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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
MICROCOM, INC.
(NAME OF SUBJECT COMPANY)
MICROCOM, INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
595 019 100
(CUSIP NUMBER OF CLASS OF SECURITIES)
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LEWIS A. BERGINS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MICROCOM, INC.
500 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062
(617) 551-1000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PARTIES AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
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WITH COPIES TO:
WILLIAM C. ROGERS, ESQ.
CHOATE, HALL & STEWART
EXCHANGE PLACE
53 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 248-5000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The subject company is Microcom, Inc., a Massachusetts corporation (the
"Company"). The address of the principal executive offices of the Company is
500 River Ridge Drive, Norwood, Massachusetts 02062. The title of the class of
equity securities to which this Statement on Schedule 14D-9 (this "Statement")
relates is the Company's Common Stock, par value $.01 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer made by Compaq-Boston, Inc., a
Massachusetts corporation (the "Purchaser"), to purchase all of the outstanding
Shares at a price of $16.25 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated April 16,
1997 (the "Offer to Purchase") and the related Letter of Transmittal and any
supplement thereto (which together constitute the "Offer"). The Purchaser is a
wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation
("Parent"). The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1") dated April 16, 1997 and filed by the Parent and the
Purchaser with the Securities and Exchange Commission (the "Commission").
According to the Schedule 14D-1, the address of the principal executive offices
of Parent is 20555 SH 249, Houston, Texas 77070, and the address of the
principal executive offices of the Purchaser is 20555 SH 249, Houston, Texas
77070.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of April 9, 1997, by and among the Purchaser, Parent and the
Company (the "Merger Agreement"). The Merger Agreement provides that, upon the
terms and subject to the conditions contained therein, as promptly as
practicable after the purchase of Shares pursuant to the Offer and, if required
by the Business Corporation Law of the Commonwealth of Massachusetts (the
"Massachusetts Law"), the approval and adoption by the affirmative vote of the
shareholders of the Company in accordance with the Massachusetts Law and the
Company's Articles of Organization, the Purchaser will be merged with and into
the Company (the "Merger") and each then outstanding Share (other than (i)
shares held by the Company as treasury stock, (ii) shares held by the Parent or
any subsidiary of the Parent, (iii) shares as to which appraisal rights have
been properly exercised or (iv) shares of Option Restricted Stock (as defined in
Item 3 below)) will be converted automatically into the right to receive $16.25
in cash. A copy of the Merger Agreement is filed as Exhibit 1 hereto and is
incorporated herein by reference in its entirety. Certain provisions of the
Merger Agreement are described below in Item 3(b)(2).
ITEM 3. IDENTITY AND BACKGROUND
(A) IDENTITY
The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
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(B)(1) ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS AND AFFILIATES
Certain information with respect to certain contracts, agreements,
arrangements and understandings between the Company and certain of its
directors, executive officers and affiliates is set forth in the "Information
Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1 Thereunder" dated April 16, 1997, which is attached as Annex II
hereto and incorporated herein by reference in its entirety (the "Information
Statement").
Parent has entered into a written agreement dated as of April 9, 1997 with
Lewis A. Bergins, President and Chief Executive Officer of the Company (the
"Continuation Agreement"), pursuant to which Mr. Bergins would continue to serve
as President of the Company after consummation of the Merger. The Continuation
Agreement has a one-year term, subject to extension upon the agreement of the
parties. Under the Continuation Agreement Mr. Bergins would receive: (i) base
salary of approximately $285,000 per annum, subject to annual increases; (ii)
eligibility for a target bonus for 1997 of $215,000, depending upon attainment
of certain agreed-upon performance criteria; and (iii) an option to purchase
25,000 shares of Parent's common stock. In the event of termination of Mr.
Bergins' employment during the term of the Continuation Agreement other than for
"cause," as defined in the Continuation Agreement, the Continuation Agreement
provides that Mr. Bergins would be entitled to severance compensation from
Parent of one year's continuance of his annual base salary as in effect at the
time of termination. Upon consummation of the Merger, the Continuation
Agreement supersedes Mr. Bergins' existing compensation and severance
arrangements with the Company.
Except as otherwise described herein in response to Item 3(b)(1) or
3(b)(2), to the best knowledge of the Company, as of the date hereof, there are
no material contracts, agreements, arrangements or understandings, or any actual
or potential conflicts of interest between the Company or its affiliates and (i)
the Company's executive officers, directors or affiliates or (ii) Parent or the
Purchaser or the executive officers, directors or affiliates of each of them.
The Company understands that Parent may grant to certain officers and
employees of the Company options to acquire shares of Parent stock in accordance
with Parent's compensation plans.
(B)(2) THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement
and the other agreements described under "Other Arrangements" below, copies of
which are filed as Exhibits hereto and are incorporated herein by reference in
their entirety. Such summary is qualified in its entirety by reference to the
Merger Agreement and the other Exhibits filed herewith.
THE OFFER. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
(as described below) and certain other conditions that are described below. The
Purchaser has agreed that no change in the Offer may be
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made which changes the form of consideration to be paid or decreases the price
per Share or the number of Shares sought in the Offer, or which imposes
conditions to the Offer in addition to the Minimum Condition and those
conditions described below, or amends the terms and conditions of the Offer in a
manner adverse to the Company.
As of April 9, 1997, there were outstanding 16,288,011 Shares and stock
options to purchