cash or other proceeds of any other transfer of Tenant's
interest in this lease shall be paid to Landlord, whether such assignment,
subletting or other transfer is consented to by Landlord or not, unless Landlord
agrees to the contrary in writing, and Tenant hereby assigns all rights it might
have or ever acquire in any such proceeds to Landlord. Any assignment,
subletting or other transfer of Tenant's interest in this lease shall be for an
amount equal to the then fair market value of such interest. These covenants
shall run with the land and shall bind Tenant and Tenant's heirs, executors,
administrators, personal representatives, representatives in any bankruptcy
proceeding, successors and assigns. any assignee, sublessee or transferee of
Tenant's interest in this lease (all such assignees, sublessees and transferees
being hereinafter referred to as "successors"), by assuming Tenant's obligations
hereunder shall assume liability to Landlord for all amounts paid to persons
other than Landlord by such successors in contravention of this Paragraph. No
assignments, subletting or other transfer, whether consented to by Landlord or
not, shall relieve Tenant of its liability hereunder. Upon the occurrence of an
"event of default" as hereinafter defined, if the premises or any part thereof
are then assigned or sublet, Landlord, in addition to any other remedies herein
provided, or provided by law, may at its option collect directly from such
assignee or subtenant all rents becoming due to Tenant under such assignment or
sublease and apply such rent against any sums due to Landlord from Tenant
hereunder, and no such collection shall be construed to constitute a novation or
a release of Tenant from the further performance of Tenant's obligations
hereunder.
B. If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code 11 U.S.C. ss. 101, et seq. (the "Bankruptcy
Code"), any and all monies or other considerations payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of the Landlord and promptly
paid or delivered to Landlord.
C. Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain insurance covering the building of
which the premises are a part in an amount not less than eighty percent (80%)
(or such greater percentage as may be necessary to comply with the provisions of
any co-insurance clauses of the policy) of the replacement cost thereof,
insuring against the perils of Fire, Lightning, Extended Coverage, Vandalism and
Malicious Mischief, extended by Special Extended Coverage Endorsement to insure
against all other regulatory authority for the state in which the premises are
situated for use by
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insurance companies admitted in such state for the writing of such insurance on
risks located within such state. Subject to the provisions of subparagraphs 12C,
12D and 12E below, such insurance shall be for the sole benefit of Landlord and
under its sole control. If, during the second calendar year after the
commencement date of this lease, or during any subsequent calendar year of the
primary term or any renewal or extension, Landlord's cost of maintaining such
insurance shall exceed Landlord's cost of maintaining such insurance for the
first calendar year or the term hereof, Tenant agrees to pay to Landlord, as
additional rental, the amount of such excess not to exceed $4,128.00 per year
(or in the event the premises constitute a portion of a multiple occupancy
building, Tenant's full proportionate share of such excess). The first calendar
year shall be the year in which the lease commences. Said payments shall be made
to Landlord within ten (10) days after presentation to Tenant of Landlord's
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph A with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
lease bears to a full year. (See additional provision #38.)
B. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally
destroyed by fire, tornado or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot in Landlord's reasonable estimation be
completed within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, this lease shall terminate and
the rent shall be abated during the unexpired portion of this lease, effective
upon the date of the occurrence of such damage.
D. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph 12A
above, but only to such extent that rebuilding or repairs can in Landlord's
reasonable estimation be completed within one hundred twenty (120) days after
the date upon which Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the premises by Tenant and except that Landlord may elect
not to rebuild if such damage occurs during the last year of the term of the
lease exclusive of any option which is unexercised at the time of such damage.
If the premises are untenantable in whole or in part following such damage, the
rent payable hereunder during the period in which they are untenantable shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord should fail to complete such repairs
and rebuilding within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may at its option
terminate this lease by delivering written notice of termination to Landlord as
Tenant's exclusive remedy, whereupon all rights and obligations hereunder shall
cease and terminate.
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E. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.
F. Each of Landlord and Tenant hereby releases the other from any loss
or damage to property caused by fire or any other perils insured in policies of
insurance covering such property, even if such loss or damage shall have been
caused by the fault or negligence of the other party, or anyone for whom such
other party may be responsible. Each of the Landlord and Tenant agrees that it
will request its insurance carriers to include in its policies such a clause or
endorsement. If extra cost shall be charged therefore, each party shall advise
the other thereof and of the amount of the extra cost, and the other party, at
its election, may pay the same, but it shall not be obligated to do so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, resulting
from and or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employee of any other person entering upon the premises,
or caused by the buildings and improvements located on the premises becoming out
of repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold safe and
harmless the property, the Landlord (including without limitation the trustee
and beneficiaries if Landlord is a trust), Landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including without
limitation attorney's fees and damages, both real and alleged, arising out of
any such damage or injury, except injury to persons or damage to property the
cause of which is the negligence of Landlord or the failure of Landlord to
repair any part of the premises which Landlord is obligated to repair and
maintain hereunder within a reasonable time after the receipt of written notice
from Tenant of needed repairs. Tenant shall procure and maintain throughout the
term of this lease a policy or policies of insurance, at its sole cost and
expense, insuring both Landlord and Tenant against all claims, demands or
actions arising out of or in connection with: (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenant's liability assumed under this lease, the
limits of such policy or policies to be in the amount of not less than
$1,000,000.00 per occurrence in respect to injury to persons (including death),
and in the amount of not less than $100,000.00 per occurrence in respect to
property damage or destruction, including loss of use thereof. All such policies
shall be procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certificates evidencing of such policies, together with receipt
evidencing payment of premiums therefor, shall be delivered to Landlord prior to
the commencement date of this lease. Not less than fifteen (15) days prior to
the expiration date of any such policies, certificates evidencing the renewals
thereof (bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
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thirty (30) days written notice shall be given to Landlord before such policy
may be cancelled or changed to reduce insurance provided thereby. (See
Additional Provision #39.)
14. Condemnation.
A. If the whole or any substantial part of the premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of the
premises for the purposes for which they are being used, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective when the physical taking of said premises shall occur.
B. If part of the premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this lease
is not terminated as provided in the subparagraph above, this lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
C. All compensation awarded for any taking (or the proceeds of private
sale in lieu thereof) of the premises, buildings or other improvements, or any
part thereof, shall be the property of Landlord and Tenant hereby assigns its
interest in any such award to Landlord; provided, however, Landlord shall have
no interest in any award made to Tenant for loss of business or for the taking
of Tenant's fixtures and improvements if a separate award for such items is made
to Tenant.
15. Holding Over. Tenant will, at the termination of this lease by
lapse of time or otherwise, yield up immediate possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed. If
Landlord agrees in writing that Tenant may hold over after the expiration or
termination of this lease, unless the parties hereto otherwise agree in writing
on the terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than five (5) days advance
written notice, or by Tenant at any time upon not less than thirty (30) days
advance written notice, and all of the other terms and provisions of this lease
shall be applicable during that period, except that Tenant shall pay Landlord
from time to time upon demand, as rental for the period of any hold over, an
amount equal to double the rent in effect on the termination date, computed on a
daily basis for each day of the hold over period. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this lease
except as otherwise expressly provided. The preceding provisions of this
paragraph 15 shall not be construed as consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has good title to
the premises, free and clear of all liens and encumbrances, excepting only the
lien for current taxes not yet due, such mortgage or mortgages as are permitted
by the terms of this lease, zoning ordinances and other building and fire
ordinances and governmental regulations relating to the use of such property,
and easements, restrictions and other conditions of record. Landlord represents
and warrants that it has full right and authority to enter into this lease and
that Tenant, upon paying the rental herein set forth
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and performing its other covenants and agreements herein set forth, shall
peaceably and quietly have, hold and enjoy the premises for the term hereof
without hindrance or molestation from Landlord, subject to the terms and
provisions of this lease.
17. Events of Default. The following events shall be deemed to be
events of default by Tenant under this lease:
A. Tenant shall fail to pay any installment of the rent herein
reserved when due, or any other payment or reimbursement to Landlord required
herein when due, and such failure shall continue for a period of ten (10) days
from the date such payment was due.
B. Tenant or any guarantor of Tenant's obligations hereunder shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit of
creditors, or Tenant or any such guarantor shall commence any case, proceeding
or other action seeking to have an order for relief entered on its behalf as a
debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or of any substantial part of its property,
or Tenant or any such guarantor shall take any action to authorize or in
contemplation of any of the actions set forth above in this paragraph, or
C. Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
an order for relief entered against it as debtor or to adjudicate it as bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property.
D. A receiver to trustee shall be appointed for all or substantially
all of the assets of Tenant.
E. Tenant shall desert or vacate any substantial portion of the
premises.
F. Tenant shall fail to discharge any lien placed upon the premises in
violation of Paragraph 22 hereof within twenty (20) days after any such lien or
encumbrance is filed against the premises.
G. Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this Paragraph 17), and shall not cure
or commence to cure and diligently pursue to completion such failure within
twenty (20) days after written notice thereof to Tenant.
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H. Tenant shall fail to continuously operate its business at the
premises for the permitted use set forth in Paragraph 3 whether or not Tenant is
in default of the rental payments due under this lease.
18. Remedies.
A. Upon the occurrence of any of such events of default described in
Paragraph 17 hereof, Landlord shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever:
(1) Terminate this lease, in which event Tenant shall
immediately surrender the premises to Landlord, and if
Tenant fails so to do, Landlord may, without prejudice
to any other remedy which it may have for possession
or arrearage in rent, enter upon and take possession
of the premises and expel or remove Tenant and any
other person who may be occupying such premises or any
part thereof, by force if necessary, without being
liable for prosecution or any claim of damages
therefore.
(2) Enter upon and take possession of the premises and
expel or remove Tenant and any other person who may be
occupying such premises or any part thereof, by force
if necessary, without being liable for prosecution or
any claim for damages therefore.
(3) Enter upon the Premises, by force if necessary,
without being liable for prosecution or any claim for
damages therefore, and do whatever Tenant is obligated
to do under the terms of this lease; and Tenant agrees
to reimburse Landlord on demand for any expenses which
Landlord may incur in thus effecting the compliance
with Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for
any damages resulting to the Tenant from such action,
whether caused by the negligence of Landlord or
otherwise.
(4) Alter all locks and other security devices at the
premises without terminating this lease.
B. In the event Landlord may elect to regain possession of the
premises by a forcible detainer proceeding, Tenant hereby specifically waives
any statutory notice which may be required prior to such proceeding, and agrees
that Landlord's execution of this lease is, in part, consideration of this
waiver.
C. In the event Tenant fails to pay any installment of rent hereunder
as and when such installment is due, to help defray the additional cost to
Landlord for processing such late payments Tenant shall pay to Landlord on
demand a late charge in an amount equal to five (5%) percent of such
installment; and the failure to pay such amount within five (5) days after
demand therefore
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shall be an event of default hereunder. The provision for such late charge shall
be in addition to all of Landlord's other rights and remedies hereunder or at
law and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner.
D. In the event Tenant's check, given to Landlord in payment, is
returned by the bank for non-payment, Tenant agrees to pay all expenses incurred
by Landlord as a result thereof.
E. Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance or surrender of
the premises by Tenant, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Landlord and Tenant. No such alteration of locks or other security devices and
no removal or other exercise of dominion by Landlord over the property of Tenant
or others at the premises shall be deemed unauthorized or constitute a
conversion, Tenant hereby consenting, after any event of default, to the
aforesaid exercise of dominion over Tenant's property within the premises. All
claims for damages by reason of such re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. Tenant agrees
that any re-entry by Landlord may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as Landlord may elect, and Landlord shall not be liable for
trespass or otherwise.
F. Omitted.
G. In the event that Landlord elects to repossess the premises without
terminating the lease, or in the event Landlord elects to terminate the lease,
then Tenant, at Landlord's option, shall be liable for and shall pay to
Landlord, at the address specified for notice to Landlord herein, all rental and
other indebtedness accrued to the date of such repossession, plus rental
required to be paid by Tenant to Landlord during the remainder of the lease term
until the date of expiration of the term as stated in Paragraph 1 diminished by
any net sums thereafter received by Landlord through reletting the premises
during said period (after deducting expenses incurred by Landlord as provided in
subparagraph 18H below). In no event shall Tenant be entitled to any excess of
any rental obtained by reletting over and above the rental herein reserved.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the lease term.
H. In case of any event of default or breach by Tenant, or threatened
or anticipatory breach or default, Tenant shall also be liable for and shall pay
to Landlord, at the address specified for notice to Landlord herein, in addition
to any sum provided to be paid above, brokers' fees incurred by Landlord in
connection with reletting the whole or any part of the premises; the costs of
removing and storing Tenant's or other occupant's property; the costs of
repairing, altering, remodeling or otherwise putting the premises into condition
acceptable to a new tenant or tenants, and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies including
reasonable attorney's fees.
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I. In the event of termination or repossession of the premises for an
event of default, Landlord shall not have any obligation to relet or to attempt
to relet the premises, or any portion thereof; and in the event of reletting,
Landlord may relet the whole or any portion of the premises for any period to
any tenant and for any use and purpose.
J. If Tenant should fail to make any payment or cure any default
hereunder within the time herein permitted, Landlord, without being under any
obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account of Tenant (and enter
the premises for such purpose), and thereupon Tenant shall be obligated to, and
hereby agrees, to pay Landlord upon demand, all costs, expenses and
disbursements (including reasonable attorney's fees) incurred by Landlord in
taking such remedial action.
K. In the event that Landlord shall have taken possession of the
premises pursuant to the authority herein granted then Landlord shall have the
right to keep in place and use all of the furniture, fixtures and equipment at
the premises, including that which is owned by or leased to Tenant at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. Landlord shall also have
the right to remove from the premises (without the necessity of obtaining a
distress warrant, writ of sequestration or other legal process) all or any
portion of such furniture, fixtures, equipment and other property located
thereon and to place same in storage at any premises within the County in which
the premises is located; and in such event, Tenant shall be liable to Landlord
for costs incurred by Landlord in connection with such removal and storage.
Landlord shall also have the right to relinquish possession of all or any
portion of such furniture, fixtures, equipment and other property to any person
("Claimant") claiming to be entitled to possession thereof who presents to
Landlord a copy of any instrument represented to Landlord by Claimant to have
been executed by Tenant (or any predecessor Tenant) granting Claimant the right
under various circumstances to take possession of such furniture, fixtures,
equipment or other property, without the necessity on the part of Landlord to
inquire into the authenticity of said instrument's copy of Tenant's or Tenant's
predecessor's signature(s) thereon and without the necessity of Landlord making
any nature of investigation or inquiry as to the validity of the factual or
legal basis upon which Claimant purports to act; and Tenant agrees to indemnity
and hold Landlord harmless from all cost, expense, loss, damage and liability
incident to Landlord's relinquishment of possession of all or any portion of
such furniture, fixtures, equipment or other property to Claimant. The rights of
Landlord herein stated shall be in addition to any and all other rights which
Landlord has or may hereafter have at law or in equity; and Tenant stipulates
and agrees that the rights herein granted Landlord are commercially reasonable.
L. Notwithstanding anything in this lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this lease, whether or not
expressly denominated as rent, shall constitute rent for the purposes of the
Bankruptcy Code, 11 U.S.C. ss.502(b)(7).
M. This is a contract under which applicable law excuses Landlord from
accepting performance from or rendering performance to any person or entity
other than Tenant within the meaning of the Bankruptcy Code, 11 U.S.C.
ss.365(c), 365(e)(2).
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N. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or of the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all monies or other
considerations constituting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the benefit of Landlord
and be promptly paid or delivered to Landlord.
O. Any person or entity to which this lease is assigned pursuant to
the provisions of the Bankruptcy Code, shall be deemed, without further act or
deed, to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.
19. Omitted.
20. Mortgages. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the premises or the improvements situated thereon, provided
however, that if the mortgagee, trustee, or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this lease superior to any such
instrument, then by notice to Tenant from such mortgagee, trustee or holder,
this lease shall be deemed superior to such lien, whether this lease was
executed before or after said mortgage or deed of trust. Tenant shall at any
time hereafter on demand execute any instruments, releases or other documents
which may be required by any mortgagee for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage.
21. Landlord's Default. In the event Landlord should become in default
in any payments due on any such mortgage described in Paragraph 20 hereof or in
the payment of taxes or any other items which might become a lien upon the
premises and which Tenant is not obligated to pay under the terms and provisions
of this lease, Tenant is authorized and empowered after giving Landlord five (5)
days prior written notice of such default and Landlord's failure to cure such
default, to pay any such items for and on behalf of Landlord, and the amount of
any item so paid by Tenant for or on behalf of Landlord, together with any
interest or penalty required to be paid in connection therewith, shall be
payable on demand by Landlord to Tenant; provided however, that Tenant shall not
be authorized and empowered to make any payment under the terms of this
Paragraph 21 unless the item paid shall be superior to Tenant's interest
hereunder. In the event Tenant pays any mortgage debt in full, in accordance
with this paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
22. Mechanics Liens and Other Taxes.
A. Tenant shall have no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind the interests of Landlord in the premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
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<PAGE> 16
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed or
materials furnished in connection with any work performed on the premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the premises or under the terms
of this lease. Tenant agrees to give Landlord immediate written notice if any
lien or encumbrance is placed on the premises.
B. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.
23. Omitted.
24. Certain Rights Reserved to Landlord. Landlord reserves and may
exercise the following rights without affecting Tenant's obligations hereunder:
(a) to change the name, street address, or suite numbers of the building; (b) to
install or maintain a sign or signs on the exterior of the building.
25. Notices. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligations to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
B. All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
C. Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail,
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<PAGE> 17
postage prepaid, Certified or Registered Mail, addressed to the parties hereto
at the respective addresses set out below, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith:
LANDLORD: TENANT:
PEACHTREE CROSSINGS BUSINESS HAYES MICROCOMPUTER PRODUCTS,
PARK ASSOCIATES INC., a Georgia Corporation
c/o Trammell Crow Company P. O. Box 105203
1575 Northside Drive, N.W. Atlanta, Georgia 30348
Building 100, Suite 200 Attention: President
Atlanta, Georgia 30318
If and when included within the term "Landlord," as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant," as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant," respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
26. Hazardous Waste. The term "Hazardous Substances," as used in this
lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any
other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law or ordinance relating to pollution or
protection of the environment. Tenant hereby agrees that (i) no activity will be
conducted on the premises that will produce any Hazardous Substance, except for
such activities that are part of the ordinary course of Tenant's business
activities that are part of the ordinary course of Tenant's business (the
"Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Landlord; (ii) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Landlord; (iii) no portion of the premises will be used as a landfill
or a dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute, a public
or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be
brought onto the premises, except for the Permitted Materials described below,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. If, at any time during
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<PAGE> 18
or after the term of the lease, the premises is found to be so contaminated or
subject to said conditions, Tenant agrees to indemnify and hold Landlord
harmless from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from or as a result of the use of
the premises by Tenant. The foregoing indemnification shall survive the
termination or expiration of this lease. See Additional Provision #40.
27. Miscellaneous.
A. Words of any gender used in this lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. In the event the premises constitutes a portion of a multiple
occupancy building or building complex, Tenant's "proportionate share," as used
in this lease, shall mean a fraction, the numerator of which is the space
contained in the premises and the denominator of which is the entire space
contained in the building or building complex.
C. The terms, provisions and covenants and conditions contained in
this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this lease. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this lease.
D. The captions inserted in this lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
E. Tenant agrees from time to time within ten (10) days after request
of Landlord, to deliver to Landlord, or Landlord's designee a certificate of
occupancy (if applicable) to an estoppel certificate stating that this lease is
in full force and effect, the date to which rent has been paid, the unexpired
term of this lease and such other matters pertaining to this lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this lease.
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
premises, Tenant shall pay to Landlord any
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<PAGE> 19
amount reasonably as necessary to put the premises, including without limitation
all heating and air conditioning systems and equipment therein, in good
condition and repair. Tenant shall also, prior to vacating the premises, pay to
Landlord the amount of Tenant's obligation hereunder for real estate taxes and
insurance premiums for the year in which the lease expires or terminates. All
such amounts shall be used and held by Landlord for payment of such obligations
of Tenant hereunder, with Tenant being liable for any additional costs therefore
upon demand by Landlord, or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied, as the case may be. Any
security deposit held by Landlord shall be credited against the amount payable
by Tenant under this Subparagraph 27G.
H. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
I. Because the premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this lease.
K. Time is of the essence of this lease and all of its provisions. This
lease in all respect shall be governed by the laws of the State of Georgia.
L. No animals shall be brought into or kept in or about the building.
M. Tenant agrees to comply with subdivision regulations, protective
covenants, or other restrictions of record that are applicable to the building
or building complex.
N. The duties and obligations of Tenant herein shall be binding upon
all or any of them. The duties and obligations of Tenant shall run and extend
not only to the benefit of the Landlord, as named herein, but to the following,
at the option of the following or any of them (i) any person by, through or
under which Landlord derives the right to lease the premises; (ii) the owner of
the premises; and (ii) holders of mortgage or rent assignment interests in the
premises, as their respective interests may appear; provided, however, nothing
contained herein shall be construed to obligate Tenant to pay rent to any person
other than the Landlord until such time as Tenant has been given written notice
of either an exercise of a rent assignment or the succession of some other party
to the interests of Landlord.
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<PAGE> 20
28. Additional Provisions. See Additional Provisions Paragraphs 29
through 40 attached hereto and made a part hereof as if fully incorporated
herein and when in conflict with the printed portion of this lease, said
Additional Provisions shall prevail.
EXECUTED BY LANDLORD, this 13th day of August, 1993.
PEACHTREE CROSSINGS BUSINESS
PARK ASSOCIATES
Attest/Witness By: Trammel Crow Asset Services, Inc.
Its: Agent
By:/s/ John Thomas
- --------------------------------- -----------------------------------
John Thomas
Title: Title: Executive Vice President
--------------------------
EXECUTED BY TENANT, this 10th day of August, 1993.
Attest/Witness HAYES MICROCOMPUTER PRODUCTS,
INC., a Georgia corporation
/s/ Kim Gallagher
- -------------------------------- By: /s/ Dennis C. Hayes
-----------------------------------
Dennis Hayes
Title: Contracts Administration Manager Title: President
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<PAGE> 21
ADDITIONAL PROVISIONS
29. If any interest shall be earned on the Tenant's security deposit
provided for in Paragraph 2B hereof, such interest shall be the property of, and
shall be retained by, the Landlord without obligation to Tenant to account
therefore.
30. Tenant expressly agrees that the obligations incurred by Landlord
shall not constitute personal obligations of the officers, directors, trustees,
partners, joint venturers, members, stockholders, or other principals or
representatives of the Landlord. Tenant further agrees that it shall have
recourse against Landlord only to the extent of Landlord's assets for the
satisfaction of the obligations of the Landlord created under this Lease, and
not against the assets of such entity's officers, directors, trustees, partners,
joint venturers, members, stockholders, principals or representatives.
31. Landlord covenants and agrees that if Tenant shall desert, vacate
or abandon the leased premises prior to the expiration or early termination of
the Lease Agreement, Landlord shall use reasonable efforts to lease the leased
premises to another Tenant.
32. While this Lease is in full force and effect, provided Tenant is
not in default of the terms, covenants and conditions thereof, Tenant shall have
the sole right or option to extend the original term of this Lease Agreement for
a further consecutive term of twelve (12) months. Such extension or renewal of
the original term shall be on the same terms, covenants and conditions as
provided in the original term with the rent at the current rate at the time of
option. Notice of Tenant's intention to exercise this right or option must be
given in writing to Landlord on or before March 1, 1998, or the option contained
in this provision shall become null and void and of no effect. The right of
option to extend the original term of this Lease Agreement provided to Tenant
herein shall be for the exclusive benefit of the Tenant and shall terminate upon
the subletting of all or any part of the premises or assignment of this Lease.
33. Notwithstanding any terms or provisions of this Lease which may be
construed to the contrary, Landlord and Tenant agree that Landlord will conduct
common area maintenance on the premises and grounds around the premises. Said
common area maintenance will include, but not be limited to, fire sprinkler
water charges, irrigation, lawn maintenance, security patrol and outside light
maintenance. The cost of said common area maintenance will be paid on a monthly
basis by Tenant and will amount to approximately SEVEN HUNDRED FORTY AND NO/100
DOLLARS ($740.00) per month. Landlord agrees that the monthly amount paid by
Tenant shall be capped at a compounded rate of ten percent (10%) per annum.
However, in the event Landlord elects to discontinue services or elects to
provide additional services as may be necessary under Paragraph 6 of this lease,
the monthly common area maintenance charge will be adjusted to reflect the
change in services provided.
34. Landlord hereby covenants and agrees to use reasonable efforts to
cause any holder of a deed to secure debt or mortgage now or at any time
hereafter constituting a lien or charge upon
<PAGE> 22
ADDITIONAL PROVISIONS CONT.
the premises or the improvements situated thereon to enter into a
non-disturbance agreement pursuant to which such holder shall agree that if it
shall acquire the ownership of the premises or the improvements situated thereon
through the exercise of a power of sale or other remedy provided for in such
deed to secure debt or mortgage, it shall permit Tenant to remain in possession
of the premises in accordance with the terms and provisions of this lease,
provided that Tenant shall continue to perform its duties and obligations
hereunder.
35. Landlord and Tenant shall each provide the other with certificates
evidencing the issuance of all policies of insurance required to be maintained
by them under the terms and provisions of this Lease. Such certificates shall be
so provided prior to the commencement date and, thereafter, not less than
fifteen (15) days prior to the expiration date of such policies.
36. Notwithstanding the provisions of Paragraph 3 herein, provided this
Lease Agreement is in full force and effect and Tenant is not in default of the
terms, covenants, and conditions thereof, Tenant shall have the sole right or
option to cancel this Lease Agreement at the end of the forty- eighth (48th)
month of the lease term by: (1) providing Landlord with prior written notice of
its desire to cancel this Lease Agreement on or before March 1, 1997, and (2)
simultaneously depositing with Landlord a cancellation fee to Landlord of ELEVEN
THOUSAND SIX HUNDRED FORTY-FIVE AND NO/100 DOLLARS ($11,645.00). Failure by
Tenant to provide said written notice and cancellation fee on or before March 1,
1997 shall render this right or option null and void, thus rendering this Lease
Agreement in full force through the original sixty (60) month lease term. The
right of option to cancel this Lease Agreement shall be for the exclusive
benefit of the Tenant and shall terminate upon the subletting of all or any part
of the premises or assignment of this Lease.
37. Notwithstanding the provisions of Paragraph 7 hereof, Tenant shall
have the option to remove the following improvements from the premises by the
date of termination of this Lease or upon earlier vacating of the premises
provided Tenant shall restore the premises to their original condition with
consideration for normal wear and tear. All such removals and restoration shall
be accomplished in a good workmanlike manner so as not to damage the primary
structure or structural qualities of the building and other improvements
situated on the premises:
(1) Security Systems (e.g. access control units, CCTV
equipment, magnetic lock sets, internal intercoms,
electric lock sets, etc.)
(2) Support equipment for specialized manufacturing.
(3) Life Safety/Control Panel.
(4) Telephone switching units.
(5) Air compressor units to support operations.
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<PAGE> 23
ADDITIONAL PROVISIONS CONT.
(6) Specialized air conditioning units (localized small
self contained units-not roof units).
38. Notwithstanding the provisions of Paragraph 12 herein, Landlord
agrees to name Tenant as additional insured subject to the rights of the
mortgage holder on the insurance covering the building of which the premises are
a part.
39. Notwithstanding the provisions of Paragraph 13 herein, Tenant shall
indemnify Landlord, Landlord's agents and employees from any loss as detailed in
Paragraph 13, however, Tenant shall only be responsible for those costs that are
not insured by Tenant's insurance policy or policies.
40. Notwithstanding Paragraph 26 hereof, Landlord represents and
warrants that to the best of its knowledge and belief, there is no condition on
the premises which currently could be considered as a violation of any
Environmental Law and that to the best of its knowledge and belief no Hazardous
Substances are present in any form on or around the premises.
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<PAGE> 24
EXHIBIT "A"
Approximately 30,378 square feet of office/warehouse space in a 30,378
square foot masonry and steel office/warehouse building located in Land Lot 273
of the 6th District of Gwinnett County, Georgia; being more commonly known as
5454 Peachtree Crossings East Peachtree Industrial Boulevard, Norcross, Georgia
30092.
A-1
<PAGE> 25
LEASE EXTENSION AND MODIFICATION AGREEMENT
THIS LEASE EXTENSION AND MODIFICATION AGREEMENT made and entered into
this 26th day of June, 1997, by and between PEACHTREE CROSSINGS BUSINESS PARK
ASSOCIATES (hereinafter referred to as "Landlord") and HAYES MICROCOMPUTER
PRODUCTS, INC., a Georgia Corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, by Lease Agreement dated August 13, 1993, attached hereto as
Exhibit "A" and made a part hereof, Landlord leased to Tenant certain premises
(hereinafter referred to as the "Premises") situated at 5854 Peachtree Corners
East, Norcross, Georgia 30092 containing 30,378 square feet; and
NOW, THEREFORE, in consideration of the mutual promises given one to
the other, the parties hereto intending to be legally bound, do hereby covenant
and agree as follows:
1. Said Lease Agreement dated August 13, 1993, attached hereto as
Exhibit "A" and made part hereof, is hereby extended for an additional
twenty-five (25) months commencing September 1, 1998 and expiring September 30,
2000.
2. Tenant's Base Monthly Rental beginning September 1, 1997 shall be
Seventeen Thousand Four Hundred Sixty-Eight and No/100 Dollars ($17,468.00) per
month.
3. Paragraph 32 and 36 of the Lease Agreement dated August 13, 1993
attached hereto as Exhibit "A" and made a part hereof, shall be null and void.
4. Except as herein modified and extended, all terms and conditions of
the Lease Agreement, dated August 13, 1993, attached hereto as Exhibit "A" and
made part hereof, shall remain in full force and effect.
5. The word "Landlord" herein shall be construed to include the said
Landlord, its successors and assigns and the word "Tenant" shall be construed to
include the said Tenant, its successors and assigns.
6. This Agreement shall be binding upon and inure to the benefit of the
parties, their respective heirs, successors and assigns.
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Lease Extension and
Modification Agreement in quadruplicate the day and year first written above.
WITNESS PEACHTREE CROSSINGS BUSINESS PARK ASSOCIATES
/s/ By: /s/
- ----------------------------- -----------------------------------------
Title:
--------------------------------------
WITNESS HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation
/s/ Kim Gallagher By: /s/ Dennis C. Hayes
- ----------------------------- -----------------------------------------
Title: Chairman
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<PAGE> 1
EXHIBIT 10.66
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made on December 21, 1995, between
the undersigned Borrower and the undersigned Lender concerning loans and other
credit accommodations to be made by Lender to Borrower.
SECTION 1. PARTIES
1.1 The "BORROWER" is Hayes Microcomputer Products, Inc., a
Georgia corporation, and its successors and assigns, which has its chief
executive office and principal place of business at the address shown on Section
10.6(b).
1.2 The "LENDER" is The CIT Group/Credit Finance, Inc. and its
successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and
conditions contained herein and in the Conditions Precedent Rider attached
hereto (the "CONDITIONS PRECEDENT RIDER"), make revolving loans to Borrower
("REVOLVING LOANS") in amounts requested by Borrower from time to time, but not
in excess of the Net Availability existing immediately prior to the making of
the requested loan and provided the requested loan would not cause the
outstanding Obligations to exceed the Maximum Credit.
(a) The "MAXIMUM CREDIT" is set forth in Section 10.1(a) hereof.
(b) The "GROSS AVAILABILITY" shall be calculated at any time as
the sum of:
(i) the product obtained by multiplying the outstanding
amount of Eligible Domestic Accounts, net of all
taxes, discounts, allowances, and credits and
accruals for price protection, coop advertising and
warranty claims, given or claimed, by the Eligible
Domestic Accounts Percentage set forth in Section
10.1(b), plus
(ii) the product obtained by multiplying the applicable
Eligible Domestic Inventory Percentage set forth in
Section 10.1(b) by the Value of Eligible Domestic
Inventory, but not to exceed the Inventory Sublimit
set forth in Section 10.1(c), plus
(iii) the sum of the products obtained by (x) multiplying
the outstanding amount of Eligible UK Accounts, net
of all taxes, discounts, allowances, and credits and
accruals for price protection, coop advertising and
warranty claims, given or claimed, by the Eligible UK
Accounts Percentage as set forth in Section 10.1(b),
and (y)
<PAGE> 2
multiplying the Eligible UK Inventory Percentage set forth in
Section 10.1(b) by the Values of Eligible UK Inventory, but
not to exceed $4,000,000, plus
(iv) the product obtained by multiplying the outstanding
amount of Eligible Foreign Accounts, net of all
taxes, discounts, allowances, and credits and
accruals for price protection, coop advertising and
warranty claims, given or claimed, by the Eligible
Foreign Accounts Percentage set forth in Section
10.1(b), but not to exceed $2,000,000,
minus (subtract from the sum of clauses (i)
through (iv) above)
(v) the Reserves.
(c) "NET AVAILABILITY" shall be calculated at any time as an
amount equal to the Gross Availability minus the aggregate amount of all
then-outstanding Revolving Loans and Accommodations.
(d) "ELIGIBLE DOMESTIC ACCOUNTS" are accounts which arise in the
ordinary course of Borrower's business for goods sold or services rendered (but
excluding royalty and franchise receivables), and which are and remain
acceptable to Lender for lending purposes. General criteria for Eligible
Domestic Accounts are set forth below but may be revised from time to time by
Lender, in its sole judgment, on fifteen (15) days' prior written notice to
Borrower. Lender shall, in general, deem accounts to be Eligible Domestic
Accounts if: (1) such accounts arise from bona fide completed transactions and
have not remained unpaid for more than the number of days after the invoice date
set forth in Section 10.1(d); (2) the amounts of the accounts reported to Lender
are absolutely owing to Borrower and do not arise from sales on consignment,
guaranteed sale or other terms under which payment by the account debtors may be
conditional or contingent; (3) the account debtor's chief executive office and
principal place of business is located in the United States; (4) such accounts
do not arise from progress billings, retainages or bill and hold sales; (5)
there are no contra relationships, setoffs, counterclaims or disputes existing
with respect thereto and there are no other facts existing or threatened which
would impair or delay the collectibility of all or any portion thereof; (6) the
goods giving rise thereto were not at the time of the sale subject to any liens
except those permitted in this Agreement; (7) such accounts are not accounts
with respect to which the account debtor or any officer or employee thereof is
an officer, employee or agent of or is affiliated with Borrower, directly or
indirectly, whether by virtue of family membership, ownership, control,
management or otherwise; (8) such accounts are not accounts with respect to
which the account debtor is the United States or any State or political
subdivision thereof or any department, agency or instrumentality of the United
States, any State or political subdivision, unless there has been compliance
with the Assignment of Claims Act or any similar State or local law, if
applicable; (9) Borrower has delivered to Lender or Lender's representative such
documents as Lender may have
-2-
<PAGE> 3
requested pursuant to Section 5.8 hereof in connection with such accounts and
Lender shall have received a verification of such account, satisfactory to it,
if sent to the account debtor or any other obligor or any bailee pursuant to
Section 5.4 hereof; (10) there are no facts existing or threatened which might
result in any adverse change in the account debtor's financial condition; (11)
such accounts owed by a single account debtor or its affiliates do not represent
more than twenty (20%) percent of all otherwise Eligible Domestic Accounts
(accounts excluded from Eligible Domestic Accounts solely by reason of this
subsection (11) shall nevertheless be considered Eligible Domestic Accounts to
the extent of the amount of such accounts which does not exceed twenty (20%)
percent of all otherwise Eligible Domestic Accounts); (12) such accounts are not
owed by an account debtor who is or whose affiliates are past due upon other
accounts owed to Borrower comprising more than fifty (50%) percent of the
accounts of such account debtor or its affiliates owed to Borrower; (13) such
accounts are owed by account debtors whose total indebtedness to Borrower does
not exceed the amount of any customer credit limits as established, and changed,
from time to time by Lender on notice to Borrower (accounts excluded from
Eligible Domestic Accounts solely by reason of this subsection (13) shall
nevertheless be considered Eligible Domestic Accounts to the extent the amount
of such accounts does not exceed such customer credit limit); and (14) such
accounts are owed by account debtors deemed creditworthy at all times by Lender.
(e) "ELIGIBLE DOMESTIC INVENTORY" is inventory owned by Borrower
which is and remains acceptable to Lender for lending purposes, is subject to
Lender's duly perfected, first priority security interest and no other lien
except liens described in SCHEDULE A hereto ("PERMITTED LIENS"), is not the
subject of any technology license agreement or any other agreement that
restricts or prohibits in any way Borrower's or Lender's right to sell or
otherwise dispose of any such inventory, and is located at one of the locations
owned or leased by Borrower in the United States of America that is set forth in
Section 10.6, other than a leased location with respect to which Lender has not
received from the owner thereof a landlord's waiver agreement in form and
substance satisfactory to Lender.
(f) "ELIGIBLE FOREIGN ACCOUNTS" are accounts which arise in the
ordinary course of Borrower's business for goods sold or services rendered,
which are and remain acceptable to Lender for lending purposes, which are owed
by account debtors having their chief executive office and principal place of
business in a country other than the United States or the United Kingdom, which
would be Eligible Domestic Accounts except for the location of the account
debtor's chief executive office or principal place of business, and with respect
to which the account debtor has procured and delivered to Borrower, and Borrower
has (if so requested by Lender) collaterally assigned to Lender all of
Borrower's rights under, an irrevocable standby letter of credit that is in form
acceptable to Lender, issued by a domestic U.S. bank acceptable to Lender in its
sole discretion and, if so requested by Lender, delivered to Lender. General
criteria for Eligible Foreign Accounts may be revised from time to time by
Lender, in its sole judgment, on fifteen (15) days' prior written notice to
Borrower.
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(g) "ELIGIBLE UK ACCOUNTS" are accounts which arise in the
ordinary course of Borrower's business for goods sold or services rendered,
which are and remain acceptable to Lender for lending purposes, which are owing
by account debtors having their chief executive office and principal place of
business in the United Kingdom and which would otherwise qualify as Eligible
Domestic Accounts except for the location of the chief executive office or
principal place of business of the account debtors with respect thereto. General
criteria for Eligible UK Accounts may be revised from time to time by Lender, in
its sole judgment, on fifteen (15) days' prior written notice to Borrower.
(h) "ELIGIBLE UK INVENTORY" is inventory which, but for its
location in the United Kingdom, would constitute Eligible Domestic Inventory and
which is at all times subject to Lender's duly perfected, first priority
security interest and no other lien except a Permitted Lien.
(i) "VALUE" means the value of Borrower's inventory at any date,
determined by Lender at the lower of cost or market on such date, with the
market value of inventory being the liquidation value in continued use of such
inventory.
(j) Lender shall have a continuing right to deduct reserves
("RESERVES") in determining the Gross Availability, and to increase and decrease
such Reserves from time to time, if and to the extent that, in the exercise of
Lender's customary credit judgement, such Reserves which are necessary to
protect Lender against (1) any state of facts which constitute an Event of
Default or (2) against a loss that might result from any state of facts which
might reasonably be expected to have a Material Adverse Effect. Lender may, at
its option, implement Reserves by designating as ineligible a sufficient amount
of accounts or inventory which would otherwise be Eligible Domestic Accounts,
Eligible Foreign Accounts, or Eligible UK Accounts, or which would otherwise be
Eligible Domestic Inventory or Eligible UK Inventory, so as to reduce Gross
Availability by the amount of the intended Reserve. As used herein, the term
"MATERIAL ADVERSE EFFECT" shall mean the effect of any event, condition or state
of facts that is material with respect to (i) Borrower's business, operations,
properties or condition (financial or otherwise) or (ii) the quantity, quality
or value of any Collateral or the priority of Lender's liens therein, which in
either case materially impairs the ability of Borrower timely to pay and perform
the Obligations or the value of the Collateral.
2.2 Term Loans.
(a) Subject to all of the terms and conditions contained herein
and in the Conditions Precedent Rider, Lender shall make two term loans to
Borrower (collectively, the "TERM LOANS" and individually a "TERM LOAN"), the
first of which ("TERM LOAN A") shall be in the amount of $2,608,000 and the
second of which ("TERM LOAN B") shall be in the amount of $7,500,000. Each of
the Term Loans shall be evidenced by a promissory note made by Borrower to the
order of Lender in substantially the form of Exhibits A and B, respectively
(each, as at any time amended or modified, a "TERM NOTE" and collectively the
"TERM NOTES") and shall be repaid, together with
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interest as provided therein, in accordance with this Agreement and the Term
Note evidencing such Term Loan. The final maturity date of each Term Loan shall
be as set forth in Section 10.2.
(b) Borrower acknowledges and agrees that Lender shall have the
right to appraise, or cause an appraisal to be conducted of, all of Borrower's
machinery and equipment on an annual basis, and the cost of each such appraisal
shall be borne solely by Borrower. If based upon any such appraisal Lender
determines that the then outstanding principal balance of Term Loan A exceeds an
amount equal to eighty percent (80%) of the auction value of Eligible Equipment
(such excess being herein called the "TERM LOAN A OVERAGE"), then Lender, at its
option (and whether or not an Event of Default exists), may require Borrower to
increase the amount of each of the next six (6) monthly installments to become
due under Term Note A after such determination (or, if there are fewer than six
(6) remaining installments due, the number of remaining installments then due
under Term Note A) by an amount equal to such Term Loan A Overage divided by six
(6) (or, if fewer in number, the then remaining number of installments payable
under Term Note A). If requested to do so, Borrower shall execute and deliver to
Lender a modification of Term Note A, in form and content acceptable to Lender,
to reflect such increase in monthly principal payments thereunder. As used
herein, the term "ELIGIBLE EQUIPMENT" shall mean equipment owned by Borrower
(and not subject to any lease or conditional sale agreement) that is located at
one of the addresses in the United States of America shown in Section 10.6(c)
with respect of which Lender has received a landlord waiver from the applicable
owner of such premises and a mortgagee waiver from each mortgagee with respect
to such premises, is subject to Lender's duly perfected, first priority security
interest and no other lien that is not a Permitted Lien, is in good and
serviceable condition and is not obsolete or unmerchantable.
(c) Borrower acknowledges and agrees that Lender shall have the
right at any time or times to appraise, or cause an appraisal to be conducted
of, any or all of Borrower's intellectual property assets, including, without
limitation, all patents, trademarks, tradenames and copyrights ("Intellectual
Property"), and the cost of each such appraisal shall be borne solely by
Borrower. Each such appraisal shall be conducted by an appraiser selected by
Lender and shall employ an appraisal methodology consistent with that employed
by Marshall & Stevens of Philadelphia, Pennsylvania in its appraisal of such
assets prepared for Lender and Borrower and determined in October, 1995. Each
such appraisal shall take into account the effect, if any, upon the value of any
such Intellectual Property as collateral security for the Obligations of any
license or other agreement with respect to such assets entered into by Borrower
after the date hereof. If based upon any such appraisal Lender determines that
the unpaid balance of Term Loan B exceeds an amount equal to the Applicable
Percentage of the value of such Intellectual Property (such excess being herein
called the "TERM LOAN B OVERAGE"), then Lender, at its option (and whether or
not an Event of Default exists), may require Borrower to increase the amount of
each of the next six (6) monthly installments to become due under Term Note B
after such determination (or, if there are fewer than six (6) remaining
installments due, the number of remaining installments then due under Term Note
B) by an amount equal to such Term Loan B Overage divided by six (6) (or, a
fewer in number, the then remaining number of installments payable under Term
Note B). If requested to do so, Borrower will
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promptly execute and deliver to Lender a modification of Term Note B, in form
and content acceptable to Lender, to reflect any such increase in monthly
principal payments thereunder. As used herein, the term "APPLICABLE PERCENTAGE"
shall mean 10% during the first Loan Year (as defined in Section 9.2), 9% during
the second Loan Year, and 8% at all times after the second Loan Year.
(d) If on any date that the Applicable Interest Margin as set
forth in Section 10.4(a) is 2- 1/8%, then Lender may, at its option, increase
the rate of monthly amortization on either or both of the Term Loans in such
amount as may be determined by CIT in its sole and absolute discretion (but in
no event to exceed, unless an Event of Default has occurred, two times the then
existing monthly amortization) and, if requested to do so, Borrower shall
promptly execute and deliver to Lender a modification of either or both of the
Term Notes, in form and content acceptable to Lender, to reflect such increase
in monthly principal payments thereunder.
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be
issued, from time to time at Borrower's request and on terms and conditions and
for purposes satisfactory to Lender, credit accommodations consisting of letters
of credit, bankers' acceptances, merchandise purchase guaranties or other
guaranties or indemnities for Borrower's account ("ACCOMMODATIONS"). Borrower
shall execute and perform additional agreements relating to the Accommodations
in form and substance acceptable to Lender and the issuer of any Accommodations,
all of which shall supplement the rights and remedies granted herein. Any
payments made by Lender or any affiliate of Lender in connection with the
Accommodations shall constitute additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection
with issuing or administering Accommodations, Borrower shall pay monthly to
Lender, on the first day of each month, charges (the "ACCOMMODATION CHARGES") on
open Accommodations at the rate per annum set forth in Section 10.3(a).
(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the Net
Availability existing immediately prior to the issuance of the requested
Accommodation, or if the requested Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set forth in
Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any Accommodation shall be included in the term
"OBLIGATIONS", as defined herein, and shall include, without limitation, (i) all
amounts due or which may become due under any Accommodation; (ii) all amounts
charged or chargeable to Borrower or
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to Lender by any bank, other financial institution or correspondent bank which
opens, issues or is involved with such Accommodations; (iii) Lender's
Accommodation Charges and all fees, costs and other charges of any issuer of any
Accommodation; and (iv) all duties, freight, taxes, costs, insurance and all
such other charges and expenses which may pertain directly or indirectly to any
Obligations or Accommodations or to the goods or documents relating thereto.
(e) Borrower unconditionally agrees to indemnify, defend and hold
Lender harmless from any and all loss, claim or liability (including, without
limitation, reasonable attorneys' fees) arising from any transactions or
occurrences relating to any Accommodation established or opened for Borrower's
account, the Collateral relating thereto and any drafts or acceptances
thereunder, including, without limitation, any such loss or claim due to any
action taken by an issuer of any Accommodation. Borrower further agrees to
indemnify and hold Lender harmless for any errors or omissions in connection
with the Accommodations, whether caused by Lender, by the issuer of any
Accommodation or otherwise. Borrower's unconditional obligation to indemnify and
hold Lender harmless under this provision shall not be modified or diminished
for any reason or in any manner whatsoever, except for Lender's gross negligence
or wilful misconduct. Borrower agrees that any charges made to Lender by any
issuer of any Accommodation shall be conclusive on Borrower and may be charged
to Borrower's account.
(f) Lender shall not be responsible for: the conformity of any
goods to the documents presented; the validity or genuineness of any documents;
delay, default, or fraud by the Borrower or shipper and/or anyone else in
connection with the Accommodations or any underlying transaction; or any act or
failure to act, or any delay in acting or negligence in the issuance of any
letter of credit.
(g) Borrower agrees that any action taken by Lender, if taken in
good faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on Borrower and shall not
create any resulting liability to Lender. In furtherance thereof, Lender shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute for Borrower's account any and
all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from Borrower. None of the foregoing actions described in this
subsection (g) may be taken by Borrower without Lender's express written
consent.
2.4 Certain Amounts Due Without Demand. Lender may, in its sole
discretion, make or permit Revolving Loans, Accommodations or other Obligations
in excess of the Maximum Credit,
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Gross or Net Availability or applicable formulas or sublimits. All or any
portion of such excess(es) shall be immediately due and payable without Lender's
demand.
SECTION 3. INTEREST AND FEES
3.1 Interest. (a) Interest on the Revolving Loans and Term Loans
shall be payable by Borrower on the first day of each month, calculated upon the
closing daily balances in the loan account of Borrower for each day during the
immediately preceding month, at the per annum rate set forth as the Interest
Rate in Section 10.4(a). The Interest Rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate (as
defined below), effective as of the date of each such change. On and after any
Event of Default or termination or non-renewal hereof, interest on the unpaid
principal amount of all unpaid Obligations shall accrue at a rate equal to two
percent (2%) per annum in excess of the Interest Rate otherwise payable until
such time as all Obligations are indefeasibly paid in full (notwithstanding
entry of any judgment against Borrower or the exercise of any other right or
remedy by Lender), and all such interest shall be payable on demand. The "PRIME
RATE" is the rate of interest publicly announced by Chemical Bank in New York,
New York, or its successors, and assigns from time to time as its prime rate
(the Prime Rate is not intended to be the lowest rate of interest charged by
Chemical Bank to its borrowers). The Prime Rate on the date hereof is 8.50% and
therefore the rate of interest in effect under this Agreement on the date
hereof, expressed in simple interest terms, is 10.125% per annum.
(b) If the amount of interest to be paid in any month based upon
the outstanding principal amount of the Obligations during the immediately
preceding month is less than the Minimum Interest Amount, then, subject to the
provisions of Section 3.8 hereof, Borrower shall be obligated to pay the Minimum
Interest Amount on the date that accrued interest is due and payable for such
immediately preceding month. As used herein, the term "MINIMUM INTEREST AMOUNT"
shall mean the interest amount that would have been paid for such month if the
average principal amount of Obligations outstanding during such month was at
least equal to the Base Loan Amount for such month. As used herein, the term
"BASE LOAN AMOUNT" shall mean, for any month, an amount equal to $30,000,000 if
such month is in the first Loan Year (as defined in Section 9.2), $15,000,000 if
such month is in the second Loan Year, and $10,000,000 if such month is in the
third or any subsequent Loan Year.
3.2 Annual Commitment Fee. Borrower shall pay Lender on each
anniversary of the "CLOSING DATE" (as defined in the Conditions Precedent Rider)
an Annual Commitment Fee in the amount set forth in Section 10.4(b), which fee
shall be fully earned as of each such anniversary date.
3.3 Closing Fee. Borrower shall pay Lender on the Closing Date a
closing fee in the amount set forth in Section 10.4(c), which fee shall be
deemed fully earned as of the Closing Date and shall be non-refundable except to
the extent otherwise required by applicable law.
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3.4 Account Servicing Fee. Borrower shall pay Lender monthly, on
the first day of each month during the initial and each renewal Term an Account
Servicing Fee for the immediately preceding month (or part thereof) in the
amount set forth in Section 10.4(d).
3.5 Unused Line Fee. Borrower shall pay Lender monthly, on the
first day of each month, in arrears, an Unused Line Fee for each month during
the initial and each renewal Term at the rate per annum set forth in Section
10.4(e), calculated upon the amount, if any, by which the Maximum Credit exceeds
the average outstanding daily principal balance during the preceding month of
all Revolving Loans, Accommodations and Term Loans.
3.6 Charges to Loan Account. At Lender's option, all payments of
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement, or in any other agreement now or hereafter existing between
Lender and Borrower, may be charged on the date when due, as principal to any
loan account of Borrower maintained by Lender.
3.7 Calculation of Interest and Fees. Interest, fees for
Accommodations, the Unused Line Fee and any other amounts payable by Borrower to
Lender based on a per annum rate shall be calculated on the basis of actual days
elapsed over a 360-day year.
3.8 Maximum Interest Charges. Regardless of any provision
contained in this Agreement, any of the other "TRANSACTION DOCUMENTS" (as
defined in the Conditions Precedent Rider), or any other instrument or agreement
now or hereafter evidencing or securing the payment of any of the Obligations,
in no contingency or event whatsoever shall the aggregate of all amounts that
are contracted for, charged or collected pursuant to the terms of this
Agreement, or any other agreement, that are deemed interest under applicable law
exceed the highest rate permissible under any applicable law. No agreements,
conditions, provisions or stipulations contained in this Agreement or the
exercise by Lender of the right to accelerate the payment or the maturity of all
or any portion of the Obligations, or the exercise of any option whatsoever
contained in this Agreement, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any contingency whatsoever, shall entitle
Lender to charge or receive in any event, interest or any charges, premiums,
fees or other amounts deemed interest by applicable law in excess of the maximum
rate authorized by applicable law and in no event shall Borrower be obligated to
pay interest exceeding such maximum rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay interest exceeding the maximum rate
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such maximum rate. If any interest is
charged or received in excess of the maximum rate, Borrower acknowledges and
agrees that such charge or receipt shall be the result of an accident and bona
fide error, in such excess, to the extent received, shall be applied first to
reduce the principal amount of the Obligations and the balance, if any, returned
to Borrower, it being the intent of the parties hereto not to enter into a
usurious or otherwise illegal relationship. The right to accelerate the maturity
of any of the Obligations does not include the right to accelerate any interest
that is not otherwise accrued on the date of such acceleration, and Lender does
not intend
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to collect any unearned interest in the event of any such acceleration. For the
purpose of determining whether or not any excess of interest has been contracted
for, charged or received by Lender, all interest at any time contracted for,
charged or received from Borrower in connection with any of the Obligations
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of the Obligations.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment and
performance in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of setoff against,
and Borrower hereby assigns and pledges to Lender, all of the Collateral,
including, without limitation, any Collateral not deemed eligible for lending
purposes.
4.2 The term "OBLIGATIONS" shall mean any and all Revolving Loans,
Term Loans, Accommodations and all other indebtedness, liabilities and
obligations of every kind, nature and description owing by Borrower to Lender
and/or its affiliates, including, without limitation, principal, interest,
charges, fees and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal Term or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute, whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, original, renewed or extended and whether arising directly
or howsoever acquired by Lender including, without limitation, from any other
entity outright, conditionally or as collateral security, by assignment, merger
with any other entity, participations or interests of Lender in the obligations
of Borrower to others, assumption, operation of law, subrogation or otherwise
and shall also include all amounts chargeable to Borrower under this Agreement
or in connection with any of the foregoing.
4.3 "COLLATERAL" shall mean all of the following property of
Borrower:
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all: accounts, interests in goods represented
by accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; chattel paper; general intangibles,
including, but not limited to, tax and duty refunds, registered and unregistered
patents, trademarks, service marks, copyrights, trade names, applications for
the foregoing, trade secrets, goodwill, software, processes, equipment
formulations, manufacturing and quality control procedures, drawings,
schematics, blueprints, customer lists, licenses (whether as licensor or
licensee), choses in action and other claims, and existing and future leasehold
interests in equipment and fixtures; documents; instruments; letters of credit,
bankers' acceptances or guaranties; cash monies, deposits, securities,
securities accounts, bank accounts, deposit accounts, credits and other property
now or hereafter held in any capacity by Lender, its affiliates or any entity
which, at any
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time, participates in Lender's financing of Borrower or at any other depository
or other institution; agreements or property securing or relating to any of the
items referred to above;
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of goods, including, but not limited to:
All inventory, wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description, including,
without limitation, all raw materials, work-in-process, finished goods,
and materials to be used or consumed in Borrower's business; and all
names or marks affixed to or to be affixed thereto for purposes of
selling same by the seller, manufacturer, lessor or licensor thereof;
All equipment and fixtures, wherever located, whether now
owned or hereafter acquired, including, without limitation, all
machinery, equipment, motor vehicles, furniture and fixtures, and any
and all additions, substitutions, replacements (including, without
limitation, spare parts), and accessions thereof and thereto;
All consumer goods, farm products, crops, timber, minerals or
the like (including, without limitation, oil and gas), wherever
located, whether now owned or hereafter acquired, of whatever kind,
nature or description;
All now owned and hereafter acquired right, title and
interests of Borrower in, to and in respect of any personal property in
or upon which Lender has or may hereafter have a security interest,
lien or right of setoff;
All present and future books, records and manuals relating to
any of the above, including, without limitation, all computer programs,
printed output and computer readable data in the possession or control
of the Borrower, any computer service bureau or other third party, and
all technical manuals and advertising materials;
All products and proceeds of the foregoing in whatever form
and wherever located, including, without limitation, all insurance
proceeds and all claims against third parties for loss or destruction
of or damage to any of the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower shall, at Borrower's expense and in the
manner requested by Lender from time to time, direct that remittances and all
other proceeds of accounts and other Collateral shall be sent to a lock box
designated by and/or maintained in the name of Lender, and deposited into a bank
account now or hereafter selected by Lender and maintained in the name of Lender
under arrangements with the depository bank under which all funds deposited to
such bank account are required to be transferred solely to Lender. Borrower
shall bear all risk of loss of any
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funds deposited into such account. In connection therewith, Borrower shall
execute such lock box and bank account agreements as Lender shall specify. Any
collections or other proceeds received by Borrower shall be held in trust for
Lender and immediately remitted to Lender in kind.
5.2 Payments. All Obligations shall be payable at Lender's office
set forth below or at Lender's bank designated in Section 10.6(a) or at such
other bank or place as Lender may expressly designate from time to time for
purposes of this Section. Lender shall apply all proceeds of accounts or other
Collateral received by Lender and all other payments in respect of the
Obligations to the Revolving Loans whether or not then due or to any other
Obligations then due, in whatever order or manner Lender shall determine. For
purposes of determining Gross and Net Availability, remittances and other
payments with respect to the Collateral and Obligations will be treated as
credited to the loan account of Borrower maintained by Lender and Collateral
balances to which they relate, upon the date of Lender's receipt of advice from
Lender's bank that such remittances or other payments have been credited to
Lender's account or in the case of remittances or other payments received
directly in kind by Lender, upon the date of Lender's deposit thereof at
Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of Borrower maintained by Lender will be credited with
remittances and other payments two (2) Business Days after the day Lender has
received advice of receipt of remittances in Lender's account at Lender's Bank.
For purposes of this Agreement, "BUSINESS DAY" shall mean any day other than a
Saturday, Sunday or any other day on which banks located in the State of New
York are authorized to close.
5.3 Loan Account Statements. Lender shall render to Borrower
monthly a loan account statement. Each statement shall be considered correct and
binding upon Borrower as an account stated, except to the extent that Lender
receives, within sixty (60) days after the mailing of such statement, written
notice from Borrower of any specific exceptions by Borrower to that statement.
5.4 Direct Collections. Lender may, at any time, whether or not an
Event of Default has occurred, without notice to or assent of Borrower, (a)
notify any account debtor that the accounts and other Collateral which includes
a monetary obligation have been assigned to Lender by Borrower and that payment
thereof is to be made to the order of and directly to Lender, (b) send, or cause
to be sent by its designee, requests (which may identify the sender by a
pseudonym) for verification of accounts and other Collateral directly to any
account debtor or any other obligor or any bailee with respect thereto, and (c)
demand, collect or enforce payment of any accounts or such other Collateral, but
without any duty to do so, and Lender shall not be liable for any failure to
collect or enforce payment thereof. At Lender's request, all invoices and
statements sent to any account debtor, other obligor or bailee, shall state that
the accounts and such other Collateral have been assigned to Lender and are
payable directly and only to Lender.
5.5 Attorney-in-Fact. Borrower hereby appoints Lender and any
designee of Lender as Borrower's attorney-in-fact and authorizes Lender or such
designee, at Borrower's sole expense, to exercise at any times in Lender's or
such designee's discretion all or any of the following powers, which powers of
attorney, being coupled with an interest, shall be irrevocable until all
Obligations
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have been paid in full: (a) receive, take, endorse, assign, deliver, accept and
deposit, in the name of Lender or Borrower, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender, information concerning
the Collateral and any amounts owing with respect thereto, (c) notify account
debtors or other obligors to make payment directly to Lender, or notify bailees
as to the disposition of Collateral, (d) after an Event of Default, take or
bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (e) after an Event of
Default, change the address for delivery of mail to Borrower and to receive and
open mail addressed to Borrower, (f) after an Event of Default, extend the time
of payment of, compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations, and (g) execute in the
name of Borrower and file against Borrower in favor of Lender financing
statements or amendments with respect to the Collateral.
5.6 Limitation on Liability. Borrower hereby releases and
exculpates Lender, its officers, employees and designees, from any liability
arising from any acts under this Agreement or in furtherance thereof, whether as
attorney-in-fact or otherwise, whether of omission or commission, and whether
based upon any error of judgment or mistake of law or fact, except for gross
negligence or willful misconduct. In no event will Lender have any liability to
Borrower for lost profits or other special or consequential damages.
5.7 Administration of Accounts. After the occurrence of an Event
of Default, Borrower shall not (a) grant any extension of time of payment of any
of the accounts or any other Collateral which includes a monetary obligation,
(b) compromise or settle any of the accounts or any such other Collateral for
less than the full amount thereof, (c) release in whole or in part any account
debtor or other person liable for the payment of any of the accounts or any such
other Collateral, or (d) grant any credits, discounts, allowances, deductions,
return authorizations or the like with respect to any of the accounts or any
such other Collateral. Prior to the occurrence of an Event of Default, Borrower
may take any of the foregoing actions in the ordinary course of its business as
presently conducted, unless Lender has in writing directed Borrower not to do so
in a specific instance.
5.8 Documents. At such times as Lender may request and in the
manner specified by Lender, Borrower shall deliver to Lender or Lender's
representative, as Lender shall designate, copies or original invoices,
agreements, proofs of rendition of services and delivery of goods and other
documents evidencing or relating to the transactions which gave rise to accounts
or other Collateral, together with customer statements, schedules describing the
accounts or other Collateral and/or statements of account and confirmatory
assignments to Lender of the accounts or other Collateral, in form and substance
satisfactory to Lender and duly executed by Borrower. Without
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limiting the provisions of Section 5.7, Borrower's granting of credits,
discounts, chargebacks, allowances, deductions, return authorizations or the
like will be promptly reported to Lender in writing. In no event shall any such
schedule or confirmatory assignment (or the absence thereof or omission of any
of the accounts or other Collateral therefrom) limit or in any way be construed
as a waiver, limitation or modification of the security interests or rights of
Lender or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by Borrower may be destroyed or otherwise disposed of by Lender six (6) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return at Borrower's expense.
5.9 Access. From time to time as requested by Lender, at the sole
expense of Borrower, Lender or its designee shall have access, prior to an Event
of Default during reasonable business hours and on or after an Event of Default
at any time, to all of the premises where Collateral is located for the purposes
of inspecting the Collateral, and all Borrower's books and records, and Borrower
shall permit Lender or its designee to make such copies of such books and
records or extracts therefrom as Lender may request. Without expense to Lender,
Lender may use such of Borrower's personnel, equipment, including, without
limitation, computer equipment, programs, printed output and computer readable
media, supplies and premises for the collection of accounts and realization on
other Collateral as Lender, in its sole discretion, deems appropriate. Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender at Borrower's expense all financial information, books and
records, work papers, management reports and other information in their
possession regarding Borrower (except that the foregoing shall not be deemed to
waive any applicable attorney-client privilege).
5.10 Environmental Audits. From time to time, as requested by
Lender, at the sole expense of Borrower, Borrower shall provide Lender, or its
designee, complete access to all of Borrower's facilities for the purpose of
conducting an environmental audit of such facilities as Lender or its designees
may deem necessary. Borrower agrees to cooperate with Lender with respect to any
environmental audit conducted by Lender or its designee pursuant to this Section
5.10.
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SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the making of loans or other credit accommodations by
Lender to Borrower:
6.1 Financial and Other Reports. Borrower shall keep and maintain
its books and records in accordance with generally accepted accounting
principles, consistently applied. Borrower shall, at its expenses deliver to
Lender: (a) true and complete monthly agings of its accounts receivable,
accounts payable and notes payable; (b) weekly inventory reports; (c) monthly
internally prepared interim financial statements. Annually, Borrower shall
deliver audited financial statements of Borrower accompanied by the report and
opinion thereon of independent certified public accountants acceptable to
Lender, as soon as available, but in no event later than ninety (90) days after
the end of Borrower's fiscal year. Except for audited financial statements
prepared in accordance with generally accepted accounting principles, all of the
foregoing shall be in such form and together with such information with respect
to the business of Borrower or any Guarantor, as Lender may in each case
request.
6.2 Trade Names. Borrower may from time to time render invoices to
account debtors under any trade names set forth in Section 10.6(e) after Lender
has received prior written notice from Borrower of the use of such trade names
and as to which, Borrower agrees that: (a) each trade name does not refer to
another corporation or other legal entity, (b) all accounts and proceeds thereof
(including, without limitation, any returned merchandise) invoiced under any
such trade names are owned exclusively by Borrower and are subject to the
security interest of Lender and the other terms of this Agreement, and (c) all
schedules of accounts and confirmatory assignments including, without
limitation, any sales made or services rendered using the trade name shall show
Borrower's name as assignor and Lender is authorized to receive, endorse and
deposit to any loan account of Borrower maintained by Lender all checks or other
remittances made payable to any trade name of Borrower representing payment with
respect to such sales or services.
6.3 Losses. Borrower shall promptly notify Lender in writing of
any loss, damage, investigation, action, suit, proceeding or claim relating to a
material portion of the Collateral or which may result in any material adverse
change in Borrower's business, assets, liabilities or condition, financial or
otherwise.
6.4 Books and Records. Borrower's books and records concerning
accounts and its chief executive office are and shall be maintained only at the
address set forth in Section 10.6(d). Borrower's only other places of business
and the only other locations of Collateral, if any, are and shall be the
addresses set forth in Section 10.6(b) hereof, except Borrower may change such
locations or open a new place of business after thirty (30) days prior written
notice to Lender. Prior to any change in location or opening of any new place of
business, Borrower shall execute and
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deliver or cause to be executed and delivered to Lender such financing
statements, financing documents and security and other agreements as Lender may
reasonably require, including, without limitation, those described in Section
6.14.
6.5 Title and Liens. Borrower has and at all times will continue
to have good and marketable title to all of the Collateral, free and clear of
all liens, security interests, claims or encumbrances of any kind except in
favor of Lender and except for Permitted Liens.
6.6 Asset Dispositions; Fundamental Changes. Borrower shall not
directly or indirectly: (a) sell, lease, transfer, assign, abandon or otherwise
dispose of any part of the Collateral (other than sales of inventory to buyers
in the ordinary course of business) or any material portion of its other assets
(other than the sale of its real estate in the 7th District, Gwinnett County,
Georgia, to the extent approved by the Court (as defined in the Condition
Precedent Rider)) or (b) consolidate with or merge with or into any other
entity, or permit any other entity to consolidate with or merge with or into
Borrower except as provided in the "MERGER AGREEMENT" (as defined in the
Condition Precedent Rider) or (c) form or acquire any interest in any firm,
corporation or other entity (other than a majority owned subsidiary in which
Borrower invests no more than $100,000 and which is engaged in substantially the
same business as is engaged in on the date hereof by Borrower or Borrower's
existing subsidiaries).
6.7 Insurance. Borrower shall at all times maintain, with
financially sound and reputable insurers, insurance (including, without
limitation, at the option of Lender, earthquake insurance if and to the extent
available at commercially reasonable rates) with respect to the Collateral and
other assets. All such insurance policies shall be in such form, substance,
amounts and coverage as may be satisfactory to Lender and shall provide for
thirty (30) days' prior written notice to Lender of cancellation or reduction of
coverage. Borrower hereby irrevocably appoints Lender and any designee of Lender
as attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Borrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or replacement
of any portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Lender determines. Borrower shall also maintain in full force and effect (i)
a policy or policies of business interruption insurance in an amount not less
than the amount of coverage in effect on the date hereof, and (ii) the life
insurance policy insuring the life of Dennis C. Hayes in an amount not less than
$4,000,000, the benefits of which policies shall be collaterally assigned to
Lender as security for the payment of the Obligations.
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6.8 Compliance With Laws. Borrower is and at all times will
continue to be in compliance with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority relating to its
business (including, without limitation, laws, rules, regulations and orders
relating to taxes, payment and withholding of payroll taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety, or environmental matters) to the
extent that noncompliance therewith might reasonably be expected to have a
Material Adverse Effect, and is and will remain in compliance with all material
agreements or other instruments binding on Borrower or its property to the
extent that noncompliance therewith might reasonably be expected to have a
Material Adverse Effect. All of Borrower's inventory shall be produced in
accordance with the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto. Borrower
shall pay and discharge all taxes, assessments and governmental charges against
Borrower or any Collateral prior to the date on which penalties are imposed or
liens attach with respect thereto, unless the same are being actively contested
in good faith any by appropriate proceedings, no lien results therefrom that is
not a Permitted Lien, Borrower has established appropriate reserves therefor in
accordance with generally accepted accounting principles, and, at Lender's
option, Reserves are established for the amount contested and penalties which
may accrue thereon to the extent reasonably determined by Lender to be necessary
to insure that Borrower has sufficient Net Availability to pay such contested
items in the event of a resolution thereof requiring payment in whole or in part
of any such items.
6.9 Accounts. With respect to each account deemed an Eligible
Domestic Account, Eligible UK Account or Eligible Foreign Account, except as
reported in writing to Lender, Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied. As to each account,
except as disclosed in writing to Lender at the time such account arises (a)
each is valid and legally enforceable and represents an undisputed bona fide
indebtedness incurred by the account debtor for the sum reported to Lender, (b)
each arises from an absolute and unconditional sale of goods, without any right
of return or consignment (except in the ordinary course of Borrower's business
as presently conducted in connection with warranty returns and stock adjustments
and price protection programs offered by Borrower to its customers), or from a
completed rendition of services, (c) each is not, at the time such account
arises, subject to any defense, offset, dispute, contra relationship,
counterclaim, or any given or claimed credit, allowance or discount, and (d) all
statements made and all unpaid balances and other information appearing in the
invoices, agreements, proofs of rendition of services and delivery of goods and
other documentation relating to the accounts, and all confirmatory assignments,
schedules, statements of account and books and records with respect thereto, are
true and correct and in all material respects what they purport to be.
6.10 Equipment. With respect to Borrower's equipment, Borrower
shall keep the equipment in good order and repair, and in running and marketable
condition, ordinary wear and tear excepted.
6.11 Reserved.
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6.12 Affiliated Transactions. Borrower will not, directly or
indirectly: (a) lend or advance money or property to, guarantee or assume
indebtedness of, or invest (by capital contribution or otherwise) in any person,
firm, corporation or other entity; or (b) declare, pay or make any dividend,
redemption or other distribution on account of any shares of any class of stock
of Borrower now or hereafter outstanding; or (c) make any payment of the
principal amount of or interest on any indebtedness owing to any officer,
director, shareholder, or Affiliate of Borrower; or (d) make any loans or
advances to any officer, director, employee, shareholder or Affiliate of
Borrower; or (e) enter into any sale, lease or other transaction with any
officer, director, employee, shareholder or Affiliate of Borrower on terms that
are less favorable to Borrower than those which might be obtained at the time
from persons who are not an officer, director, employee, shareholder or
Affiliate of Borrower. Notwithstanding the foregoing, the following transactions
shall not be prohibited: (i) the redemption of Borrower's stock to the extent
provided by the "REORGANIZATION PLAN" (as defined in the Conditions Precedent
Rider); (ii) the funding of loans by shareholders of Borrower in the amounts, at
the times and on the terms provided in the "MERGER DOCUMENTS" (as defined in the
Conditions Precedent Rider) as in effect on the date hereof and the repayment of
such loans to the extent allowed by a Subordination Agreement (as defined in the
Conditions Precedent Rider); (iii) the loans outstanding from time to time to
Dennis C. Hayes (not to exceed $250,000 outstanding at any time) that are
evidenced by a promissory note dated March 15, 1991, in the original principal
amount of $250,000, which note and all security therefor shall be pledged by
Borrower to Lender as security for the Obligations; (iv) transactions between
Borrower and Northern Telecom Inc. in furtherance of their strategic business
relationship as described in Exhibit A to the Shareholders' Agreement forming a
part of the Merger Documents; and (v) sales of goods by Borrower to a Subsidiary
in the ordinary course of business as presently conducted. As used herein, the
term "AFFILIATE" shall mean a person or entity (i) which directly or indirectly
through one or more intermediaries controls, or as controlled by, or as under
control with, Borrower; (ii) which beneficially owns or holds 10% or more of any
class of the voting stock of Borrower; or (iii) 10% or more of the voting stock
(or in the case of a person or entity that is not a corporation, 10% or more of
the equity interest) of which is beneficially owned or held by Borrower or a
subsidiary of Borrower. For purposes hereof, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through the ownership of
voting stock, by contract or otherwise.
6.13 Fees and Expenses. Borrower shall pay, on Lender's demand, all
costs, expenses, filing fees and taxes payable in connection with the
preparation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement, the other Transaction Documents, and all other
existing and future agreements or documents contemplated herein or related
hereto, including, without limitation, any amendments, waivers, supplements or
consents which may hereafter be made or entered into in respect hereof, or in
any way involving claims or defenses asserted by Lender or claims or defenses
against Lender asserted by Borrower, any guarantor or any third party directly
or indirectly arising out of or related to the relationship between Borrower and
Lender or any guarantor and Lender, including, but not limited to, the
following, whether incurred before, during or after the initial or any
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renewal Term or after the commencement of any case with respect to Borrower or
any guarantor under the United States Bankruptcy Code or any similar statute:
(a) all costs and expenses of filing or recording (including, without
limitation, Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all insurance premiums, appraisal fees, fees incurred in
connection with any environmental report, audit or survey and search fees; (c)
all fees as then in effect relating to the wire transfer of loan proceeds and
other funds and fees then in effect for returned checks and credit reports; (d)
all expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate set forth in Section
10.4(f) for Lender's examiners in the field and office; and (e) the costs, fees
and disbursements of in-house and outside counsel to Lender, including, but not
limited to, such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals arising
therefrom.
6.14 Further Assurances. At the request of Lender, at any time and
from time to time, at Borrower's sole expense, Borrower shall execute and
deliver or cause to be executed and delivered to Lender, such agreements,
documents and instruments, including, without limitation, waivers, consents and
subordination agreements from mortgagees or other holders of security interests
or liens, landlords or bailees, and do or cause to be done such further acts as
Lender, in its discretion, deems necessary or desirable to create, preserve,
perfect or validate any security interest of Lender or the priority thereof in
the Collateral and otherwise to effectuate the provisions and purposes of this
Agreement and the other Transaction Documents. Borrower hereby authorizes Lender
to file financing statements or amendments against Borrower in favor of Lender
with respect to the Collateral, without Borrower's signature and to file as
financing statements any carbon, photographic or other reproductions of this
Agreement or any financing statements signed by Borrower.
6.15 Revolving Loans. The unpaid balance of Revolving Loans
outstanding from time to time shall not at any time exceed the Net Availability
at such time unless Lender has consented in writing. If on any date the
aggregate amount of Revolving Loans shall exceed the Net Availability on such
date, such excess shall be payable by Borrower immediately without demand.
6.16 Environmental Condition. Except as otherwise disclosed in the
Certificate Regarding Environmental Matters dated the date hereof from Borrower
to Lender, none of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
hazardous waste or hazardous substance disposal site, or a candidate for closure
pursuant to any environmental protection statute. No lien arising under any
environmental protection statute has attached to any revenues or to any real or
personal property owned by Borrower. Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency any action or omission by Borrower
resulting in the releasing, or otherwise exposing of hazardous waste or
hazardous substances into the environment. Borrower has not received any notice
of noncompliance, and is in compliance in all material respects, with all
statutes, regulations, ordinances and other legal
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requirements pertaining to the production, storage, handling, treatment,
release, transportation or disposal of any hazardous waste or hazardous
substance.
6.17 Litigation. SCHEDULE B attached hereto sets forth all pending
litigation against Borrower on the date hereof any and all litigation known by
Borrower to be threatened against it.
6.18 Subsidiaries; Tax Identification Numbers. SCHEDULE C attached
hereto identifies each corporation, partnership, limited liability company,
limited liability partnership, or other entity in which Borrower owns 50% or
more of the beneficial interests, and the tax identification number for Borrower
and each of the foregoing described entities.
6.19 Intellectual Property. SCHEDULE D attached hereto sets forth
all patents, trademarks, service marks, copyrights and other similar rights
owned by Borrower or any of its subsidiaries on the date hereof.
6.20 Benefit Plans. Except as disclosed on SCHEDULE E attached
hereto, neither Borrower nor any of its subsidiaries has any employee benefit
plan, and Borrower and each subsidiary is in compliance with all laws applicable
to the administration and funding of each such plan and reporting concerning
each such plan, except to the extent that any noncompliance does not have a
Material Adverse Effect.
6.21 Inventory Reappraisals. Borrower acknowledges and agrees that
Lender may, on an annual basis when no Event of Default exists, and at any time
after the occurrence of an Event of Default, cause the inventory of Borrower,
wherever located, to be appraised, the cost of which appraisals shall be paid
for by Borrower.
6.22 Inventory Recordkeeping. Within 60 days after the date hereof,
Borrower shall enter into an agreement with MB Valuation Services, Inc. by which
MB Valuation Services, Inc. shall allow Borrower to use (and permit Lender to
have access to) its computer programs to enable Borrower to keep records with
respect to its inventory, the value thereof and categories of inventory in order
to enable Borrower to report to Lender, and Lender to determine, which inventory
is Eligible Domestic Inventory or Eligible UK Inventory, and the Value thereof.
6.23 No Finder's Fees. Except for fees that may be payable by
Borrower to Emerald Group International, L.L.C., there are no finder's, broker's
or other fees, commissions or other compensation of any nature which Borrower is
liable to pay to any person or entity in connection with this Agreement or any
of the transactions contemplated hereby (other than the fees payable pursuant to
the terms of this Agreement to Lender), and Borrower hereby agrees to indemnify
and hold harmless Lender from any liability for any such fees, commissions or
other compensation.
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SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due
and payable, without notice or demand, and any provisions of this Agreement as
to future loans and credit accommodations by Lender shall terminate
automatically, upon the termination or non-renewal of this Agreement or, at
Lender's option, upon or at any time after the occurrence or existence of any
one or more of the following "EVENTS OF DEFAULT":
(a) Borrower fails to pay when due any of the Obligations (whether
due at stated maturity, on acceleration or otherwise);
(b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, any of the other Transaction Documents or
any other agreement, schedule, confirmatory assignment or otherwise, or to any
Affiliate of Lender, shall prove to have been inaccurate or misleading in any
material respect when made or deemed made;
(c) Borrower fails or neglects to perform, keep or observe (i) any
covenant contained in Sections 5.1, 5.7, 5.9, 5.10, 6.4, 6.6, 6.7, 6.12 and
6.14; or (ii) any other covenant contained in this Agreement (other than a
default in the performance or observance of which is dealt with specifically
elsewhere in this Section 7.1) and the breach of such other covenant is not
cured to Lender's satisfaction within fifteen (15) days after the sooner to
occur of Borrower's receipt of notice of such breach from Lender or the date on
which such failure or neglect first becomes known to any officer of the
Borrower, provided that such notice and opportunity to cure shall not apply in
the case of the failure to perform, keep or observe any covenant that is not
capable of being cured at all or within such fifteen (15)-day period, or which
has been the subject of a prior failure within the preceding one hundred eighty
(180) days or which is a willful and knowing breach by Borrower;
(d) Either (1) an event of default shall occur under, or (2)
Borrower shall default in the performance or observance of any material term,
condition or agreement contained in, any of the other Transaction Documents or
any other existing or future financing, security or other agreement between
Borrower and Lender or any affiliate of Lender;
(e) Any guarantor of the whole or any part of the Obligations
(including any Subsidiary) revokes, terminates or fails to perform any of the
terms of any guaranty, security agreement, endorsement or other agreement of
such party in favor of Lender or any Affiliate of Lender;
(f) Any judgment or judgments aggregating in excess of $500,000 or
any injunction or attachment is obtained against Borrower or any guarantor which
remains unsatisfied or unstayed for a period of ten (10) days or is enforced;
(g) Borrower or any guarantor is dissolved, fails to maintain its
corporate existence and good standing, or the usual business of Borrower or any
guarantor ceases or is suspended;
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(h) Borrower or any guarantor of the whole or any part of the
Obligations becomes insolvent, makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a general meeting of its
creditors or principal creditors;
(i) Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed by or against Borrower or any guarantor
(and, if against Borrower or any guarantor, such proceeding continues
undismissed for sixty (60) days);
(j) The indictment of Borrower or any guarantor under any criminal
statute, or commencement of criminal or civil proceedings against Borrower or
any guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property of
Borrower or such guarantor;
(k) Any default or event of default occurs on the part of Borrower
under any agreement, document or instrument to which Borrower is now or
hereafter a party or by which Borrower or any of its property is now or
hereafter bound, creating or relating to any indebtedness for money borrowed by
Borrower from any person or entity other than Lender in an amount exceeding
$350,000, if (1) payment of such indebtedness is not subordinated to the payment
of the Obligations pursuant to an agreement between each holder of such
indebtedness and Lender and (2) the effect of such default is to accelerate the
maturity of all or any part of such indebtedness, or all or any part of any such
indebtedness shall be declared to be due and payable or required to be prepaid
or any other reason, in either event prior to the stated maturity thereof;
(l) Borrower shall default in the observance or performance of any
condition or covenant contained in the Reorganization Plan, such default is not
timely cured within any period of cure set forth in the Reorganization Plan and
such default has or may reasonably be expected to have a Material Adverse
Effect;
(m) Any license agreement that is material to Borrower's business,
including, but not limited to, Borrower's license with American Telegraph &
Telephone Company under Patent License Agreement made effective as of January 1,
1988, shall be terminated; or
(n) Any event occurs or any condition exists that has a Material
Adverse Effect.
7.2 Remedies. Upon the occurrence of an Event of Default and at
any time thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements between Borrower and Lender, the Uniform
Commercial Code or other applicable law, all of which rights and remedies may be
exercised without notice to Borrower, all such notices being hereby waived,
except such notice as is expressly provided for hereunder or is not waivable
under applicable law. All rights and remedies of Lender are cumulative and not
exclusive and are enforceable, in Lender's
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discretion, alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the foregoing,
Lender may (a) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender, (b) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(c) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (d) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, (f) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower. If any of the Collateral is sold or
leased by Lender upon credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment therefor is finally collected
by Lender. If notice of disposition of Collateral is required by law, seven (7)
days prior notice by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral actually received by Lender from any sale, lease, foreclosure or
other disposition of the Collateral to payment of any of the Obligations, in
whole or in part (including, without limitation, reasonable attorneys' fees and
legal expenses incurred by Lender with respect thereto or otherwise chargeable
to Borrower) and in such order as Lender may elect, whether or not then due.
Borrower shall remain liable to Lender for the payment of any deficiency
together with interest at the highest rate provided for herein and all costs and
expenses of collection or enforcement, including, without limitation, reasonable
attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at
its option, cure any default by Borrower under any agreement with a third party
or pay or bond on appeal any judgment entered against Borrower, discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Lender's sole judgment, is necessary or appropriate to
preserve, protect, insure, maintain, or realize upon the Collateral. Lender may
charge Borrower's loan account for any
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<PAGE> 24
amounts so expended, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment, bonding or discharge,
and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM
AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTUOUS CONDUCT BY BORROWER OR LENDER,
OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any kind, nature or description
in any action or proceeding instituted by Lender with respect to this Agreement,
the Obligations, the Collateral or any matter arising therefrom or relating
thereto, except compulsory counterclaims.
8.3 Jurisdiction. Borrower hereby irrevocably submits and consents
to the nonexclusive jurisdiction of the State and Federal Courts located in the
State in which the office of Lender designated in Section 10.6(a) is located and
any other State where any Collateral is located with respect to any action or
proceeding arising out of this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by mail
directed to Borrower at its chief executive office set forth herein or other
address thereof of which Lender has received notice as provided herein, service
to be deemed complete five (5) days after mailing, or as permitted under the
rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on FORUM NON CONVENIENS and any objection to venue in connection
therewith.
8.4 No Waiver by Lender. Lender shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
rights or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. A waiver by Lender of any right or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy which Lender would otherwise have on any future occasion, whether similar
in kind or otherwise.
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<PAGE> 25
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon
execution and delivery by Borrower and Lender in Atlanta, Georgia, and shall
continue in full force and effect for a term of three (3) years from the Closing
Date hereof and shall be deemed automatically renewed for successive terms of
three (3) years thereafter unless terminated as of the end of the initial or any
renewal term (each a "TERM") by either party giving the other written notice at
least sixty (60) days' prior to the end of the then-current Term.
9.2 Early Termination. Borrower may terminate this Agreement by
giving Lender at least thirty (30) days prior written notice at any time upon
payment in full of all of the Obligations as provided herein, including, without
limitation, the early termination fee provided below. Lender shall have the
right to terminate this Agreement (i) at any time upon or after the occurrence
of an Event of Default or (ii) upon ninety (90) days' prior written notice to
Borrower if (A) there shall occur any change in the controlling ownership of
Borrower (other than a change of ownership contemplated by the Merger Documents)
or any person now or hereafter occupying the position of Borrower's chief
executive officer, chief financial officer or chief operating officer shall
cease for any reason to occupy such position, and (B) Northern Telecom Inc. does
not own at the time in question at least 20.2% of the outstanding equity
securities in Borrower. If Lender or Borrower shall terminate this Agreement
effective as of any date other than the last day of the then current Term,
Borrower shall pay to Lender (in addition to all other Obligations) upon the
effective date of such termination, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits, an early termination
fee calculated as follows:
<TABLE>
<CAPTION>
IF TERMINATION OCCURS THE TERMINATION FEE SHALL BE:
AT ANY TIME:
<S> <C> <C> <C>
(a) before the last (a) 3% of the greater of the Base
day of the first Loan Amount in the month during
Loan Year which notice of termination
is given or the Average Daily
Loan Balance for the period
(not to exceed 180 days)
immediately preceding the
effective date of termination
(b) after the first (b) 2% of the greater of the Base
Loan Year but Loan Amount in the month during
before the last which notice of termination is
day of the second is given or the Average Daily
Loan Year Loan Balance for the 180-day
period
(c) after the seond (c) 1% of the greater of the Base
Loan Year Loan Amount in the month during
which notice of termination is
is given or the Average Daily
Loan Balance for the 180-day
period prior to the effective
date of termination
</TABLE>
-25-
<PAGE> 26
If the effective date of termination pursuant to a properly given notice occurs
on the last day of any Term, then no termination charge shall be payable. As
used herein, the term "LOAN YEAR" shall mean a period commencing on the Closing
Date or an anniversary thereof and ending on the next anniversary; and the term
"AVERAGE DAILY LOAN BALANCE" shall mean, for any period, an amount equal to the
aggregate principal balance of Revolving Loans, Term Loans and Accommodations
outstanding at the end of each day during such period divided by the number of
days in such period.
9.3 Additional Costs Collateral. Upon termination of this
Agreement by Borrower, as permitted herein, in addition to payment of all
Obligations which are not contingent, Borrower shall deposit such amount of cash
collateral as Lender determines is necessary to secure Lender from loss, cost,
damage or expense, including, without limitation, reasonable attorneys' fees, in
connection with any open Accommodations or remittance items or other payments
provisionally credited to the Obligations and/or to which Lender has not yet
received final and indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices, requests
and demands hereunder shall be (a) made to Lender at its address set forth in
Section 10.6(a) and to Borrower at its chief executive office set forth in
Section 10.6(b), or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if by first class or certified mail, three
(3) days after mailing.
9.5 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This Agreement, the
Term Notes referred to in Section 2.2 and the Conditions Precedent Rider contain
the entire agreement of the parties as to the subject matter hereof, all prior
commitments, proposals and negotiations concerning the subject matter hereof
being merged herein and superseded hereby. Neither this Agreement nor any
provision hereof shall be amended, modified or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns, except that any
obligation of Lender under this Agreement shall not be assignable nor inure to
the successors and assigns of Borrower.
-26-
<PAGE> 27
9.7 Discharge of Borrower. No termination of this Agreement shall
relieve or discharge Borrower of its Obligations, grants of Collateral, duties
and covenants hereunder or otherwise until such time as all Obligations to
Lender have been indefeasibly paid and satisfied in full, including, without
limitation, the continuation and survival in full force and effect of all
security interests and liens of Lender in and upon all then existing and
thereafter-arising or acquired Collateral and all warranties and waivers of
Borrower.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement and all references to the singular or plural herein shall also
mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Georgia.
9.10 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts taken together shall constitute but
one and the same instrument. In proving this Agreement in any judicial
proceeding, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is sought.
9.11 Confidentiality. Lender agrees to exercise reasonable efforts
(and, in any event, with at least the same degree of care as it ordinarily
exercises with respect to Proprietary Information (as hereinafter defined) of
its other customers) to keep any Proprietary Information delivered or made
available by Borrower to it, including information obtained by Lender in
connection with a visit or investigation authorized by this Agreement,
confidential from any person or entity other than individuals employed or
retained by Lender who are or are expected to become engaged in evaluating,
approving, structuring, administering or otherwise giving professional advice
with respect to any of the Transaction Documents, Obligations or Collateral, and
other than its legal counsel; provided, however, that nothing herein shall
prevent Lender from disclosing such Proprietary Information (i) to any party to
this Agreement from time to time or to any participant, (ii) pursuant to an
order of any court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over Lender, (iv) which
has been publicly disclosed other than by an act or omission of Lender that is
not permitted herein, (v) to the extent required in connection with any
litigation with respect to any of the other Transaction Documents or any of the
transactions contemplated thereby, or (vi) to the extent required in connection
with the exercise of any remedies hereunder. As used herein, the term
"PROPRIETARY INFORMATION" shall mean any information that is received by Lender
from Borrower and designated by Borrower in writing to be proprietary in nature
and that consists of confidential information relating to Borrower's trade
secrets, patents, processes or business strategies.
-27-
<PAGE> 28
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 Maximum Credit; Availability Calculations
(a) Maximum Credit: $70,000,000.
(b) Gross Availability Formulas:
(i) Eligible Domestic Accounts Percentage:
85% for so long as Dilution (as hereinafter defined)
does not exceed 3%; but if on any date Dilution,
calculated on a rolling 90-day average, exceeds 3%,
then the foregoing 85% advance percentage with
respect to Eligible Domestic Accounts shall be
reduced by one percentage point, or fraction thereof,
for each percentage point, or fraction thereof,
increase in Dilution above 3%. As used herein,
"DILUTION" shall mean on any date an amount derived
by dividing the gross invoice amount of all accounts
outstanding on such date into the aggregate of all
credits (including accrued credits for price
protection and coop advertising), returns,
allowances, discounts, write-offs, and offsets with
respect to such accounts.
(ii) Eligible UK Accounts Percentage:
85% for so long as Dilution does not exceed 3%; but
if on any date Dilution, calculated on a rolling
90-day average, exceeds 3%, then the foregoing 85%
advance percentage with respect to Eligible UK
Accounts shall be reduced by one percentage point, or
fraction thereof, for each percentage point, or
fraction thereof, increase in Dilution above 3%.
(iii) Eligible Foreign Accounts Percentage:
85% for so long as Dilution does not exceed 3%; but
if on any date Dilution, calculated on a rolling
90-day average, exceeds 3%, then the foregoing 85%
advance percentage with respect to Eligible Foreign
Accounts shall be reduced by one percentage point, or
fraction thereof, for each percentage point, or
fraction thereof, increase in Dilution above 3%.
(iv) Eligible Domestic Inventory Percentage: 80%
(v) Eligible UK Inventory Percentage: 80%
-28-
<PAGE> 29
(c) Inventory Sublimit:
On any date, the lesser of $25,000,000 or 150% of the Accounts
Margin Amount on such date. As used herein, the term "ACCOUNTS
MARGIN AMOUNT" shall mean, on any date of determination
thereof, an amount derived by application of the Eligible
Domestic Accounts Percentage set forth in Section 10.1(b)(i)
to the net amount of Eligible Domestic Accounts outstanding on
such date.
(d) Maximum days after Invoice
Date for Eligible Domestic,
Eligible Foreign and Eligible
UK Accounts: 90 Days
10.2 Term Loans:
(a) Term Loan A
Amount: $2,608,000
Final Maturity Date: the earlier of (i) January 2, 2002,
or (ii) the date of termination
under Section 9.2
(b) Term Loan B
Amount: $7,500,000
Final Maturity Date: the earlier of (i) January 2, 2002,
or (ii) the date of termination
under Section 9.2
10.3 Accommodations:
(a) Lender's Charge for Accommodations:
1-7/8% per annum of the face amount of outstanding letter of
credit plus any costs or fees incurred by Lender to the issuer
of such letter of credit.
(b) Sublimit for Accommodations: $3,000,000
10.4 Interest, Fees and Charges:
(a) Interest Rate:
-29-
<PAGE> 30
A fluctuating rate per annum equal to the Prime Rate plus the
Applicable Interest Margin. The "APPLICABLE INTEREST MARGIN"
shall be 1-5/8%; provided, however, that (1) if Borrower shall
have Net Income for its fiscal year ending September 30, 1996,
of less than $2,500,000, or Net Income for its fiscal year
ending September 30, 1997, of less than $5,000,000, or a
Tangible Net Worth at the end of any fiscal year of Borrower
that is less than the Base Tangible Net Worth, then the
Applicable Interest Margin shall be 2-1/8%; and (2) if
Borrower shall conduct an initial public offering of its
capital stock from which Borrower shall receive net proceeds
of not less than $15,000,000 and at the time of Borrower's
receipt of such proceeds there does not exist any Default or
Event of Default, then the Applicable Interest Margin shall be
1-3/8%. As used herein, the term "NET INCOME" shall mean, for
any period, the net income of Borrower for the period in
question after giving effect to deduction of or provision for
all operating expenses, all taxes and reserves (including
reserves for deferred taxes) and all other proper deductions,
all determined in accordance with generally accepted
accounting principles consistently applied, provided that
there shall be excluded: (i) any restoration of any
contingency reserve, except to the extent that provision for
such reserve was made out of income during such period, (ii)
any net gain or losses on the sale or other disposition, not
in the ordinary course of business, of capital assets,
provided that there shall also be excluded any related charges
for taxes thereon, (iii) any net gain arising from the
collection of the proceeds of any insurance policy, (iv) any
write-up of any asset, and (v) any other extraordinary items.
"TANGIBLE NET WORTH" shall mean, on any date of determination
thereof, the book net worth of Borrower on such date plus the
total amount of indebtedness of Borrower on such date that is
subordinated in right of payment to the payment of all or any
part of the Obligations, minus prepaid expenses and other
assets, all determined in accordance with generally accepted
accounting principles consistently applied; the term "BASE
TANGIBLE NET WORTH" shall mean the Tangible Net Worth of
Borrower as of the Closing Date, after (i) giving effect to
the transactions contemplated by the Merger Documents,
including the addition to Borrower's equity capital of the
$35,000,000 investment to be made in Borrower pursuant to the
Merger Documents, (ii) deducting all adjustments necessary to
pay all claims under the Reorganization Plan and to redeem all
shares of capital stock of Borrower held on the Closing Date
by non-employee shareholders (other than former employees and
other than the interest of former employees in Borrower's
pension, profit sharing and stock plan), and (iii) subtracting
$2,000,000.
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<PAGE> 31
(b) Annual Commitment Fee:
$325,000 each year, earned and payable on each anniversary
date after the Closing Date.
(c) Closing Fee: $325,000
(d) Account Servicing Fee: Not Applicable
(e) Unused Line Fee: Not Applicable
(f) Field Examination per diem: $650
10.5 Reserved.
10.6 (a) Lender's Address:
The CIT Group/Credit Finance, Inc.
135 West 50th Street
New York, New York 10020
Lender's Bank:
Chemical Bank, N.A.
270 Park Avenue
New York, New York
(b) Borrower's Chief Executive Office:
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Dennis C. Hayes
Telecopy: (770) 840-6840
(c) Leased Locations:
Borrower leases the following locations and Collateral may be
found at each of these locations:
-31-
<PAGE> 32
<TABLE>
<CAPTION>
Location Landlord
----------------------------------------------------------
<S> <C>
5835 Peachtree Corners East Trammell Crow Company
Norcross Georgia 30092 3101 Powercreek Parkway
Suite 400
Atlanta, Georgia 30339
5923 Peachtree Industrial Trammell Crow Company
Boulevard 3101 Powercreek Parkway
Norcross, Georgia 30092 Suite 400
Atlanta, Georgia 30339
5804 Peachtree Corners East Trammell Crow Company
Norcross, Georgia 30092 3101 Powercreek Parkway
Suite 400
Atlanta, Georgia 30339
5953 Peachtree Industrial Trammell Crow Company
Boulevard 3101 Powercreek Parkway
Norcross, Georgia 30092 Suite 400
Atlanta, Georgia 30339
5854 Peachtree Corners East Trammel Crow Company
Norcross, Georgia 30092 3101 Powercreek Parkway
Suite 400
Atlanta, Georgia 30339
One Westbrook Corporate Interoffice/Chicago-Itasca
Center One Pierce Place
Suite 300 Suite 500-E
Westchester, Illinois 60154 Itasca, Illinois 60143
24461 Ridge Route Drive REMC Enterprises, Inc.
Suite 200 Attn: Ron McElroy
Laguna Hills, CA 92653 Lakehills Executive Suites
24461 Ridge Route Drive
Suite 200
Laguna Hills, CA 92653
375 Conejo Ridge Avenue Billingsley (United
Thousand Oaks, CA 91361 States), Inc.
c/o Citibank, N.A.
909 Third Avenue
30th Floor
New York, New York 10043
1590 Pederson Road E.A. Houston Construction
Thousand Oaks, CA 91361 1588 Pederson Road
Thousand Oaks, CA 91360
</TABLE>
-32-
<PAGE> 33
(d) Other Locations of Collateral:
Collateral of Borrower may be stored or located at one or more
of the following other locations:
(1) Facilities maintained by Borrower's Subsidiaries:
Hayes Government Services, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Enterprise Technologies, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Hayes Microcomputer Products (Australia) PTY Limited
Level 10
201 Miller Street
North Sydney NSW 2060
Australia
39/F., Unit B
Manulife Tower
169 Electric Road
North Point
Hong Kong
Unit 10
8th Floor
Fortress Tower
250 King's Road
Hong Kong
Hayes Microcomputer Products (Canada), Ltd.
240 Holiday Inn Drive
Unit E
Cambridge, Ontario N3C 3X4
Canada
Tour Neptune Cedex 20
92086 Paris La Defense
France
Hayes Microcomputer Products (Scandinavia) ApS
Regus Copenhagen APS
Regus House
Larsbjornsstraede 3
1454 Copenhagen K
Denmark
Hayes Microcomputer Products de Mexico S.A. de C.V.
Av. Insurgentes Sur #213-B
Suite 313
Col. Roma
Mexico D.F. 06708
Mexico
-33-
<PAGE> 34
Practical Peripherals (Europe) Limited
Millennium House
Fleetwood Park
Barley Way
Fleet, Hants GU13 8UT
England
AEI Dateline Logistics, Limited
Unit 1, Challenge Road
Middlesex TU 15 1AU
England
Hayes Microcomputer Products (International) Limited
Suite 208
Citibank Building
Charlotte Amalie
St. Thomas, U.S.V.I.
(2) Manufacturing facilities maintained by subcontractors
to Borrower:
Comptronix Corporation
1800 Comptronix Drive
Guntersville, Alabama 35976
and
2300 Highway 79 South
Guntersville, Alabama 35976
Kaifa Technology (H.K.) Limited
2201 H.K. Worsted Mills Ind. Bldg.
31-39 Wo Tong Tsui St.
Kwai Chung, New Territories
Hong Kong
P.T. Singatronics Batam
Kawasn Industri Batamindo
Blok 10 Lantai 3
Jalan S. Parman
Mukakuning, Pulau Batam, 29432
Indonesia
Wong's Electronics Co., Limited
180 Wai Yip Street
Wong's Ind. Centre
Kwun Tong
Hong Kong
-34-
<PAGE> 35
China National Postal and Telecommunications
Appliances Corporation (Service Center)
40 Xue Yuan Road
Beijing, China 100083
AEI Dateline Logistics, Limited (Warehouse)
Unit 1, Challenge Road
Middlesex, TU15 1AU
England
(e) Borrower's Trade Names for
Invoicing:
Practical Peripherals, Inc.
10.7 Conditions Precedent
Borrower acknowledges and agrees that the terms of the Conditions
Precedent Rider are incorporated herein and made a part hereof. Without limiting
the foregoing, capitalized terms used herein that are not defined in this
Agreement shall have the meaning ascribed to them in the Conditions Precedent
Rider.
IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Agreement in Atlanta, Georgia, on the day and year first written above.
LENDER: BORROWER:
THE CIT GROUP/CREDIT HAYES MICROCOMPUTER PRODUCTS,
FINANCE, INC. INC.
By: /s/ Friedberg By: /s/ Dennis C. Hayes
------------------------- ------------------------------
Title: Executive VP Title:
Attest: /s/
---------------------------
Secretary
[CORPORATE SEAL]
-35-
<PAGE> 1
EXHIBIT 10.67
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is made and entered into this 16th day of April, 1996, by and between HAYES
MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (hereinafter referred to as
"Borrower") with its chief executive office and principal place of business at
5835 Peachtree Corners East, Norcross, Georgia 30092, and THE CIT GROUP/CREDIT
FINANCE, INC., a Delaware corporation (hereinafter, together with its
successors and assigns, referred to as "Lender") with an office at 135 West
50th Street, New York, New York 10020.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security
Agreement and a certain Conditions Precedent Rider thereto, both dated December
21, 1995 (collectively, as at any time amended, the "Loan Agreement") pursuant
to which Lender may make revolving credit and term loans to Borrower in
accordance with the terms thereof.
The parties desire to amend the Loan Agreement as hereinafter set
forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in
hand paid and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment,
unless otherwise defined herein, shall have the meanings ascribed to such terms
in the Loan Agreement.
2. AMENDMENT TO AGREEMENT. The Loan Agreement is hereby amended
as follows:
(a) By inserting after the word "Inventory" in the third
line of Section 2.1(h) the phrase", which is located at a location
owned by Borrower or leased by Borrower from a landlord who has
executed in favor of Lender a landlord's waiver agreement in form and
substance satisfactory to Lender and with respect to which Lender has
received assurances from counsel as to due execution and
enforceability of such waiver"
(b) By deleting from the fifth line of Section 2.2(a)
the reference to "$2,608,000," and by substituting in lieu thereof a
reference to "$2,027,000";
(c) By inserting after the word "Lender" in the third
line of Section 6.16 the phrase "and the Bringdown Certificate dated
March 29, 1996, from Borrower to Lender,";
<PAGE> 2
(d) By deleting Section 6.12(iv) in its entirety;
(e) By deleting from the first and second lines of
Section 6.22 the phrase "Within 60 days after the date hereof," and by
substituting in lieu thereof the phrase "On or before the close of
business on May 31, 1996,";
(f) By adding immediately after Section 6 the following
new Section 6A:
Section 6A. Additional Covenants
6A.1 Additional Covenants. Borrower covenants
that, unless otherwise consented to by Lender in writing, it
shall:
(a) On or before the close of business
on May 15, 1996, execute and deliver, or cause to be
executed or delivered, to Lender all Intellectual
Property Documents granting or perfecting security
interests in favor of Lender in patents, trademarks
and copyrights of Borrower or any Subsidiary that
are registered in countries other than the United
States, Canada or England;
(b) On or before the close of business
on May 15, 1996, execute and deliver, or cause to be
executed and delivered, to Lender all Foreign
Perfection Filings with respect to all of the
Collateral and other property subject to the foreign
Subsidiary Security Agreements (the "Subsidiary
Collateral"), except Collateral in the Subsidiary
Collateral located in Denmark, France or Mexico; and
(c) On or before the close of business
on April 30, 1996, deliver to Lender favorable
written opinions of foreign counsel to each of the
foreign Subsidiaries that each of the foreign
Subsidiaries has all requisite power and authority
to execute and deliver each of the Transaction
Documents to be signed by it and has duly executed
and delivered the Transaction Documents through duly
authorized officers, and that the Transaction
Documents create legal, valid and binding
obligations of the signatories thereto that are
enforceable in accordance with their respective
terms, and such written opinions shall otherwise be
in form, content and scope satisfactory to Lender.
(g) By deleting Section 7.1(c)(i) in its entirety and by
substituting the following in lieu thereof:
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<PAGE> 3
(i) any covenant contained in Sections 5.1,
5.7, 5.9, 5.10, 6.4, 6.6, 6.7, 6.12, 6.14 and 6A; or
(h) By deleting from Section 9.2(i)(B) the reference to
"Northern Telecom Inc." and by substituting therefor "Rinzai Limited";
(i) By changing the word "seond" in clause (c) of
Section 9.2(i)(B) relating to the time of termination of the Loan
Agreement to "second";
(j) By deleting Section 10.1(a) in its entirety and
substituting the following in lieu thereof:
(a) Maximum Credit: $70,000,000, except as
otherwise provided in this paragraph (a). Borrower
acknowledges and understands that the conditions precedent
set forth in Section 2(z) of the Conditions Precedent Rider
dated December 21, 1995, as amended, has not been satisfied
because Key Bank of New York ("Key Bank"), one of the
required participants, has declined to purchase a
participation in the Revolving Loans, Term Loans and
Accommodations (the "Loans). By reason of Key Bank's
declination to purchase such a participation, Lender has no
obligation to proceed with funding. Nevertheless, Lender has
agreed to waive the satisfaction of that condition, provided
that, unless and until Lender sells an additional
participation to a new participant satisfactory in all
respects to Lender in a maximum amount of $5,500,000, the
principal amount of the Obligations outstanding at any time
shall not exceed $64,500,000. Lender shall have no obligation
whatsoever to solicit the purchase of any such participation
and shall have no liability to Borrower for any failure to
procure or delay in procuring a participant to replace Key
Bank.
(k) By deleting Sections 10.2(a) and 10.2(b) in its
entirety and by substituting in lieu thereof the following:
<TABLE>
<CAPTION>
10.2 Term Loans:
(a) Term Loan A
<S> <C> <C>
Amount: $2,027,000
Final Maturity Date: the earlier of (i) April 1, 2002, or
(ii) the date of termination under
Sections 9.1 or 9.2
(b) Term Loan B
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
<S> <C>
Amount: $7,500,000
Final Maturity Date: the earlier of (i) April 1,
2002, or (ii) the date of
termination under Sections
9.1 or 9.2
</TABLE>
(l) By deleting the telecopier number for Borrower in
Section 10.6(b) and by inserting in lieu thereof the telecopier number
"(770) 840-6830";
(m) By adding immediately above the phrase "Tour Neptune
Cedex 20" in Section 10.6(d)(1) the name "Hayes Microcomputer Products
(France) S.A.R.L."
(n) By deleting from 10.6(d)(2) the following:
Comptronix Corporation
1800 Comptronix Drive
Guntersville, Alabama 35976
China National Postal and Telecommunications
Appliances Corporation (Service Center)
40 Xue Yuan Road
Beijing, China 100083
AEI Dateline Logistics, Limited (Warehouse)
Unit 1, Challenge Road
Middlesex, TU15 1AU England
(o) By adding immediately after 10.6(d)(2) the following:
(3) Service Centers:
40 Xue Yuan Road
Beijing, China 100083
(4) Warehouse maintained by warehouseman:
AEI Dateline Logistics, Limited (Warehouse)
Unit 1, Challenge Road
Middlesex, TU15 1AU
England
(p) By deleting the parenthetical phrase in clause (iv)
of the definition of "Properly Contested" in Schedule A to the Loan
Agreement and by substituting therefor
- 4 -
<PAGE> 5
the phrase "(other than a lien for property taxes having priority
under applicable state law)".
3. CONSENT TO SCALEABLE TRANSACTION. Borrower has informed
Lender that Borrower and Borrower's subsidiary, Hayes Microcomputer Products
(Canada) Limited ("Hayes-Canada"), a Canadian corporation, intend to enter into
an Asset Purchase Agreement (the "Purchase Agreement"), a draft of which is
attached hereto as Exhibit A. Pursuant to the terms of the Purchase Agreement,
Scaleable Software Solutions, Inc., an Ontario corporation ("Scaleable"), will
purchase U.S. Assets and Canada Assets (as such terms are defined in the
Purchase Agreement) from Borrower and Hayes-Canada, respectively. Borrower has
further informed Lender that in consideration of the U.S. Assets and the Canada
Assets, Scaleable will transfer to Borrower thirty thousand (30,000) shares of
common stock of Scaleable (the "Purchased Shares"). The consummation of the
transactions contemplated by the Purchase Agreement (the "Transactions")
requires the prior written consent of Lender under the Loan Agreement and that
certain General Security Agreement, dated the date hereof, between Hayes-Canada
and Lender (the "Hayes-Canada Security Agreement"). Lender hereby consents to
the Transactions and agrees that the Transactions shall not constitute an Event
of Default under the Loan Agreement or an Event of Default under (and as
defined in) the Hayes-Canada Security Agreement, provided that each of the
following conditions is promptly satisfied following consummation of the
Transactions:
(a) Borrower delivers to Lender a copy of the Asset
Purchase Agreement and all amendments thereto, certified by a duly
authorized officer of Borrower;
(b) As security for the payment and performance of all
of the Obligations, Borrower pledges to Lender all of the Purchase
Shares pursuant to a Stock Pledge Agreement substantially in the form
of Exhibit B attached hereto;
(c) Borrower executes and delivers an Irrevocable Stock
Power substantially in the form of Exhibit C attached hereto;
(d) Borrower delivers to Lender the original stock
certificates evidencing the Purchased Shares;
(e) No Event of Default exists under the Loan Agreement;
(f) Lender receives evidence satisfactory to it that the
Transactions will not (i) violate any provisions of the Articles of
Incorporation or by-laws of Borrower or the Hayes-Canada (ii) result
in or constitute a default under any agreement or instrument to which
Borrower or Hayes-Canada is a party or any of its properties is bound
(iii) violate any provision of judicial or administrative law, rule or
regulation, or any judgment, decree or determination by which Borrower
or Hayes-Canada or any of its property is bound; or (iv) cause, result
in or require the creation or imposition in favor of anyone
- 5 -
<PAGE> 6
of any lien upon or security interest in any property now or hereafter
acquired by Borrower or Hayes-Canada; and
(g) Lender receives such other documents, instruments
and agreement that it may reasonable request in connection with the
Transactions.
4. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and
reaffirms each of the Transaction Documents as modified by the Bringdown
Certificate executed by the President of Borrower, Dennis C. Hayes, and dated
the date hereof (the "Bringdown Certificate"), and all of Borrower's covenants,
duties and liabilities thereunder.
5. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Transaction Documents executed
by Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); and the security interests and
liens granted by Borrower in favor of Lender are duly perfected, first priority
security interests and liens.
6. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender, to induce Lender to enter into this Amendment, that no
Event of Default exists on the date hereof; the execution, delivery and
performance of this Amendment have been duly authorized by all requisite
corporate action on the part of Borrower and this Amendment has been duly
executed and delivered by Borrower; and except as may have been disclosed in
writing by Borrower to Lender prior to the date hereof or in the Bringdown
Certificate, all of the representations and warranties made by Borrower in the
Loan Agreement are true and correct on and as of the date hereof.
7. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all
costs and expenses incurred by Lender in connection with the preparation,
negotiation and execution of this Amendment and any other Transaction Documents
executed pursuant hereto and any and all amendments, modifications, and
supplements thereto, including, without limitation, the costs and fees of
Lender's legal counsel and any taxes or expenses associated with or incurred in
connection with any instrument or agreement referred to herein or contemplated
hereby.
8. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of Georgia.
9. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
10. NO NOVATION, ETC.. Except as otherwise expressly provided in
this Amendment, nothing herein shall be deemed to amend or modify any provision
of the Loan Agreement, the Subsidiary Security Agreements, or any of the other
Transaction Documents, each of which shall
- 6 -
<PAGE> 7
remain in full force and effect. This Amendment is not intended to be, nor
shall it be construed to create, a novation or accord and satisfaction, and the
Loan Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Transaction Documents, the parties agree that the terms of each of the
Transaction Documents shall be strictly adhered to on and after the date
hereof.
11. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be
executed in any number of counterparts and by different parties to this
Agreement on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall
be deemed to be an original signature hereto.
12. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS
AMENDMENT, BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND
ALL OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER,
FROM ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF
ANY KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED
OR UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS
OR EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS OR OTHERWISE.
13. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING
ARISING OUT OF OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed under seal in Atlanta, Georgia, and delivered by their
respective duly authorized officers on the date first written above.
ATTEST: HAYES MICROCOMPUTER PRODUCTS,
INC. ("Borrower")
By:/s/ Dennis C. Hayes
- ----------------------------- ----------------------------
Secretary DENNIS C. HAYES, President
[CORPORATE SEAL]
Accepted and Agreed to:
THE CIT GROUP/CREDIT FINANCE,
INC. ("Lender")
By:/s/
----------------------------
Title: Vice President
-------------------------
- 7 -
<PAGE> 8
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time
owing to Lender hereby (i) acknowledge receipt of a copy of the foregoing First
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be
bound thereby; and (iv) affirm that nothing contained therein shall modify in
any respect whatsoever its respective guaranty of the Obligations and reaffirm
that such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such First Amendment to Loan and
Security Agreement.
HAYES MICROCOMPUTER PRODUCTS
(AUSTRALIA) PTY LIMITED
By: /s/ Dennis C. Hayes
---------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(CANADA) LIMITED
By: /s/ Dennis C. Hayes
---------------------------
DENNIS C. HAYES, President
PRACTICAL PERIPHERALS (EUROPE)
LIMITED
By: /s/ Dennis C. Hayes
---------------------------
DENNIS C. HAYES, Director
[Signatures continued on following page]
- 8 -
<PAGE> 9
HAYES MICROCOMPUTER PRODUCTS
(FRANCE) S.A.R.L.
By: /s/ Dennis C. Hayes
------------------------------
DENNIS C. HAYES,
Authorized Representative
HAYES MICROCOMPUTER PRODUCTS
DE MEXICO S.A. DE C.V.
By: /s/ Dennis C. Hayes
------------------------------
DENNIS C. HAYES, Sole
Administrator
HAYES MICROCOMPUTER PRODUCTS
(SCANDINAVIA) APS
By: /s/ Dennis C. Hayes
------------------------------
DENNIS C. HAYES, Managing
Director
By: /s/ William Louis Pechey
------------------------------
WILLIAM LOUIS PECHEY,
Managing Director
HAYES MICROCOMPUTER PRODUCTS
(INTERNATIONAL) LIMITED
By: /s/ Dennis C. Hayes
------------------------------
DENNIS C. HAYES, President
[Signatures continued on following page]
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<PAGE> 10
ENTERPRISE TECHNOLOGIES, INC.
By: /s/ Jack E. Fisher
-----------------------------
JACK E. FISHER, President
HAYES GOVERNMENT SERVICES, INC.
By: /s/ Dennis C. Hayes
-----------------------------
DENNIS C. HAYES, President
/s/ Dennis C. Hayes (SEAL)
-----------------------------
DENNIS C. HAYES
- 10 -
<PAGE> 11
HAYES MICROCOMPUTER PRODUCTS, INC.
SECRETARY'S CERTIFICATE
OF
BOARD OF DIRECTORS RESOLUTIONS
I, James A. Jones, DO HEREBY CERTIFY, that I am the Secretary of HAYES
MICROCOMPUTER PRODUCTS, INC. (the "Corporation"), a corporation duly organized
and existing under and by virtue of the laws of the State of Georgia and am
keeper of the records and seal thereof; that the following is a true, correct
and compared copy of the resolutions duly adopted by the unanimous consent of
all members of the Board of Directors of said Corporation effective as of April
16, 1996; and that said resolutions are still in full force and effect:
RESOLVED, that the Chairman of the Board, President, any Vice
President, or any other officer or board member of this Corporation (or the
designee of any of them), each be, and each hereby is, authorized and empowered
(either alone or in conjunction with any one or more of the other officers of
the Corporation) to take, from time to time, all or any part of the following
actions on or in behalf of the Corporation: (i) to make, execute and deliver to
THE CIT GROUP/CREDIT FINANCE, INC. ("Lender") (1) a First Amendment to Loan and
Security Agreement (the "Loan Amendment") providing for the amendment of
certain terms of that certain Loan and Security Agreement dated December 21,
1995 between the Corporation and Lender, as amended (the "Loan Agreement"), (2)
a First Amendment to Conditions Precedent Rider ("Conditions Amendment")
providing for the amendment of certain terms of that certain Conditions
Precedent Rider dated December 21, 1995, and (3) all other agreements,
documents and instruments contemplated by or referred to in the Loan Amendment
and Conditions Amendment or executed by the Corporation in connection
therewith; said Loan Amendment or Conditions Amendment to be substantially in
the form presented by Lender with such additional, modified or revised terms as
may be acceptable to any officer or director of the Corporation, as
conclusively evidenced by his or her execution thereof; and (ii) to carry out,
modify, amend or terminate any arrangements or agreements at any time existing
between the Corporation and Lender.
RESOLVED, that any arrangements, agreements, security agreements, or
other instruments or documents referred to or executed pursuant to the Loan
Amendment and Conditions Amendment by Dennis C. Hayes, any other officer or
director of the Corporation, or by an employee of the Corporation acting
pursuant to delegation of authority, may be attested by such person and may
contain such terms and provisions as such person shall, in his or her sole
discretion, determine.
RESOLVED, that the Loan Agreement and each amendment to the Loan
Agreement heretofore executed by any officer or director of the Corporation and
any actions taken under the Loan Agreement as thereby amended are hereby
ratified and approved.
- 1 -
<PAGE> 12
I DO FURTHER CERTIFY that Dennis C. Hayes is the Chairman of the Board
and President of the Corporation and James A. Jones is the Secretary of the
Corporation and each is duly elected, qualified and acting as such,
respectively.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal
of the Corporation in Atlanta, Georgia, this 16th day of April, 1996.
/s/ James A. Jones
-----------------------------
James A. Jones, Secretary
[CORPORATE SEAL]
I, Dennis C. Hayes, President of said Corporation, do hereby certify
that the foregoing is a correct copy of the resolutions passed by the Board of
Directors of the Corporation and that James A. Jones is Secretary of the
Corporation and is duly authorized to attest to the passage of said
resolutions.
/s/ Dennis C. Hayes
-----------------------------
Dennis C. Hayes, President
- 2 -
<PAGE> 1
EXHIBIT 10.68
FIRST AMENDMENT TO CONDITIONS PRECEDENT RIDER
THIS FIRST AMENDMENT TO CONDITIONS PRECEDENT RIDER (hereinafter
referred to as this "Amendment") is made and entered into this 16th day of
April, 1996, by and between HAYES MICROCOMPUTER PRODUCTS, INC. ("Borrower"),
a Georgia corporation, and THE CIT GROUP/CREDIT FINANCE, INC. ("Lender"), a
Delaware corporation.
RECITALS:
Borrower and Lender are parties to a certain Loan and Security
Agreement dated December 21, 1995 (as at any time amended, the "Loan
Agreement"), as supplemented by a certain Conditions Precedent Rider dated
December 21, 1995 (the "Conditions Rider") between Borrower and Lender.
The parties desire to amend the Conditions Rider as hereinafter set
forth.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound thereby, agree as follows:
1. DEFINITIONS. All capitalized terms contained in this Amendment,
unless otherwise defined herein, shall have the meanings ascribed to such terms
in the Loan Agreement.
2. AMENDMENT TO RIDER. The Conditions Rider is hereby amended as
follows:
(a) By adding to Section 1 the following definitions in appropriate
alphabetical sequence:
"Administrative Claim" shall mean the Application of Gary J. Franza,
John C. Stuckey and Mikhail Drabkin for Allowance and Payment of
Administrative Expense Claim filed with the Court on March 26, 1996.
"Aid of Confirmation Motion" shall mean the Motion for Order in Aid
of Confirmation, Implementation and Consummation of Debtor's Plan of
Reorganization, Alternative Motion for Modification of Confirmed Plan
and Request for Expedited Hearing Thereon, filed with the Court by
Borrower on April 8, 1996.
"Certificate Regarding Investment Documents" shall mean the
Certificate Regarding Investment Documents to be executed by Borrower
on the Closing Date
- 1 -
<PAGE> 2
in favor of Lender in substantially the form delivered to Borrower and
pursuant to which Borrower shall confirm to Lender the consummation of
the Merger Agreement, the purchase of Preferred Stock by the Investors
and the execution and delivery of the Investors Shareholders' Agreement
and Voting Trust Agreements (the terms Preferred Stock, Investors,
Investors Shareholders' Agreement and Voting Trust Agreements shall
have the meanings ascribed to them in the Agreement and Plan of
Merger).
"Complaints for Revocation" shall mean the two Complaints for
Revocation of Order Confirming Plan of Reorganization and Request for
Emergency Hearing for Relief Pursuant to Bankruptcy Code ss.1144 filed
with the Court by Belgrave Investments Trust N.V. on April 3, 1996, and
by Gary J. Franza, John C. Stuckey and Mikhail Drabkin on April 5,
1996.
"Domestic Subsidiary" shall mean those Subsidiaries organized
under the laws of a state of the United States.
"Emergency Motions" shall mean the two Emergency Motions for
Appointment of Chapter 11 Trustee or, in the Alternative, for
Conversion of the Case to Chapter 7; Request for Emergency Hearing; and
Supporting Memorandum filed with the Court by Belgrave Investments
Trust N.V. on April 3, 1996, and by Gary J. Franza, John C. Stuckey and
Mikhail Drabkin on April 5, 1996.
"Limited Guaranty" shall mean the Limited Guaranty Agreement,
executed by Dennis C. Hayes in favor of Lender, pursuant to which
Dennis C. Hayes shall unconditionally guarantee the due and punctual
payment and performance of all of the Obligations, but with liability
thereunder limited to $5,000,000, and in the form attached hereto as
Exhibit Q or otherwise in form and substance satisfactory to Lender and
each Participant;
"Participants" shall mean Mellon Bank, N.A., Key Bank of New
York, Foothill Capital Corporation, Finova Capital Corporation, LaSalle
National Bank, and National Bank of Canada, and their respective
successors and assigns.
(b) By deleting from Section 1 the definitions of "Final
Order," "Merger Agreement" and "Subsidiary Guaranties" in their entireties and
by substituting the following definitions in lieu thereof:
"Final Order" shall mean an order of the Court, the
implementation, operation or effect of which has not been stayed and
with respect to which no appeal and no motion, complaint or other
proceeding for review, rehearing or revocation has been timely filed or
is pending, or if any such appeal, motion, complaint or other
proceeding is timely filed, the same has been dismissed with prejudice
or otherwise resolved in a manner that leaves unaffected such order and
- 2 -
<PAGE> 3
the time for further appeal, review or other consideration of such
order has expired.
"Merger Agreement" shall mean that certain Agreement and Plan
of Merger dated as of April 12, 1996, by and among Borrower, Dennis C.
Hayes, Rinzai Limited,, Kaifa Technology (H.K.) Limited, Rolling Profit
Holdings, Ltd., Lao Hotel (H.K.) Limited, Saliendra Pte Limited, S.P.
Quek Investments Limited, and Financial Sub, Inc., a Georgia
corporation and wholly-owned subsidiary of Rinzai Limited, together
with all schedules and exhibits thereto and all amendments thereto
prior to the date hereof.
"Subsidiary Guaranties" shall mean the Guaranties to be
executed by each Subsidiary in favor of Lender, in substantially the
form attached hereto as Exhibit N-1 or in such other form as may be
requested by Lender in the case of a foreign Subsidiary (with such
revisions as may be necessary to conform to applicable law of the
jurisdiction of incorporation of each such Subsidiary) and N-2 or in
such other form as may be requested by Lender in the case of a domestic
Subsidiary, and by which each Subsidiary shall unconditionally
guarantee the due and punctual payment and performance of all of the
Obligations.
(c) By deleting paragraphs (a) and (b) of Section 2 in their
entireties and by substituting the following new paragraphs (a) and (b) in lieu
thereof:
(a) Lender shall have received assurances satisfactory to
it and each Participant (including assurances in the form of a
favorable written opinion addressed to Lender from Borrower's
bankruptcy counsel and in the form of the Certificate Regarding
Confirmed Plan of Reorganization to be executed and delivered on the
Closing Date in the form provided by Lender to Borrower) that (i) the
Confirmation Order has become a Final Order, except for the appeals
therefrom taken by Melita Easters Hayes on March 18, 1996 and
Megahertz Corporation on March 18, 1996; (ii) Borrower is in
compliance with and able to perform all of the terms of the
Reorganization Plan and Confirmation Order; and (iii) Borrower is
authorized to proceed with consummation of the Reorganization Plan;
(b) Lender shall have received from Borrower and each
Subsidiary the duly executed Intellectual Property Security Documents
granting or perfecting security interests in favor of Lender in
patents, trademarks and copyrights of Borrower or any Subsidiary that
are registered in the United States, Canada or England;
(d) By deleting Section 2(d) in its entirety and by
substituting the following new Section 2(d) in lieu thereof:
- 3 -
<PAGE> 4
(d) Each of the Subsidiaries shall have executed and
delivered to Lender the Subsidiary Guaranties, Subsidiary Security
Agreements and the Service of Process Appointment, and, to the extent
requested by Lender, shall have joined with Borrower in executing and
delivering to Lender the Contribution Agreement;
(e) By adding the word "Domestic" before the word "Subsidiary"
in Section 2(h) and by deleting from Section 2(h) the words "and Foreign
Perfection Filings."
(f) By deleting Section 2(j) in its entirety and by
substituting the following new Section 2(j) in lieu thereof:
(j) Lender shall have received assurances satisfactory to
it and each Participant (including assurances in the form of favorable
written opinions addressed to Lender from counsel to Borrower) that
Borrower and the Domestic Subsidiaries each has all requisite power
and authority to execute and deliver each of the Transaction Documents
to be signed by it and has duly executed and delivered the Transaction
Documents through duly authorized officers, and that the Transaction
Documents create legal, valid and binding obligations of the
signatories thereto that are enforceable in accordance with their
respective terms;
(g) By deleting Section 2(l) in its entirety and by
substituting the following new Section 2(l) in lieu thereof:
(1) Lender shall have received assurances satisfactory to
it and each Participant (including assurances in the form of the
Certificate Regarding Investment Documents to be executed and
delivered on the Closing Date in the form provided by Lender to
Borrower) that (1) the "Investors" (as defined in the Merger
Agreement) have consented to the terms of the Loan Agreement and other
Transaction Documents to the extent that their consents are required
under the terms of the Merger Agreement and Investors Shareholders'
Agreement and (2) the transactions contemplated by the Merger
Documents have been, or concurrently with the funding of the initial
Revolving Loans under the Loan Agreement will be, fully consummated in
accordance with the terms thereof as in effect on the date hereof
(except to the extent of any waiver of closing conditions that the
parties thereto may elect to make), including the infusion into
Borrower of not less than $35,000,000, in cash, as a contribution to
the equity capital of Borrower;
(h) By deleting Section 2(x) in its entirety and by
substituting the following new Section 2(x) in lieu thereof:
- 4 -
<PAGE> 5
(x) The Closing Date occurs no later than the Funding
Date and the Funding Date occurs no later than the close of business on
April 22, 1996 (or such later date to which Lender may give its
consent, in its sole discretion).
(i) By adding the following new paragraphs (y) through
(cc) to Section 2:
(y) Lender shall have received assurances
satisfactory to it and each Participant (including assurances in the
form of a favorable written opinion addressed to Lender from Borrower's
bankruptcy counsel) that the Court has entered an order, in form and
substance satisfactory to Lender and each Participant, which grants the
relief requested by Borrower in the Aid of Confirmation Motion and
which authorizes Borrower to proceed with consummation of the
Reorganization Plan.
(z) Each Participant shall have confirmed in writing
to Lender its willingness to proceed with the purchase of its
participation interest in the Revolving Loans, Term Loans and
Accommodations pursuant to the participation agreement previously
entered into between Lender and such Participant;
(aa) Lender shall have received the Limited Guaranty
Agreement duly executed by Dennis C. Hayes;
(bb) The Emergency Motions and Complaints for
Revocation shall have been dismissed by a written order of the Court
that is in form and substance satisfactory to Lender and each
Participant, or the Court by written order in form and substance
satisfactory to Lender and each Participant has otherwise expressly
authorized Borrower to consummate the Reorganization Plan
notwithstanding the pendency of the Emergency Motions and Complaints
for Revocation;
(cc) Lender shall have received assurances
satisfactory to it and each Participant that no order for a stay has
been entered by the Court with respect to the Confirmation Order, the
order approving the Aid of Confirmation Motion or any other order in
any way relating to the Confirmation Order;
(j) By deleting Section 3(b) in its entirety and by
substituting the following new Section 3(b) in lieu thereof:
(b) With respect to Term Loan A, Lender shall have
received assurances satisfactory to it and each Participant that 80% of
the appraised auction sale value of Eligible Equipment on the Closing
Date is not less than $2,027,000 (and if 80% of such value is
determined by Lender to be less than $2,027,000, then Term Loan A shall
be reduced by an amount equal to the difference).
- 5 -
<PAGE> 6
2. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Transaction Documents executed
pursuant hereto and any and all amendments, modifications, and supplements
thereto, including, without limitation, the costs and fees of Lender's legal
counsel and any taxes or expenses associated with or incurred in connection with
any instrument or agreement referred to herein or contemplated hereby.
3. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and
reaffirms each of the Transaction Documents as modified by the Bringdown
Certificate executed by the President of Borrower, Dennis C. Hayes, and dated
the date hereof (the "Bringdown Certificate"), and all of Borrower's covenants,
duties and liabilities thereunder.
4. ACKNOWLEDGEMENTS AND STIPULATIONS. Borrower acknowledges and
stipulates that the Loan Agreement and the other Transaction Documents executed
by Borrower are legal, valid and binding obligations of Borrower that are
enforceable against Borrower in accordance with the terms thereof; all of the
Obligations are owing and payable without defense, offset or counterclaim (and
to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by Borrower); and the security interests and
liens granted by Borrower in favor of Lender are duly perfected, first priority
security interests and liens.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Event of Default
exists on the date hereof; the execution, delivery and performance of this
Amendment have been duly authorized by all requisite corporate action on the
part of Borrower and this Amendment has been duly executed and delivered by
Borrower; and except as may have been disclosed in writing by Borrower to Lender
prior to the date hereof or in the Bringdown Certificate, all of the
representations and warranties made by Borrower in the Loan Agreement are true
and correct on and as of the date hereof.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Georgia.
7. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
8. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Conditions Rider or any of the other Transaction Documents, each of which
shall remain in full force and effect. This Amendment is not intended to be, nor
shall it be construed to create, a novation or accord and satisfaction, and the
Loan Agreement as herein modified shall continue in full force and effect.
Notwithstanding any prior mutual temporary disregard of any of the terms of any
of the Transaction Documents, the parties agree that the terms of each of the
Transaction Documents shall be strictly adhered to on and after the date hereof.
- 6 -
<PAGE> 7
9. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed
in any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
10. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS OR OTHERWISE.
11. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING
OUT OF OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal in Atlanta, Georgia, and delivered by their respective
duly authorized officers on the date first written above.
ATTEST: HAYES MICROCOMPUTER PRODUCTS,
INC. ("Borrower")
By: /s/ Dennis C. Hayes
- ------------------------- -----------------------------
Secretary DENNIS C. HAYES, President
[CORPORATE SEAL]
[Signatures continued on the following page]
Accepted and Agreed to:
THE CIT GROUP/CREDIT FINANCE,
INC. ("Lender")
By: /s/
-----------------------------
Title: Vice President
----------------------------
- 7 -
<PAGE> 8
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time
owing to Lender hereby (i) acknowledge receipt of a copy of the foregoing First
Amendment to Conditions Precedent Rider; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such First Amendment to Conditions
Precedent Rider.
HAYES MICROCOMPUTER PRODUCTS
(AUSTRALIA) PTY LIMITED
By: /s/ Dennis C. Hayes
---------------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(CANADA) LIMITED
By: /s/ Dennis C. Hayes
---------------------------------
DENNIS C. HAYES, President
PRACTICAL PERIPHERALS (EUROPE)
LIMITED
By: /s/ Dennis C. Hayes
---------------------------------
DENNIS C. HAYES, Director
[Signatures continued on following page]
- 8 -
<PAGE> 9
HAYES MICROCOMPUTER PRODUCTS
(FRANCE) S.A.R.L.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES,
Authorized Representative
HAYES MICROCOMPUTER PRODUCTS
DE MEXICO S.A. DE C.V.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, Sole
Administrator
HAYES MICROCOMPUTER PRODUCTS
(SCANDINAVIA) APS
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, Managing
Director
By: /s/ William Louis Pechey
-----------------------------------
WILLIAM LOUIS PECHEY,
Managing Director
HAYES MICROCOMPUTER PRODUCTS
(INTERNATIONAL) LIMITED
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
ENTERPRISE TECHNOLOGIES, INC.
By: /s/ Jack E. Fisher
-----------------------------------
JACK E. FISHER, President
[Signatures continued on following page]
- 9 -
<PAGE> 10
HAYES GOVERNMENT SERVICES, INC.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
/s/ Dennis C. Hayes (SEAL)
-----------------------------------
DENNIS C. HAYES
- 10 -
<PAGE> 1
EXHIBIT 10.69
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into this 15th day of October, 1996 and made effective
as of October 1, 1996, by and between HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation (hereinafter referred to as "Borrower") with its chief
executive office and principal place of business at 5835 Peachtree Corners
East, Norcross, Georgia 30092, and THE CIT GROUP/CREDIT FINANCE, INC., a
Delaware corporation (hereinafter, together with its successors and assigns,
referred to as "Lender") with an office at 135 West 50th Street, New York, New
York 10020.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security
Agreement and a certain Conditions Precedent Rider thereto, both dated December
21, 1995, as amended by that certain First Amendment to Loan and Security
Agreement, dated April 16, 1996, between Borrower and Lender and that certain
First Amendment to Conditions Precedent Rider dated April 16, 1996
(collectively, as at any time amended, the "Loan Agreement") pursuant to which
Lender may make revolving credit and term loans to Borrower in accordance with
the terms thereof.
The parties desire to amend the Loan Agreement as hereinafter set
forth.
NOW, THEREFORE, for and in consideration of TEN DOLLARS ($10.00) in
hand paid and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment,
unless otherwise defined herein, shall have the meanings ascribed to such terms
in the Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as follows:
(a) By deleting the reference to "$30,000,000" in the
thirteenth line of Section 3.1(b) and by inserting in lieu thereof the
reference to "$21,000,000"
(b) By deleting Section 9.1 in its entirety and by
substituting in lieu thereof the following:
<PAGE> 2
9.1 Term. This Agreement shall only become
effective upon execution and delivery by Borrower and Lender
in Atlanta, Georgia, and shall continue in full force and
effect for a term of four (4) years from the Closing Date
hereof and shall be deemed automatically renewed for
successive terms of four (4) years thereafter unless
terminated as of the end of the initial or any renewal term
(each a "TERM") by either party giving the other written
notice at least sixty (60) days' prior to the end of the
then-current Term.
(c) By deleting the reference to "September 30, 1996"
and "September 30, 1997" in Section 10.4 and by substituting in lieu
thereof a reference to "December 31, 1996" and "December 31, 1997"
respectively.
3. ACKNOWLEDGEMENTS AND STIPULATIONS. Each of the Transaction
Documents is modified by the Bringdown Certificate dated April 16, 1996,
executed by Dennis E. Hayes as President of Borrower (the "Bringdown
Certificate"). Borrower acknowledges and stipulates that the Loan Agreement and
the other Transaction Documents executed by Borrower are legal, valid and
binding obligations of Borrower that are enforceable against Borrower in
accordance with the terms thereof; all of the Obligations are owing and payable
without defense, offset or counterclaim (and to the extent there exists any
such defense, offset or counterclaim on the date hereof, the same is hereby
waived by Borrower); and the security interests and liens granted by Borrower
in favor of Lender are duly perfected, first priority security interests and
liens.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender, to induce Lender to enter into this Amendment; that the
execution, delivery and performance of this Amendment have been duly authorized
by all requisite corporate action on the part of Borrower and this Amendment
has been duly executed and delivered by Borrower.
5. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all
costs and expenses incurred by Lender in connection with the preparation,
negotiation and execution of this Amendment and any other Transaction Documents
executed pursuant hereto and any and all amendments, modifications, and
supplements thereto, including, without limitation, the costs and fees of
Lender's legal counsel and any taxes or expenses associated with or incurred in
connection with any instrument or agreement referred to herein or contemplated
hereby.
6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of Georgia.
7. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
-2-
<PAGE> 3
8. NO NOVATION, ETC.. Except as otherwise expressly provided in
this Amendment, nothing herein shall be deemed to amend or modify any provision
of the Loan Agreement, the Subsidiary Security Agreements, or any of the other
Transaction Documents, each of which shall remain in full force and effect.
This Amendment is not intended to be, nor shall it be construed to create, a
novation or accord and satisfaction, and the Loan Agreement as herein modified
shall continue in full force and effect. Notwithstanding any prior mutual
temporary disregard of any of the terms of any of the Transaction Documents,
the parties agree that the terms of each of the Transaction Documents shall be
strictly adhered to on and after the date hereof.
9. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be
executed in any number of counterparts and by different parties to this
Agreement on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall
be deemed to be an original signature hereto.
10. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS
AMENDMENT, BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND
ALL OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER,
FROM ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF
ANY KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED
OR UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS
OR EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS OR OTHERWISE.
11. WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVES
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING
ARISING OUT OF OR RELATED TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed under seal in Atlanta, Georgia, and
-3-
<PAGE> 4
delivered by their respective duly authorized officers on the date first
written above.
ATTEST: HAYES MICROCOMPUTER PRODUCTS, INC.
("Borrower")
/s/ By: /s/ Dennis C. Hayes
- --------------------------------- ----------------------------------
Secretary Dennis C. Hayes, President
[CORPORATE SEAL]
Accepted and Agreed to:
THE CIT GROUP/CREDIT FINANCE, INC.
("Lender")
By /s/ Camye E. Lessman
----------------------------------
Title: Assistant Vice President
----------------------------
-4-
<PAGE> 5
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time
owing to Lender hereby (i) acknowledge receipt of a copy of the foregoing
Second Amendment to Loan and Security Agreement; (ii) consent to Borrower's
execution and delivery thereof and of the other documents, instruments or
agreements Borrower agrees to execute and deliver pursuant thereto; (iii) agree
to be bound thereby; and (iv) affirm that nothing contained therein shall
modify in any respect whatsoever its respective guaranty of the Obligations and
reaffirm that such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Second Amendment to Loan and
Security Agreement.
HAYES MICROCOMPUTER PRODUCTS
(AUSTRALIA) PTY LIMITED
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(CANADA) LIMITED
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, President
PRACTICAL PERIPHERALS (EUROPE)
LIMITED
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, Director
[Signatures continued on following page]
-5-
<PAGE> 6
HAYES MICROCOMPUTER PRODUCTS
(FRANCE) S.A.R.L.
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES,
Authorized Representative
HAYES MICROCOMPUTER PRODUCTS
DE MEXICO S.A. DE C.V.
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, Sole
Administrator
HAYES MICROCOMPUTER PRODUCTS
(SCANDINAVIA) APS
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, Managing
Director
By: /s/ William Louis Pechey
-------------------------------
WILLIAM LOUIS PECHEY,
Managing Director
HAYES MICROCOMPUTER PRODUCTS
(INTERNATIONAL) LIMITED
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, President
-6-
<PAGE> 7
ENTERPRISE TECHNOLOGIES, INC.
By: /s/ Jack E. Fisher
-------------------------------
JACK E. FISHER, President
HAYES GOVERNMENT SERVICES, INC.
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, President
/s/ Dennis C. Hayes (SEAL)
-------------------------------
DENNIS C. HAYES
-7-
<PAGE> 8
HAYES MICROCOMPUTER PRODUCTS, INC.
SECRETARY'S CERTIFICATE
OF
BOARD OF DIRECTORS RESOLUTIONS
I, James A. Jones, DO HEREBY CERTIFY, that I am the Secretary of HAYES
MICROCOMPUTER PRODUCTS, INC. (the "Corporation"), a corporation duly organized
and existing under and by virtue of the laws of the State of Georgia and am
keeper of the records and seal thereof; that the following is a true, correct
and compared copy of the resolutions duly adopted by the unanimous consent of
all members of the Board of Directors of said Corporation effective as of
October 15th, 1996; and that said resolutions are still in full force and
effect:
RESOLVED, that the Chairman of the Board, President, any Vice
President, or any other officer or board member of this Corporation (or the
designee of any of them), each be, and each hereby is, authorized and empowered
(either alone or in conjunction with any one or more of the other officers of
the Corporation) to take, from time to time, all or any part of the following
actions on or in behalf of the Corporation: (i) to make, execute and deliver to
THE CIT GROUP/CREDIT FINANCE, INC. ("Lender") (1) a Second Amendment to Loan
and Security Agreement (the "Loan Amendment") providing for the amendment of
certain terms of that certain Loan and Security Agreement dated December 21,
1995 between the Corporation and Lender, as amended (the "Loan Agreement"), (2)
a First Amendment to Conditions Precedent Rider ("Conditions Amendment")
providing for the amendment of certain terms of that certain Conditions
Precedent Rider dated December 21, 1995, and (3) all other agreements,
documents and instruments contemplated by or referred to in the Loan Amendment
and Conditions Amendment or executed by the Corporation in connection
therewith; said Loan Amendment or Conditions Amendment to be substantially in
the form presented by Lender with such additional, modified or revised terms as
may be acceptable to any officer or director of the Corporation, as
conclusively evidenced by his or her execution thereof; and (ii) to carry out,
modify, amend or terminate any arrangements or agreements at any time existing
between the Corporation and Lender.
RESOLVED, that any arrangements, agreements, security agreements, or
other instruments or documents referred to or executed pursuant to the Loan
Amendment and Conditions Amendment by Dennis C. Hayes, any other officer or
director of the Corporation, or by an employee of the Corporation acting
pursuant to delegation of authority, may be attested by such person and may
contain such terms and provisions as such person shall, in his or her sole
discretion, determine.
RESOLVED, that the Loan Agreement and each amendment to the Loan
Agreement heretofore executed by any officer or director of the Corporation and
any actions taken under the Loan Agreement as thereby amended are hereby
ratified and approved.
I DO FURTHER CERTIFY that Joseph C. Formichelli is the President of
the Corporation and James A. Jones is the Secretary of the Corporation and each
is duly elected, qualified and acting as such, respectively.
<PAGE> 9
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal
of the Corporation in Atlanta, Georgia, this 15th day of October, 1996.
/s/ James A. Jones
--------------------------------
James A. Jones, Secretary
[CORPORATE SEAL]
I, Joseph C. Formichelli, President of said Corporation, do hereby
certify that the foregoing is a correct copy of the resolutions passed by the
Board of Directors of the Corporation and that James A. Jones is Secretary of
the Corporation and is duly authorized to attest to the passage of said
resolutions.
/s/ Joseph C. Formichelli
--------------------------------
Joseph C. Formichelli, President
-2-
<PAGE> 1
EXHIBIT 10.70
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made and entered into as of the 1st day of January, 1997, by and between HAYES
MICROCOMPUTER PRODUCTS, INC., a Georgia corporation (hereinafter referred to as
"Borrower") with its chief executive office and principal place of business at
5835 Peachtree Corners East, Norcross, Georgia 30092, and THE CIT GROUP/CREDIT
FINANCE, INC., a Delaware corporation (hereinafter referred to as "Lender") with
an office at 135 West 50th Street, New York, New York 10020.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security Agreement
and a certain Condition Precedent Rider thereto, both dated December 21, 1995,
as amended by that certain First Amendment to Loan and Security Agreement April
16, 1996, and that certain Second Amendment to Loan and Security Agreement dated
October 15, 1996 (collectively, as at any time amended, the "Loan Agreement"),
pursuant to which Lender has made certain revolving credit and term loans to
Borrower.
The parties desire to amend the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is hereby amended by
deleting the first sentence of Section 10.1(c) in its entirety and by
substituting the following in lieu thereof:
On any date, the lesser of $25,000,000 or the following
percentage of the Accounts Margin Amount for the following periods: (i)
for the period from January 1, 1997, through April 30, 1997, 200% of the
Accounts Margin Amount on such date, and (ii) for the period from May 1,
1997, and thereafter, 150% of the Accounts Margin Amount on such date.
3. RATIFICATION AND REAFFIRMATION. Borrower hereby ratifies and reaffirms
each of the Transaction Documents and all of Borrower's covenants, duties,
indebtedness and liabilities thereunder.
<PAGE> 2
4. ACKNOWLEDGMENTS AND STIPULATIONS. Borrower acknowledges and stipulates
that the Loan Agreement and the other Transaction Documents executed by Borrower
are legal, valid and binding obligations of Borrower that are enforceable
against Borrower in accordance with the terms thereof; all of the Obligations
are owing and payable without defense, offset or counterclaim (and to the extent
there exists any such defense, offset or counterclaim on the date hereof, the
same is hereby waived by Borrower); the security interests and liens granted by
Borrower in favor of Lender are duly perfected, first priority security
interests and liens.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, to induce Lender to enter into this Amendment, that no Event of Default
exists on the date hereof; the execution, delivery and performance of this
Amendment have been duly authorized by all requisite corporate action on the
part of Borrower and this Amendment has been duly executed and delivered by
Borrower; and except as may have been disclosed in writing by Borrower to Lender
prior to the date hereof, all of the representations and warranties made by
Borrower in the Loan Agreement are true and correct on and as of the date
hereof.
6. EXPENSES OF LENDER. Borrower agrees to pay, ON DEMAND, all costs and
expenses incurred by Lender in connection with the preparation, negotiation and
execution of this Amendment and any other Transaction Documents executed
pursuant hereto and any and all amendments, modifications, and supplements
thereto, including, without limitation, the costs and fees of Lender's legal
counsel and any taxes or expenses associated with or incurred in connection with
any instrument or agreement referred to herein or contemplated hereby.
7. EFFECTIVENESS/GOVERNING LAW. This Amendment shall be effective upon
acceptance by Lender (notice of which acceptance is hereby waived), provided
that this Amendment shall be null and void if not accepted by Borrower by
Borrower's execution below and received by Lender on or before January 31, 1997.
This Amendment shall be governed by and construed in accordance with the
internal laws of the State of Georgia.
8. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
9. NO NOVATION, ETC.. Except as otherwise expressly provided in this
Amendment, nothing herein shall be deemed to amend or modify any provision of
the Loan Agreement or any of the other Transaction Documents, each of which
shall remain in full force and effect. This Amendment is not intended to be, nor
shall it be construed to create, a novation or accord and satisfaction, and the
Loan Agreement as herein modified shall continue in full force and effect.
10. COUNTERPARTS; TELECOPIED SIGNATURES. This Amendment may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
2
<PAGE> 3
11. FURTHER ASSURANCES. Borrower agrees to take such further actions as
Lender shall reasonably request from time to time in connection herewith to
evidence or give effect to the amendments set forth herein or any of the
transactions contemplated hereby.
12. SECTION TITLES. Section titles and references used in this Amendment
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreements among the parties hereto.
13. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO THIS AMENDMENT,
BORROWER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES LENDER, AND ALL
OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF LENDER, FROM
ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS OR CAUSES OR ACTIONS OF ANY
KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE OR CONTINGENT, DISPUTED OR
UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR UNKNOWN, THAT BORROWER NOW HAS OR
EVER HAD AGAINST LENDER ARISING UNDER OR IN CONNECTION WITH ANY OF THE
TRANSACTION DOCUMENTS OR OTHERWISE.
14. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
ATTEST: HAYES MICROCOMPUTER
PRODUCTS, INC. ("Borrower")
/s/ By: /s/ Dennis C. Hayes
- ----------------------- -------------------------------
Secretary
[CORPORATE SEAL] Title: Chairman
----------------------
[Signatures continued on following page]
3
<PAGE> 4
THE CIT GROUP/CREDIT
FINANCE, INC. ("Lender")
By: /s/ Camye Lessman
-------------------------------
Title: Assistant Vice President
CONSENT AND REAFFIRMATION
The undersigned guarantors of the Obligations of Borrower at any time owing
to Lender hereby (i) acknowledge receipt of a copy of the foregoing Third
Amendment to Loan and Security Agreement; (ii) consent to Borrower's execution
and delivery thereof and of the other documents, instruments or agreements
Borrower agrees to execute and deliver pursuant thereto; (iii) agree to be bound
thereby; and (iv) affirm that nothing contained therein shall modify in any
respect whatsoever its respective guaranty of the Obligations and reaffirm that
such guaranty is and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Third Amendment to Loan and Security
Agreement.
HAYES MICROCOMPUTER PRODUCTS
(AUSTRALIA) PTY LIMITED
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(CANADA) LIMITED
By: /s/ Dennis C. Hayes
-------------------------------
DENNIS C. HAYES, President
[Signatures continued on following page]
4
<PAGE> 5
PRACTICAL PERIPHERALS (EUROPE)
LIMITED
By: /s/ Dennis C. Hayes
---------------------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(FRANCE) S.A.R.L.
By: /s/ Dennis C. Hayes
---------------------------------------
DENNIS C. HAYES, Authorized
Representative
HAYES MICROCOMPUTER PRODUCTS
DE MEXICO S.A. DE C.V.
By: /s/ Dennis C. Hayes
---------------------------------------
DENNIS C. HAYES, Sole Administrator
HAYES MICROCOMPUTER PRODUCTS
(SCANDINAVIA) APS
By: /s/ Dennis C. Hayes
---------------------------------------
DENNIS C. HAYES, Managing Director
By: /s/ William Louis Pechey
---------------------------------------
WILLIAM LOUIS PECHEY, Managing Director
HAYES MICROCOMPUTER PRODUCTS
(INTERNATIONAL) LIMITED
By: /s/ Dennis C. Hayes
---------------------------------------
DENNIS C. HAYES, President
[Signatures continued on following page]
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ENTERPRISE TECHNOLOGIES, INC.
By: /s/ Jack E. Fisher
-----------------------------------
JACK E FISHER, President
HAYES GOVERNMENT SERVICES, INC.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
/s/ Dennis C. Hayes (SEAL)
--------------------------------------
DENNIS C. HAYES
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HAYES MICROCOMPUTER PRODUCTS, INC.
SECRETARY'S CERTIFICATE
OF
BOARD OF DIRECTORS RESOLUTIONS
I, James A. Jones, DO HEREBY CERTIFY, that I am the Secretary of HAYES
MICROCOMPUTER PRODUCTS, INC. (the "Corporation"), a corporation duly organized
and existing under and by virtue of the laws of the State of Georgia and am
keeper of the records and seal thereof; that the following is a true, correct
and compared copy of the resolutions duly adopted by the unanimous consent of
all members of the Board of Directors of said Corporation effective as of
January 1, 1997; and that said resolutions are still in full force and effect:
RESOLVED, that the Chairman of the Board, President, any Vice President, or
any other officer or board member of this Corporation (or the designee of any of
them), each be, and each hereby is, authorized and empowered (either alone or in
conjunction with any one or more of the other officers of the Corporation) to
take, from time to time, all or any part of the following actions on or in
behalf of the Corporation: (i) to make, execute and deliver to THE CIT
GROUP/CREDIT FINANCE, INC. ("Lender") (1) a Third Amendment to Loan and Security
Agreement] (the "Amendment") providing for the amendment of certain terms of
that certain Loan and Security Agreement and Conditions Precedent Rider thereto,
both dated December 21,1995, between the Corporation and Lender, as amended by
that certain First Amendment to Loan and Security Agreement dated April 16,
1996, and that certain Second Amendment to Loan and Security Agreement dated
October 15, 1996 (the "Loan Agreement"), and (2) all other agreements, documents
and instruments contemplated by or referred to in the Amendment or executed by
the Corporation in connection therewith; said Amendment to be substantially in
the form presented by Lender with such additional, modified or revised terms as
may be acceptable to any officer or director of the Corporation, as conclusively
evidenced by his or her execution thereof; and (ii) to carry out, modify, amend
or terminate any arrangements or agreements at any time existing between the
Corporation and Lender.
RESOLVED, that any arrangements, agreements, security agreements, or other
instruments or documents referred to or executed pursuant to the Amendment by
Dennis C. Hayes, any other officer or director of the Corporation, or by an
employee of the Corporation acting pursuant to delegation of authority, may be
attested by such person and may contain such terms and provisions as such person
shall, in his or her sole discretion, determine.
RESOLVED, that the Loan Agreement and each amendment to the Loan Agreement
heretofore executed by any officer or director of the Corporation and any
actions taken under the Loan Agreement as thereby amended are hereby ratified
and approved.
<PAGE> 8
I DO FURTHER CERTIFY that Joseph C. Formichelli is the President of the
Corporation, and James A. Jones is the Secretary of the Corporation and each is
duly elected, qualified and acting as such, respectively.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the
Corporation, as of the 1st day of January, 1997.
/s/ James A. Jones
--------------------------------------
JAMES A. JONES, Secretary
[CORPORATE SEAL]
I, Joseph C. Formichelli, President of said Corporation, do hereby certify
that the foregoing is a correct copy of the resolutions passed by the Board of
Directors of the Corporation and that James A. Jones is Secretary of the
Corporation and is duly authorized to attest to the passage of said resolutions.
/s/ Joseph C. Formichelli
--------------------------------------
JOSEPH C. FORMICHELLI, President
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<PAGE> 1
EXHIBIT 10.71
FOURTH AMENDMENT TO LOAN AND SECURITY
AGREEMENT AND CONSENT AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONSENT
AGREEMENT (this "Agreement") is made and entered into as of the 30th day of
December, 1997, by and between HAYES MICROCOMPUTER PRODUCTS, INC., a Georgia
corporation (hereinafter referred to as "Borrower") with its chief executive
office and principal place of business at 5854 Peachtree Corners East,
Norcross, Georgia 30072, and THE CIT GROUP/CREDIT FINANCE, INC., a Delaware
corporation (hereinafter referred to as "Lender") with an office at 1211 Avenue
of the Americas, 21st Floor, New York, New York 10036.
RECITALS:
Lender and Borrower are parties to a certain Loan and Security
Agreement and a certain Condition Precedent Rider thereto, both dated December
21, 1995, as amended by that certain First Amendment to Loan and Security
Agreement April 16, 1996, that certain Second Amendment to Loan and Security
Agreement dated October 15, 1996, and that certain Third Amendment to Loan and
Security Agreement dated as of January 1, 1997 (collectively, as at any time
amended, the "Loan Agreement"), pursuant to which Lender has made certain
revolving credit and term loans to Borrower.
The parties desire to amend the Loan Agreement as hereinafter set
forth.
NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good
and valuable consideration, the receipt and sufficiency of which are hereby
severally acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. DEFINITIONS. All capitalized terms used in this
Agreement, unless otherwise defined herein, shall have the meaning
ascribed to such terms in the Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is
hereby amended as follows:
a. By deleting Section 3.1(b) in its entirety and
by substituting the following new Section 3.1(b) in lieu thereof:
(b) If the amount of interest to be paid in any month
based upon the outstanding principal amount of the Obligations during
the immediately preceding month is less than the Minimum Interest
Amount, then, subject to
<PAGE> 2
the provisions of Section 3.8 hereof, Borrower shall be obligated to
pay the Minimum Interest Amount on the date that accrued interest is
due and payable for such immediately preceding month. As used herein,
the term "MINIMUM INTEREST AMOUNT" shall mean the interest amount that
would have been paid for such month if the average principal amount of
Obligations outstanding during such month was at least equal to the
Base Loan Amount for such month. As used herein, the term "BASE LOAN
AMOUNT" shall mean, for any month, an amount equal to $10,000,000.
b. By deleting Section 9.1 in its entirety and
by substituting the following new Section 9.1 in lieu thereof:
9.1 Term. This Agreement shall only become effective
upon execution and delivery by Borrower and Lender in Atlanta,
Georgia, and shall continue in full force and effect for a term of
five (5) years from the Closing Date hereof and shall be deemed
automatically renewed for successive terms of three (3) years
thereafter unless terminated as of the end of the initial or any
renewal term (each a "TERM") by either party giving the other written
notice at least sixty (60) days' prior to the end of the then-current
Term.
c. By deleting Section 9.2 in its entirety and
by substituting the following new Section 9.2 in lieu thereof:
9.2 Early Termination. Borrower may terminate this
Agreement by giving Lender at least thirty (30) days prior written
notice at any time upon payment in full of all of the Obligations as
provided herein, including, without limitation, the early termination
fee provided below. Lender shall have the right to terminate this
Agreement (i) at any time upon or after the occurrence of an Event of
Default or (ii) upon ninety (90) days' prior written notice to
Borrower if (A) there shall occur any change in the controlling
ownership of Borrower (other than a change of ownership contemplated
by the Merger Documents) or any person now or hereafter occupying the
position of Borrower's chief executive officer, chief financial
officer or chief operating officer shall cease for any reason to
occupy such position, and (B) Hayes Corporation, a Delaware
corporation, does not own at the time in question at least 90% of the
outstanding equity securities in Borrower. If Lender or Borrower shall
terminate this Agreement effective as of any date other than the last
day of the then current Term, Borrower shall pay to Lender (in
addition to all other Obligations) upon the effective date of such
termination, in view of the impracticality and extreme difficulty of
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<PAGE> 3
ascertaining actual damages and by mutual agreement of the parties as
to a reasonable calculation of Lender's lost profits, an early
termination fee calculated as follows:
<TABLE>
<CAPTION>
IF TERMINATION OCCURS THE TERMINATION FEE SHALL BE:
AT ANY TIME:
<S> <C> <C>
(a) on or before April (a) $450,000
16, 1998
(b) from April 17, 1998, (b) 1% of the greater of the Base
to April 15, 2001 Loan Amount in the month during
which notice of termination
is given or the Average Daily
Loan Balance for the 180-day
period prior to the effective
date of termination, plus $150,000
</TABLE>
If the effective date of termination pursuant to a properly given
notice occurs on the last day of any Term, then no termination charge
shall be payable. As used in this Agreement, the term "LOAN YEAR"
shall mean a period commencing on the Closing Date or an anniversary
thereof and ending on the next anniversary; and the term "AVERAGE
DAILY LOAN BALANCE" shall mean, for any period, an amount equal to the
aggregate principal balance of Revolving Loans, Term Loans and
Accommodations outstanding at the end of each day during such period
divided by the number of days in such period.
d. By deleting Section 10.1(a) in its entirety
and by substituting the following new Section 10.1(a) in lieu thereof:
(a) Maximum Credit: $50,000,000
e. By deleting Section 10.4(a) in its entirety
and by substituting the following new Section 10.4(a) in lieu thereof:
(a) Interest Rate:
A fluctuating rate per annum equal to the Prime Rate
plus the Applicable Interest Margin. The "APPLICABLE
INTEREST MARGIN" shall be 2.125%, until January 1,
1998, at which time the Applicable Interest Margin
shall be 1.875%; provided, however, that (1) if
Borrower shall have Net Income for the six months
ending June 30, 1998, of greater than $585,000, then
the Applicable Interest Margin shall be reduced by
.25 percentage points, effective July 1, 1998; and
(2) if Borrower
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<PAGE> 4
shall have Net Income for the its fiscal year ending
December 31, 1998, of greater than $5,850,000, then
the Applicable Interest Margin shall be reduced by
.25 percentage points, effective January 1, 1999;
provided, that if the Applicable Interest Margin is
reduced pursuant to subparagraph (a)(1) above and
Borrower has Net Income for its fiscal year ending
December 31, 1998, of less than $5,850,000, then the
Applicable Interest Margin shall be increased by .25
percentage points, effective January 1, 1999. As
used herein, the term "NET INCOME" shall mean, for
any period, the net income of Borrower for the
period in question after giving effect to deduction
of or provision for all operating expenses, all
taxes and reserves (including reserves for deferred
taxes) and all other proper deductions, all
determined in accordance with generally accepted
accounting principles consistently applied, provided
that there shall be excluded: (i) any restoration of
any contingency reserve, except to the extent that
provision for such reserve was made out of income
during such period, (ii) any net gain or losses on
the sale or other disposition, not in the ordinary
course of business, of capital assets, provided that
there shall also be excluded any related charges for
taxes thereon, (iii) any net gain arising from the
collection of the proceeds of any insurance policy,
(iv) any write-up of any asset, and (v) any other
extraordinary items.
f. By deleting Section 10.4(b) in its entirety
and by substituting the following new Section 10.4(b) in lieu thereof:
(b) Annual Commitment Fee:
$325,000 for each of the first four Loan Years,
earned and payable on each of the first three
anniversary dates after the Closing Date, and
$250,000 for the fifth Loan Year, earned and payable
on the fourth anniversary date after the Closing
Date.
g. By deleting Section 10.6(a) and Section
10.6(b)in their entireties and by substituting the following new Section
10.6(a) and Section 10.6(b) in lieu thereof:
10.6(a) Lender's Address:
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<PAGE> 5
The CIT Group/Credit Finance, Inc.
1211 Avenue of the Americas
21st Floor
New York, New York 10036
Lender's Bank:
The Chase Manhattan Bank, N.A.
270 Park Avenue
New York, New York
(b) Borrower's Chief Executive Office:
5854 Peachtree Corners East
Norcross, Georgia 30072-3405
Attention: Dennis C. Hayes
Telecopy: (770) 840-6830
h. By adding the following to Section
10.6(d)(1):
Hayes (Asia Pacific) Limited
39/F, Unit B
Manuliffe Tower
169 Electric Road
North Point, Hong Kong
Hayes (China) Limited
Beijing Representative Office
A1912 Vantone New World Plaza
Number 2 Fuchengmenwai Dajie
XiCheng District, Beijing PRC 10037
Cardinal Technologies, Inc.
5854 Peachtree Corners East
Norcross, Georgia 30072
i. By deleting Section 10.6(e) in its entirety
and by substituting the following new Section 10.6(e) in lieu thereof:
(e) Borrower's Trade Names for
Invoicing:
Hayes Communications
Hayes Communications, Inc.
Practical Peripherals, Inc.
Practical Peripherals
Cardinal Technologies, Inc.
Cardinal Technologies
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<PAGE> 6
3. CONSENT TO MERGER. Borrower has informed Lender that
pursuant to the terms of that certain Agreement and Plan of Reorganization
dated as of July 29, 1997, between Borrower and Access Beyond, Inc. ("Access
Beyond") a true and complete copy of which is attached hereto as Exhibit A (the
"Reorganization Agreement"), (i) H&A Merger Sub, Inc., a Georgia corporation
and wholly owned subsidiary of Access Beyond ("H&A") will merge with and into
Borrower and (ii) Borrower will become a wholly owned subsidiary of Hayes
Corporation, formerly known as Access Beyond, Inc. The consummation of the
merger contemplated by the Reorganization Agreement (the "H&A Merger") requires
the prior written consent of Lender under the Loan Agreement. Lender hereby
consents to the H&A Merger and agrees that the H&A Merger shall not constitute
an Event of Default under the Loan Agreement, provided that each of the
conditions precedent set forth in Paragraph 8 hereof are satisfied.
4. CONSENT TO PAYOFF OF SUBORDINATED DEBT. Pursuant to
the terms of that certain Capital Contribution Agreement dated the date hereof
by Hayes Corporation, formerly known as Access Beyond, Inc., in favor of
Lender, Hayes Corporation has agreed to advance to Borrower, as a contribution
to Borrower's capital, an amount equal to $35,000,000 in cash (the "Capital
Contribution"). Borrower has informed Lender that Borrower intends to use
$11,375,000 of the proceeds received from the Capital Contribution to satisfy
the aggregate of all subordinated indebtedness owing from Borrower to Rinzai
Limited, a Hong Kong corporation ("Rinzai"), Kaifa Technology (H.K.) Limited, a
Hong Kong corporation ("Kaifa"), Rolling Profit Holdings, Ltd., a British
Virgin Island corporation ("Rolling Profit"), LAO Hotel (H.K.) Limited, a Hong
Kong corporation ("LAO"), Saliendra Pte Ltd, a private Singapore corporation
("Saliendra") and S.P. Quek Investments, a private Singapore corporation ("S.P.
Quek") (Rinzai, Kaifa, Rolling Profit, LAO, Saliendra and S.P. Quek are
hereinafter referred to collectively as the "Creditors").
Lender hereby consents to Borrower's use of $11,375,000 of the
proceeds received from the Capital Contribution to satisfy the aggregate of all
indebtedness owing from Borrower to the Creditors (the "Creditor Payoff") and
agrees that the Creditor Payoff will not constitute an Event of Default under
the Loan Agreement or a default under any subordination agreement between
Lender, Borrower and any Creditor, provided, that each of the conditions
precedent set forth in Paragraph 8 hereof are satisfied prior to the Creditor
Payoff, and, provided, that Borrower shall have remitted to Lender an amount
sufficient to satisfy all Obligations owing by Borrower to Lender under Term
Loan B.
5. RATIFICATION AND REAFFIRMATION. Borrower hereby
ratifies and reaffirms each of the Transaction Documents and all of
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<PAGE> 7
Borrower's covenants, duties, indebtedness and liabilities thereunder.
6. ACKNOWLEDGMENTS AND STIPULATIONS. Borrower
acknowledges and stipulates that the Loan Agreement and the other Transaction
Documents executed by Borrower are legal, valid and binding obligations of
Borrower that are enforceable against Borrower in accordance with the terms
thereof; all of the Obligations are owing and payable without defense, offset
or counterclaim (and to the extent there exists any such defense, offset or
counterclaim on the date hereof, the same is hereby waived by Borrower); the
security interests and liens granted by Borrower in favor of Lender are duly
perfected, first priority security interests and liens.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants to Lender, to induce Lender to enter into this Agreement, that no
Event of Default exists on the date hereof; the execution, delivery and
performance of this Agreement have been duly authorized by all requisite
corporate action on the part of Borrower and this Agreement has been duly
executed and delivered by Borrower; and except as may have been disclosed in
writing by Borrower to Lender prior to the date hereof, all of the
representations and warranties made by Borrower in the Loan Agreement are true
and correct on and as of the date hereof.
8. CONDITIONS PRECEDENT. The effectiveness of the
amendments contained in Section 2 hereof and Lender's consents contained in
Section 3 and Section 4 are subject to the satisfaction of each of the
following conditions precedent, in form and substance satisfactory to Lender,
unless satisfaction thereof is specifically waived in writing by Lender:
a. No Event of Default exists under (and as
defined in) the Loan Agreement;
b. Borrower delivers to Lender final drafts of
all documents to be executed in conjunction with the H&A Merger and such
documents are satisfactory in all respects to Lender in its sole discretion;
c. Lender receives assurances satisfactory to
it that (1) H&A will consent to the terms of the Loan Agreement to the extent
that its consent is required under the terms of the Reorganization Agreement or
the H&A Merger Agreement and (2) the transactions contemplated by the H&A
Merger Documents will be, fully consummated in accordance with the terms
thereof as in effect on the date hereof. As used herein, the term "H&A Merger
Agreement" means those certain Articles of Merger dated December 29, 1997, by
and between H&A Merger Sub, Inc., a Georgia corporation, and Borrower, together
with all schedules and exhibits
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<PAGE> 8
thereto; and the term "H&A Merger Documents" means the H&A Merger Agreement and
each of the instruments and agreements that are to be executed in connection
therewith; and
d. Lender receives such other documents,
instruments and agreements as Lender may reasonably request to give effect to
the terms and provisions of this Agreement.
9. ADDITIONAL COVENANTS. To induce Lender to enter into
this Agreement, Borrower covenants and agrees that:
a. Upon receipt by Borrower of the equity
contribution in the amount of $35,000,000 from Hayes Corporation, Borrower will
remit to Lender $4,529,200 or such greater amount as is necessary to satisfy
all Obligations owing by Borrower to Lender under Term Loan B on or before the
second day following Borrower's receipt of such contribution;
b. On or before the close of business on
December 31, 1997, Borrower will deliver or cause to be delivered to Lender
evidence that the Certificate of Merger with respect to the H&A Merger has been
filed with the Secretary of State of the State of Georgia and the H&A Merger is
valid and effective in accordance with the terms and provisions of the H&A
Merger Agreement and the applicable corporation statutes of the State of
Georgia; and
c. On or before the close of business on
December 31, 1997, Borrower will deliver or cause to be delivered to Lender an
opinion letter of counsel to Borrower with respect to the H&A Merger Agreement,
the effectiveness of the H&A Merger as of the date hereof.
d. On or before the close of business on
December 31, 1997, Lender shall have received assurances satisfactory to it
(including assurances in the form of the Certificate Regarding Merger to be
executed and delivered to Lender in the form provided by Lender to Borrower)
that (1) H&A has consented to the terms of the Loan Agreement to the extent
that its consent is required under the terms of the Reorganization Agreement or
the H&A Merger Agreement and (2) the transactions contemplated by the H&A
Merger Documents have been fully consummated in accordance with the terms
thereof as in effect on the date hereof.
e. On or before the close of business on
December 31, 1997, Borrower shall cause Hayes Corporation to execute and
deliver to Lender a Capital Contribution Agreement in form and substance
satisfactory to Lender, pursuant to which Hayes Corporation agrees to advance
to Borrower, as a contribution to Borrower's capital, an amount equal to
$35,000,000 in cash;
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f. On or before the close of business on
December 31, 1997, Borrower shall cause each of Hayes Corporation and Access
Beyond Technologies, Inc. ("AB Technologies") to execute and deliver to Lender
a Guaranty in form and substance satisfactory to Lender, pursuant to which each
of Hayes Corporation and AB Technologies unconditionally guarantees all
indebtedness owing from Borrower to Lender at any time;
g. On or before the close of business on
December 31, 1997, Borrower shall cause each of Hayes Corporation and AB
Technologies to execute and deliver to Lender a General Security Agreement in
form and substance satisfactory to Lender, pursuant to which such company
grants to Lender a lien upon all of its assets as further security for all
indebtedness owing from Borrower to Lender at any time;
h. On or before the close of business on
December 31, 1997, Borrower shall cause each of Hayes Corporation and Penril to
execute and deliver to Lender any and all documents, instruments and agreements
necessary to perfect Lender's security interests in the assets of such company;
i. On or before the close of business on
December 31, 1997, Borrower shall cause Hayes Corporation to deliver to Lender
evidence satisfactory to Lender that Hayes Corporation's execution, delivery
and performance of the Guaranty and the General Security Agreement
(collectively, the "Hayes Corporation Documents") will not (i) violate any
provisions of the Articles of Incorporation or By-Laws of Hayes Corporation;
(ii) result in or constitute a default under any agreement or instrument to
which Hayes Corporation is a party or any of its properties is bound; (iii)
violate any provision of any judicial or administrative law, rule or
regulation, or any judgment, decree or determination by which Hayes Corporation
or any of its properties is bound; or (iv) cause, result in or require the
creation or imposition in favor of any one of any lien upon or security
interest in any property now or hereafter acquired by Hayes Corporation;
j. On or before the close of business on
December 31, 1997, Borrower shall cause Hayes Corporation to deliver to Lender
a copy of the resolutions adopted by the directors of Hayes Corporation,
certified by an officer of Hayes Corporation, which resolutions authorize Hayes
Corporation's execution, delivery and performance of the Hayes Corporation
Documents;
k. On or before the close of business on
December 31, 1997, Borrower shall cause Hayes Corporation to deliver to Lender
a favorable opinion from Hayes Corporation's counsel, which counsel shall be
acceptable to Lender, with respect to (i) the enforceability of the Hayes
Corporation Documents; (ii) the perfection of Lender's charge upon the security
interests in the
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assets of Hayes Corporation; and (iii) such other matters as requested by
Lender;
l. On or before the close of business on
December 31, 1997, Borrower shall cause AB Technologies to deliver to Lender
evidence satisfactory to Lender that AB Technologies' execution, delivery and
performance of the Guaranty and the General Security Agreement (collectively,
the "AB Technologies Documents") will not (i) violate any provisions of the
Articles of Incorporation or ByLaws of AB Technologies; (ii) result in or
constitute a default under any agreement or instrument to which AB Technologies
is a party or any of its properties is bound; (iii) violate any provision of
any judicial or administrative law, rule or regulation, or any judgment, decree
or determination by which AB Technologies or any of its properties is bound; or
(iv) cause, result in or require the creation or imposition in favor of any one
of any lien upon or security interest in any property now or hereafter acquired
by AB Technologies;
m. On or before the close of business on
December 31, 1997, Borrower shall cause AB Technologies to deliver to Lender a
copy of the resolutions adopted by the directors of Hayes Corporation,
certified by an officer of AB Technologies, which resolutions authorize AB
Technologies' execution, delivery and performance of the AB Technologies
Documents;
n. On or before the close of business on
December 31, 1997, Borrower shall cause AB Technologies to deliver to Lender a
favorable opinion from AB Technologies' counsel, which counsel shall be
acceptable to Lender, with respect to (i) the enforceability of the AB
Technologies Documents; (ii) the perfection of Lender's charge upon the
security interests in the assets of AB Technologies; and (iii) such other
matters as requested by Lender; and
o. On or before the close of business on
December 31, 1997, Borrower shall deliver or cause to be delivered to Lender
such other document, instruments and agreements as Lender may reasonably
request.
Borrower agrees that any breach of the foregoing covenants shall
constitute an Event of Default under the Loan Agreement and shall nullify
Lender's consents contained herein.
10. AMENDMENT FEE. Borrower agrees to pay to Lender a
fee in the amount of $75,000 in immediately available funds on the date hereof
in consideration for Lender's willingness to enter into this Agreement.
11. EXPENSES OF LENDER. Borrower agrees to pay, ON
DEMAND, all costs and expenses incurred by Lender in connection
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with the preparation, negotiation and execution of this Agreement and any other
Transaction Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
costs and fees of Lender's legal counsel and any taxes or expenses associated
with or incurred in connection with any instrument or agreement referred to
herein or contemplated hereby.
12. EFFECTIVENESS/GOVERNING LAW. This Agreement shall be
effective upon acceptance by Lender (notice of which acceptance is hereby
waived) whereupon the same shall be governed by and construed in accordance
with the internal laws of the State of Georgia; provided, that, if this
Agreement is not executed by Borrower and delivered to Lender on or before
December 31, 1997, the amendments contained herein shall be null and void and
Lender's consents contained herein shall be ineffective.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
14. NO NOVATION, ETC.. Except as otherwise expressly
provided in this Agreement, nothing herein shall be deemed to amend or modify
any provision of the Loan Agreement or any of the other Transaction Documents,
each of which shall remain in full force and effect. This Agreement is not
intended to be, nor shall it be construed to create, a novation or accord and
satisfaction, and the Loan Agreement as herein modified shall continue in full
force and effect.
15. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement
may be executed in any number of counterparts and by different parties to this
Agreement on separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall
be deemed to be an original signature hereto.
16. FURTHER ASSURANCES. Borrower agrees to take such
further actions as Lender shall reasonably request from time to time in
connection herewith to evidence or give effect to the amendments set forth
herein or any of the transactions contemplated hereby.
17. SECTION TITLES. Section titles and references used
in this Agreement shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto.
18. RELEASE OF CLAIMS. TO INDUCE LENDER TO ENTER INTO
THIS AGREEMENT, BORROWER HEREBY RELEASES, ACQUITS AND FOREVER
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DISCHARGES LENDER, AND ALL OFFICERS, DIRECTORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS OF LENDER, FROM ANY AND ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS
OR CAUSES OR ACTIONS OF ANY KIND OR NATURE (IF THERE BE ANY), WHETHER ABSOLUTE
OR CONTINGENT, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY, OR KNOWN OR
UNKNOWN, THAT BORROWER NOW HAS OR EVER HAD AGAINST LENDER ARISING UNDER OR IN
CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR OTHERWISE.
19. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO EACH HEREBY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
ATTEST: HAYES MICROCOMPUTER PRODUCTS, INC.
("Borrower")
/s/ G. Donald Johnson By: /s/ James A. Jones
- --------------------------- -------------------------------
Assistant Secretary
[CORPORATE SEAL] Title: Vice President
----------------------------
Accepted and agreed to:
THE CIT GROUP/CREDIT FINANCE, INC.
("Lender")
By: /s/
-------------------------------
Title: Senior Vice President
----------------------------
[Consent and Reaffirmation on the following page]
12
<PAGE> 13
CONSENT AND REAFFIRMATION
Each of the undersigned guarantors of the Obligations of Borrower at
any time owing to Lender hereby (i) acknowledge receipt of a copy of the
foregoing Fourth Amendment to Loan and Security Agreement; (ii) consent to
Borrower's execution and delivery thereof and of the other documents,
instruments or agreements Borrower agrees to execute and deliver pursuant
thereto; (iii) agree to be bound thereby; and (iv) affirm that nothing
contained therein shall modify in any respect whatsoever its respective
guaranty of the Obligations and reaffirm that such guaranty is and shall remain
in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Fourth Amendment to Loan and
Security Agreement and Consent Agreement.
HAYES MICROCOMPUTER PRODUCTS
(AUSTRALIA) PTY LIMITED
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(CANADA) LIMITED
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
PRACTICAL PERIPHERALS (EUROPE)
LIMITED
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, Director
HAYES MICROCOMPUTER PRODUCTS
(FRANCE) S.A.R.L.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, Authorized
Representative
[Signatures continued on following page]
13
<PAGE> 14
HAYES MICROCOMPUTER PRODUCTS
DE MEXICO S.A. DE C.V.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, Sole
Administrator
HAYES MICROCOMPUTER PRODUCTS
(INTERNATIONAL) LIMITED
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
ENTERPRISE TECHNOLOGIES, INC.
By: /s/ Jack E. Fisher
-----------------------------------
JACK E. FISHER, President
HAYES GOVERNMENT SERVICES, INC.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
CARDINAL TECHNOLOGIES, INC.
By: /s/ Dennis C. Hayes
-----------------------------------
DENNIS C. HAYES, President
14
<PAGE> 1
EXHIBIT 10.72
GUARANTY
(HAYES CORPORATION)
January 2, 1998
The CIT Group/Credit Finance, Inc.
1211 Avenue of the Americas
21st Floor
New York, New York 10036
Re: Hayes Microcomputer Products, Inc., a Georgia corporation
("Borrower")
Gentlemen:
Reference is made to the financing arrangements between The CIT
Group/Credit Finance, Inc. ("Lender") and Borrower pursuant to which Lender may
extend loans, advances and other financial accommodations to Borrower as set
forth in the Loan and Security Agreement between Borrower and Lender dated
December 21, 1995, as supplemented by that certain Conditions Precedent Rider
dated December 21, 1995 between Lender and Borrower, and as amended by that
certain First Amendment to Loan and Security Agreement dated April 16, 1996
between Lender and Borrower, that certain Second Amendment to Loan and Security
Agreement dated October 15, 1996 between Lender and Borrower, that certain Third
Amendment to Loan and Security Agreement dated as of January 1, 1997, and that
certain Fourth Amendment to Loan and Security Agreement dated on or about the
date hereof, between Lender and Borrower and various other agreements, documents
and instruments now or at any time executed or delivered in connection therewith
or otherwise related thereto, including, but not limited to, this Guaranty (all
of the foregoing, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between Borrower
and the undersigned ("Guarantor"), in consideration of the benefits which will
accrue to Guarantor, and as an inducement for and in consideration of Lender at
any time providing or extending loans, advances and other financial
accommodations to Borrower, whether pursuant to the Financing Agreements or
otherwise, Guarantor hereby, irrevocably and unconditionally, (a) guarantees,
and agrees to be liable for, the prompt indefeasible and full payment and
performance of all revolving loans, term loans, letters of credit, bankers'
acceptances, merchandise purchase guaranties or other guaranties or indemnities
for Borrower's account and all other obligations, liabilities and indebtedness
of every kind, nature or description owing by Borrower to Lender or Lender's
affiliates, including, without limitation, principal, interest, charges, fees
and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under any of the Financing Agreements or
<PAGE> 2
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Financing Agreements or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute, whether or not such obligations,
liabilities or indebtedness are direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, original, renewed or extended, and whether
arising directly or howsoever acquired by Lender including from any other entity
outright, conditionally or as collateral security, by assignment, merger with
any other entity, participations or interests of Lender in the obligations of
Borrower to others, assumption, operation of law, subrogation or otherwise and
(b) agrees to pay to Lender on demand the amount of all expenses (including,
without limitation, attorneys' fees and legal expenses) incurred by Lender in
connection with the preparation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of Borrower's obligations,
liabilities and indebtedness as aforesaid to Lender, Lender's rights in any
collateral or under this Guaranty and all other Financing Agreements or in any
way involving claims by or against Lender directly or indirectly arising out of
or related to the relationship between Borrower and Lender, Guarantor and
Lender, or any other Obligor (as hereinafter defined) and Lender, whether such
expenses are incurred before, during or after the initial or any renewal term of
the Financing Agreements or after the commencement of any case with respect to
Borrower, Guarantor or any other Obligor under the United States Bankruptcy Code
or any similar statute (all of which being collectively referred to herein as
the "Guaranteed Obligations").
GUARANTOR HEREBY EXPRESSLY WAIVES notice of Lender's acceptance of this
Guaranty, the making of loans, advances and extensions of credit or other
financial accommodations to, and the incurring of any expenses by or in respect
of, Borrower, and presentment, demand, protest, notice of protest, notice of
nonpayment or default and all other notices to which Borrower or Guarantor are
or may be entitled. GUARANTOR ALSO WAIVES notice of, and hereby consents to, (i)
any amendment, modification, supplement, renewal, restatement or extensions of
time of payment of or increase or decrease in the amount of any of the
Guaranteed Obligations or to the Financing Agreements and any collateral, and
the guarantee made herein shall apply to the Guaranteed Obligations as so
amended, modified, supplemented, renewed, restated or extended, increased or
decreased, (ii) the taking, exchange, surrender and releasing of any collateral
or guarantees now or at any time held by or available to Lender for the
obligations of Borrower or any other party at any time liable for or in respect
of the Guaranteed Obligations (individually and collectively, the "Obligors"),
(iii) the exercise of, or refraining from the exercise of any rights against
Borrower, Guarantor or any other Obligor or any collateral, and (iv) the
settlement, compromise or release of, or the waiver of any default with respect
to, any Guaranteed Obligations. Guarantor agrees that the amount of the
Guaranteed Obligations shall not be diminished and the liability of Guarantor
hereunder shall not be otherwise impaired or affected by any of the foregoing.
To the fullest extent permitted by applicable law, GUARANTOR HEREBY FURTHER
WAIVES the right to plead any statute of limitations as a defense to performance
of its obligations under, or to Lender's enforcement of, this Guaranty.
This Guaranty is a guaranty of payment and not of collection. Guarantor
agrees that Lender need not attempt to collect any Guaranteed Obligations from
Borrower or any other Obligor or to realize upon any collateral (and Guarantor
hereby waives the benefit of any statute or other law that
2
<PAGE> 3
might otherwise require Lender to institute suit against Borrower or any other
Obligor on Guarantor's request or prior to instituting suit against Guarantor),
but Lender may require Guarantor to make immediate payment of the Guaranteed
Obligations to Lender when due or at any time thereafter. Lender may apply any
amounts received in respect of the Guaranteed Obligations to any of the
Guaranteed Obligations, in whole or in part (including reasonable attorneys'
fees and legal expenses incurred by Lender with respect thereto or otherwise
chargeable to Borrower or Guarantor) and in such order as Lender may elect,
whether or not then due.
No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to, or legal or equitable discharge of Borrower in respect of
any of the Guaranteed Obligations or Guarantor in respect of this Guaranty,
affect, impair or be a defense to this Guaranty. Without limitation of the
foregoing, the liability of Guarantor hereunder shall not be discharged or
impaired in any respect by reason of any failure by Lender to perfect or
continue perfection of any lien or security interest in any collateral for the
Guaranteed Obligations or any delay by Lender in perfecting any such lien or
security interest. As to interest, fees and expenses, whether arising before or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute, Guarantor shall be liable
therefor, even if Borrower's liability for such amounts does not, or ceases to,
exist by operation of law.
This Guaranty is absolute, unconditional and continuing and is in
addition to, but not contingent upon Lender's obtaining, any other guaranty of
the whole or any part of the Guaranteed Obligations. Payment by Guarantor shall
be made to Lender at its office from time to time on demand as Guaranteed
Obligations become due. One or more successive or concurrent actions may be
brought hereon against Guarantor either in the same action in which Borrower or
any other Obligors are sued or in separate actions.
Payment of all amounts now or hereafter owed to Guarantor by Borrower
or any other Obligor is hereby subordinated in right of payment to the
indefeasible payment in full to Lender of the Guaranteed Obligations and is
hereby assigned to Lender as security therefor. Guarantor hereby irrevocably and
unconditionally waives and relinquishes all statutory, contractual, common law,
equitable and all other claims against Borrower, any collateral for the
Guaranteed Obligations or other assets of Borrower or any other Obligor, for
subrogation, reimbursement, exoneration, contribution, indemnification, setoff
or other recourse in respect of sums paid or payable to Lender by Guarantor
hereunder and Guarantor hereby further irrevocably and unconditionally waives
and relinquishes any and all other benefits which Guarantor might otherwise
directly or indirectly receive or be entitled to receive by reason of any
amounts paid by or collected or due from Guarantor, Borrower or any other
Obligor upon the Guaranteed Obligations or realized from their property.
All sums at any time owed by Lender to Guarantor or to the credit of
Guarantor and any property of Guarantor on which Lender at any time has a lien
or security interest or of which Lender at any time has possession, shall secure
payment and performance of all Guaranteed Obligations and all other obligations
of Guarantor to Lender however arising.
3
<PAGE> 4
In case proceedings be instituted by or against Borrower or Guarantor
or any other Obligor, in bankruptcy or insolvency, or for reorganization,
arrangement, receivership, or the like, or if Borrower or Guarantor or any other
Obligor calls a meeting of creditors or makes any assignment for the benefit of
creditors, or upon the occurrence of any event which constitutes a default or
event of default under the Financing Agreements, the liability of Guarantor for
the entire Guaranteed Obligations shall mature, even if the liability of
Borrower or any other Obligor therefor does not.
Guarantor shall continue to be liable hereunder until one of Lender's
officers actually receives a written termination notice by certified mail; but
the giving of such notice shall not relieve Guarantor from liability for any
Guaranteed Obligations incurred before Lender's receipt of such notice of
termination or for post-termination collection expenses and interest pertaining
to any Guaranteed Obligations arising before termination.
Guarantor agrees that this Guaranty shall remain in full force and
effect or be reinstated, as the case may be, if at any time payment of any of
the Guaranteed Obligations is rescinded or otherwise restored by Lender to
Borrower or to any other person who made such payment, or to the creditors or
creditors' representative of Borrower or such other person.
Lender's books and records showing the account between Lender and
Borrower shall be admissible in evidence in any action or proceeding as prima
facie proof of the items therein set forth, and any written statements rendered
by Lender to Borrower, to the extent to which no written objection is made
within sixty (60) days after the date thereof, shall be considered correct and
be binding on Guarantor as an account stated for purposes of this Guaranty.
No delay on Lender's part in exercising any rights hereunder or failure
to exercise the same shall constitute a waiver of such rights. No notice to, or
demand on, Guarantor shall be deemed to be a waiver of the obligation of
Guarantor to take further action without notice or demand as provided herein. No
waiver of any of Lender's rights hereunder, and no modification or amendment of
this Guaranty, shall be deemed to be made by Lender unless the same shall be in
writing, duly signed on Lender's behalf, and each such waiver, if any, shall
apply only with respect to the specific instance involved and shall in no way
impair Lender's rights or the obligations of Guarantor to Lender in any other
respect at any other time.
Guarantor hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower and any and all endorsers or other
guarantors of any of the Guaranteed Obligations and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations or any part
thereof that diligent inquiry would reveal, and Guarantor hereby agrees that
Lender shall have no duty to advise Guarantor of information known to Lender
regarding such condition or any such circumstances.
This Guaranty is binding upon Guarantor, its successors and assigns and
shall benefit Lender and its successors, endorses, transferees and assigns. All
references to Borrower and Lender herein shall include their respective
successors and assigns. This instrument shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Georgia.
4
<PAGE> 5
Guarantor hereby irrevocably submits and consents and to the
non-exclusive jurisdiction of the State and Federal Courts located in the State
of Georgia with respect to any action or proceeding arising out of this Guaranty
or any matter arising herefrom or relating hereto. Any such action or proceeding
commenced by Guarantor against Lender will be litigated only in a Federal Court
located in the district, or a State Court in the State of Georgia and County of
Fulton and Guarantor waives any objection based on forum non conveniens and any
objection to venue in connection therewith.
In any such action or proceeding, Guarantor waives personal service of
the summons and complaint or other process and papers therein and agrees that
any process or notice of motion or other application to any of said Courts or a
judge thereof, or any notice in connection with any proceedings hereunder may be
served (i) inside or outside such State by registered or certified mail, return
receipt requested, addressed to Guarantor at the address set forth below or
which Guarantor has previously advised Lender in writing and as indicated in the
records of Lender and service or notice so served shall be deemed complete five
(5) days after the same shall have been posted or (ii) in such other manner as
may be permissible under the rules of said Courts.
Notwithstanding any other provision of this Guaranty to the contrary,
if the obligations of Guarantor hereunder would otherwise be held or determined
by a court of competent jurisdiction in any action or proceeding involving any
state corporate law or any state or federal bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar law affecting
the rights of creditors generally, to be void, invalid or unenforceable to any
extent on account of the amount of such Guarantor's liability under this
Guaranty, then notwithstanding any other provision of this Guaranty to the
contrary, the amount of such liability shall, without any further action by
Guarantor or any other person or entity, be automatically limited and reduced to
the highest amount that is valid and enforceable as determined in such action or
proceeding.
This Guaranty may be executed in any number of counterparts and by
different parties to this Agreement on separate counterparts, each of which,
when so executed, shall be deemed an original, but all such counterparts shall
constitute one and the same agreement.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR AND LENDER
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY
EITHER OF THEM AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
GUARANTY, ANY ALLEGED TORTIOUS CONDUCT BY GUARANTOR OR LENDER, OR, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATED TO THE RELATIONSHIP BETWEEN
GUARANTOR AND LENDER OR BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
GUARANTOR HEREBY ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS OWN SELECTION IN THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS GUARANTY,
THAT LENDER HAS NO FIDUCIARY RELATIONSHIP TO GUARANTOR (BUT RATHER THE
RELATIONSHIP BETWEEN LENDER AND GUARANTOR IS SOLELY THAT OF CREDITOR AND
DEBTOR), AND THAT NO JOINT VENTURE EXISTS BETWEEN LENDER AND BORROWER OR BETWEEN
LENDER AND GUARANTOR.
5
<PAGE> 6
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
under seal on day and year first above written.
ATTEST: HAYES CORPORATION, FORMERLY KNOWN AS
ACCESS BEYOND, INC.
/s/ By: /s/ Ronald Howard
- ---------------------- -----------------------------------
Secretary
Title: /s/ Vice Chairman-CEO
[CORPORATE SEAL] ---------------------------------
Address: 1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
STATE OF Georgia )
) ss.:
COUNTY OF Gwinnett )
On this 2nd day of January, 1998, before me personally came Ronald
Howard, to me known, who stated that he is the Vice Chairman-CEO of HAYES
CORPORATION, FORMERLY KNOWN AS ACCESS BEYOND, INC. described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the Board of Directors of said corporation.
/s/ Kim Gallagher
-------------------------
Notary Public
My Commission Expires:
March 12, 2000
-------------------------
[NOTARIAL SEAL]
6
<PAGE> 1
EXHIBIT 10.73
GENERAL SECURITY AGREEMENT
(HAYES CORPORATION)
1. GRANT OF SECURITY INTEREST.
For valuable consideration, receipt whereof is acknowledged, and as
general and continuing security for the payment of all obligations, indebtedness
and liabilities in any currency of HAYES CORPORATION, FORMERLY KNOWN AS ACCESS
BEYOND, INC. of 1300 Quince Orchard Boulevard, Gaithersburg, Maryland 20878 (the
"Undersigned") to THE CIT GROUP/CREDIT FINANCE, INC. ("Lender") with an office
at 1211 Avenue of the Americas, 21st Floor, New York, New York 10036, whether
incurred prior to, at the time of or subsequent to the execution hereof,
including extensions or renewals, and all other liabilities of the Undersigned
to Lender, direct or indirect, absolute or contingent, matured or not,
wheresoever and howsoever incurred (whether incurred by the Undersigned alone or
with another or others, whether incurred as principal or surety and whether
arising from dealings between Lender and the Undersigned or from other dealings
or proceedings by which Lender may be or become in any manner whatever a
creditor of the Undersigned) and any ultimate unpaid balance thereof, whether
the same is from time to time reduced and thereafter increased or entirely
extinguished and thereafter incurred again, including, without limiting the
generality of the foregoing, (i) liability of the Undersigned under any contract
of guarantee now or hereafter in existence whereby the Undersigned guarantees
payment of the debts, liabilities and obligations of a third party to Lender,
including, but not limited to, that certain Guaranty dated of even date herewith
from the Undersigned to Lender, as hereafter modified, amended or otherwise
altered (the "Guaranty"), pursuant to which the Undersigned has guaranteed all
debts, liabilities and obligations of Hayes Microcomputer Products, Inc.
("Borrower"), whether now existing or hereafter arising, to Lender, and (ii) all
interest, commissions, legal and other costs, charges and expenses
(collectively, the "Obligations"), the Undersigned hereby grants, assigns,
transfers, sets over, mortgages and charges to Lender, its successors and
assigns, and grants to Lender, its successors and assigns, a continuing security
interest in and lien upon, the Collateral (as defined in paragraph 2 hereof). If
the security interest in the Collateral is not sufficient, in the event of
default as hereinafter defined, to satisfy all Obligations of the Undersigned to
Lender, the Undersigned acknowledges and agrees that the Undersigned shall
continue to be liable for any Obligations remaining outstanding and Lender shall
be entitled to pursue full payment thereof.
2. DESCRIPTION OF COLLATERAL.
The Collateral of the Undersigned shall be deemed to include:
(a) Accounts. All accounts, including contract rights, deposit
accounts in banks, credit unions, trust companies and similar
institutions, debts, claims, dues, moneys,
<PAGE> 2
demands and choses in action of every nature and kind
howsoever arising which now are or which may at any time
hereafter be due, owing or accruing due to or owned by the
Undersigned, and also all securities, bills, notes, letters of
credit and other documents now held or owned or which may be
hereafter taken, held or owned by the Undersigned or anyone on
behalf of the Undersigned in respect of the said accounts,
debts, claims, dues, moneys, demands and choses in action or
any part thereof, and also all books and papers recording,
evidencing or relating to the said accounts, debts, claims,
dues, moneys, demands and choses in action or any part
thereof, and also all claims of any kind which the Undersigned
now has or may hereafter have, including, but not limited to,
claims under insurance policies ("Accounts");
(b) Chattel Paper. All chattel paper now or hereafter owned by the
Undersigned ("Chattel Paper");
(c) Documents of Title. All warehouse receipts, bills of lading
and other documents of title, whether negotiable or otherwise,
now or hereafter owned by the Undersigned ("Documents of
Title");
(d) Instruments. All instruments now or hereafter owned by the
Undersigned ("Instruments");
(e) Equipment. All goods, machinery, equipment and other tangible
personal property now owned or hereafter acquired or
reacquired by the Undersigned, which are neither Inventory as
described in subparagraph 2(g) nor consumer goods, used or
intended for use in or about the places designated in Schedule
A hereto or in any business conducted elsewhere by the
Undersigned, including, without limiting the generality of the
foregoing, all machinery, equipment, fixtures, furniture,
plant, tools, vehicles, other tangible personal property, and
all accessories installed in or affixed or attached or
appertaining to any of the foregoing ("Equipment");
(f) Intangibles. All intangible property now owned or hereafter
acquired or reacquired by the Undersigned which is not
Accounts as defined in subparagraph 2(a), including, without
limiting the generality of the foregoing, all general
intangibles, contract rights, contracts, agreements, options,
permits, licenses, consents, approvals, authorizations,
orders, judgments, certificates, rulings, insurance policies,
agricultural and other quotas, subsidies, franchises,
immunities, privileges, and benefits as well as all goodwill,
patents, trade marks, trade names, trade secrets, inventions,
processes, copyrights and other industrial or intellectual
property, whether foreign or domestic ("Intangibles");
(g) Inventory. All inventory of whatever kind and wherever
situated now owned or hereafter acquired or reacquired by the
Undersigned including, without limiting the
2
<PAGE> 3
generality of the foregoing, all goods, merchandise, raw
materials, goods or work in process, finished goods, other
tangible personal property held for sale, lease or resale or
that have been leased or consigned to or by the Undersigned or
furnished or to be furnished under contracts for service or
used or consumed in the business of the Undersigned
("Inventory");
(h) Securities. All shares, stock, warrants, rights, bonds,
debentures, debenture stock, instruments or other securities,
securities accounts, securities entitlements, money, letters
of credit, advices of credit and checks now or hereafter owned
by the Undersigned together with renewals thereof,
substitutions therefor, accretions thereto and all rights and
claims in respect thereof ("Security"); and
(i) Books, Records etc. With respect to the personal property
described in subparagraphs 2(a) to 2(i) inclusive, all books,
accounts, invoices, letters, papers, documents, disks, and
other records in any form, electronic or otherwise, evidencing
or relating thereto and all contracts, securities, bills,
notes, instruments, writings and other documents and other
rights and benefits in respect thereof now or hereafter held
or owned by the Undersigned or anyone on behalf of the
Undersigned;
and includes all parts, components, renewals, substitutions and replacements
thereof, all attachments, accessories, increases, additions and accessions
thereto and any interest of the Undersigned therein and further includes the
proceeds, in whatever form, of any sale, lease or other disposition of the
foregoing and all personal property in any form or fixtures derived directly or
indirectly from any dealing with any of the foregoing or proceeds therefrom, any
insurance or other payment that indemnifies or compensates for destroyed,
damaged, stolen or lost Collateral (as hereinafter defined) and any payment made
in total or partial discharge or redemption of an Intangible, Instrument,
Document of Title, Chattel Paper or Security (collectively, the "Collateral").
In this General Security Agreement, the words "consumer goods" and
"goods" shall have the same meanings as their defined meanings where such words
are defined in the Uniform Commercial Code of Georgia, as in effect from time to
time in Georgia (the "Code"). Any reference herein to "Collateral" shall, unless
the context otherwise requires, be deemed a reference to "Collateral or any part
thereof".
3. REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED.
The Undersigned hereby represents and warrants, and so long as this
General Security Agreement remains in effect shall be deemed to continuously
represent and warrant, to Lender that:
(a) Except for the security interest created hereby, the other
security interests granted by the Undersigned which are
hereafter approved by Lender in writing prior to their
creation or assumption, or which are Permitted Liens (as
defined in subparagraph 4(e) hereof), the Undersigned is, or
with respect to Collateral acquired after the date
3
<PAGE> 4
hereof will be, the sole beneficial owner of the Collateral,
free and clear of any mortgage, lien, pledge, charge, security
interest, hypothecation, adverse interest, encumbrance, tax or
assessment.
(b) The Undersigned has, or with respect to Collateral acquired
after the date hereof will have, the right to grant a security
interest in the Collateral in favor of Lender.
(c) To the extent applicable, each Account, Chattel Paper,
Instrument, Document of Title, Intangible and Security which
constitutes Collateral is enforceable in accordance with its
terms against the party obligated to pay the same (the "Third
Party Debtor"), and the amount represented by the Undersigned
to Lender from time to time as owing by each Third Party
Debtor or by all Third Party Debtors will be the correct
amount actually and unconditionally owing by such Third Party
Debtor or Third Party Debtors, except for normal cash
discounts where applicable, and no Third Party Debtors will
have any defense, set-off, claim or counterclaim against the
Undersigned which can be asserted against Lender, whether in
any proceeding to enforce the Collateral, this General
Security Agreement or otherwise.
(d) The locations specified in Schedule A hereto as to business
operations and records are accurate and complete and the
Collateral insofar as it consists of goods (other than
Inventory in transit from suppliers or in transit to
customers) and other tangible property is at and will be kept
at one of such locations or at such other locations as the
Undersigned shall specify in writing to Lender and, subject to
the provisions of this General Security Agreement, none of the
Collateral shall be moved therefrom without the prior written
consent of Lender.
(e) The Undersigned's chief executive address is as set out in
Schedule A hereto.
(f) The Undersigned is duly incorporated and organized and validly
existing under the laws of Delaware and has full corporate
power, authority and capacity to conduct its business and own
the Collateral in all jurisdictions in which the Undersigned
carries on business.
(g) The Undersigned has full corporate power, authority and
capacity to execute, deliver and perform all of its
obligations under this General Security Agreement.
(h) All corporate action on the part of the Undersigned, its
directors or shareholders, necessary for the authorization,
execution, delivery and performance of this General Security
Agreement has been duly taken.
(i) The officers of the Undersigned executing this General
Security Agreement and any other instrument or agreement
required hereunder hold the offices which they purport to hold
and are fully and duly authorized to execute the same.
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(j) This General Security Agreement when duly executed and
delivered by the Undersigned will be a legal, valid and
binding obligation of the Undersigned, enforceable against it
in accordance with its terms, subject only as such enforcement
may be limited by bankruptcy, insolvency and any other similar
laws or proceedings relating to the enforcement of creditors'
rights generally and to the extent that equitable remedies
such as specific performance and injunction are in the
discretion of a court of competent jurisdiction.
(k) There is no charter, by-law, or capital stock provision of the
Undersigned and no provision of any indenture, mortgage, lease
or agreement, written or oral, to which the Undersigned is a
party or under which the Undersigned is obligated, nor to the
knowledge of the Undersigned is there any law, statute, rule
or regulation, or any judgment, decree or order of any court
or agency binding on the Undersigned, which would be violated,
contravened, breached by or under which default would occur as
a result of the execution and delivery of this General
Security Agreement or by the performance of any provision,
condition, covenant or other term hereof.
(l) There is no litigation, tax claim, proceeding or dispute in
progress, pending or, to the knowledge of the Undersigned,
threatened, against, relating to or affecting the Undersigned
or its property, the adverse determination of which might
adversely affect the Undersigned's financial condition or
operations or impair the Undersigned's ability to perform its
obligations hereunder or under any other instrument or
agreement required hereunder.
(m) The undersigned is solvent in the sense that the fair saleable
value of all of its assets exceeds the total amount of its
liabilities.
4. COVENANTS OF THE UNDERSIGNED.
So long as this General Security Agreement remains in effect, the
Undersigned hereby covenants and agrees that:
(a) Without the prior written consent of Lender, the Undersigned
shall not assume, create or permit the creation of any
mortgage, lien, charge, pledge, security interest,
hypothecation or encumbrance whatsoever (other than a
Permitted Lien) on any of the Collateral, including, without
limiting the generality of the foregoing, any purchase money
security interest as defined in the Code.
(b) The Undersigned shall diligently defend its title to the
Collateral against the claims and demands of all persons
claiming the same or an interest therein.
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(c) The Undersigned shall diligently maintain, use and operate the
Collateral and shall carry on and conduct its business in a
proper and efficient manner so as to preserve and protect the
Collateral and the earnings, incomes, rents, issues and
profits thereof.
(d) The Undersigned shall (i) cause the Collateral to be properly
insured and kept properly insured with reputable insurers as
shall be acceptable to Lender against loss or damage by fire,
windstorm, water, theft, malicious mischief and extended
coverage, and such other risks as Lender may require, to the
full insurable value thereof, (ii) either assign the insurance
policies to Lender or have the loss thereunder made payable to
Lender, as Lender may require, (iii) deliver to Lender the
originals of such policies or certified copies thereof with
satisfactory lender's loss payable endorsements naming Lender
as sole loss payee, mortgagee, assignee and additional
insured, as appropriate, and (iv) deliver to Lender evidence
of such insurance satisfactory to Lender. Should the
Undersigned neglect to maintain such insurance, Lender may
(but shall not be required to) insure the Collateral, and any
premiums paid by Lender together with interest thereon shall
be payable by the Undersigned to Lender upon demand.
(e) The Undersigned shall keep the Collateral free and clear of
all taxes, assessments, claims, liens and encumbrances except
for ("Permitted Liens"):
(i) security interests and liens at any time granted in
favor of Lender;
(ii) liens for taxes that are not yet due or are being
contested in good faith by the Undersigned by
appropriate proceedings promptly instituted and
diligently conducted, when the Undersigned has
established appropriate reserves therefor, but only
if nonpayment of such taxes will not have a material
adverse effect upon the business, operations,
properties, condition (financial or otherwise), or
the business prospects of the Undersigned or the
Collateral and no lien is imposed upon the
Undersigned's assets with respect to such taxes
unless such lien is at all times junior and
subordinate in priority to the security interests and
liens in favor of Lender;
(iii) statutory liens arising in the ordinary course of the
Undersigned's business by operation of law or
regulation, but only if (a) payment in respect of any
such lien is not at the time required or such liens
are being contested in good faith by the Undersigned
by appropriate proceedings promptly instituted and
diligently conducted, when the Undersigned has
established appropriate reserves therefor, (b) such
liens do not, in the aggregate, materially detract
from the value of the Collateral or materially impair
the use thereof in the operation of the Undersigned's
business, and (c) such liens are at all times junior
and subordinate to the security interests and liens
in favor of Lender; and
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(iv) such other liens as Lender may hereafter approve in
writing.
(f) The Undersigned shall pay all rents, taxes, rates, levies,
assessments, government fees, dues and other charges of every
nature lawfully levied, assessed or imposed against or in
respect of the Undersigned or the Collateral or any part
thereof as and when the same shall become due and payable, and
shall exhibit to Lender, when required, the receipts and
vouchers establishing such payments.
(g) The Undersigned shall preserve and maintain its corporate
existence, rights, franchises and privileges and shall duly
observe and conform to all valid requirements of any
governmental authority relative to its business, credit or any
of the Collateral and all covenants, terms and conditions upon
or under which the Collateral is held.
(h) The Undersigned shall notify Lender in writing:
(i) promptly after the Undersigned's learning thereof, of
the commencement of any litigation or claims before
any court, administrative board or other tribunal
relating to or affecting the Undersigned or any of
its properties, whether or not the claim is
considered by the Undersigned to be covered by
insurance;
(ii) of the occurrence of any event or the existence of
any fact which renders any representation or warranty
in this General Security Agreement inaccurate,
incomplete or misleading;
(iii) promptly after the Undersigned's learning thereof, of
any default by the Undersigned under any note
indenture, loan agreement, mortgage, lease, deed,
guaranty or other similar agreement relating to any
indebtedness of the Undersigned exceeding $300,000;
(iv) promptly after the occurrence thereof, of any Event
of Default;
(v) promptly after the occurrence thereof, of any default
by any obligor under any note or other evidence of
indebtedness payable to the Undersigned;
(vi) promptly after the occurrence thereof, of any
judgment rendered against the Undersigned in an
amount exceeding $300,000;
(vii) at least thirty (30) days prior to the occurrence
thereof, the details of any proposed material
acquisition of Collateral and, promptly after the
occurrence thereof, the details of any acquisition of
any vehicle, mobile home, trailer, boat, aircraft or
aircraft engine;
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(viii) promptly after the Undersigned's learning thereof, of
any event which occurs that would have an adverse
effect upon the Collateral or upon the financial
condition of the Undersigned, including, without
limiting the generality of the foregoing, any loss of
or damage to the Collateral, any default by any Third
Party Debtors in the payment or other performance of
its obligations with respect to the Collateral or the
return to or repossession by the Undersigned of
Collateral where such return or repossession of
Collateral is material in relation to the business of
the Undersigned; and
(ix) promptly (and in any event within 2 Business Days)
after the Undersigned's learning thereof, of the
termination of or assertion by a landlord of the
Undersigned of any default under any lease between
such landlord and the Undersigned.
(i) The Undersigned shall not sell, exchange, transfer, lease,
assign or otherwise dispose of or change the use of the
Collateral or any interest therein (except for sales of
Inventory in the ordinary course of the Undersigned's business
so long as no Event of Default exists hereunder) or modify,
amend, discount, compromise or terminate any Chattel Paper,
Document of Title, Instrument, Security, Intangible or
Accounts, or assign, factor or discount any of the Accounts to
a third party, without the prior written consent of Lender.
All proceeds of the Collateral shall be held in trust by the
Undersigned for Lender.
(j) The Undersigned shall prevent the Collateral, except the
Collateral sold or leased as permitted hereby, from being or
becoming an accession to other property not covered by this
General Security Agreement.
(k) The Undersigned shall not create or permit the creation of any
trust deed or similar instrument without the prior written
consent of Lender.
(l) The Undersigned shall keep proper books of account in
accordance with sound accounting practice and complete and
accurate records concerning the Collateral. The Undersigned
shall from time to time forthwith, on request, furnish to
Lender in writing all information and statements, including
financial information and statements, requested relating to
the Undersigned's business, the Collateral or any part
thereof, and Lender or its authorized agents shall be entitled
from time to time to inspect the tangible Collateral wherever
located, including, without limiting the generality of the
foregoing, the books and records, financial or otherwise,
maintained by the Undersigned with respect to the Collateral,
and to make copies thereof and take extracts therefrom, and
for such purpose Lender or its authorized agents shall have
access to all places where the Collateral or any part thereof
is located and to all premises occupied by the Undersigned.
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(m) The Undersigned shall keep all Collateral, other than
Inventory in transit, at one or more locations set forth in
Schedule A attached hereto, and all such Collateral shall not,
without the prior written consent of Lender, be moved
therefrom, except prior to an Event of Default, for (i) sales
of Inventory in the ordinary course of business and (ii) the
storage of Inventory at locations within Maryland and Georgia
other than those shown on Schedule A if, prior to storage of
any such Inventory at such locations, all filings that are
necessary to perfect or continue to perfect Lender's security
interests in or liens upon the Collateral have been filed.
(n) The Undersigned shall provide Lender with all agreements
hereafter entered into between the Undersigned and any
landlord or warehouseman which owns any premises at which any
Inventory may hereafter be kept. The Undersigned shall obtain
a lien waiver or subordination, in the form requested by
Lender, from each landlord of a premises leased by the
Undersigned.
(o) The Undersigned shall furnish Lender with Inventory reports,
which reports shall describe the Inventory by each location
and be substantially in the form requested by Lender, at such
times as Lender may request. The Undersigned shall conduct a
physical inventory no less frequently than annually and shall
provide to Lender reports based on each such physical
inventory promptly thereafter, together with such supporting
information as Lender shall reasonably request.
(p) The Undersigned shall deliver to Lender from time to time
promptly upon request such other information concerning the
Collateral, the Undersigned and the Undersigned's business and
affairs as Lender may reasonably request.
(q) The Undersigned shall not change its name or the location of
its chief executive office or principal place of business
without having given Lender at least sixty (60) days prior
written notice thereof.
5. USE AND VERIFICATION OF COLLATERAL.
Subject to compliance with the Undersigned's covenants contained herein
and paragraph 7 hereof, the Undersigned may, until an Event of Default, possess,
operate, collect, use, enjoy and deal with the Collateral in the ordinary course
of the Undersigned's business in any lawful manner not inconsistent with the
provisions of this General Security Agreement; provided always that Lender shall
have the right at any time and from time to time to verify the existence and
state of the Collateral in any manner Lender may consider appropriate and the
Undersigned agrees to furnish all assistance and information and to perform all
such acts as Lender may request in connection therewith and for such purpose,
the Undersigned shall permit Lender and its representatives, from time to time,
and as often as may be requested, but only during normal business hours, to (i)
visit and inspect the properties at which any Collateral is located, (ii)
inspect, audit and make extracts from its books and records and (iii) discuss
with the Undersigned's officers, employees and
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independent accountants, the Undersigned's business, assets, liabilities,
financial condition, business prospects and results of operations.
6. SECURITIES.
If Collateral at any time includes Securities, the Undersigned hereby
authorizes Lender to transfer the same or any part thereof into its own name or
that of its nominee(s) so that Lender or its nominee(s) may appear of record as
the sole registered owner thereof; provided, that, until the occurrence of Event
of Default, Lender shall deliver promptly to the Undersigned all notices or
other communications received by it or its nominee(s) as such registered owner
and, upon demand and receipt of payment of any reasonable expenses in connection
thereof, shall issue to the Undersigned or its order a proxy to vote and take
all action with respect to such Securities. After the occurrence of an Event of
Default, the Undersigned waives all rights to receive any notices or
communications received by Lender or its nominee(s) as such registered owner and
agrees that no proxy issued by Lender to the Undersigned or its order as
aforesaid shall thereafter be effective. Lender shall be entitled but not bound
or required to vote in respect of such Securities at any meeting at which the
holder thereof is entitled to vote and, generally, to exercise any of the rights
which the holder of such Securities may at any time have; provided, that, Lender
shall not be responsible for any loss occasioned by the exercise of any of such
rights or by the failure to exercise the same within the time limited for the
exercise thereof.
7. COLLECTION AND VERIFICATION OF ACCOUNTS AND OTHER DEBTS.
To expedite collection, the Undersigned shall endeavor to make
collection of its Accounts and all debts evidenced by its Chattel Paper or its
Instruments for Lender. Any of Lender's officers, employees or agents shall have
the right, at any time or times thereafter, in the name of Lender, any designee
of Lender or the Undersigned, to verify the validity, amount or any other matter
relating to any Account with the account debtor of such Account by mail,
telephone, telecopier or otherwise. The Undersigned shall cooperate fully with
Lender to facilitate and promptly conclude any such verification process.
8. PROCEEDS, INCREASES, PROFITS, PAYMENTS OR DISTRIBUTIONS.
Whether or not an Event of Default has occurred, Lender may take
control of or receive all proceeds of, income from or interest on Collateral and
may apply any money taken as Collateral to the satisfaction of the Obligations
secured hereby. Lender may hold as additional security any increase or profits
received from any Collateral in Lender's possession, may receive any payment or
distribution upon redemption or retirement of the Collateral or upon the
dissolution or liquidation of the issuer of the Collateral and may apply any
money received from such Collateral to reduce the Obligations secured hereby and
may hold any balance as additional security for such part of the Obligations as
may not yet be due, whether absolute or contingent. If the Undersigned receives
any such increase or profits or payments or distributions, the Undersigned will
deliver the same promptly to Lender to be held by Lender as herein provided.
Lender will not be obligated to keep any
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Collateral separate or identifiable. In the case of any Instrument, Security or
Chattel Paper, Lender will not be obligated to take any necessary or other steps
to preserve rights against other persons.
9. EVENT OF DEFAULT.
The occurrence of one or more of the following events shall constitute
an "Event of Default":
(a) The Undersigned shall default in the payment of all or any
part of the Obligations of the Undersigned to Lender as the
same falls due, whether by acceleration or otherwise.
(b) The Undersigned shall default in the performance or observance
of any covenant, obligation, term, condition, undertaking,
provision or agreement heretofore, herein or hereafter given
to Lender, whether contained herein or in any other agreement
to which the Undersigned and Lender are parties, including,
without limiting the generality of the foregoing, any covenant
or undertaking set out in the Guaranty.
(c) Any of the representations and warranties heretofore, herein
or hereafter given to Lender is or becomes incorrect in any
respect at any time or any certificate, statement or audit
report heretofore, herein or hereafter given or delivered to
Lender is incorrect in any respect at the time such
certificate, statement or audit report is given or delivered
to Lender.
(d) If any execution, judgment or any other process of any court
shall become enforceable against the Undersigned or any
guarantor of any of the Obligations or any distress or
analogous process shall be levied upon the Collateral or any
part thereof.
(e) The Undersigned or any guarantor of any of the Obligations
shall become insolvent, file a bankruptcy petition, make an
assignment in bankruptcy, make a bulk sale of its assets or
otherwise transfer all or substantially all of its assets,
propose a compromise or arrangement to its creditors or take
advantage of provisions for relief under the U.S. Bankruptcy
Code or any other legislation for the benefit of insolvent
debtors.
(f) If a bankruptcy petition shall be filed or presented against
the Undersigned or any guarantor of any of the Obligations and
not be bona fide opposed by the Undersigned or any guarantor
of any of the Obligations, any proceeding is taken, whether in
court or under the terms of any agreement or appointment in
writing, with respect to a compromise or arrangement to have
the Undersigned or any guarantor of any of the Obligations
dissolved, liquidated or wound up, or to have a receiver or
similar official appointed in respect of the Undersigned or
any guarantor of any of the Obligations or of any part of the
Collateral, or if any encumbrance becomes
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enforceable against any Collateral or any encumbrancer takes
possession of any part thereof.
(g) The Undersigned or any guarantor of any of the Obligations
shall cease or threaten to cease to carry on business for a
period which significantly affects the Undersigned's capacity
to continue its business, on a profitable basis; or the
Undersigned shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by the Undersigned
which is necessary to the continued or lawful operation of its
business; or the Undersigned shall be enjoined, restrained or
in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business
affairs.
(h) An Event of Default shall have occurred under (and as defined
in) the Loan and Security Agreement dated December 21, 1995,
between Lender and Borrower, as modified, amended or otherwise
altered (the "Loan Agreement").
(i) If the Undersigned enters into any reorganization, merger or
other similar arrangement.
(j) The Undersigned shall be criminally indicted or convicted
under any law that could lead to forfeiture of any property of
the Undersigned.
(k) Lender shall have commercially reasonable grounds to believe
that the prospect of payment of the Obligations or performance
of the obligations under this General Security Agreement or
under any other agreement between the Undersigned and Lender
are about to be impaired or that the Collateral is about to be
in danger of being lost, damaged, confiscated or placed in
jeopardy.
(l) The Undersigned or any other guarantor of all or any part of
the Obligations shall revoke or attempt to revoke its
guaranty.
The provisions of this clause are not intended in any way to affect any rights
of Lender with respect to any Obligations which may now or hereafter be payable
on demand.
10. REMEDIES ON DEFAULT.
(a) Upon or at any time after the occurrence of any Event of
Default, Lender, at its sole discretion, may declare all or
any part of the Obligations, whether or not any such
Obligation is not by its terms payable on demand, to be
immediately due and payable in full, without demand or notice
of any kind.
(b) If Lender declares that the Obligations shall immediately
become due and payable in full, Lender may withhold any future
advances, may proceed to enforce payment
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of the Obligations, take immediate possession of the
Collateral, enter upon any premises of the Undersigned,
otherwise enforce this General Security Agreement and enforce
any rights of the Undersigned in respect of the Collateral by
any manner permitted by applicable law, and may use the
Collateral in the manner and to the extent that Lender may
consider appropriate and may hold, insure, repair, process,
maintain, preserve, prepare for disposition and dispose of the
same and may require the Undersigned to assemble and deliver
the Collateral or make the Collateral available to Lender at a
place designated by Lender. Lender may also take proceedings
in any court of competent jurisdiction for the appointment of
a receiver (which term shall include a receiver and manager)
of the Collateral or of any part thereof or may by instrument
in writing appoint any person to be a receiver of the
Collateral or of any part thereof and may remove any receiver
so appointed by Lender and appoint another in his stead; and
any such receiver appointed by instrument in writing shall, to
the extent permitted by applicable law or to such lesser
extent permitted, have all of the rights, remedies, benefits
and powers of Lender hereunder or under the Code or otherwise
and, without limiting the generality of the foregoing, have
power (i) to take possession of the Collateral or any part
thereof, (ii) to carry on or concur in carrying on all or any
part or parts of the business of the Undersigned, (iii) to
file such proofs of claim and other documents as may be
necessary or advisable in order to have his claim lodged in
any bankruptcy, winding-up or other judicial proceedings
relative to the Undersigned, (iv) to borrow money required for
the seizure, repossession, retaking, repair, insurance,
maintenance, preservation, protection, collection, preparation
for disposition, disposition or realization of the Collateral
or any part thereof and for the enforcement of this General
Security Agreement or for the carrying on of the business of
the Undersigned on the security of the Collateral in priority
to the security interest created under this General Security
Agreement, and (v) to sell, lease or otherwise dispose of, or
concur in the sale, lease or other disposition of, the whole
or any part of the Collateral at public auction, by public
tender or by private sale, lease or other disposition, either
for cash or upon credit, at such time and upon such terms and
conditions as the receiver may determine, provided that if any
such disposition involves a deferred payment or payments,
Lender will not be accountable for and the Undersigned will
not be entitled to be credited with the proceeds of any such
disposition until the monies therefor are actually received.
Any such receiver shall for all purposes be deemed to be the
agent of the Undersigned. Lender may from time to time fix the
remuneration of such receiver. All moneys from time to time
received by such receiver shall be paid by him first in
discharge of the reasonable expenses of Lender incurred in
retaking, holding, repairing, processing and preparing for
disposition and disposing of the Collateral including, without
limitation, all rents, taxes, rates, insurance premiums and
outgoings affecting the Collateral, remuneration of the
receiver, such other amounts referred to in subparagraph 12(b)
hereof, costs of keeping in good standing any liens and
charges on the Collateral prior to the security constituted by
this General Security Agreement and any other reasonable
expenses
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incurred by Lender, and secondly in or toward payment of such
parts of the Obligations of the Undersigned to Lender in such
manner and order as Lender may in its sole discretion
determine, and any residue of such moneys so received shall be
paid to the Undersigned. Lender in appointing or refraining
from appointing such receiver shall not incur any liability to
the receiver, the Undersigned or otherwise and shall not in
any way be responsible for any misconduct or negligence of any
such receiver.
(c) In addition to the rights and remedies specifically provided
herein, Lender shall, upon the occurrence of an Event of
Default, have the rights and remedies of a secured party under
the Code and other applicable legislation and as otherwise
provided by applicable law.
(d) If the disposition of the Collateral fails to satisfy all of
the Obligations, the Undersigned shall be liable to pay for
any deficiency on demand.
(e) When required to do so by the Code, Lender shall give to the
Undersigned the written notice required by the Code of any
intended disposition of the Collateral by serving such notice
personally on the Undersigned or by mailing such notice by
registered mail to the last known address of the Undersigned
or by any other method authorized or permitted by the Code.
11. ACCOUNTS.
In addition to the remedies set out in paragraph 10 hereof, Lender may
collect, realize, sell or otherwise deal with the Accounts or any part thereof
in such manner, upon such terms and conditions and at such time or times after
the occurrence of an Event of Default as may seem to it advisable and without
notice to the Undersigned (except in the case of sale and then subject to
subparagraph 10(e) hereof). Lender shall not be liable or accountable for any
failure to collect, realize, sell or obtain payment of the Accounts or any part
thereof and shall not be bound to institute proceedings for the purpose of
collecting, realizing or obtaining payment of the same or for the purpose of
preserving any rights of Lender, the Undersigned or any other person, firm or
corporation in respect of the same. All moneys collected or received by the
Undersigned in respect of the Accounts shall be received as trustee for Lender
and shall be forthwith paid over to Lender. All moneys collected or received by
Lender in respect of the Accounts or other Collateral may be applied, after
deduction of the reasonable expenses of realization from the money collected and
subject to any applicable requirements of the Code, on account of such parts of
the Obligations of the Undersigned as to Lender deems best or in the discretion
of Lender may be released to the Undersigned, all without prejudice to the
liability of the Undersigned or Lender' right to hold and realize this security.
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12. CHARGES AND EXPENSES.
(a) Upon the Undersigned's failure to perform any of its duties
hereunder, Lender may, but shall not be obligated to, perform
any or all of such duties, without waiving any rights to
enforce this General Security Agreement, and the Undersigned
shall pay to Lender, forthwith upon written demand therefor,
an amount equal to the costs, fees and expenses incurred by
Lender in so doing (including, without limiting the generality
of the foregoing, costs, fees and expenses associated with
legal advice and services).
(b) Lender may charge on its own behalf and pay to others
reasonable sums for costs, fees and expenses incurred and for
services rendered (including, without limiting the generality
of the foregoing, legal advice and services) in or in
connection with seizing, repossessing, retaking, repairing,
insuring, realizing, disposing of, retaining or collecting the
Collateral or any part thereof, and such sums shall be a first
charge on the proceeds of such realization, disposition or
collection. Subject to any applicable requirements of the Code
and the provisions of paragraph 10 hereof, the proceeds of any
such disposition of any Collateral may be applied by Lender to
the payment of all such costs, fees and expenses and any
balance of such proceeds may be applied by Lender towards the
payment of the Obligations in such order of application as
Lender may from time to time determine.
(c) All of the above costs, fees and expenses and all amounts
borrowed on the security of the Collateral under paragraph 10
hereof shall bear interest at a rate equal to two percent
(2.0%) per annum above the Interest Rate (as such term is
defined in the Loan Agreement) then in effect under the Loan
Agreement and shall be Obligations under this General Security
Agreement.
13. FURTHER ASSURANCES.
The Undersigned shall from time to time forthwith on Lender's request
furnish further assurance of title to the Collateral and further security to
Lender and execute and deliver all such financing statements, further
assignments, documents and instruments, and do or make all such further acts,
matters and things as may be required by Lender with respect to the Collateral
or any part thereof or as may be required or desirable to give effect to the
purposes and provisions of this General Security Agreement, and the Undersigned
further covenants and agrees to pay all costs and expenses incurred in
connection therewith. The Undersigned hereby irrevocably constitutes and
appoints Lender the true and lawful attorney of the Undersigned, with full power
of substitution, to do, make, sign, execute and deliver on behalf of the
Undersigned all such statements, assignments, documents, instruments, acts,
matters and things, as the Undersigned has agreed by these presents to do, make,
sign, execute or deliver or as may be required by Lender to give effect to these
presents or in the exercise of the powers on Lender hereby conferred, with the
right to use the name of the Undersigned, whenever and wherever Lender may deem
it necessary or expedient to do so. The power of attorney granted herein may be
exercised in the name and on behalf of the successors or
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assigns of the Undersigned. None of the powers hereby granted shall be revoked
by the bankruptcy of the Undersigned.
14. DEALINGS BY LENDER.
Lender may grant extensions of time, additional advances, renewals,
extensions and other indulgences, take and give up securities, accept
compositions, grant releases and discharges and otherwise deal with the
Undersigned, debtors of the Undersigned, sureties and others and with the
Collateral and other securities as Lender may see fit without prejudice to the
liability of the Undersigned or Lender's rights under this General Security
Agreement.
15. GENERAL.
The Undersigned and Lender further agree that:
(a) This General Security Agreement shall constitute and be a
continuing security agreement in every respect, shall not be
considered as satisfied or discharged by any intermediate
payment of all or any part of the Obligations and shall be in
addition to and not in substitution for any other security now
or hereafter held by Lender.
(b) Nothing in this General Security Agreement shall obligate
Lender to make any loan or accommodation to the Undersigned or
to grant, continue, renew or extend the time for payment or
satisfaction of the Obligations.
(c) Any failure by Lender to exercise any right set out in this
General Security Agreement shall not constitute a waiver
thereof. No remedy for the enforcement of the rights of Lender
hereunder shall be exclusive of or dependent on any other such
remedy but any one or more of such remedies may from time to
time be exercised in whole or in part, independently or in
combination.
(d) The security interests and liens created or provided for by
this General Security Agreement are intended to attach to
Collateral existing when this General Security Agreement is
signed by the Undersigned and delivered to Lender (or in the
case of property acquired subsequent thereto, immediately upon
the Undersigned acquiring any rights in such property). The
Undersigned acknowledges that it has received value and has
(or in the case of after acquired property, will have) rights
in the Collateral. The parties do not intend to postpone the
attachment of any security interest or lien created hereby.
For greater certainty, it is declared that any and all future
loans, advances or other value which Lender may in its
discretion make or extend to or for the account of the
Undersigned shall be secured by this General Security
Agreement.
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(e) All rights of Lender hereunder shall be assignable and in any
action brought by an assignee to enforce such rights, the
Undersigned shall not assert against the assignee any claim or
defense which the Undersigned now has or may hereafter have
against Lender.
(f) This General Security Agreement shall inure to the benefit of
and be binding upon Lender and the Undersigned, their
successors and assigns.
(g) If the Collateral or any part thereof is being sold or
delivered to the Undersigned by Lender, title and ownership of
each part of the Collateral shall not pass to the Undersigned
but shall be and remain in Lender until all Obligations in
respect of each such part are paid or performed in full.
(h) If more than one person executes this General Security
Agreement, then obligations hereunder shall be joint and
several and the Obligations shall include those of all or any
one or more of them.
(i) This General Security Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed
to be an original and such counterparts together shall
constitute one and the same instrument. Any signature
delivered by a party by facsimile transmission shall be deemed
to be an original signature hereto.
(j) In this General Security Agreement words importing number
shall include the singular and the plural, words importing
gender shall include all genders and the word "person" shall
include all firms, corporations, trusts, partnerships and
other forms of association.
(k) The headings of the paragraphs hereof are inserted for
convenience of reference only and shall not affect the
interpretation or construction of this General Security
Agreement.
(l) Time shall be of the essence of this General Security
Agreement and of each and every part hereof.
(m) This General Security Agreement shall be deemed effective upon
Lender's acceptance thereof. This General Security Agreement
will be governed in all respects by the laws of the State of
Georgia.
(n) No modification of or amendment to this General Security
Agreement shall be valid or binding unless set forth in
writing and duly executed by the Undersigned and Lender and no
waiver of any breach of any term or provision of this General
Security Agreement shall be effective or binding unless made
in writing and signed by the
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party purporting to give the same and, unless otherwise
provided, shall be limited to the specific breach waived.
(o) Any provision of this General Security Agreement, as amended
from time to time, which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidation of the remaining provisions hereof or affecting
the validity or enforceability of such provision in any other
jurisdiction.
16. NOTICES.
Except as otherwise provided in this General Security Agreement, any
notice, demand, request, consent or approval which is required or permitted to
be given or made by one party to any other pursuant to any provision of this
General Security Agreement or as otherwise required by applicable law shall be
given or made in writing and shall be sent by certified or registered mail,
return receipt requested, by personal delivery against receipt, by overnight
courier or by facsimile and, unless expressly provided herein, have been validly
served, given or delivered immediately when delivered against receipt one
business day after deposit in the mail, postage prepaid, or with an overnight
courier or in the case of facsimile notice, when sent, addressed as follows:
If to the Undersigned: Hayes Corporation
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
Attention: President
Telecopy: (301) 921-9149
If to Lender: The CIT Group/Credit Finance, Inc.
1211 Avenue of the Americas
21st Floor
New York, New York 10036
Attention: Marcia L. Karetsky, Esq.
Legal Department
Telecopy: (212) 408-6068
or such other address as each party may designated for itself by notice given in
accordance with this paragraph.
17. COPY OF GENERAL SECURITY AGREEMENT.
The Undersigned hereby acknowledges receipt of a copy of this General
Security Agreement. The Undersigned expressly waives the right to receive a copy
of any financing statement or financing change statement which may be registered
by Lender in connection with this General Security Agreement or any verification
statement issued with respect thereto where such waiver is not otherwise
prohibited by law.
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IN WITNESS WHEREOF, the Undersigned has executed this General Security
Agreement under seal, this 2nd day of January, 1998.
ATTEST: HAYES CORPORATION, FORMERLY KNOWN AS
ACCESS BEYOND, INC.
/s/ By: /s/ Ronald Howard
- -------------------------- -------------------------
Secretary
Title: CEO
[CORPORATE SEAL] -----------------------
Accepted and Agreed to:
THE CIT GROUP/CREDIT FINANCE, INC.
By: /s/ Camye Sarrett
--------------------------
Title: AVP
-----------------------
Date: January 2, 1998
------------------------
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SCHEDULE A
(SUBPARAGRAPHS 2(E), 3(D) AND 3(E))
LEGAL DESCRIPTION
ALL LOCATIONS OF COLLATERAL
Location of Chief Executive Office:
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
Locations of Records relating to Collateral
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
Locations of Collateral
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20878
<PAGE> 1
EXHIBIT 10.74
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the
11th day of April, 1997, by and among HAYES MICROCOMPUTER PRODUCTS, INC., a
Georgia corporation ("Hayes"), CARDINAL TECHNOLOGIES, INC., a Pennsylvania
corporation (the "Company"), VULCAN VENTURES INCORPORATED, a Washington
corporation ("Vulcan"), and the direct subsidiary of Hayes, HAYES MERGER SUB.,
INC., a Pennsylvania corporation ("Merger Sub").
BACKGROUND
A. On March 12, 1997, Hayes, the Company and Vulcan entered into
that certain letter of intent for the purpose of proceeding with an all cash
merger between Merger Sub and the Company (the "Letter of Intent").
B. This Agreement and Plan of Merger constitutes the Definitive
Agreement as described in the Letter of Intent.
AGREEMENT
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereby agree as follows:
1. Plan of Merger.
1.1 Terms and Conditions of Merger.
(a) Merger. Prior to the date hereof, Hayes has
formed Merger Sub, a directly owned subsidiary formed under the Pennsylvania
Business Corporation Law (the "Pennsylvania BCL") for the purpose of
accomplishing the merger described herein. Upon the terms and subject to the
conditions set forth herein and in accordance with the Pennsylvania BCL, at the
Effective Time, Merger Sub shall be merged with and into the Company (the
"Merger"), and the separate existence of Merger Sub shall cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"). At the Closing Merger Sub and the Company
shall cause Articles of Merger in the form attached hereto as Exhibit "1.1(a)"
(the "Articles of Merger"), together with all other required certifications,
filings and instruments, to be duly filed with the Secretary of State of the
Commonwealth of Pennsylvania and cause all fees associated therewith to be paid.
The Merger
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shall be effective at the time of such filings with the said Secretary of State
(the "Effective Time").
(b) Conversion of Common Shares. At the
Effective Time, each outstanding share of capital stock of the Company (the
"Company Shares"), other than Company Shares held in the treasury of the Company
which shall be canceled and retired, shall be converted into and evidence the
right to receive an amount per Company Share equal to Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "Merger Consideration") divided by the
aggregate number of Company Shares outstanding immediately prior to the
Effective Time (the "Merger Consideration Per Share"). At the Effective Time,
each outstanding common share, par value $.01 per share, of Merger Sub shall be
converted into one common share, par value $.01 per share, of the Surviving
Corporation.
(c) Stock Options. At the Effective Time, all
unexercised options to purchase Company Shares shall be converted into the right
to receive the Merger Consideration Per Share upon proper exercise of such
option.
(d) Dissenting Shares. Notwithstanding anything
in this Agreement to the contrary, Company Shares outstanding immediately prior
to the Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing, and who has demanded to be paid the fair
value of such Company Shares in accordance with Chapter 15, Subchapter D of the
Pennsylvania BCL ("Dissenting Shares"), shall not be converted into the right to
receive the Merger Consideration , unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal but shall be canceled and
converted into the right, if and to the extent perfected in accordance with
applicable law, to receive the "fair value" thereof as determined in accordance
with the Pennsylvania BCL. If, after the Effective Time, such holder fails to
perfect or withdraws or loses his right to appraisal, such Company Shares shall
be treated as if they had been converted as of the Effective Time into the right
to receive the Merger Consideration, without interest thereon, upon surrender of
the certificate or certificates formerly representing such Company Shares less
any required withholding of taxes. The Company shall give Hayes and Merger Sub
prompt notice of all demands received by the Company for appraisal of Company
Shares prior to the Effective Time and the Surviving Corporation shall give
Vulcan prompt notice of all demands received by the Company for appraisal of
Company Shares after the Effective Time. Vulcan shall have the right and
obligation to direct all negotiations and proceedings with respect to such
demands.
(e) Articles of Incorporation; Bylaws; Officers
and Directors. The Articles of Incorporation and Bylaws of the Company shall be
amended and restated as of the Effective Time so that the Articles of
Incorporation and Bylaws of Merger Sub, copies of which are attached hereto as
Exhibit "1.1(e)," shall be the Amended and Restated Articles of Incorporation
and Bylaws of the Surviving Corporation following the Merger. At the Effective
Time, the Board of Directors of the Company shall no longer be the Board of
Directors of the Surviving Corporation. At the Effective Time, the officers of
the Company shall no longer be the officers of the Surviving Corporation. The
Board of Directors and the officers of Merger Sub
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shall become, at the Effective Time, the Board of Directors and officers of the
Surviving Corporation.
(f) Formation and Capitalization of Merger Sub.
Prior to the Effective Time, Hayes shall cause Merger Sub to take all such
corporate and other actions necessary to consummate the transactions
contemplated by this Agreement. Hayes agrees to vote its Merger Sub Stock in
favor of the Merger. Subject to the terms and conditions of this Agreement,
Hayes agrees to capitalize Merger Sub in at least the amount of Two Million Five
Hundred Thousand and No/Hundredths Dollars ($2,500,000.00).
(g) Shareholder Approval. The Company has or
shall prior to Closing take such actions as are necessary in accordance with
applicable law to obtain the approval of its shareholders to this Agreement, the
Merger and the consummation of the transactions contemplated hereby.
(h) Payment for Company Shares . Promptly after
the Effective Time, the Surviving Corporation shall mail to each record holder,
as of the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Company Shares (the
"Certificates"), a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Surviving Corporation) and
instructions for effecting the surrender of the Certificates for payment of the
Merger Consideration. Upon surrender to the Surviving Corporation of a
Certificate (or an affidavit as to its loss with an appropriate indemnity),
together with a duly executed letter of transmittal and any other required
documents, the holder of such Certificate shall receive in exchange therefor (as
promptly as practicable) the Merger Consideration Per Share, without any
interest thereon, less any required withholding of taxes, and such Certificate
shall forthwith be canceled. If payment is to be made to a person other than the
person in whose name a Certificate so surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer, that the signatures on the
Certificate or any related stock power shall be properly guaranteed and that the
person requesting such payment shall either pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate so surrendered or establish to the satisfaction of Vulcan and
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this 1.1(h), each
Certificate (other than (i) Certificates representing Company Shares held in the
Company's treasury which shall be canceled at the Effective Time, or (ii)
Certificates representing Dissenting Shares, which shall represent for all
purposes only the right, if perfected, to receive fair value as provided in
Section 1.1(d)) shall represent for all purposes only the right to receive the
Merger Consideration Per Share. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the
Company Shares which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
Per Share in accordance with procedures set forth in this Section 1.1(h). From
and after the Effective Time, the holders of Certificates evidencing ownership
of Company Shares outstanding immediately prior to the Effective Time shall
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<PAGE> 4
cease to have any rights with respect to such Company Shares except as otherwise
provided herein or by applicable law. Such holders shall have no rights, after
the Effective Time, with respect to such Company Shares except to surrender such
Certificates in exchange for cash pursuant to this Agreement or to perfect any
rights to receive fair value as a holder of Dissenting Shares that such holders
may have pursuant to the Pennsylvania BCL. Any portion of the Merger
Consideration that remains unclaimed by the shareholders of the Company for one
year after the Effective Time shall be paid to and shall become the property of
Vulcan. Notwithstanding anything to the contrary in this Section 1.1, neither
Vulcan nor the Surviving Corporation shall be liable to a holder of a
Certificate formerly representing Company Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.2 Effect of Merger; Tax Status of Merger. The Merger
shall have the effects set forth in Section 1929 of the Pennsylvania BCL.
Without limiting the generality of the foregoing, immediately after the Merger
the Surviving Corporation shall possess all of the rights, privileges, powers
and franchises of each of the Company and Merger Sub, and all property and other
interests due or belonging to the Company and Merger Sub shall be vested in the
Surviving Corporation. It is the intent of the parties hereto that the Merger
will be consummated in accordance with the applicable provisions of the
Pennsylvania BCL. It shall not be a condition to the consummation of the Merger
that any party shall have received a ruling of the Internal Revenue Service or
an opinion of tax counsel as to the federal income tax consequences of the
Merger.
1.3 Closing. The consummation of the Merger as provided
herein shall take place at the offices of Womble Carlyle Sandridge & Rice, PLLC,
Suite 700, 1275 Peachtree Street, N.E., Atlanta, Georgia 30309, on the next
business day following the fulfillment of the conditions to Closing set forth in
Section 5 and Section 6 hereof, but not later than April 16, 1997, at 10:00 A.M.
EST, or at such other time and place as the Company, Hayes and Vulcan mutually
agree upon (the time, date and place are hereby designated as the "Closing"). At
the Closing, each of the following transactions shall occur:
(a) The Company shall deliver to Hayes the
following:
(i) evidence of the filing of the
Articles of Merger with the Secretary of State of the Commonwealth of
Pennsylvania;
(ii) certificate of good standing for the
Company, as of the most recent practicable date, from the Secretary of State of
the Commonwealth of Pennsylvania;
(iii) executed consents and waivers and
copies of all authorizations required to close the Merger as set forth in this
Agreement and the Schedules hereto;
(iv) the opinions of counsel contemplated
by Section 6.8 hereof;
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(v) a certificate of the Secretary or
an Assistant Secretary or other officer of the Company dated the date of Closing
certifying the names of the Directors of the Company and the names of the
officers of the Company authorized to sign this Agreement, and any other
documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the true
signatures of such officers;
(vi) a copy of the resolutions of the
Board of Directors and the shareholders of the Company evidencing the approval
of this Agreement, the Merger, and the other matters contemplated hereby,
certified by the Secretary or an Assistant Secretary of the Company to be true,
complete and correct as of the Closing date;
(vii) the compliance certificate required
by Section 6.3 hereof; and
(viii) the documents required to be
delivered by the Company pursuant to Section 6.6 hereof; and
(ix) the Resignations, effective at the
Effective Time, of all Officers and Directors of the Company, and the releases
of the Company from each of Frank Leonardi, Jeff Murphy and Kevin Doren.
(b) Hayes shall deliver to Vulcan the following:
(i) a copy of the resolutions of the
Board of Directors and shareholders, to the extent required of Merger Sub,
evidencing the approval of this Agreement, the Merger, and the other matters
contemplated hereby, certified by the Secretary or an Assistant Secretary of
Merger Sub, to be true, complete and correct as of the date of Closing;
(ii) a copy of the resolutions of the
Board of Directors and shareholders, to the extent required of Hayes, evidencing
the approval of this Agreement, the Merger, and the other matters contemplated
hereby, certified by the Secretary or an Assistant Secretary of Hayes, to be
true, complete and correct as of the date of Closing;
(iii) the opinion of counsel to Hayes
required by Section 5.6(a) hereof;
(iv) certificates of the Secretary or an
Assistant Secretary or other officer of Hayes and Merger Sub, dated the Closing,
certifying the names of the officers of Hayes and Merger Sub authorized to sign
this Agreement and the other documents, instruments or certificates to be
delivered pursuant to this Agreement by Hayes and/or Merger Sub, or any of
its/their officers, together with the true signatures of such officers;
(v) the documents required to be
delivered by Hayes pursuant to by Section 5.7 hereof;
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(vi) executed consents and waivers and
copies of all authorizations required to close the Merger, as set forth in this
Agreement and the Schedules hereto, and
(vii) the compliance certificate required
by Section 5.3.
(c) Vulcan shall deliver to Hayes the following:
(i) a copy of the resolutions of the
Board of Directors and Shareholders, to the extent required of Vulcan,
evidencing the approval of this Agreement, the Merger and the other matters
contemplated hereby, certified by the Secretary or an Assistant Secretary of
Vulcan, to be true, complete and correct as of the date of Closing;
(ii) the Certificates of the Secretary or
an Assistant Secretary or other officer of Vulcan, dated the Closing Date,
certifying the names of the officers of Vulcan authorized to sign this Agreement
and the other documents, instruments or certificates to be delivered pursuant to
this Agreement by Vulcan, or any of its officers, together with the true
signatures of such officers;
(iii) the documents required to be delivered
by Vulcan pursuant to Section 5.6 hereof;
(iv) the compliance certificate required by
Section 6.3 hereof; and
(v) the opinion of counsel required by
Section 6.8 hereof.
(d) Vulcan shall deliver to the Company the
following:
(i) certificates representing all of the
Company Shares owned by it;
(ii) the documents required to be delivered
by it pursuant to Section 6.6 hereof
(e) Other Documents. Each of the parties hereto
shall deliver to the appropriate other party all of the other documents required
to be delivered by this Agreement and the Transactions described herein.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Hayes, except as set forth on the Schedules of
Exception or in other Schedules contained in this Agreement, that each of the
following statements is true and correct on the date hereof and will be true and
correct immediately prior to the Effective Time of the Closing. For purposes of
the following, "best knowledge" shall be deemed to mean the knowledge of any
member of the Board of Directors of the Company, the interim CEO or the
Controller, after due
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inquiry as to the matters contained herein. Also, for purposes of this Section
2, all representations and warranties relating to material adverse effects on
the Company shall be deemed to apply to the Company and its subsidiaries, taken
as a whole.
2.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania (with respect to the Company)
and the laws of Germany and the laws of Japan, respectively, for each of the
Company's subsidiaries, and each has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify might result, individually or in
the aggregate, in a material adverse change in the assets, condition or
prospects of the Company, financial or otherwise. A true, correct and complete
copy of the Articles of Incorporation as currently in effect and the Bylaws as
currently in effect of the Company are attached hereto as Exhibit "2.1".
2.2 Capitalization.
(a) Issued and Outstanding Stock.
(i) The entire authorized capital stock
of the Company currently consists, and immediately prior to the Merger will
consist, of 125,000,000 shares of Common Stock of which 46,425,069 shares are
issued and outstanding as of the date hereof and 63,091,735 will be issued and
outstanding after the conversion of $10,000,000 debt and accrued interest
outstanding to Vulcan immediately before the Effective Time, in the manner
disclosed in the Schedule of Exceptions (less any shares of Common Stock as to
which the holder thereof has perfected its right to obtain the fair value
thereof in connection with the Red Wing Transaction and plus any shares of
Common Stock issued upon the proper exercise after the date hereof but prior to
the Effective Time, of existing employee stock options). Immediately prior to
the Effective Time, there are stock options issued to employees and former
employees of the Company entitling such holders to purchase an aggregate of
8,073,094 shares of Common Stock upon proper exercise thereof and payment of the
exercise price of $.51 per share. All such options are nontransferable and
expire 90 days from the termination of the holder's employment with the Company,
and at the Effective Time will represent only the right to receive the Merger
Consideration Per Share upon proper exercise thereof.
(ii) At the Effective Time, as a result of
the Merger, the entire authorized capital stock of the Surviving Corporation
shall consist of 1,000 Common Shares, of which 100 Common Shares shall be issued
and outstanding to Hayes.
(b) Agreements for Purchase of Securities.
Except for the rights granted pursuant to this Agreement, prior to and as of the
Effective Time there will not be any outstanding options, warrants, rights
(including conversion rights, preemptive rights or rights of first offer) or
agreements for the purchase or acquisition from the Company of any shares of its
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<PAGE> 8
capital stock or any obligation of the Company to pay dividends on such shares
or to purchase, redeem or retire such shares.
(c) The issued and outstanding shares of capital
stock of the Company are duly and validly issued, fully paid and nonassessable,
and (i) the shares issued to Vulcan, CSK Venture Capital Co., Ltd (for CSK-1(A)
Investment Fund, CSK-1(B) Investment Fund, and CSK-2 Investment Fund)
(collectively, "CSK") and UMAX Data Systems, Inc. ("UMAX"), and (ii) to the best
knowledge of the Company, all other such shares of such capital stock and other
securities of the Company have been issued in compliance with the registration
and prospectus delivery requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or in compliance with applicable exemptions therefrom,
the registration and qualification requirements of all applicable securities
laws of states of the United States and all other provisions of applicable
securities laws of the states of the United States, including, without
limitation, anti-fraud provisions.
(d) The Shareholder Ledger of the Company
includes a true, correct and complete list, both as of the date hereof and
immediately prior to the Merger, of all issued and outstanding shares of the
capital stock of the Company, together with a true, correct and complete list of
the shareholders.
2.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, partnership or other business entity, except for the Japanese
subsidiary and the German subsidiary as described on the Schedule of Exceptions.
2.4 Authorization. The Company has the capacity and
authority to execute and deliver this Agreement and the other documents,
instruments and agreements to be entered into pursuant hereto and thereto by it,
to perform hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby without the necessity of any act or consent of
any other person whomsoever. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement and the other agreements, documents and
instruments to be entered into by the Company pursuant hereto and thereto has
been taken or will be taken on or prior to the Closing, and this Agreement and
all other agreements made and entered into by the Company pursuant to this
Agreement constitute valid and legally binding obligations of the Company
enforceable in accordance with each of their terms, except as affected by public
policy, equitable principles or the exercise of judicial discretion.
2.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of the Company is required to be obtained in
connection with the Company's valid execution, delivery, or performance of this
Agreement, except as required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act").
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2.6 Litigation. There is no action, suit, proceeding,
claim, arbitration, audit or investigation (an "Action") pending or to the best
knowledge of the Company currently threatened against the Company, its
properties or assets or, to the best knowledge of the Company, against any
officer, director, employee, consultant, independent contractor, agency employee
or other agent of the Company in connection with such individual's relationship
with, or actions taken on behalf of, the Company which questions the validity of
this Agreement or the right of the Company to enter into this Agreement, or to
consummate the transactions contemplated hereby, or which might result, either
individually or in the aggregate, in any adverse change in the assets,
condition, or prospects of the Company taken as a whole, financial or otherwise,
or any change in the current equity ownership of the Company. The Company is not
a party or subject to the provisions of any material settlement agreement,
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no Action by the Company currently pending or which
the Company intends to initiate.
2.7 Patents and Trademarks. To the best knowledge of the
Company, the Company's business as now conducted does not conflict with or
infringe upon anyone's patents, copyrights, trademarks, service marks, mask
works, trade secrets, or other proprietary rights in a manner which would have a
material adverse effect on the assets, condition or prospects of the Company,
financial or otherwise. To the best knowledge of the Company, the Company owns,
or has the right to use, all patents, trademarks, service marks, copyrights,
mask works, trade secrets or other proprietary rights necessary for the conduct
of its business as it is presently conducted without infringing on any patents,
trademarks or service marks, copyrights, mask works, trade secrets or other
proprietary rights of others. The Company has not received any communications
alleging that the Company (or any of its respective employees or consultants)
has violated or infringed any patents, trademarks, service marks, copyrights,
mask works, trade secrets or other proprietary rights of any other person or
entity. A complete list of all the Company's patents, trademarks, service marks,
copyrights, and mask works, including applications for the foregoing, is
attached as Schedule 2.7 hereto. To the best knowledge of the Company, no third
party has any ownership right, title, interest, claim in or lien on any of the
Company's patents, trademarks, service marks, copyrights, mask works, trade
secrets or other proprietary rights. The Company is not obligated to pay any
royalties or other payments to third parties with respect to the license or use
of any patents, trademarks, service marks, copyrights, mask works, trade secrets
or other proprietary rights, except for Royalty Agreements disclosed pursuant to
Section 2.9.
2.8 Compliance with Law. The execution and delivery of
this Agreement does not, and the consummation of the Merger and the other
transactions contemplated hereby will not, violate or constitute an occurrence
of default under any provision of the Articles of Incorporation or Bylaws of the
Company, or any judgment, order, writ or decree to which the Company is a party
or by which it is bound or its assets are affected, or violate in any material
respect foreign, domestic, federal, state or local statute, ordinance, rule or
regulation applicable to the Company, its business and assets. The Company is
presently conducting its business so as to comply with all applicable foreign,
domestic, federal, state and local statutes, ordinances, rules and regulations
of any governmental authority, the violation of which would have a material
adverse effect on
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the assets, condition or prospects of the Company, financial or otherwise. The
Company is presently conducting its business so as to comply in all respects
with all judgments, orders, writs and decrees to which it is a party or its
assets or businesses are affected.
2.9 Agreements; Action.
(a) Except as provided in Schedule 2.9, there
are no agreements, understandings, instruments or contracts to which the Company
is a party or by which it is bound which involve (i) the leasing or subleasing
of any real property or material item of personal property (which shall exclude
leases of personal property having payment obligations of less than $100,000 per
year), or (ii) the employment of any individuals by the Company, or (iii)
license of any patent, trademark, service mark, copyright, mask work, trade
secret or other proprietary right, or (iv) a joint venture or partnership,
acquisition or disposition of a material asset, or the purchase or sale of
securities, or (v) the settlement of any Action by or against the Company
(collectively, the "Material Agreements"). The Company is not in breach of any
Material Agreement in any material respect. To the Company's best knowledge no
other party thereto is in breach of any provision of or in default under any
Material Agreement to which the Company is a party, which breach or default
would have an adverse effect on the assets, condition or prospects of the
Company, financial or otherwise. Each Material Agreement is in full force and
effect and, to the best knowledge of the Company, no other party to such
Material Agreement is in default thereunder, and there is no basis for
termination thereunder. Each of the Material Agreements is, to the knowledge of
the Company, enforceable by the Company, and each of the Material Agreements is
enforceable against the Company in accordance with its terms, except as affected
by equitable principles or the exercise of judicial discretion. The execution
and delivery of this Agreement by the Company does not, and the consummation of
the Merger and the other transactions contemplated hereby and thereby will not,
violate or constitute an occurrence of default under any Material Agreement ,
which violation or default would have a material adverse effect on the assets,
condition or prospects of the Company, financial or otherwise.
(b) The Company (i) is not a party to any
contract with any agency or instrumentality of the U.S. government (a
"Government Agency") which has been classified as to confidentiality by such
Government Agency; (ii) does not conduct research or development activities for
any Government Agency; and (iii) does not sell any products to any Government
Agency for which there is no readily available substitute which would perform
substantially the same function.
2.10 Title to Property and Assets. Schedule 2.10 contains
a true, correct and complete list of all real property and a list of all
material items of personal property owned or leased by the Company. The Company
owns its property and assets free and clear of all mortgages, liens, claims,
loans and encumbrances, except such encumbrances and liens which arise in the
ordinary course of business (excluding liens for borrowed money, or that may
arise by reason of violations of law or breach of contract), and do not
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the
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Company is in compliance with such leases and, to the best knowledge of the
Company, holds a valid leasehold interest free of any liens, claims or
encumbrances, which liens, claims or encumbrances would be materially adverse to
the Company.
2.11 Financial Statements.
(a) The Company has delivered to Hayes its
unaudited financial statements (balance sheet and profit and loss statement) at
and for the calendar year ended December 31, 1996 (the "12/31 Financial
Statements"), and its unaudited balance sheet for the period ended February 21,
1997 (the "2/21 Balance Sheet"). The 12/31 Financial Statements and the 2/21
Balance Sheet are true, complete and correct in all material respects and have
been prepared consistently with prior periods. The 12/31 Financial Statements
and the 2/21 Balance Sheet fairly present in all material respects the financial
condition, assets and liabilities and (for the 12/31 Financial Statements) the
operating results of the Company taken as a whole as of the dates, and for the
periods, indicated therein.
(b) In the context of the foregoing, the Company
confirms that the inventory of the Company ("Inventory") in excess of that
amount necessary to meet the Company's Manufacturing Resource Plan in effect at
February 1997 ("MRP") was fully reserved in the 2/21 Balance Sheet.
(c) In addition, the Company confirms that all
open, non-cancelable Purchase Orders of the Company at the date of the 2/21
Balance Sheet are for Inventory required to meet the MRP, or for resale at cost
to Red Wing Corporation.
2.12 Absence of Change or Event. Except for the matters
described in Section 2.26, since February 21, 1997, the Company has conducted
its business only in the ordinary course and has not:
(a) when considered as a whole, incurred any
obligation or liability, absolute, accrued, contingent or otherwise, whether due
or to become due, except liabilities or obligations incurred in the ordinary
course of business and consistent with prior practice or liabilities arising as
a matter of law as a consequence at the Company's insolvent financial condition;
(b) mortgaged, pledged or subjected to lien,
restriction or any other encumbrance any of the material property or assets,
tangible or intangible, of the Company;
(c) (i) sold, transferred, leased to others or
otherwise disposed of any of its material assets (or committed to do any of the
foregoing), except for the Red Wing Transaction, as defined in Section 2.28
including the payment of any loans owed to any affiliate, except for inventory
sold to customers or returned to vendors and payments to any non-affiliates on
account of accounts payable or scheduled payments in respect of indebtedness for
money borrowed disclosed in the 12/31 Financial Statements or the 2/21 Balance
Sheet, in each case in
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the ordinary course of business and consistent with prior practice, or (ii)
canceled, waived, released or otherwise compromised any debt or claim or any
right of significant value;
(d) suffered any damage, destruction or loss
(whether or not covered by insurance) which has had or could have a material
adverse effect on the assets, condition or prospects of the Company, financial
or otherwise;
(e) made or committed to make any capital
expenditures or capital additions or betterments to or for the Company;
(f) encountered any labor union organizing
activity or had any actual or threatened employee strikes, work stoppages,
slow-downs or lock-outs;
(g) instituted any litigation, action or
proceeding before any court, governmental body or arbitration tribunal relating
to it or its property;
(h) declared or paid any dividend or made or
agreed to make any other payment or distribution in respect of its capital
stock, or directly or indirectly redeemed, purchased or otherwise acquired any
of its capital stock or agreed to do any of the foregoing;
(i) increased or agreed to increase the
compensation of any officer, director, employee, consultant, independent
contractor, agency employee or other agent of the Company, directly or
indirectly, including by means of any bonus, loan, retention plan, pension plan,
profit sharing, deferred compensation, savings, insurance, retirement,
incentive, severance, stock purchase or stock option plan or any other employee
benefit plan, compensation or remuneration plan, program or arrangement, except
with respect to ordinary or semi-annual increases to base pay consistent with
past practices;
(j) increased promotional or advertising
expenditures except in the ordinary course of business consistent with prior
practice or otherwise changed its policies or practices with respect thereto;
(k) made or changed any election concerning
taxes or tax returns, changed an annual accounting period, adopted or changed
any accounting method, filed any amended return, entered into any closing
agreement with respect to taxes, settled any tax claim or assessment or
surrendered any right to claim a refund of taxes or obtained or entered into any
tax ruling, agreement, contract, understanding, arrangement or plan; or
(l) made any loans or advances to any person or
entity.
2.13 Proprietary Information. To the best knowledge of the
Company, The Company has not done anything to compromise the secrecy,
confidentiality or value of any of its trade secrets, know-how, inventions,
prototypes, designs, processes or technical data required to conduct its
business as now conducted. All of the officers, directors and employees of the
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Company have executed a non-disclosure/invention assignment agreements in the
forms attached to Schedule 2.13. To the best knowledge of the Company, no
officer, director, employee or consultant of the Company in connection with such
employee's employment with the Company, has violated the terms of any agreement
with a previous employer. To the best knowledge of the Company, none of the
directors, officers, employees or consultants (including without limitation
former directors, officers, employees and consultants) of the Company has taken,
removed or made copies of any proprietary documentation, manuals, products,
materials, or any other tangible item from his or her previous employer relating
to the business as conducted or proposed to be conducted of such previous
employer.
2.14 Permits. To the best knowledge of the Company, the
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could materially and adversely affect the business, properties,
prospects, or financial condition of the Company. To the knowledge of the
Company, The Company is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority. To the knowledge of
the Company, neither the execution nor delivery of this Agreement, nor the
consummation of the transactions contemplated hereby and thereby, will result in
the termination of any material franchise, permit, license or right held by the
Company, and all such franchises, permits, licenses and rights will remain
vested in and inure to the benefit of the Company after the consummation of the
transactions contemplated by this Agreement.
2.15 Brokers or Finders. The Company has not engaged any
broker, investment banker (other than Howard Lawson & Co. who has been engaged
for $35,000 to provide a fairness opinion, which amount will be paid by the
Company prior to Closing) or finder in connection with the transactions
contemplated by this Agreement.
2.16 Minute Books. The minute books of the Company and
each subsidiary as provided to Hayes contain a complete record of all meetings,
consents and actions of the Board of Directors and the shareholders of the
Company since the time of its incorporation, accurately reflecting all such
meetings, consents and actions in all material respects. The Company has made
available to Hayes all of the corporate records in its possession for the
Company's German and Japanese subsidiaries.
2.17 Tax. As used in this Agreement, "taxes" or "tax
liability" means all taxes (including but not limited to income taxes, excise
taxes, sales taxes, property taxes, occupational or employment taxes, gross
receipts taxes or any other taxes), including applicable interest additions to
tax and penalties.
(a) The Company has filed all required U.S.
federal tax returns and, to the best knowledge of the Company, all other tax
returns and has paid all U.S. federal taxes owed by the Company (whether or not
shown on any tax return) with respect to any period ending on or before the date
of Closing, except for taxes accrued but not yet payable. Such U.S. federal
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<PAGE> 14
returns are correct and complete in all material respects and, to the best
knowledge of the Company, all other tax returns are complete and correct in all
material respects.
(b) The Company has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
(c) The Company has adequately accrued amounts
with respect to the payment of all taxes that are not yet due and payable,
except that the Company has not accrued a tax liability in respect of the Red
Wing Transaction.
(d) The Company has not been a member of an
affiliated group filing a consolidated federal income tax return, or any
consolidated or combined or unitary group filing a state tax return.
(e) The Company has no liability for taxes (i)
as a transferee or successor, or (ii) imposed by contract which would not be
otherwise paid by the Company.
(f) There are no unpaid foreign, federal, state
or local taxes assessed or asserted in writing in respect of any tax returns
filed by the Company or claimed in writing to be due by the appropriate taxing
authority, except those, if any, currently being contested in good faith which
are disclosed on Schedule 2.17. The Company is not being audited by the Internal
Revenue Service (the "IRS") or any other taxing authority. No request by the
Company for ruling or determination letters relating to foreign, federal, state
or local taxes is pending with any taxing authority. The Company has not agreed
to or is required to make any adjustment pursuant to Section 481(a) of the Code,
by reason of a change in accounting method initiated by it or required by law,
and the Company has no knowledge that the IRS has proposed or purported to
require any such adjustment or change in accounting method.
2.18 Environmental Matters.
(a) To the best knowledge of the Company, the
Company has complied in all respects with and is in compliance with all foreign,
federal, state and local laws, statutes, rules, regulations, ordinances, permits
and licenses relating to the protection of the environment ("Environmental
Laws") applicable to its business, facilities and properties, and the Company
has obtained all environmental licenses and permits required for its business
and operations, a list of which is contained in Schedule 2.18, and all of which
are valid and in full force and effect.
(b) The Company has not received any notice of,
or to the best knowledge of the Company, is subject to any claim or demand from
any person or governmental body concerning any emission, discharge, spill, leak,
release, threatened release, event, condition, circumstance, activity, practice
or incident of or relating to Hazardous Materials (as hereinafter defined) that
(i) may interfere with or prevent compliance or continued compliance by the
Company with any Environmental Law, (ii) may give rise to or result in any
liability of the
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Company to any person or governmental body for damage or injury to natural
resources, wildlife, human health or the environment, or (iii) could reasonably
be expected to result in the Company incurring any expense, cost, loss or
liability.
(c) To the best knowledge of the Company, it is
not, as a result of the operation or condition of its business or assets,
subject to any (i) contingent liability in connection with any release or
threatened release of Hazardous Materials (as hereafter defined) into the
environment whether on or off any property or facility now or previously owned,
leased or used by the Company (collectively, the "Company Properties") or (ii)
removal or remediation requirements under any Environmental Law, or any
reporting requirements related thereto.
(d) The Company has not been notified that it is
potentially liable or has received any requests for information or other
correspondence concerning any of the Company Properties or any other site or
facility, and is not otherwise aware that they are considered potentially liable
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or any similar state law.
(e) No use, storage, handling, disposal,
release, burial or placement of hazardous or toxic substances, wastes,
pollutants, or contaminants, or petroleum, gas products, biomedical waste or
asbestos-containing materials (as any of such terms may be defined under
federal, state or local law) (hereinafter collectively referred to as "Hazardous
Materials") by the Company has occurred, except in accordance with law, on, in,
at, or about the Company Properties .
(f) To the best knowledge of the Company, there
has been no disposal, release, burial or placement of Hazardous Materials on any
property which (i) is currently owned or upon which the Company currently
conducts activities or operations; or (ii) was owned by the Company, or upon
which the Company or any of its predecessors previously conducted activities or
operations which may result or has resulted in contamination of, or beneath, any
of the Company Properties.
(g) All of the above ground and underground
storage tanks located on Company owned properties have been identified in
Schedule 2.18(g).
(h) No lien has been asserted on any Company
owned properties or, to the knowledge of the Company, any other Company Property
under Environmental Laws.
(i) Except as provided in Schedule 2.18(i), no
investigation or audit has been conducted by the Company or, to the best
knowledge of the Company, by any other person as to the environmental matters at
any of the Company Properties.
2.19 Insurance. The insurance policies held by the Company
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the date of the Closing that are due and payable
have been or will be paid, and no notice of cancellation
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or termination has been received with respect to any such policy. Such policies
are sufficient for compliance with all requirements of law and all agreements to
which the Company is a party.
2.20 Affiliate Interests.
(a) Except for employment relationships,
Schedule 2.20(a) sets forth all amounts in excess of US $10,000 in the aggregate
paid (or deemed for accounting purposes to have been paid) and services provided
by the Company, or received by the Company from, any affiliate of the Company,
or any shareholder, officer or director of the Company during the last fiscal
year for products or services (including any charge for administrative,
purchasing, financial or other services) and all such amounts currently owed by
the Company to, or to the Company by, any affiliate of the Company, or any
shareholder, officer or director of the Company.
(b) Each contract, agreement or arrangement
between the Company, on the one hand, and any affiliate of the Company or any
shareholder, officer or director of the Company, on the other hand ("Affiliate
Agreements"), is described in Schedule 2.20(b), except for employment
relationships. Except as disclosed in Schedule 2.20(b), each of the transactions
described in Schedule 2.20(b) and each of the Affiliate Agreements was entered
into in the ordinary course of business and on commercially reasonable terms and
conditions.
(c) Except as set forth in Schedule 2.20(c), no
shareholder, officer or director of the Company has any interest in any
property, real or personal, tangible or intangible, including without
limitation, inventions, patents, trademarks, service marks or trade names, used
in or pertaining to the business of the Company.
2.21 Absence of Questionable Payments. Neither the Company
nor, to the best knowledge of the Company, any director, officer, agent,
employee or other person acting on behalf of the Company, has used any corporate
or other funds for unlawful contributions, payments, gifts, or entertainment, or
made any unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Section 30A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Neither the Company nor, to the best knowledge of
the Company, any current director, officer, agent, employee or other person
acting on behalf of the Company, has accepted or received any unlawful
contributions, payments, gifts, or expenditures.
2.22 Products.
(a) Schedule 2.22 sets forth all claims asserted
or, to the best knowledge of the Company, threatened at any time during the past
two (2) years against the Company in respect of personal injury, wrongful death
or property damage (excluding claims of property damage of less than $10,000
individually or $250,000 in the aggregate) alleged to have resulted from
products or services provided by the Company, together with a description of
each such claim or action initiated with respect thereto and the disposition
thereof.
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(b) The Company has not experienced product
recall or warranty claims in excess of five percent 5% of aggregate gross sales
for any of the past two (2) years.
2.23 Benefit Plans. Except as set forth on Schedule 2.23,
the Company is in substantial compliance with the provisions of any employment,
bonus, profit sharing, compensation, loan remuneration, employee benefit,
incentive, pension or retirement, stock purchase or stock option, retention or
employment agreement, plan, program or arrangement and any oral or written
contract or agreement with directors, officers, employees, independent
contractors, agency employees or unions, or consultants to which the Company is
a party or is subject. The Company has delivered to Hayes true, correct and
complete copies of all such obligations (to the extent they are in writing or
written descriptions to the extent they are oral), each of which is attached to
Schedule 2.23.
The Company has not, and never has had, any union contracts or
collective bargaining agreement with, or employee benefit plans for collective
bargaining groups or pursuant to collective bargaining agreements, or any other
obligations to, employee organizations or groups relating to the Company's
business or the Company's employees. No collective bargaining agent has been
certified as a representative of any of the employees of the Company and no
representation campaign, strike, slowdown, picketing, work stoppage or other job
action has occurred within the last two years or is threatening to occur with
respect to any of the employees of the Company.
All employee benefit plans are in substantial compliance with
all applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and regulations issued under the Code and ERISA.
The Company does not contribute to, has no obligation to
contribute to, or otherwise has no liability or, to the best knowledge of the
Company, potential liability with respect to (A) any Multiemployer Plan (as such
term is defined in Section 3(37) of ERISA), or (B) any plan which provides
health, life insurance or other "welfare type" benefits to current or future
retirees or current or former employees, their spouses or dependents, other than
in accordance with Section 4980B of the Code or applicable state continuation of
coverage law.
Except as disclosed on Schedule 2.25, the Company is not
obligated to pay separation, severance, termination or similar-type benefits
solely as a result of any transaction contemplated by this Agreement or solely
as a result of a "change in control", as such term is used in Section 280G of
the Code.
Each Employee benefit plan which is identified as, and has
been represented to be, a qualified plan under Section 401(a) or Section 401(k)
with an exempt trust under Section 501(a) of the Code has received a
determination letter from the Internal Revenue Service as to the qualification
under the Code with respect to such plan and is in substantial compliance with
all Code provisions and all applicable regulations with respect to Section
401(a) and Section 401(k)
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qualified plans and Section 501(a) exempt trusts. Each such plan and the funding
agreements and administrative forms and notices contain no language and, to the
best knowledge of the Company, the administrators and fiduciaries of such plan
have engaged in no acts of commission or omission which are likely to result in
the disqualification of such plan under Section 401(a) or Section 401(k) of the
Code or trust under Section 501(a) of the Code.
To the best knowledge of the Company, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, or
on behalf of any person or entity against or with respect to any of the employee
benefit or compensation plans, programs, arrangements or agreements maintained
or previously maintained by the Company.
None of the Company or any of the plans subject to ERISA, nor
any fiduciary or any employee of the Company involved in the administration of
such plans, has engaged in transaction subject to either a civil penalty
pursuant to Section 409 or 502(i) or Section 502(1) of ERISA or a tax pursuant
to Section 4975 or 4976 of the Code in connection with which the Company has
directly or indirectly incurred, or may incur, liability.
All compensation and benefit plans, programs, arrangements and
agreements currently maintained by the Company may be amended or terminated by
the Company at any time upon reasonable notice without reservation or penalty
except for customary "run-out" provisions. All terminated compensation and
benefit plans, programs, arrangements and agreements of the Company were
terminated in accordance with the written provisions of the plan, program,
arrangement or agreement and of applicable provisions of the Code and ERISA. Any
employee pension benefit plan which was qualified under Code Section 401(a)
retained its qualified plan status at the time of termination of the plan.
2.24 Disclosure. This Agreement (including the Schedules
and attachments thereto) do not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements herein or
therein not misleading.
2.25 Business Relationships. The Company has not entered
into any legally binding agreement or undertaking with or made legally binding
promises to Vulcan, as an inducement to enter into this Agreement or otherwise,
which would obligate the Company (i) to conduct business with Vulcan in the
future on any basis or (ii) to make any investment, directly or indirectly, in
any entity or facility of Vulcan.
2.26 Shut Down Matters. The Company has, or will have
prior to the Closing: (i) closed on the Red Wing Transaction, (ii) issued all
Worker Adjustment Retraining Notification Act ("WARN") notifications of the
Company, (iii) complied with all requirements of the Company pursuant to Section
7.2 herein; and (iv) completed, or will complete by the Closing, the conversion
of the $10 million of indebtedness owed by the Company to Vulcan into 16,666,666
shares of the Company Shares as described in Section 7.2(b).
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2.27 Shut Down. The Company has, since March 12, 1997 (and
will continue until the Closing), in coordination with and in cooperation with
Hayes, implemented applicable procedures and activities, or ceased applicable
activities, as appropriate, in order to complete the orderly cessation of all of
the Company's manufacturing of modems and other business which it carries on in
its existing Company facilities and locations ("Shut Down"). In proceeding with
the Shut Down, the Company has and shall use its good faith best efforts to
accomplish so much of the Shut Down matters as requested by Hayes which are
appropriate to be accomplished or commenced prior to the Closing and shall use
its good faith best efforts to accomplish or commence such Shut Down matters in
a cost efficient manner. The Company, to the extent not expended for Shut Down
matters prior to the Closing, shall have accrued or reserved the Shut Down costs
("Shut Down Accruals/Reserves") as provided on the Pro Forma, attached hereto as
Exhibit "2.27" ("Pro Forma"). The Company has used and shall continue to use its
good faith best efforts to achieve the projected Shareholders' equity as
reflected on the Pro Forma prior to Closing, taking into consideration the Shut
Down matters and/or Shut Down Accruals/Reserves, the consummation of the Red
Wing Transaction and other matters reflected therein and herein.
2.28 Red Wing Transaction. The Company has consummated the
Red Wing Transaction wherein Vulcan has, among other things, remitted $3 million
in cash to the Company in payment for the acquisition of the technology and
other matters to be acquired by Vulcan pursuant to the Red Wing Transaction as
evidenced by that Contract Assignment and Asset Purchase Agreement by and
between the Company and Vulcan dated March 7, 1997 (the "Red Wing Transaction").
Consummation of the Red Wing Transaction, including the related assignment of
contracts from the Company to Red Wing Corporation, did not result in a default
or event of default under any contracts or agreements to which the Company is a
party.
2.29 Intercompany Accounts. Beginning March 7, 1997, the
Company incurred employee, product development, lease and other costs for and on
behalf of Red Wing Corporation, a wholly owned subsidiary of Vulcan. The Company
has accurately accounted for all such costs and expenses and at the Effective
Time, the Company shall have received reimbursement from Red Wing Corporation
for all such costs and expenses and will not be obligated to incur any such
costs or expenses or any other cost or expense or obligation on behalf of Red
Wing Corporation or which inures to the benefit of Red Wing or Vulcan, after the
Effective Time.
3. Representations and Warranties of Vulcan. Vulcan hereby represents
and warrants to Hayes, each of which is true and correct on the date hereof and
will be true and correct immediately prior to the Effective Time of the Closing:
3.1 Title to Stock. Vulcan owns, beneficially and of
record, 31,633,333 Company Shares as of the date hereof and will own,
beneficially and of record 48,299,999 Company Shares at the Effective Time, free
and clear of all liens, claims and encumbrances whatsoever.
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3.2 Authorization. Vulcan has the capacity and authority
to execute and deliver this Agreement, and each other document, instrument and
agreement to be entered into by Vulcan pursuant hereto or thereto, to perform
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby without the necessity of any act or consent of any other person
whomsoever. All corporate action on the part of Vulcan, its officers, directors
and shareholders necessary for the authorization, execution and delivery of this
Agreement and all other agreements, documents and instruments to be entered into
by Vulcan pursuant hereto and thereto, has been taken or will be taken on or
prior to the Closing, and this Agreement and other agreements entered into by
Vulcan pursuant to this Agreement constitute the valid and legally binding
obligations of Vulcan, enforceable in accordance with each of their terms,
except as affected by public policy, equitable principles or the exercise of
judicial discretion.
3.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of Vulcan is required to be obtained in
connection with Vulcan's valid execution, delivery, or performance of this
Agreement, or the other agreements entered into by Vulcan pursuant to this
Agreement, except as required pursuant to the HSR Act.
3.4 Litigation. There is no Action pending or, to the
best knowledge of Vulcan, currently threatened, against Vulcan or, to the best
knowledge of Vulcan, against any officer, director or employee of Vulcan in
connection with such officers', directors' or employees' relationship with, or
actions taken on behalf of, Vulcan which questions the validity of this
Agreement or the right of Vulcan to enter into this Agreement or to consummate
the transactions contemplated hereby.
3.5 Organization and Good Standing. Vulcan is a
corporation duly organized, valid existing and in good standing under the laws
of the State of Washington, and has all requisite corporate power and authority
to own the capital stock of the Company.
3.6 Brokers or Finders. Vulcan has not engaged any
broker, investment banker or finder in connection with the transactions
contemplated in this Agreement.
4. Representations and Warranties of Hayes. Hayes and Merger Sub
hereby represent and warrant to the Company and to Vulcan, each of which is true
and correct on the date hereof and will be true and correct immediately prior to
the Effective Time of the Closing:
4.1 Authorization. Hayes and Merger Sub have the capacity and
authority to execute and deliver this Agreement, and each other document,
instrument and agreement to be entered into by Hayes or Merger Sub pursuant
hereto or thereto, to perform hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby without the necessity of any act or
consent of any other person whomsoever. All corporate action on the part of
Hayes and Merger Sub, their respective officers, directors and shareholders
necessary for the authorization, execution and delivery of this Agreement and
all other agreements,
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documents and instruments to be entered into by Hayes and Merger Sub,
respectively, pursuant hereto and thereto, has been taken or will be taken on or
prior to the Closing, and this Agreement and other agreements entered into by
Hayes and Merger Sub pursuant to this Agreement constitute the valid and legally
binding obligations of Hayes and Merger Sub, enforceable in accordance with each
of their terms, except as affected by public policy, equitable principles or the
exercise of judicial discretion.
4.2 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any foreign, United States federal, state, local or provincial
governmental authority on the part of Hayes or Merger Sub is required to be
obtained in connection with Hayes' and Merger Sub's valid execution, delivery,
or performance of this Agreement, or the other agreements entered into by Hayes
or Merger Sub pursuant to this Agreement, except as required pursuant to the HSR
Act.
4.3 Litigation. There is no Action pending or, to the
best knowledge of Hayes, currently threatened against Hayes or, to the best
knowledge of Hayes, against any officer, director or employee of Hayes in
connection with such officers', directors' or employees' relationship with, or
actions taken on behalf of, Hayes which questions the validity of this Agreement
or the right of Hayes or Merger Sub to enter into this Agreement or to
consummate the transactions contemplated hereby.
4.4 Organization, Good Standing and Qualification of
Merger Sub. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. Merger Sub is in good standing in
Pennsylvania with no operating history and will have no obligations, liabilities
or encumbrances of any kind or nature whatsoever, other than its obligations
under this Agreement.
4.5 Brokers or Finders. Hayes has not engaged any broker
(except for Cyrus J. Keefer), investment banker or finder in connection with the
transactions contemplated in this Agreement.
5. Conditions of the Company's and Vulcan's Obligations at
Closing. The obligations of the Company and Vulcan under Section 1 of this
Agreement and to otherwise consummate the transactions contemplated in this
Agreement at Closing 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 Hayes and Merger Sub given to the Company contained herein
shall be true in all material respects 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.
5.2 Performance. Hayes and Merger Sub shall have
performed and complied in all material respects with all agreements, obligations
and conditions contained in this
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Agreement that are required to be performed or complied with by each of them on
or before the Closing.
5.3 Compliance Certificate. At the Closing, the Chairman
of Hayes shall deliver to the Company and Vulcan a certificate dated as of the
Closing certifying that the conditions set forth in Sections 5.1 and 5.2
pertaining to the applicable party have been fulfilled as of the Closing.
5.4 Regulatory Approvals. Hayes shall have filed all
required reports and satisfied all requests for additional information pursuant
to the HSR Act, and all applicable waiting periods shall have expired or been
terminated.
5.5 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit, or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement, the Merger or the consummation of
the transactions contemplated hereby or thereby, or which is related to or
arises out of the business of the Company, if such action, proceeding,
investigation, regulation or legislation, in the reasonable judgment of the
Company would make it inadvisable to consummate such transactions.
5.6 Opinions.
(a) For Vulcan only, Hayes shall have delivered
the opinion of Womble Carlyle Sandridge & Rice, PLLC, with respect to the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to Vulcan.
(b) Vulcan shall have delivered the opinion of
Foster Pepper & Shefelman, in form and substance reasonably satisfactory to the
Company.
(c) Howard Lawson & Co. shall have delivered its
opinion to the Company that the Merger is fair to the Company's shareholders
from a financial standpoint.
5.7 Closing Deliveries. Hayes and Merger Sub shall have
delivered to the Company each of the certificates, documents and agreements
required to be delivered by such party hereunder to the Company.
5.8 Investment Transaction. The transaction contemplated
by that certain Preferred Stock Purchase Agreement of even date between Hayes
and Vulcan shall have closed.
5.9 Cross-Guarantee. Hayes shall have provided Vulcan
with its cross- guarantee of the following Vulcan guarantees: (i) Amended and
Restated Corporate Guarantee dated April 11, 1997, in favor of U.S. Robotics,
Inc.; (ii) Vulcan Guaranty to Amplicon, Inc., dated October 12, 1994 and that
certain Standby Letter of Credit No. G193066 in favor of
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Amplicon, Inc.; and (iii) that certain Standby Letter of Credit No. G193876 in
favor of Tokai Financial Services, Inc.
5.10 Consents. The Company and/or Hayes shall have
obtained consents to the Merger, in form and substance acceptable to Vulcan in
its sole discretion, from (i) CIT, (ii) Amplicon, Inc. ("Amplicon"), and (iii)
Tokai Financial Services, Inc. ("Tokai"). It is understood that the Standby
Letters of Credit by Seattle-First National Bank in favor of Amplicon and Tokai
will be retired as provided in Section 7.11, and prior to Closing the parties
shall have agreed upon the form of Escrow Agreement required by Section 7.11.
6. Conditions of Hayes' Obligations at Closing. The obligations
of Hayes under Section 1 of this Agreement and to otherwise consummate the
transactions contemplated in this Agreement at Closing are subject to the
fulfillment on or before the Closing of each of the following conditions by:
6.1 Representations and Warranties. The representations
and warranties of the Company and the representations and warranties of Vulcan
given to Hayes contained herein shall be true in all material respects on and as
of the date 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. Vulcan and the Company shall have
performed and complied in all material respect with all agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by each of them on or before the Closing, and shall deliver to
Hayes at Closing evidence of the fulfillment by the Company of the obligations
under Section 2.26 hereof.
6.3 Compliance Certificate. At the Closing, the President
of the Company and William D. Savoy, Vice President of Vulcan, shall deliver to
the Company a certificate dated as of the Closing certifying that the conditions
set forth in Sections 6.1 and 6.2 pertaining to the applicable party have been
fulfilled as of the Closing, including a statement of the number of shares
outstanding at the Effective Time.
6.4 Regulatory Approvals. The Company and Vulcan shall
have filed all required reports and satisfied all requests for additional
information pursuant to the HSR Act and all applicable waiting periods shall
have expired or terminated.
6.5 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit, or obtain substantial damages in respect of, or which is
related to, or arises out of, this Agreement, the Merger or the consummation of
the transactions contemplated hereby or thereby, or which is related to or
arises out of the business of the Company, if such action, proceeding,
investigation, regulation or legislation, in the reasonable judgment of the
Company would make it inadvisable to consummate such transactions.
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6.6 Closing Deliveries. Each of the Company and Vulcan
shall have delivered to Hayes each of the certificates, documents and agreements
required to be delivered by such party hereunder to Hayes.
6.7 Proceedings and Documentation. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto and deliverable by the Company or
Vulcan shall be reasonably satisfactory in form and substance to counsel to
Hayes, and such counsel shall have received all such counterpart originals and
certified or other copies of such documents as they may reasonably request.
6.8 Opinions.
(a) The Company shall have delivered the
opinions of Drinker Biddle & Reath with respect to the transactions contemplated
by this Agreement, in form and substance reasonably satisfactory to Hayes.
(b) Vulcan shall have delivered the opinion of
Foster Pepper & Shefelman, in form and substance reasonably satisfactory to
Hayes.
6.9 Major Adverse Change. No major uninsured loss,
casualty or other damage shall have occurred having a material adverse effect on
the Company's assets and liabilities as reflected in the Pro Forma taken as a
whole.
6.10 USR Supply Commitment. Hayes shall have no
substantial reason to believe U.S. Robotics will dishonor its supply commitment
in respect of the Company's purchase orders Number PO9006-PO90011 and PO90046
after Closing.
6.11 Vulcan Guaranty of Equipment Leases. Vulcan shall
have agreed to continue its guaranty for all of the Company's equipment leases
in effect on February 21, 1997 (or as terminated and not renewed and with
respect to additional equipment leases entered into since such date, all of
which are in the ordinary course of the business of the Company), but in each
case for not less than sixty (60) days after the Closing.
6.12 Preferred Stock Purchase. Consummation of the
investment in Hayes by Vulcan pursuant to the closing on the transactions
described in that certain Preferred Stock Purchase Agreement by and between
Hayes and Vulcan of even date herewith (the "Stock Purchase Agreement").
6.13 Consents. The Company and/or Hayes shall have
obtained consents to the Merger from (i) CIT, (ii) Amplicon, and (iii) Tokai,
with the Amplicon and Tokai consent being in form and substance acceptable to
Hayes in its sole discretion. It is understood that the Standby Letters of
Credit by Seattle-First National Bank in favor of Amplicon and Tokai will be
retired as provided in Section 7.11, and prior to Closing the parties shall have
agreed upon the form of Escrow Agreement required by Section 7.11.
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6.14 Red Wing Transactions. The Company and/or Vulcan
shall have obtained an assignment and assumption agreement, in form and
substance acceptable to Hayes in its sole discretion, whereby that certain lease
by and between the Company and High Properties dated July 28, 1995, as amended
to include additional space as of July 15, 1996, will be assigned by the Company
to Red Wing Corporation and all obligations of the Company thereunder released
by the lessor thereof. In addition, the Company shall have delivered to Hayes an
intercompany reconciliation of accounts, in form and substance acceptable to
Hayes in its sole discretion, properly allocating expenses incurred by the
Company for Red Wing Corporation, and Red Wing Corporation shall have reimbursed
the Company therefor, as set forth in Section 2.29 hereof.
7. Covenants.
7.1 Liabilities Undertaking.
(a) Effective at the Effective Time, Hayes will
cause the Company, subject to the limitations contained herein, to perform, pay
or discharge the following:
(i) all unpaid debts and liabilities of
the Company existing at the Closing, but only if they are disclosed to Hayes or
reserved against in the 12/31 Financial Statements or the 2/21 Balance Sheet, or
are incurred subsequent to the date of the 2/21 Balance Sheet and prior to
Closing in the ordinary course of the Company's business and otherwise in
conformity with this Agreement (the "Debts"); and
(ii) all unperformed and unfulfilled
obligations which are required to be performed and fulfilled by the Company
under the terms of all executory written contracts, agreements, leases,
licenses, commitments and undertakings which are disclosed to Hayes in the
Company's Disclosure Schedules attached hereto or reserved against in the 12/31
Financial Statements or the 2/21 Balance Sheet, or are entered into by the
Company subsequent to the date of the 2/21 Balance Sheet and prior to Closing in
the ordinary course of the Company's business and disclosed to Hayes in the
Company's Disclosure Schedules attached hereto (the "Obligations").
(b) Nothing contained herein shall prevent the
Company or Hayes from negotiating for discounts or amendments to the terms of
Debts and Obligations; provided that the Company or Hayes shall not engage in
litigation, bankruptcy or other adversarial proceedings in respect of a Debt or
Obligation unless the Company has a bona fide, good faith basis to contest the
validity or amount of such Debt or Obligation.
(c) Vulcan is the sole intended beneficiary of
this Section 7.1. There are no intended third party beneficiaries of this
Section.
7.2 Conduct of Business Prior to the Closing Date. The Company
agrees that, between the date hereof and the date of Closing:
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(a) Except as contemplated by this Agreement,
and specifically the matters described in Sections 2.27 and Section 2.28 (Red
Wing Transaction), or permitted by written consent of Hayes, the Company shall
operate its business only in the ordinary course consistent with prior practice
and not to:
(i) take any action of the nature referred
to in Section 2.12, except as permitted therein;
(ii) change the Company's banking or safe
deposit arrangements;
or
(iii) change the Company's articles of
incorporation or bylaws.
(b) The Company and Vulcan, prior to the
Closing, shall convert $10 million of indebtedness ($9,200,000 of principal and
$800,000 of interest) of the Company to Vulcan in consideration for the issuance
of 16,666,666 shares of common stock of the Company.
(c) The Company shall endeavor to preserve the
business organization of the Company intact and shall use its good faith best
efforts to preserve for the Company the goodwill of the Company's suppliers,
customers, distributors, sales representatives and others having business
relations with the Company.
(d) The Company shall maintain in force the
insurance policies referred to in Section 2.19 or insurance policies providing
the same or substantially similar coverage; provided, however, that the Company
will notify Hayes prior to the expiration of any of such insurance policies.
(e) Except as contemplated by this Agreement or
permitted by written consent of Hayes, no plan, fund, or arrangement described
in Section 2.23 has been or will be:
(i) terminated by the Company;
(ii) amended (except as expressly required
by law) in any manner which would directly or indirectly increase the benefits
accrued, or which may be accrued, by any participant thereunder; or
(iii) amended in any manner which would
materially increase the cost to the Company of maintaining such plan, fund, or
arrangement.
7.3 Consents. The Company agrees to take all actions and
effect all filings necessary to obtain all licenses, consents, approvals and
authorizations of all third parties and governmental bodies necessary for it to
consummate the Merger and the other transactions contemplated by this Agreement.
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7.4 Examination of Records. Subject to any applicable
court orders, during the period prior to the Closing, the Company shall allow
Hayes, its respective counsel and other representatives reasonable access during
normal business hours to all books, records, files, documents, assets,
properties, contracts and agreements of the Company and shall furnish Hayes and
its counsel and representatives with all available information concerning the
affairs of the Company which is reasonably requested or as necessary to allow
Hayes to make the determination that the condition set forth in Sections 6.1 and
6.3 have been satisfied.
7.5 Delivery of Interim Financial Statements. Prior to
Closing, the Company shall promptly deliver to Hayes all regularly prepared
unaudited financial statements of the Company, in format historically utilized
internally, as soon as available.
7.6 Notification of Certain Matters. Promptly after
receipt of notice thereof, each of the Company, Hayes, and Vulcan shall advise
the other parties hereto of (i) the occurrence or failure to occur of any event,
the occurrence or failure of which is reasonably believed by such party to cause
any representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect any time from the date hereof
through the Closing Date; and (ii) any material failure of such party to comply
with or satisfy any covenant or condition to be complied with or satisfied by
him or it hereunder prior to the Closing; and such party shall use his or its
commercially reasonably efforts to remedy the same.
7.7 Best Efforts. The Company, Hayes and Vulcan agree to
use their best efforts to fulfill, prior to or at Closing, all conditions to
Closing which are to be fulfilled by them.
7.8 Capitalization of Subsidiaries. Hayes shall have duly
formed and capitalized Merger Sub in the amount and as specified in Section
1.1(f) hereof.
7.9 Vulcan Shares. At the Closing, Vulcan shall transmit
all of its capital stock of the Company pursuant to the terms and provisions of
the Merger as described in Section 1.1 hereof, and shall cooperate and assist in
authorizing and causing the Merger to occur.
7.10 State Taxes. The parties acknowledge that the Company
shall recognize a significant taxable gain in respect of the Red Wing
Transaction which, if not offset by losses recognized prior to the Effective
Time, will result in a Pennsylvania state income tax liability, and a U.S.
Federal Alternative Minimum Tax ("AMT") liability, to be paid by the Company
after the Closing. The Company has cooperated with Hayes prior to the Closing in
accelerating the recognition of losses and taking such other actions as Hayes
has reasonably requested to minimize the Company's Pennsylvania state income and
AMT tax liability.
7.11 Release of Letters of Credit. Hayes hereby covenants
and agrees to obtain the release of that certain Standby Letter of Credit issued
by Vulcan in the amount of $1,800,000 in favor of Amplicon, Inc. no later than
October 17, 1997, and to obtain the release of that certain Standby Letter of
Credit issued by Vulcan in the amount of $480,000 in favor of Tokai
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Financial Services, Inc. within sixty (60) days after the Closing Date. In
addition, Hayes agrees to establish a depository account within ten (10) days
after the Closing Date with a financial institution acceptable to Vulcan (the
"Depository") and to deposit with such Depository a sum equal to two (2) months
rental payment under the Company's Lease Agreement with Amplicon, Inc. dated
October 8, 1994 (the "Amplicon Lease") and to maintain such amount on deposit
with the Depository at all times until the release of Vulcan's Standby Letter of
Credit in favor of Amplicon, Inc. has been obtained. The Depository shall
directly pay to Amplicon from the funds on deposit by Hayes, each monthly
installment under the Amplicon Lease on or before the due date thereof. The
Depository will further agree to notify Vulcan in writing in the event that the
amount of funds on deposit by Hayes is less than the two (2) months rental
amount as specified above. In such event, Vulcan will have the right to make any
payment under the Amplicon Lease directly to Amplicon or to deposit sufficient
funds with the Depository for payment of the Amplicon Lease, and such amount
will be repaid to Vulcan as provided in the Cross Guarantee contemplated by
Section 5.9 hereof.
8. Indemnification.
8.1 First Indemnification by Vulcan. Subject to the
matters described in Sections 8.5, 8.6 and 8.7, and effective at the Effective
Time, Vulcan hereby agrees to defend, indemnify and hold harmless (the "First
Vulcan Indemnity") Hayes and its successors, assigns and affiliates and the
Surviving Corporation (collectively, the "Hayes Indemnitees") from and against
any and all losses, deficiencies, liabilities, damages, assessments, judgments,
costs and expenses, including attorneys' fees (both those incurred in connection
with the defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this provision) (collectively, "Hayes
Losses"), which for purposes of this first Vulcan Indemnity are caused by,
result from or arise out of:
(a) (i) breaches of any representation or
warranty on the part of the Company herein or any Schedule or Exhibit hereto or
in any other written statement, certificate or other instrument delivered by it
pursuant hereto; and (ii) failures by the Company to perform or otherwise
fulfill any of its undertakings or other agreements pursuant to the transactions
or obligations hereunder;
(b) (i) breaches of any representation or
warranty on the part of Vulcan herein or in any Schedule or Exhibit hereto or in
any other written statement, certificate or other instrument delivered by Vulcan
pursuant hereto, except those specific representations listed in Section 8.2(c)
which are covered by the Second Vulcan Indemnity below; and (ii) failures by
Vulcan to perform or otherwise fulfill any of its undertakings or other
agreements or obligations hereunder; or
(c) any and all actions, suits, proceedings,
claims or demands incident to any of the foregoing or such indemnification.
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8.2 Second Indemnification by Vulcan. Subject to matters
described in Sections 8.5, 8.6(b)-(d) and 8.7, and effective at the Effective
Time, Vulcan hereby agrees to defend, indemnify and hold harmless (the "Second
Vulcan Indemnity") each Hayes Indemnitee from and against any and all Hayes
Losses, and which, for purposes of this Second Vulcan Indemnity, are caused by,
result from or arise out of:
(a) the conduct of Vulcan, Vulcan's affiliates,
the Company or any of their directors or officers, or otherwise arising in any
manner and is the subject of a claim by any shareholder of the Company who was a
shareholder at any time prior to the Effective Time of the Merger ("Prior
Company Shareholders") in connection with the Merger or the Red Wing Transaction
(specifically including, but not limited to claims by any Prior Company
Shareholder for "Fair Value" pursuant to "Dissenters' Rights" under applicable
Pennsylvania law, breach of fiduciary obligations by the Company, Vulcan or any
directors or officers thereof in connection with the Red Wing Transaction or the
Merger, and the disbursement of the Merger Consideration pursuant to Section
1.1(h) hereof);
(b) any failure by Red Wing Corporation to honor
its obligations set forth in Section 5.5 of the Contract Assignment and Asset
Purchase Agreement dated March 7, 1997;
(c) breaches of any representation or warranty
on the part of Vulcan or the Company contained in Sections 2.2(a), 2.2(d), 2.15,
3.1 or 3.6 hereof;
(d) the exercise of any stock options of the
Company which are outstanding at the Effective Time or the conversion of such
options into the right to receive the Merger Consideration Per Share as provided
in Section 1.1(c) hereof; provided that the amount of Vulcan's indemnification
obligation pursuant to this Section 8.2(d) shall be reduced by the amount of the
net cash received by the Company from the exercise of any such stock options;
(e) any default or breach, whether now existing
or hereafter arising under any contract, agreement or obligation assigned by the
Company to and assumed by Red Wing Corporation; or
(f) any and all actions, suits, proceedings,
claims, or demands, incident to any of the foregoing or such indemnification.
8.3 Indemnification by the Company. Subject to matters
described in Sections 8.5, 8.6(b)-(d) and 8.7, the Company hereby agrees to
defend, indemnify and hold harmless each Hayes Indemnitee from and against any
and all Hayes Losses (but only if the Merger does not occur), caused by,
resulting from or arising out of:
(a) (i) breaches of any representation or
warranty on the part of the Company herein or in any Schedule or Exhibit hereto
or in any other written statement, certificate or other instrument delivered by
the Company pursuant hereto; and (ii) failures by the Company
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<PAGE> 30
to perform or otherwise fulfill any of its undertakings or other agreements or
obligations hereunder;
(b) any and all actions, suits, proceedings,
claims or demands, incident to any of the foregoing or such indemnification.
8.4 Indemnification by Hayes. Subject to the matters
described in Sections 8.6(b)-(d) and 8.7, Hayes hereby agrees to defend,
indemnify and hold harmless the Company and its successors, assigns and
affiliates (but only if the Merger does not occur) and effective at the
Effective Time, Vulcan and its successors, assigns and affiliates (collectively,
the "Company Indemnitees") from and against any and all losses, deficiencies,
liabilities, damages, assessments, judgments, costs and expenses, including
reasonable attorneys' fees (both those incurred in connection with the defense
or prosecution of the indemnifiable claim and those incurred in connection with
the enforcement of this provision) (collectively, "Company Losses"), caused by,
resulting from or arising out of:
(a) (i) breaches of any representation or
warranty on the part of Hayes herein or in any Schedule or Exhibit hereto or in
any other written statement, certificate or other instrument delivered by Hayes
pursuant hereto; and (ii) failures by Hayes to perform or otherwise fulfill any
of its undertakings or other agreements or obligations hereunder; or
(b) any and all actions, suits, proceedings,
claims or demands incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand,
assessment, action, suit or proceeding shall be asserted by a third party naming
a Company Indemnitee in respect of which a Company Indemnitee proposes to demand
indemnification from Hayes (a "Third Party Company Indemnified Claim"), such
Company Indemnitee shall notify Hayes thereof, provided further, however, that
the failure to so notify Hayes shall not reduce or affect the obligations of
such claimant with respect thereto except to the extent that Hayes is materially
prejudiced thereby. Subject to Section 8.7 of this Agreement and to rights of or
duties to any insurer or other third person having liability therefor, Hayes
shall have the right promptly upon receipt of such notice to assume the control
and defense of, and to compromise or settle, any such Third Party Company
Indemnified Claims; provided, however, that Hayes may not compromise or settle
any such claim without Vulcan's written consent (which consent shall not be
unreasonably withheld) if such settlement does not provide all Company
Indemnitees with a complete release by the claimant and such settlement seeks to
bind Vulcan to any nonmonetary obligation. Vulcan shall be entitled to
participate in the defense of any such claim at its own expense.
8.5 Third Party Claims. If any claim, liability, demand,
assessment, action, suit or proceeding shall be asserted by a third party naming
a Hayes Indemnitee or the Company as a party to an action or otherwise making a
claim or seeking recovery from a Hayes Indemnitee in respect of which a Hayes
Indemnitee proposes to demand indemnification (a "Third Party Hayes Indemnified
Claim") pursuant to the First and the Second Vulcan Indemnity, such Hayes
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Indemnitee shall notify Vulcan (or the Company, as appropriate), provided,
however, that the failure to so notify Vulcan (or the Company, as the case may
be), except with respect to the time limitation described in Section 8.6(b),
shall not reduce or affect the obligations herein with respect thereto except to
the extent that Vulcan is materially prejudiced thereby. Subject to Section 8.7
of this Agreement and to rights of or duties to any insurer or other third
person having liability therefor, Vulcan (or the Company, as the case may be)
shall have the right promptly upon receipt of such notice to assume the control
and defense of, and to compromise or settle, any such Third Party Hayes
Indemnified Claims; provided that Vulcan (or the Company, as the case may be)
may not compromise or settle any such claim without Hayes' written consent
(which consent shall not be unreasonably withheld) if such settlement does not
provide all Hayes Indemnitees with a complete release by the claimant; and
either: (i) it would exceed the amount of the limitations on Vulcan's
indemnification obligation set forth in Section 8.7 (ii) or such settlement
seeks to bind Hayes and/or the Company to any nonmonetary obligation. Hayes
shall be entitled to participate in the defense of any such claim at its own
expense.
8.6 Certain Limitations.
(a) The obligations of Vulcan to indemnify
pursuant to the First Vulcan Indemnity pursuant to Section 8.1 of this Article
shall accrue only if the aggregate Hayes Losses for all matters indemnifiable
under Section 8.1 exceed One Hundred Thousand Dollars (US $100,000), and then
Vulcan shall be liable only for Hayes Losses in excess of such amount, subject
to the maximum amount described below. The obligations of Vulcan to indemnify
the Hayes Indemnitees under Section 8,1 shall not exceed the aggregate of Two
Million Five Hundred Thousand U.S. Dollars (US $2,500,000). The limitations
described in this Section 8.6(a) shall not apply to the Second Vulcan Indemnity
as described in Section 8.2.
(b) No claim for indemnification pursuant to
Section 8.1, 8.2, 8.3 or 8.4 may be made unless written notice of such claim,
accompanied by a description of the particular facts involved and the provisions
of this Agreement implicated, is delivered to the indemnifying party
("Indemnification Notice"). For purposes of the First Vulcan Indemnity pursuant
to Section 8.1, the Indemnification Notice must be received on or before
eighteen (18) months from the Effective Time; provided, however, no 18 month
time limit shall apply to indemnification claims pursuant to Indemnification
Notices provided to the indemnifying party before the expiration of such 18
month period where such claim(s) shall not have been fully resolved by such
expiration date; and provided further, no such term limit shall apply with
respect to the indemnification provided pursuant to Sections 8.2, 8.3 or 8.4.
(c) The amount of Vulcan's indemnification
obligation in respect of any Hayes Loss shall be reduced by the amount of any
insurance proceeds received by Hayes, the Company or the Surviving Corporation
in respect of such Loss.
(d) The amount of Vulcan's indemnification
obligation hereunder shall be reduced by the amount determined to be owing to
Vulcan by Hayes pursuant to Section 9.12 of that certain Preferred Stock
Purchase Agreement of even date herewith.
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8.7 Defense of Certain Claims. In any Third Party Hayes
Indemnified Claims or any Third Party Company Indemnified Claims defended by the
Company, Hayes or Vulcan pursuant to this Agreement (i) the party not
controlling the defense of such claim shall have the right to be represented by
counsel and accountants, at such party's own expense, (ii) the party controlling
the defense of such claim shall keep the other party fully informed of the
status of such claim at all stages thereof, whether or not such other party is
represented by its own counsel, (iii) the Company, Hayes or Vulcan, as
applicable, shall make available to the indemnifying party and its accountants
and legal representatives all books and records of the Company, Hayes or Vulcan
relating to such Third Party Hayes Indemnified Claims or Third Party Company
Indemnified Claims, as applicable, and (iv) the parties shall render to each
other such assistance as may reasonably be requested in order to insure the
proper and adequate defense of such Third Party Hayes Indemnified Claims, as
applicable.
8.8 No Impairment of Investors' Rights. Neither the
examination or inspection by audit of the properties, financial condition or
other matters of the Company or its business prior to the Closing, nor the fact
that the Company itself is providing representations, warranties, schedules,
exhibits and entering into the covenants and other matters pursuant to this
Agreement, shall in no way limit, affect or impair the ability of Hayes or the
Company to rely upon the representations, warranties, covenants and obligations
of the Company and Vulcan set forth in this Agreement or otherwise limit the
indemnification obligations set forth in this Article 8.
9. Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Hayes, Merger
Sub, Vulcan and the Company;
(b) by either Hayes or the Company if the Merger
shall not have been consummated before April 16, 1997 (unless the failure to do
so consummate the Merger by such date shall be due to the action or failure to
act of the party seeking to terminate this Agreement;
(c) by either Hayes or the Company if any
governmental entity shall have issued a final permanent order, decree or ruling
or taken any other final action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall become
nonappealable;
(d) by Hayes and Merger Sub, if (i) there shall
have been a breach on the part of the Company or Vulcan of any representation or
warranty of the Company or of Vulcan set forth herein, or (ii) there shall have
been any failure of the Company or Vulcan to perform or comply with the
covenants or agreements hereunder and in either case, the aggregate effect of
all such breaches or failures, as the case may be, would be material; or
(e) by the Company if (i) there shall have been
a breach of any representation or warranty on the part of Hayes or Merger Sub or
(ii) there shall have been a
32
<PAGE> 33
failure of Hayes or Merger Sub to perform or comply its covenants and agreements
hereunder and, in either case, the aggregate effect of all such breaches and
failures would be material.
9.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders. Nothing contained in this Section 9.2 shall relieve any party from
liability for any breach of this Agreement.
10. Miscellaneous.
10.1 Survival of Warranties. The warranties and
representations of the Company, Hayes, and Vulcan contained in or made pursuant
to this Agreement shall survive the execution and delivery of this Agreement.
10.2 Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The rights and obligations of
the parties hereto may not be assigned without the express written consent of
the other parties hereto; provided, however, that no assignment shall relieve
such party from or diminish or affect such party's obligations hereunder, unless
pursuant to written permission from the party or parties to whom said
obligation(s) is/are owed.
10.3 Governing Law; Dispute Resolutions. This Agreement
shall be governed by and construed under the laws of the Commonwealth of
Pennsylvania without reference to its conflicts of law principles.
(a) Policy - Mediation. The parties hope there
will be no disputes arising out of their relationship. To that end, each commits
to cooperate in good faith and to deal fairly in performing its duties under
this agreement in order to accomplish their mutual objectives and avoid
disputes. But if a dispute arises, the parties agree to resolve all disputes,
except as set forth below, by the following alternate dispute resolution
process:
(i) first, the parties will seek a fair
and prompt negotiated resolution in
accordance with the following
procedures:
(A) Upon the written request of
either party hereto, each
of the parties will appoint
a designated representative
whose task it will be to
meet for the purpose of
endeavoring to resolve such
dispute.
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<PAGE> 34
(B) The designated
representatives shall meet
as often as necessary to
gather and furnish to the
other all information with
respect to the matter in
issue which is appropriate
and germane in connection
with its resolution.
(C) Such representatives shall
discuss the problem and
negotiate in good faith in
an effort to resolve the
dispute without the
necessity of any formal
proceeding relating
thereto.
(D) During the course of such
negotiations all reasonable
requests made by one party
to the other for non-
privileged information
reasonably related to this
Agreement, will be honored
in order that each of the
parties may be fully
advised of the other's
position.
(E) The specific format for
such discussions will be
left to the discretion of
the designated
representatives, but may
include the preparation of
agreed upon statements of
fact or written statements
of position furnished to
the other party.
(ii) If the designated representatives
cannot resolve the dispute within
sixty (60) days after the initial
request to negotiate the dispute,
then the dispute shall be escalated
to the Chairman of Hayes, or his
designee, and the Chief Executive
Officer of Vulcan, for their review
and resolution. If the dispute
cannot be resolved within thirty
(30) days after referral to such
officers, then the provisions of
Subsection (b) below shall apply.
(b) Arbitration. Except as provided below, all
disputes not resolved in accordance with the above procedures shall be resolved
by binding arbitration. The parties recognize that negotiation or mediation may
not be appropriate to resolve some disputes and agree that either party may
proceed with arbitration without negotiating or mediating. The parties confirm
that by agreeing to this alternate dispute resolution process, they intend to
give up their right to have any dispute decided in court by a judge or jury.
Notwithstanding the foregoing or anything to the contrary herein, if a dispute
arises out of or relates to a breach of the Confidentiality Agreements between
the parties dated February 19, 1997 (between the Company and Hayes) or dated
March 20, 1997 (between Vulcan and Hayes), or any other agreement or provision
for which a party is seeking injunctive relief, then such dispute shall not be
subject to the provisions of this Section 10.3 and may be resolved by formal
judicial or equitable resolution.
34
<PAGE> 35
(c) Binding Arbitration. Except as provided
above, any claim between the parties, including but not limited to those arising
out of or relating to this agreement and any claim based on or arising from an
alleged tort, shall be determined by arbitration in Atlanta, Georgia. In any
arbitration proceeding, there shall be three (3) arbitrators, one selected by
Hayes, one selected by Vulcan, and the third selected by the two arbitrators
chosen by the parties. If the parties (or their respective arbitrators) cannot
agree on the identity of the arbitrator(s) within ten (10) days of the
arbitration demand, the arbitrator(s) shall be selected by the administrator of
the American Arbitration Association (AAA) office in Atlanta, Georgia from its
Large, Complex Case Panel (or have similar professional credentials). Each
arbitrator shall be an attorney with at least fifteen (15) years' experience in
commercial law and shall reside in the Atlanta metropolitan area. Whether a
claim is covered by this agreement shall be determined by the arbitrator(s). All
statutes of limitations which would otherwise be applicable shall apply to any
arbitration proceeding hereunder.
(d) Procedures. The arbitration shall be
conducted in accordance with the AAA Commercial Arbitration Rules with Expedited
Procedures, in effect on the date hereof, as modified by this agreement. There
shall be no dispositive motion practice. As may be shown to be necessary to
ensure a fair hearing: the arbitrator(s) may authorize limited discovery; and
may enter pre-hearing orders regarding (without limitation) scheduling, document
exchange, witness disclosure and issues to be heard. The arbitrator(s) shall not
be bound by the rules of evidence or of civil procedure, but may consider such
writings and oral presentations as reasonable business people would use in the
conduct of their day-to-day affairs, and may require the parties to submit some
or all of their case by written declaration or such other manner of presentation
as the arbitrator(s) may determine to be appropriate. The parties intend to
limit live testimony and cross-examination to the extent necessary to ensure a
fair hearing on material issues.
(e) Hearing - Law - Appeal Limited. The
arbitrator(s) shall take such steps as may be necessary to hold a private
hearing within one hundred twenty (120) days of the initial demand for
arbitration and to conclude the hearing within three (3) days; and the
arbitrator(s)'s written decision shall be made not later than fourteen (14)
calendar days after the hearing. The parties have included these time limits in
order to expedite the proceeding, but they are not jurisdictional, and the
arbitrator(s) may for good cause afford or permit reasonable extensions or
delays, which shall not affect the validity of the award. The written decision
shall contain a brief statement of the claim(s) determined and the award made on
each claim. In making the decision and award, the arbitrator(s) shall apply
applicable substantive law. Absent fraud, collusion or willful misconduct by an
arbitrator, the award shall be final, and judgment may be entered in any court
having jurisdiction thereof. The arbitrator(s) may award injunctive relief or
any other remedy available from a judge, including the joinder of parties or
consolidation of this arbitration with any other involving common issues of law
or fact or which may promote judicial economy, and may award attorneys' fees and
costs to the prevailing party but shall not have the power to award punitive or
exemplary damages. The decision and award of the arbitrators need not be
unanimous; rather, the decision and award of two arbitrators shall be final.
35
<PAGE> 36
(f) Provisional Remedies. Pending selection of
the arbitrator(s), either party may request the AAA to appoint unilaterally an
arbitrator for the limited purpose of awarding temporary or preliminary relief.
This award may be immediately entered in any federal or state court having
jurisdiction over the parties even though the decision on the underlying dispute
may still be pending. Once appointed, the arbitrator(s) may, upon request of a
party, issue a superseding order to modify or reverse such temporary or
preliminary relief or may confirm such relief pending a full hearing on the
merits of the underlying dispute. Any such initial or superseding order of
temporary or preliminary relief may be immediately entered in any federal or
state court having jurisdiction over the parties even though the decision on the
underlying dispute may remain pending. Such relief may be granted by the
arbitrator(s) only after notice to and opportunity to be heard by the opposing
party unless the party applying for such relief demonstrates that its purpose
would be rendered futile by giving notice.
10.4 Counterparts. This Agreement may be executed in one
or more counterparts, including counterparts transmitted by telecopier or
telefax, all of which shall be considered one and the same agreement. Facsimile
copies with signatures of the parties to this Agreement, or their duly
authorized representatives, shall be legally binding and enforceable. All such
facsimile copies are declared as originals and accordingly admissible in any
jurisdiction or tribunal having jurisdiction over any matter relating to this
Agreement; however, original counterpart signature pages shall be promptly
delivered to all parties and attached to as the counterpart original of the
applicable documents.
10.5 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.
10.6 Notices. All notices, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by overnight courier service, one (1) day after delivery to
the courier or, if earlier, upon delivery against a signed receipt therefor or
(b) upon transmission by facsimile or telecopier, which transmission is
confirmed and an original of such notice is, on or before the next day of U.S.
Postal Service operations following such transmission, sent by First Class Mail,
postage prepaid, in either case addressed to the party to be notified at the
address set forth below or at such other address as such party shall have
notified the other parties hereto, by notice given in conformity with this
Section 10.6:
(a) If to Hayes:
if by hand or overnight courier:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners Circle East
Norcross, Georgia 30092
Attention: Mr. Dennis C. Hayes and
36
<PAGE> 37
Contracts Administration
Telecopy: (770) 840-6840
if by United States mail:
Hayes Microcomputer Products, Inc.
Post Office Box 105203
Atlanta, Georgia 30348
Attention: Mr. Dennis C. Hayes
and Contracts Administration
with a required copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E., Suite 700
Atlanta, Georgia 30309
Attention: G. Donald Johnson, Esq.
Telecopy: (404) 888-7490
(b) If to the Company:
Cardinal Technologies, Inc.
1827 Freedom Road
Lancaster, Pennsylvania 17602
Attention: Mr. Frank Leonardi
Telecopy: (717) 293-3055
with a required copy to:
Drinker Biddle & Reath
Suite 300
1000 Westlakes Drive
Berwyn, Pennsylvania 19312-2409
Attention: Walter J. Mostek, Jr., Esquire
Telecopy: (610) 993-8585
(c) If to Vulcan:
Vulcan Ventures Incorporated
110-110th Avenue, N.E.
Suite 500
Bellvue, Washington 98004
Attention: Mr. William D. Savoy
Telecopy: (206) 453-1985
37
<PAGE> 38
with a required copy to:
Foster Pepper & Shefelman
1111 Third Avenue
Suite 3400
Seattle, Washington 98101-3299
Attention: Christopher W. Wright, Esquire
Telecopy: (206) 749-2037
10.7 Expenses. Each party hereto shall pay all fees and
expenses of such party's respective counsel, accountants and other paid
representatives and all other expenses incurred by such party incident to the
negotiation, preparation and execution of this Agreement and the consummation of
the transaction contemplated hereby.
10.8 Amendments and Waivers. Any term of this Agreement
may be amended only with the written consent of each of the parties hereto.
10.9 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 this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
10.10 Entire Agreement. This Agreement, the Exhibits and
Schedules attached hereto, and such are hereby incorporated herein, and the
other documents and agreements delivered pursuant hereto constitute the full and
entire understanding and agreement among the parties with regard to the subjects
hereof and thereof and supersedes any prior agreements (including any memorandum
of understanding or letters of intent) between the parties regarding the subject
matter hereof.
10.11 Public Announcements. No party shall make any public
announcement of the execution of this Agreement or the transactions contemplated
hereby without first obtaining the prior consent of the other parties hereto;
provided, however, that nothing contained herein shall prohibit any party hereto
from making any public announcement that such party determines in good faith, is
required by applicable law or the rules or regulations of any applicable
securities exchange; provided, that in such event, such party shall use its
reasonable efforts to consult with the other parties hereto prior to making such
disclosure and in any case will promptly notify all other parties of such
disclosure.
10.12 Further Assurances. Each party covenants that at any
time, and from time to time, after the date of Closing, it will execute such
additional instruments and take such actions as may be reasonably requested by
the other parties to confirm or perfect or otherwise to carry out the intent and
purposes of this Agreement.
38
<PAGE> 39
10.13 Tax Consequences of the Parties. The parties agree
that no parties make any representations or warranties herein as to the tax
consequences of this Agreement or the events and the actions contemplated
hereby.
39
<PAGE> 40
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
HAYES MICROCOMPUTER PRODUCTS, INC.,
a Georgia corporation
By: /s/ Dennis C. Hayes
---------------------------
Name: DENNIS C. HAYES
Title: Chairman
HAYES MERGER SUB, INC.,
a Pennsylvania corporation
By: /s/ Dennis C. Hayes
---------------------------
Name: Dennis C. Hayes
---------------------------
Title: President
---------------------------
CARDINAL TECHNOLOGIES, INC.,
a Pennsylvania corporation
By: /s/ Frank Leonardi
---------------------------
Name: Frank Leonardi
Title: President
VULCAN VENTURES INCORPORATED,
a Washington corporation
By: /s/ William D. Savoy
---------------------------
Name: William D. Savoy
Title: Vice President
40
<PAGE> 1
EXHIBIT 10.75
================================================================================
HAYES MICROCOMPUTER PRODUCTS, INC.
PREFERRED STOCK PURCHASE AGREEMENT
APRIL 11, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. DEFINITIONS ............................................................... -1-
Section 2. PURCHASE AND SALE OF STOCK ................................................ -3-
2.1 Sale and Issuance of Preferred to Purchaser ............................... -3-
2.2 Closing; Payment and Delivery ............................................. -3-
Section 3. CONDITIONS OF COMPANY'S OBLIGATIONS AT CLOSING ............................ -4-
3.1 Shareholders' Agreement ................................................... -4-
3.2 Representations and Warranties True at Closing ............................ -4-
3.3 Securities Law Qualification .............................................. -4-
Section 4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING .......................... -4-
4.1 Charter ................................................................... -4-
4.2 Representations and Warranties True at Closing ............................ -4-
4.3 Corporate Proceedings ..................................................... -4-
4.4 Closing Certificates ...................................................... -4-
4.5 Corporate Standing ........................................................ -5-
4.6 Opinion of Counsel for the Company ........................................ -5-
4.7 Consents .................................................................. -5-
4.8 Closing of Merger of Cardinal Technologies, Inc. .......................... -5-
4.9 Due Diligence ............................................................. -5-
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................. -5-
5.1 Organization and Qualification ............................................ -5-
5.2 Power ..................................................................... -5-
5.3 Capitalization ............................................................ -5-
5.4 Subsidiaries .............................................................. -7-
5.5 Financial Statements ...................................................... -7-
5.6 Liabilities ............................................................... -8-
5.7 Company Authorizations .................................................... -8-
5.8 Validity of Securities .................................................... -8-
5.9 Governmental Authorizations ............................................... -8-
5.10 Other Authorizations ...................................................... -8-
5.11 Properties ................................................................ -8-
5.12 Intellectual Property ..................................................... -9-
5.13 Other Agreements .......................................................... -9-
5.14 Absence of Certain Changes and Events ..................................... -9-
5.15 Contracts; No Defaults .................................................... -9-
5.16 Litigation ................................................................ -10-
5.17 Employee Benefit Plans .................................................... -10-
5.18 Offering .................................................................. -10-
5.19 Fees and Commissions ...................................................... -10-
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
5.20 Environmental Matters ..................................................... -11-
5.21 Liability Insurance ....................................................... -11-
5.22 Disclosure ................................................................ -11-
5.23 No Impairment of Purchaser's Rights........................................ -11-
5.24 Deemed Disclosure.......................................................... -11-
Section 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ........................... -11-
6.1 Investment Intent -12-
6.2 Investment Experience; Accredited Investor Status ......................... -12-
6.3 Potential for Loss ........................................................ -12-
6.4 Brokers ................................................................... -12-
6.5 Authorization ............................................................. -12-
6.6 Due Diligence ............................................................. -12-
Section 7. COVENANTS OF THE COMPANY .................................................. -12-
7.1 Insurance ................................................................. -12-
7.2 Payment of Taxes .......................................................... -12-
7.3 Compliance With Laws, Etc -13-
7.4 Preservation of Corporate Existence and Property .......................... -13-
7.5 Material Adverse Change ................................................... -13-
7.6 Expenses -13-
7.7 Termination of Covenants .................................................. -13-
Section 8. RESTRICTED SECURITIES ..................................................... -14-
8.1 Restrictive Legends ....................................................... -14-
8.2 Transfer -14-
8.3 Removal of Legends ........................................................ -14-
Section 9. MISCELLANEOUS ............................................................. -15-
9.1 Brokers, Indemnification .................................................. -15-
9.2 Stamp Tax and Delivery Costs .............................................. -15-
9.3 Entire Agreement; Amendment and Waiver .................................... -15-
9.4 Replacement Certificates .................................................. -15-
9.5 Representations and Warranties to Survive Closing ......................... -16-
9.6 Severability .............................................................. -16-
9.7 Successors and Assigns .................................................... -16-
9.8 Notices ................................................................... -16-
9.9 Governing Law ............................................................. -17-
9.10 Counterparts .............................................................. -18-
9.11 Headings................................................................... -18-
9.12 Dispute Resolution ........................................................ -18-
</TABLE>
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<PAGE> 4
TABLE OF EXHIBITS
EXHIBIT A Amended and Restated Articles of Incorporation
EXHIBIT B By-laws
EXHIBIT C Shareholders' Agreement
EXHIBIT D Exceptions to Representations
EXHIBIT E Financial Statements
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<PAGE> 5
PREFERRED STOCK PURCHASE AGREEMENT
Preferred Stock Purchase Agreement dated as of April 11, 1997 (this
"Agreement"), between Hayes Microcomputer Products, Inc., a Georgia corporation
(the "Company"), and Vulcan Ventures Incorporated, a Washington corporation (the
"Purchaser").
Capitalized terms used in this Agreement and not otherwise defined are
defined in Section 1 of this Agreement.
PRELIMINARY STATEMENT
The Company wishes to authorize and sell a new class of stock, called
Series B Preferred Stock, and the Purchaser wishes to purchase shares of the
Series B Preferred Stock from the Company, on the terms provided in this
Agreement.
In consideration of the mutual representations and agreements set forth
in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
therefore agree as follows.
Section 1. DEFINITIONS.
1.1. As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any person, any entity controlling,
controlled by or under common control with such designated person. For the
purposes of this definition, "controlling", "controlled by" or "under common
control" shall have the meaning specified as of the date of this Agreement for
that word in Rule 405 promulgated by the Securities and Exchange Commission
under the Securities Act.
"Board" means the Board of Directors of the Company.
"By-laws" means the Amended and Restated By-laws of the Company in the
form attached to this Agreement as Exhibit B, as amended through Closing.
"Common" means the Company's Common Stock, $.01 par value per share.
"Conversion Stock" means the Common issued or issuable upon conversion
of the Series B Preferred.
"Environmental, Health, and Safely Laws" means all applicable federal,
state and local last, rules, regulations, orders, guidelines, ordinances and
requirements relating to pollution or protection of the environment, public
health and safety, or employee health and safety, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.9601 et seq., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss.6901 et seq., the Emergency Planning and Community Right-to-Know Act,
42 U.S.C. ss.11001 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Federal Water Pollution Control Act, 33 U.S.C.
<PAGE> 6
ss. 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq., the Hazardous Materials
Transportation Act, 49 U. S. C. ss. 1801, and the Occupational Safety and Health
Act, 42 U.S.C. ss.651 et seq., each as amended, and any regulations, rules,
ordinances adopted or publications promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all rules and regulations promulgated thereunder.
"Intellectual Property" means: (a) all fictional business names,
registered and unregistered trademarks, service marks and applications
(collectively, "Marks"); (b) all patents, patent applications and inventions and
discoveries that may be patentable (collectively, "Patents"); (c) all copyrights
in both published works and unpublished works (collectively "Copyrights"); (d)
all rights in mask works (collectively, "Mask Works"); and (e) all material
know-how, trade secrets, confidential information, customer lists, software
(including source and object codes), technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets");
all as owned, used or licensed by the Company or any Subsidiary in its business,
including as licensee or licensor.
"Plans" means all employee benefit plans, as defined in Section 3(3) of
ERISA, which (i) are (or have been) sponsored by, (ii) cover (or have covered)
the employees (or former employees) of, or (iii) to which contributions are (or
have been) made by, the Company or any Subsidiary for any employee of the
Company or any Subsidiary.
"Preferred" means, collectively, the Series A Preferred and the Series
B Preferred.
"Purchaser" means Vulcan Ventures Incorporated.
"Restated Charter" means the Amendment and Restated Articles of
Incorporation of the Company in the form attached to this Agreement as Exhibit
A.
"Securities" means any debt or equity securities of the Company,
whether now or hereafter authorized, and any instrument convertible into, or
exercisable or exchangeable for, Securities or a Security.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Series A Preferred" means (a) the 4,900,000 shares of the Company's
Series A Preferred Stock, without par value, and (b) other Securities issued as
a dividend or other distribution with respect to, or in replacement of, any
Series A Preferred.
"Series B Preferred" means (a) the 263,113 shares of the Company's
Series B Preferred Stock, without par value, sold to the Purchaser pursuant to
this Agreement, and (b) other
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<PAGE> 7
Securities issued as a dividend or other distribution with respect to, or in
replacement of, any Series B Preferred.
"Shareholders' Agreement" means the Shareholders' Agreement made as of
April 16, 1996 among the Company and certain other parties in the form attached
to this Agreement as Exhibit C, as amended from time to time.
"Subsidiary" means as of April 4, 1997 (a) any corporation at least 50%
of whose outstanding Voting Stock, or any class thereof, is owned or controlled,
directly or indirectly, by the Company or by one or more Subsidiaries or by the
Company and one or more Subsidiaries, (b) any partnership of which the Company
or one or more Subsidiaries is a general partner, for which the Company or one
or more Subsidiaries possesses the power to direct the affairs or of which the
Company or any Subsidiary owns, directly or indirectly, 50%, or more of any
class of partnership interest, (c) any limited liability company for which the
Company or one or more Subsidiaries possesses the power to direct the affairs of
the limited liability company or of which the Company or any Subsidiary owns,
directly or indirectly, 50% or more of any class of membership interest.
"Transfer" means any sale, assignment, transfer, negotiation, pledge,
hypothecation, or other disposition, and any other event or transaction in which
a lien is created.
"Voting Stock" as applied to the stock of any corporation, means stock
of any class or classes (however designated) having ordinary voting power for
the election of a majority of the members of the board of directors (or other
governing body) of such corporation, other than stock having such power only by
reason of the happening of a contingency.
Section 2. PURCHASE AND SALE OF STOCK.
2.1 Sale and Issuance of Preferred to Purchaser. Subject to the
terms and conditions of this Agreement, and upon the basis of the
representations and warranties contained in this Agreement the Company agrees to
sell to the Purchaser and to issue to the Purchaser free and clear of any liens,
claims, charges and encumbrances whatsoever (except those imposed by the
Purchaser or pursuant to this Agreement or the Shareholder Agreement), and the
Purchaser agrees to purchase from the Company 263,113 shares of Series B
Preferred for the purchase price of $20.9036 per share.
2.2 Closing; Payment and Delivery . Payment for and delivery of the
certificates evidencing the Series B Preferred to be sold to the Purchaser (the
"Closing") shall be effected at Womble Carlyle Sandridge & Rice, 1275 Peachtree
Street N.E., Suite 700, Atlanta, Georgia, at 9:00 am. Eastern time on April 16,
1997, or at such other place, time or date upon which the Company and the
Purchasers shall agree. At the Closing the purchase price for the Series B
Preferred purchased by the Purchaser shall be paid in immediately available
funds against delivery by the Company to the Purchaser of certificates
representing 263,113 shares of Series B Preferred.
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<PAGE> 8
Section 3. CONDITIONS OF COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to consummate the sale of the Series B Preferred to
the Purchaser are subject to the satisfaction of the following conditions, any
of which may be waived by the Company in writing:
3.1 Shareholders' Agreement . The Purchaser shall have entered into
an addendum to the Shareholders' Agreement substantially in the form attached
hereto and, subject to the consummation of the transaction to occur at the
Closing.
3.2 Representations and Warranties True at Closing. The
representations and warranties made by the Purchaser in Section 6 of this
Agreement shall have been true when made, and shall be true as of the Closing as
if made at the Closing.
3.3 Securities Law Qualification . The offer and sale of the Series B
Preferred shall be qualified or exempt from qualification under all applicable
federal and state securities laws.
Section 4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The
obligation of the Purchaser to purchase the Series B Preferred under this
Agreement is subject to the satisfaction of the following conditions, any of
which may be waived by Purchaser in writing:
4.1 Charter. The Company shall have adopted the Restated Charter,
filed it with the appropriate offices in the State of Georgia, and the Restated
Charter shall constitute the Company's articles of incorporation, as amended and
restated through the date of the Closing.
4.2 Representations and Warranties True at Closing. The
representations and warranties made by the Company in Section 5 of this
Agreement shall have been true when made, and shall be true as of the Closing as
if made at the Closing.
4.3 Corporate Proceedings. All corporate and other proceedings
required to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchaser, and the Purchaser shall have received all
such counterpart originals or certified or other copies of such documents as it
shall request.
4.4 Closing Certificates. At the Closing, the Company shall have
delivered to the Purchaser copies of each of the following, in each case
certified as of the date of the Closing by the Secretary of the Company:
(a) the By-laws of the Company; and
(b) resolutions of the Board adopting and authorizing the
execution and filing of the Restated Charter, and authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, the issuance and sale of the Series B Preferred to be sold pursuant to
this Agreement and the reservation of the Common issuable upon conversion of the
Series B Preferred.
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4.5 Corporate Standing . The Company and each U.S. Subsidiary shall
be validly existing as a corporation in their respective state of incorporation,
and the Company shall have delivered to the Purchaser copies of a current
certificate of existence for the Company and each U.S. Subsidiary in their
respective states of incorporation, certified by the Secretary of State of the
State of Georgia.
4.6 Opinion of Counsel for the Company. The Purchaser shall have
received from legal counsel to the Company an opinion with respect to the
Closing in form and substance reasonably acceptable to Purchaser.
4.7 Consents. The Company shall have obtained all consents necessary
for the sale of the Series B Preferred under this Agreement, and waivers of
preemptive rights from all necessary parties as required under the Shareholders'
Agreement and any other applicable agreement.
4.8 Closing of Merger of Cardinal Technologies, Inc. The Company,
through a wholly-owned subsidiary, will have closed the acquisition of Cardinal
Technologies, Inc. (the "Acquisition").
4.9 Due Diligence. The Purchaser shall be reasonably satisfied, in
its sole discretion, of the results of its due diligence investigation of the
business, prospects, financial condition and results of operations of the
Company, which determination shall be made prior to the closing of the
Acquisition or this condition shall be deemed to have been fulfilled at such
time.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser that, except as set forth on the
schedules attached as Exhibit D to this Agreement (references to "Knowledge of
the Company", "to the Company's Knowledge" or similar phrases shall mean for
purposes of Section 5 the knowledge of any of the Company's principal executive
officers or members of the Board after due inquiry as to the matters contained
herein):
5.1 Organization and Qualification. The Company is a corporation
duly organized and validly existing in good standing under the laws of the State
of Georgia and has the requisite legal and corporate power to own its property
and to carry on its business as proposed to be conducted by it. The Company is
qualified and authorized to transact business and is in good standing as a
foreign corporation in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business, properties, prospects or
financial condition.
5.2 Power. The Company has all requisite legal power to enter into
this Agreement and to carry out and perform its obligations under the terms
hereof and thereof. The Company has all requisite legal power to issue the
Series B Preferred and the Conversion Stock.
5.3 Capitalization .
(a) At the Closing, the authorized capital stock of the
Company will consist of 100,000,000
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shares of Common and 10,263,113 shares of Preferred Stock, of which 10,000,000
shares are designated Series A Preferred and 263,113 shares are designated
Series B Preferred. After giving effect to the consummation of the transactions
contemplated by this Agreement at the Closing, all of the capital stock of the
Company which is either issued or outstanding, reserved for issuance or
committed to be issued will consist of:
(i) 10,000,000 shares of authorized Series A
Preferred, of which 4,900,000 fully paid and
non-assessable shares of Series A Preferred
are duly issued and outstanding;
(ii) 4,900,000 shares of authorized, unissued
Common reserved for issuance upon conversion
of the Series A Preferred;
(iii) 263,113 fully paid and non-assessable shares
of Series B Preferred duly issued and
outstanding and owned of record by the
Purchaser;
(iv) 263,113 shares of authorized, unissued Common
reserved for issuance upon conversion of the
Series B Preferred;
(v) 4,991,750 fully paid and non-assessable
shares of Common duly issued and outstanding
and owned of record;
(vi) 1,800,000 shares of authorized, unissued
Common reserved for issuance to employees of
and consultants to the Company upon exercise
of stock options granted and to be granted
pursuant to the Company's stock option plan;
(vii) additional shares of Common Stock that may be
issued under the Anti-Dilution Warrant (as
defined in the Shareholders Agreement);
(viii) additional shares of Common Stock that may be
issued upon conversion of Convertible
Promissory Notes (as defined in the
Shareholders Agreement); and
(ix) 600,000 shares of Common Stock received for
issuance under the Board Warrants (as defined
in the Shareholders Agreements).
(b) The Shareholders' Agreement grants preemptive rights to each
shareholder who was a party thereto. The Company has received executed waivers
of such preemptive rights from every person who was entitled pursuant to the
Shareholders' Agreement to preemptive rights with respect to the issuance of the
Series B Preferred. Except as provided in the Shareholders' Agreement, no person
is entitled to any preemptive right or right of first refusal with respect to
the issuance of the Series B Preferred as contemplated by this Agreement. There
are no outstanding preemptive rights, options, warrants, conversion rights,
agreements or other rights
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<PAGE> 11
to purchase any of the authorized but unissued stock of the Company or any
Subsidiary other than those issued, reserved or committed to be issued as set
forth in Section 5.3 of this Agreement and other than those granted in the
Shareholders' Agreement.
(c) None of the Company or any Subsidiary has issued or
obligated itself to issue Securities other than as contemplated by this
Agreement.
5.4 Subsidiaries. The Company owns one hundred percent (100%) of
the issued capital stock of the Subsidiaries described in Schedule 5.4. To the
knowledge of the Company, each Subsidiary is a corporation duly organized and
validly existing in good standing under the laws of the state or country in
which it is incorporated and has the requisite legal and corporate power to own
its property and to carry on its business as proposed to be conducted by it. To
the knowledge of the Company, each Subsidiary is qualified and authorized to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business, properties, prospects or financial condition. The
Company does not own of record or beneficially any securities of any
corporation, any interest or investment in any partnership, limited liability
company, association, fund or other business entity of any material value,
except for the Subsidiaries.. The Company is not a participant in any joint
venture, partnership, limited liability company or similar arrangement.
5.5 Financial Statements.
(a) The Company has delivered to the Purchaser its unaudited
consolidated balance sheet as of February 28, 1997 (the "Reference Balance
Sheet"), its unaudited consolidated balance sheet as of December 31, 1996, and
statements of operations for such year attached to this Agreement as Exhibit E
(the "Financial Statements"). The Financial Statements were prepared in
accordance with generally accepted accounting principles. The Reference Balance
Sheet accurately reflects the financial position of the Company and its
Subsidiaries as of the date indicated in all material respects. The foregoing
statement of operations accurately reflects the Company's operations for such
period in all material respects.
(b) Since the date of the Reference Balance Sheet, there has been
no event or condition of any type that has materially and adversely affected or,
to the best of its knowledge, is likely to affect materially and adversely the
business, condition, affairs, operations, properties or assets of the Company or
its Subsidiaries.
(c) Audited financial statements of the Company for fiscal 1995,
consisting of a consolidated balance sheet, consolidated statement of operations
and statement of cash flows for such year, with accompanying notes (the "Annual
Financial Statements") are attached hereto as Exhibit E.
The Annual Financial Statements are accurate and complete in all
material respects and have been prepared in accordance with generally accepted
accounting principles consistently applied during those two years. The Company
received an unqualified opinion on the Annual Financial Statements from the
Company's independent accountants.
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<PAGE> 12
5.6 Liabilities. To the knowledge of the Company, neither the Company
nor any Subsidiary has any liabilities exceeding $250,000 except (a) liabilities
fully reflected on the Reference Balance Sheet, (b) liabilities disclosed, on
Exhibit D to this Agreement, and (c) liabilities incurred in the ordinary course
of business since the date of the Reference Balance Sheet, which do not exceed
$100,000 in the aggregate.
5.7 Company Authorizations. All corporate action on the part of the
Company and its directors and shareholders necessary for the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and for the authorization, issuance and
delivery of the Series B Preferred and the Conversion Stock has been taken or
will be taken prior to Closing. This Agreement is the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as limited by bankruptcy, insolvency or other laws affecting
the enforcement of creditors rights generally and (ii) that the availability of
equitable relief is subject to the discretion of the court before which any
proceeding therefor may be brought (the "Standard Exceptions").
5.8 Validity of Securities. Except for liens, charges, claims or
encumbrances created by or through the Purchaser or imposed by this Agreement
(a) the Series B Preferred, when issued, sold and delivered in accordance with
the terms of this Agreement, will be duly and validly issued, fully paid,
non-assessable and free and clear of all liens, charges, claims and
encumbrances; and (b) the shares of Conversion Stock have been duly and validly
reserved and, upon issuance in accordance with the conversion provisions of the
Restated Charter will be duly and validly issued, fully paid, non-assessable and
free and clear of all liens, charges, claims and encumbrances.
5.9 Governmental Authorizations. All consents, approvals,
qualifications, licenses, orders or authorizations of, or filings with, any
governmental authority, including state securities or blue sky offices, required
in connection with the Company's valid execution, delivery or performance of any
of this Agreement or the offer, sale or issuance of the Series B Preferred, or
the issuance of Conversion Stock, have been obtained or made, except for routine
post-closing filings with the United States Securities and Exchange Commission
and under state corporation and securities laws, each of which will be timely
filed within the applicable period therefor.
5.10 Other Authorizations. No approval or consent of any third party
is required by law or by the Restated Charter or By-laws of the Company or by
any indenture, instrument or other agreement to which the Company is a party or
by any holder of indebtedness of the Company in connection with the issuance and
sale of Series B Preferred pursuant to this Agreement and the performance by the
Company of its obligations hereunder except for any approval or consent that
would not have a material adverse effect on the Company's business, properties,
prospects or financial condition or the transactions contemplated by this
Agreement.
5.11 Properties. Except as reflected on the Reference Balance Sheet,
neither the Company nor its Subsidiaries owns or leases any material real or
tangible personal property that would be required by generally accepted
accounting principles to be reflected on the Reference Balance Sheet.
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<PAGE> 13
5.12 Intellectual Property. To the best of the Company's knowledge,
the conduct of the Company's business does not violate, conflict with or
infringe the Intellectual Property of others. To the best of the Company's
knowledge, the Company has valid title to or rights to use all Intellectual
Property necessary for the conduct of its business.
5.13 Other Agreements.
(a) Except as set forth on Exhibit D, the execution and delivery
of this Agreement, the consummation of the transactions contemplated herein, the
current business of the Company and its Subsidiaries, and compliance with the
terms and provisions of this Agreement will not conflict with or result in a
breach of the terms and conditions of, or constitute any default under, the
Restated Charter or By-laws of the Company, or the charter or by-laws of any
Subsidiary, or of any provision of (i) any indebtedness of the Company or any
Subsidiary, (ii) any contract, covenant or instrument under which the Company or
any Subsidiary is bound, or (iii) any judgment, order, ruling, injunction or
decree of any court or administrative agency affecting the Company or any
Subsidiary, except for any conflict, breach or default that would not have a
material adverse effect on the Company's business, properties, prospects or
financial condition or the transactions contemplated by this Agreement.
(b) To the knowledge of the Company none of the principal
executive officers of the Company or any Subsidiary is obligated under any
contract (including licenses, covenants or commitments of any kind) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would have or could have a material adverse effect
on the Company's business, property or condition, financial or otherwise.
5.14 Absence of Certain Changes and Events . Since the date of the
Reference Balance Sheet, the Company and each Subsidiary have conducted their
business only in the ordinary course and there has not been any:
(a) damage to or destruction or loss of any asset or property of
the Company or any Subsidiary, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, financial condition or
prospects of the Company, taken as a whole; or
(b) sale, lease or other disposition of any asset or property of
the Company or any Subsidiary, or mortgage, pledge or imposition of any lien or
other encumbrance on any material asset or property of the Company or any
Subsidiary other than in the ordinary course of business.
5.15 Contracts; No Defaults. The Company has made available to the
Purchaser true and complete copies of all written contracts and agreements
involving performance of services or delivery of goods or materials to or by the
Company or any Subsidiary, each lease, rental, license and conditional sale
agreement affecting any real or personal property used, owned or licensed by the
Company or any Subsidiary, and all other contracts and agreements to which the
Company or any Subsidiary is a party or is bound, and a written summary of any
oral agreement described
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<PAGE> 14
above, in each case if the contract or agreement involves the payment of
$500,000 or more in either a single aggregate payment or over a twelve month
period. Each such contract is in full force and effect and is valid and
enforceable in accordance with its terms, subject to the Standard Exceptions.
None of the Company or any U.S. Subsidiary, or to the knowledge of the Company,
any foreign Subsidiary is in material default with respect to the performance of
any Company (or Subsidiary) obligations under any such contracts.
5.16 Litigation. Except as disclosed on Exhibit D, there are no
actions, suits, arbitrations or other proceedings, or investigations pending or,
to its knowledge, threatened against or affecting the Company or any Subsidiary
before any court or before any administrative agency or administrative officer
or executive which may have a material adverse effect on the Company. There are
no actions, suits, arbitrations or other proceedings pending or, to its
knowledge, threatened against the principal executive officers of the Company or
any Subsidiary by reason of the past employment relationship of executive
management which may have a material adverse effect on the Company.
5.17 Employee Benefit Plans. Schedule 5.17 contains an accurate and
complete list of all Plans, as defined below, contributed to, maintained or
sponsored by the Company, to which the Company is obligated to contribute or
with respect to which the Company has any liability or potential liability,
whether director or indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of companies, within the
meaning of Sections 414(B), 414(c), and 414(m) of the Code, of which the Company
is a member. For purposes of this Agreement, the term "Plans" shall mean: (A)
employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not funded and
whether or not terminated; (B) employment agreements; and (C) personnel policies
or fringe benefit plans, policies, programs and arrangements, whether or not
subject to ERISA, whether or not funded, and whether or not terminated,
including without limitation, stock bonus, deferred compensation, pension,
severance, bonus, vacation, travel, incentive, and health, disability and
welfare plans. Each Plan and all related trusts, insurance contracts, and funds
have been maintained, funded and administered in compliance in all respects with
all applicable laws and regulations, including but not limited to ERISA and the
Code.
5.18 Offering. Subject to the truth of the representations and
warranties of the Purchaser contained in Section 6 hereof, the offer, sale and
issuance of the Series B Preferred as contemplated by this Agreement, and the
issuance of Conversion Stock, are exempt from the registration requirements of
the Securities Act.
5.19 Fees and Commissions. None of the Company or any Subsidiary has
retained any finder, broker, agent, financial adviser or other intermediary in
connection with the transactions contemplated by this Agreement, and none of the
Company or any Subsidiary owes any such fees to any person in connection
therewith.
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<PAGE> 15
5.20 Environmental Matters.
(a) To its knowledge, the Company and its Subsidiary have
complied in all material respects with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the generality of the
preceding sentence, to its knowledge, the Company and each Subsidiary have
obtained and been in compliance with all of the material terms and conditions of
all permits, licenses, and other authorizations which are required under, and
have materially complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health, and Safety Laws.
(b) To its knowledge, none of the Company or any Subsidiary has
any Liability (and none of the Company or any Subsidiary has handled or disposed
of any substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or owned or operated
any property or facility in any manner that could form the basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company or any Subsidiary giving rise to any
material liability) for damage to any site, location, or body of water (surface
or subsurface), for any material illness of or material personal injury to any
employee or other individual, or for any reason under any Environmental, Health,
and Safety Law.
5.21 Liability Insurance. In the Company's reasonable business
judgment, the Company has procured, in adequate amounts, effective not later
than the Closing, with financially sound and reputable insurers, insurance
against material loss or damage with respect to the Company's and any
Subsidiary's properties and business.
5.22 Disclosure. To the knowledge of the Company, this Agreement does
not contain any untrue statement of material fact or omit to state any material
fact necessary in order to make the statements contained herein not misleading.
5.23 No Impairment of Purchaser's Rights. The Company agrees and
acknowledges that any examination or inspection of the properties, financial
condition or other matters of the Company and its Subsidiaries or their
respective businesses conducted by the Purchaser or their representatives prior
to Closing shall in no way limit, affect or impair the ability and right of the
Purchaser to rely upon the representations, warranties and covenants of the
Company set forth in this Agreement.
5.24 Deemed Disclosure. Any disclosure or exception by the Company in
this Agreement, in any exhibit hereto, or in any document, schedule or other
written information delivered to the Purchaser in connection herewith, shall be
deemed to be a disclosure and exception with respect to same and throughout this
Agreement and the attachments hereto.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants to the Company that:
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<PAGE> 16
6.1 Investment Intent. The Purchaser is acquiring the Series B
Preferred for its own account for investment and not with a view to, or for sale
or other disposition in connection with, any distribution thereof, nor with any
present intention of selling or otherwise disposing of the same.
6.2 Investment Experience; Accredited Investor Status. The Purchaser
is experienced in investing in nonpublic companies such as the Company, and has
sufficient knowledge and experience in business and financial matters to permit
it to evaluate the merits and risks of an investment in the Company. The
Purchaser is an "accredited investor" as defined in Regulation D promulgated
under the Securities Act.
6.3 Potential for Loss. The Purchaser has the economic ability to
bear the complete loss of the Purchaser's investment in the Company.
6.4 Brokers. The Purchaser has not engaged any broker or finder who
is entitled to any fee or commission from the Company in connection with this
Agreement or the transactions contemplated hereby.
6.5 Authorization. The Purchaser has full power and authority to
enter into this Agreement, and that this Agreement, when executed and delivered,
will constitute a valid and legally binding obligation of such Purchaser.
6.6 Due Diligence. The Purchaser represents, warrants and
acknowledges that (i) the Company has provided it with the opportunity to
inspect its books, records, financial information, contracts, loan documents and
other information and data of the Company and make copies thereof, (ii) the
Company has made available for inquiry by Purchaser the Company's principal
officers and managers, attorneys and accountants, (iii) the Company has made its
facilities available for inspection by Purchaser, (iv) the Company has delivered
to Purchaser copies of financial statements, revenue and sales information and
other information, including, but not limited to, the information described in
Schedule 6.6 and (v) the Company has briefed Purchaser regarding the Company's
project known as "Cashew." This provision does not limit or modify any of the
representations or warranties of the Company in Section 5 of this Agreement or
affect the Purchaser's reliance thereon. Furthermore, the Purchaser is relying
on the accuracy of these representations and warranties of the Company in making
its investment decision.
Section 7. COVENANTS OF THE COMPANY.
7.1 Insurance. The Company agrees to maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Subsidiaries, against loss or damage of the kinds customarily insured against by
corporations of established reputation and similar size engaged in the same or
similar businesses, in customary adequate amounts.
7.2 Payment of Taxes. The Company agrees to deposit, and agrees to
cause each Subsidiary to deposit, all taxes due to any governmental unit with
respect to compensation paid
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<PAGE> 17
to any employee of the Company or any Subsidiary on or before the due date
therefor. The Company agrees to pay or cause to be paid, and agrees to cause
each Subsidiary to pay or cause to be paid, all taxes, assessments and other
governmental charges levied upon any of its or their respective properties or
assets, or in respect of its or their respective franchises, businesses, income
or profits before the same become delinquent, except that (unless and until
foreclosure, sale or other similar proceedings shall have been commenced) no
such charge need be paid if being contested in good faith and by appropriate
proceedings promptly initiated and diligently conducted if (a) such reserve or
other appropriate provision, if any, as shall be required by sound accounting
practice shall have been made therefor and (b) no property or assets are in
imminent danger of forfeiture.
7.3 Compliance With Laws, Etc. The Company agrees to comply, and
agrees to cause each Subsidiary to comply, with all material laws, rules,
regulations, judgments, orders and decrees of any governmental or regulatory
authority applicable to it and its respective assets and properties, and with
all contracts and agreements to which it is a party or shall become a party, and
to perform all obligations which it has or shall incur. The Company shall make
all required securities filings under federal and applicable state securities
laws in connection with the issuance and sale of the Series B Preferred and the
Conversion Stock.
7.4 Preservation of Corporate Existence and Property. The Company
agrees to preserve, protect and maintain (a) its corporate existence, (b) its
rights, franchises and privileges, and (c) all its properties necessary or
useful in the proper conduct of its business in good working order and
condition, with the exception of (i) ordinary wear and tear and (ii) casualty
losses covered by insurance, allowing for reasonable deductibles. The Company
will maintain reasonably adequate financial and accounting controls.
7.5 Material Adverse Change. The Company agrees to notify the
Purchaser promptly in writing of (a) any change in the business or affairs of
the Company which the Company reasonably determines shall constitute a material
adverse change in the Company's business or affairs, or (b) any breach of any of
its covenants, representations or warranties set forth in this Agreement.
7.6 Expenses. Each of the parties hereto agrees to bear all of its
own expenses in connection with this Agreement and the consummation of the
Purchaser of the Series B Preferred Stock. In addition, the Company shall pay
the reasonable legal fees of, plus out-of-pocket expenses incurred by, counsel
to the Purchaser in connection with any amendments hereto which amendments were
requested by the Company, and any waivers or consents delivered pursuant hereto.
7.7 Termination of Covenants. The obligations of the Company pursuant
to each of Sections 7.1 through 7.6 shall terminate upon the earlier of (a) the
Purchaser owning less than twenty percent of the Series B Preferred initially
purchased pursuant to this Agreement, or (b) the conversion of the Series B
Preferred Stock to Common Stock.
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Section 8. RESTRICTED SECURITIES.
8.1. Restrictive Legends.
(a) Unless and until otherwise permitted by this Section, each
certificate for Preferred and Conversion Stock issued to a Purchaser or any
subsequent transferee of any such certificate shall be stamped or otherwise
imprinted with legends in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any other applicable
Federal or state securities laws, and may not be sold, distributed,
pledged on or otherwise transferred unless (i) there is an effective
registration statement under the Securities Act and applicable state
securities laws covering any such transaction involving these shares,
(ii) the Company receives an opinion of legal counsel for the holder
of the shares satisfactory to the Company stating that such
transaction is exempt from registration, or (iii) the Company
otherwise satisfies itself that such transaction is exempt from
registration.
"The shares represented by this certificate are subject to the
terms and conditions of a certain Shareholders Agreement and may not
be sold, encumbered or transferred except in accordance with the terms
and conditions of said Agreement, a copy of which is on file at the
principal office of the Company and will be furnished to the holder of
the certificate upon request and without charge."
(b) In addition to the other legends required by this Section
8.1, each certificate for Preferred and Conversion Stock issued to a Purchaser
or any subsequent transferee shall be stamped or otherwise imprinted with any
legend required pursuant to applicable state corporation and securities laws.
8.2 Transfer. The Company may decline to acknowledge or register a
Transfer of any shares of Preferred or Conversion Stock bearing any legend
pursuant to Section 8. 1, and may instruct any transfer agent for its Securities
to decline the same, unless the Company is reasonably satisfied that the
Securities being transferred have been registered or are exempt from
registration under applicable securities laws.
8.3 Removal of Legends. Whenever the legend or legends described in
Section 8.1 shall no longer be required by law, the holder of any particular
shares of Preferred or Conversion Stock bearing such legend shall be entitled to
receive from the Company, upon delivery to the Company of an opinion of counsel
reasonably satisfactory to the Company stating that such legends may be removed,
without expense to such holder, one or more new certificates for such particular
shares not bearing restrictive legends pursuant to Section 8.1 hereof.
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<PAGE> 19
Section 9. MISCELLANEOUS.
9.1 Brokers, Indemnification. The Company will hold the Purchaser
free and harmless from any claim, demand, liability for, or expense in
connection with, any broker's or finder's fees or commissions from any person
acting on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby. The Purchaser will hold the Company free and
harmless from any claim, demand, liability for, or expense in connection with,
any broker's or finder's fee or commissions from any person acting on behalf of
the Purchaser in connection with this Agreement or the transactions contemplated
hereby.
9.2 Stamp Tax and Delivery Costs. The Company will pay all stamp and
other taxes, if any, which may be payable in respect of the sale of Securities
hereunder to the Purchaser and the issuance of such Securities to the Purchaser
or its nominee, and will save the Purchaser harmless against any loss or
liability resulting from nonpayment or delay in payment of any such tax. The
Company will also pay all reasonable costs of delivery to the Purchaser, or its
nominee, of the Securities issuable to the Purchaser hereunder.
9.3 Entire Agreement; Amendment and Waiver.
(a) This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to this subject matter. Any term, covenant,
agreement or condition contained in this Agreement may be amended with, and only
with, the consent of the Company and the Purchaser. Compliance by the Company
with any such term, covenant, agreement or condition may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by written instruments signed by the Purchaser.
(b) This Agreement shall not be altered, amended or supplemented
except by written agreement in accordance with Section 9.3(a) above. Any waiver
of any term, covenant, agreement or condition contained in this Agreement shall
not be deemed a waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement or condition
shall not be deemed a waiver of any later default thereof or of any default of
any other term, covenant, agreement or condition.
9.4 Replacement Certificates .
(a) The Company will issue a new certificate evidencing Series B
Preferred or Conversion Stock in place of any such certificate alleged to have
been lost, stolen, destroyed or mutilated, upon (i) receipt by the Company,
except as otherwise provided in Section 9.4(b), of indemnity satisfactory to it,
in the case of a lost, stolen or destroyed certificate, (ii) surrender and
cancellation of such certificate if mutilated, and (iii) reimbursement to the
Company of all reasonable expenses incidental thereto.
(b) If the Purchaser or any Affiliate of the Purchaser is the
beneficial owner of a lost, stolen or destroyed certificate, then an affidavit
of an officer of the beneficial owner, if a
-15-
<PAGE> 20
corporation, setting forth the fact of loss, theft or destruction, and the
Purchaser's or Affiliate's beneficial ownership of the certificate at the time
of such loss, theft or destruction, shall be accepted as satisfactory evidence
thereof, and no indemnity shall be required as a condition to execution and
delivery of a new certificate other than the written agreement of the Purchaser
or such Affiliate, as the case may be, to indemnify the Company and its
directors, officer and agents.
(c) Any certificate made and delivered in accordance with the
provisions of this Section 9.4 shall be dated as of the date of the certificate
in lieu of which such new certificate is made and delivered. The term
"outstanding", when used in this Agreement with reference to Securities as of
any particular time, shall not include Preferred or Conversion Stock evidenced
by a certificate in lieu of which a new certificate has been made and delivered
by the Company in accordance with the provisions of this Section 9.4, but shall
include such Preferred or Conversion Stock as evidenced by such new certificate.
9.5 Representations and Warranties to Survive Closing. All
representations, warranties and covenants contained herein or made in writing by
the Company or the Purchaser in connection herewith shall survive the execution
and delivery of this Agreement and the issuance and sale of Series B Preferred
hereunder, and the issuance of Conversion Stock upon conversion of the Series B
Preferred until the expiration of three (3) years from the date hereof.
9.6 Severability. The invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder hereof in such jurisdiction or the validity,
legality or enforceability hereof, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
9.7 Successors and Assigns. All representations, warranties,
covenants and agreements of the parties contained in this Agreement or made in
writing in connection herewith, shall, except as otherwise provided herein, be
binding upon and inure to the benefit of their respective successors and
permitted assigns. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for the benefit of the
Purchasers are also for the benefit of, and enforceable by, any subsequent
holders of Securities purchased hereunder except any subsequent holder who
acquires any such Security after such Security has been sold to the public
pursuant to an effective registration statement under the Securities Act or in a
sale through a broker or market maker effected pursuant to Rule 144 of the
Securities and Exchange Commission.
9.8 Notices. All communications in connection with this Agreement
shall be in writing and shall be deemed properly given if hand delivered or sent
by telecopier (provided that such communication is confirmed by same-day deposit
in the United States mail first class postage prepaid) or overnight courier with
adequate evidence of delivery or sent by registered or certified mail, postage
prepaid and return receipt requested and, if to the Purchaser or its nominee,
addressed to the Purchaser at the address for notices set forth below and if to
any holders of Securities other than a Purchaser or its nominee, addressed to
such holders at their addresses as
-16-
<PAGE> 21
shown on the books of the Company or its transfer agent, and if to the Company,
to the Company's offices at:
If by hand delivery or overnight courier:
Hayes Microcomputer Products, Inc.
5835 Peachtree Corners East
Norcross, Georgia 30092
Attention: Contracts Administration
If by mail to:
Hayes Microcomputer Products, Inc.
Post Office Box 105203
Atlanta, Georgia 30348
Attention: Contracts Administration
with a copy to:
Womble Carlyle Sandridge & Rice, PLLC
1275 Peachtree Street, N.E.
Suite 700
Atlanta, Georgia 30309
Attention: G. Donald Johnson, Esq.
to the Purchaser:
Vulcan Ventures Incorporated
110-110th Avenue N.E., Suite 550
Bellevue, WA 98004
with a copy to:
Foster Pepper & Shefelman
1111 Third Avenue, 34th Floor
Seattle, Washington 98101
Attention: Alan Koslow, Esq.
or such other addresses or persons as the recipient shall have designated to the
sender by a written notice given in accordance with this Section 9.8. Any notice
called for hereunder shall be deemed delivered when received.
9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
-17-
<PAGE> 22
9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same Agreement.
9.11 Headings. The headings used herein are solely for the
convenience of the parties and shall not serve to modify or interpret the text
of the Sections at the beginning of which they appear.
9.12 Dispute Resolution.
(a) Policy - Mediation. The parties hope there will be no
disputes arising out of their relationship. To that end, each commits to
cooperate in good faith and to deal fairly in performing its duties under this
agreement in order to accomplish their mutual objectives and avoid disputes. But
if a dispute arises, the parties agree to resolve all disputes, except as set
forth below, by the following alternate dispute resolution process:
(i) first, the parties will seek a fair and prompt
negotiated resolution in accordance with the following
procedures:
(A) Upon the written request of either party hereto,
each of the parties will appoint a designated
representative whose task it will be to meet for
the purpose of endeavoring to resolve such
dispute.
(B) The designated representatives shall meet as
often as necessary to gather and furnish to the
other all information with respect to the matter
in issue which is appropriate and germane in
connection with its resolution.
(C) Such representatives shall discuss the problem
and negotiate in good faith in an effort to
resolve the dispute without the necessity of any
formal proceeding relating thereto.
(D) During the course of such negotiations all
reasonable requests made by one party to the
other for non-privileged information reasonably
related to this Agreement, will be honored in
order that each of the parties may be fully
advised of the other's position.
(E) The specific format for such discussions will be
left to the discretion of the designated
representatives, but may include the preparation
of agreed upon statements of fact or written
statements of position furnished to the other
party.
-18-
<PAGE> 23
(ii) If the designated representatives cannot resolve the
dispute within sixty (60) days after the initial
request to negotiate the dispute, then the dispute
shall be escalated to the Chairman of the Company, or
his designee, and the Chief Executive Officer of the
Purchaser, for their review and resolution. If the
dispute cannot be resolved within thirty (30) days
after referral to such officers, then the provisions of
Subsection (b) below shall apply.
(b) Arbitration. Except as provided below, all disputes not
resolved in accordance with the above procedures shall be resolved by binding
arbitration. The parties recognize that negotiation or mediation may not be
appropriate to resolve some disputes and agree that either party may proceed
with arbitration without negotiating or mediating. The parties confirm that by
agreeing to this alternate dispute resolution process, they intend to give up
their right to have any dispute decided in court by a judge or jury.
Notwithstanding the foregoing or anything to the contrary herein, if a dispute
arises out of or relates to a breach of the Confidentiality Agreements between
the parties dated March 20, 1997, or any other agreement or provision for which
a party is seeking injunctive relief, then such dispute shall not be subject to
the provisions of this Section 9.12 and may be resolved by formal judicial or
equitable resolution.
(c) Binding Arbitration. Except as provided above, any claim
between the parties, including but not limited to those arising out of or
relating to this agreement and any claim based on or arising from an alleged
tort, shall be determined by arbitration in Atlanta, Georgia. In any arbitration
proceeding, there shall be three (3) arbitrators, one selected by Hayes, one
selected by Vulcan, and the third selected by the two arbitrators chosen by the
parties. If the parties (or their respective arbitrators) cannot agree on the
identity of the arbitrator(s) within ten (10) days of the arbitration demand,
the arbitrator(s) shall be selected by the administrator of the American
Arbitration Association (AAA) office in Atlanta, Georgia from its Large, Complex
Case Panel (or have similar professional credentials). Each arbitrator shall be
an attorney with at least fifteen (15) years' experience in commercial law and
shall reside in the Atlanta metropolitan area. Whether a claim is covered by
this agreement shall be determined by the arbitrator(s). All statutes of
limitations which would otherwise be applicable shall apply to any arbitration
proceeding hereunder.
(d) Procedures. The arbitration shall be conducted in
accordance with the AAA Commercial Arbitration Rules with Expedited Procedures,
in effect on the date hereof, as modified by this agreement. There shall be no
dispositive motion practice. As may be shown to be necessary to ensure a fair
hearing: the arbitrator(s) may authorize limited discovery; and may enter
pre-hearing orders regarding (without limitation) scheduling, document exchange,
witness disclosure and issues to be heard. The arbitrator(s) shall not be bound
by the rules of evidence or of civil procedure, but may consider such writings
and oral presentations as reasonable business people would use in the conduct of
their day-to-day affairs, and may require the parties to submit some or all of
their case by written declaration or such other manner of presentation as the
arbitrator(s) may determine to be appropriate. The parties intend to limit live
testimony and cross-examination to the extent necessary to ensure a fair hearing
on material issues.
-19-
<PAGE> 24
(e) Hearing - Law - Appeal Limited. The arbitrator(s) shall
take such steps as may be necessary to hold a private hearing within one hundred
twenty (120) days of the initial demand for arbitration and to conclude the
hearing within three (3) days; and the arbitrator(s)'s written decision shall be
made not later than fourteen (14) calendar days after the hearing. The parties
have included these time limits in order to expedite the proceeding, but they
are not jurisdictional, and the arbitrator(s) may for good cause afford or
permit reasonable extensions or delays, which shall not affect the validity of
the award. The written decision shall contain a brief statement of the claim(s)
determined and the award made on each claim. In making the decision and award,
the arbitrator(s) shall apply applicable substantive law. Absent fraud,
collusion or willful misconduct by an arbitrator, the award shall be final, and
judgment may be entered in any court having jurisdiction thereof. The
arbitrator(s) may award injunctive relief or any other remedy available from a
judge, including the joinder of parties or consolidation of this arbitration
with any other involving common issues of law or fact or which may promote
judicial economy, and may award attorneys' fees and costs to the prevailing
party but shall not have the power to award punitive or exemplary damages. The
decision and award of the arbitrators need not be unanimous; rather, the
decision and award of two arbitrators shall be final.
(f) Provisional Remedies. Pending selection of the
arbitrator(s), either party may request the AAA to appoint unilaterally an
arbitrator for the limited purpose of awarding temporary or preliminary relief.
This award may be immediately entered in any federal or state court having
jurisdiction over the parties even though the decision on the underlying dispute
may still be pending. Once appointed, the arbitrator(s) may, upon request of a
party, issue a superseding order to modify or reverse such temporary or
preliminary relief or may confirm such relief pending a full hearing on the
merits of the underlying dispute. Any such initial or superseding order of
temporary or preliminary relief may be immediately entered in any federal or
state court having jurisdiction over the parties even though the decision on the
underlying dispute may remain pending. Such relief may be granted by the
arbitrator(s) only after notice to and opportunity to be heard by the opposing
party unless the party applying for such relief demonstrates that its purpose
would be rendered futile by giving notice.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
-20-
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock
Purchase Agreement to be executed on the day first above written.
THE COMPANY: HAYES MICROCOMPUTER PRODUCTS, INC.,
a Georgia corporation
By: /s/ Dennis C. Hayes
-----------------------------
DENNIS C. HAYES, Chairman
SERIES B PURCHASER: VULCAN VENTURES INCORPORATED, a
Washington corporation
By: /s/ William D. Savoy
-----------------------------
WILLIAM D. SAVOY,
Title: Vice President
----------------------
-21-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF HAYES CORPORATION
Set forth below are the names of certain subsidiaries, at least 50% owned,
directly or indirectly, of Hayes Corporation as of January 3, 1998.
<TABLE>
<CAPTION>
PERCENTAGE STATE OR OTHER
OWNED BY JURISDICTION OF
IMMEDIATE INCORPORATION
NAME PARENT OR ORGANIZATION
---- ---------- ----------------
<S> <C> <C>
Hayes Corporation (Registrant):
Hayes Microcomputer Products, Inc................................. 100 Georgia
Access Beyond Technologies, Inc................................... 100 Delaware
Access Beyond Limited............................................. 100 U.K.
Hayes Microcomputer Products (France) SARL........................ 100 France
Hayes Microcomputer Products (Germany) GmbH....................... 100 Germany
Hayes Microcomputer Products (International) Limited.............. 100 U.S. Virgin Islands
Hayes Microcomputer Products de Mexico S.A. de C.V................ 100(1) Mexico
Hayes Microcomputer Products (Scandinavia) ApS.................... 100 Denmark
Enterprise Technologies, Inc...................................... 100 Georgia
Hayes Microcomputer Products (Canada) Limited..................... 100 Canada
Hayes Government Services, Inc.................................... 100 Georgia
Practical Peripherals (Europe) Limited............................ 100 U.K.
Hayes Microcomputer Products (Australia) PTY Limited.............. 100 Australia
Hayes (Asia Pacific) Limited...................................... 100(2) Hong Kong
Hayes (China) Limited............................................ 100(3) Hong Kong
Cardinal Technologies, Inc........................................ 100 Pennsylvania
Cardinal Technologies Japan Ltd.................................. 100 Japan
Cardinal Technologies GmbH....................................... 100 Germany
</TABLE>
- ---------------
(1) Hayes Microcomputer Products, Inc. owns 98% and 2% is held in the name of
Dennis Hayes in trust for the benefit of the Company.
(2) Hayes Microcomputer Products, Inc. owns 99% and 1% is held in the name of
Dennis Hayes in trust for the benefit of the Company.
(3) Hayes (Asia Pacific) Limited owns 50% and 50% is held in the name of
Dennis Hayes in trust for the benefit of the Company.
<PAGE> 1
EXHIBIT 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Our report on the consolidated financial statements of Hayes Corporation is
included on page F-1 of this Form 10-K. In connection with our audits of such
consolidated financial statements, we have also audited the related consolidated
financial statement schedule included on page F-21 of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand, L.L.P.
Atlanta, Georgia
February 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HAYES CORPORATION FOR THE YEAR ENDED JANUARY 3,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 15,770
<SECURITIES> 0
<RECEIVABLES> 43,652
<ALLOWANCES> 4,241
<INVENTORY> 32,250
<CURRENT-ASSETS> 89,321
<PP&E> 48,809
<DEPRECIATION> 39,373
<TOTAL-ASSETS> 115,328
<CURRENT-LIABILITIES> 80,710
<BONDS> 0
52,914
0
<COMMON> 193
<OTHER-SE> (19,069)
<TOTAL-LIABILITY-AND-EQUITY> 115,328
<SALES> 199,612
<TOTAL-REVENUES> 199,612
<CGS> 154,799
<TOTAL-COSTS> 154,799
<OTHER-EXPENSES> 11,788
<LOSS-PROVISION> 389
<INTEREST-EXPENSE> 4,478
<INCOME-PRETAX> (81,127)
<INCOME-TAX> (4)
<INCOME-CONTINUING> (81,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84,606)
<EPS-PRIMARY> (10.80)
<EPS-DILUTED> (10.80)
</TABLE>
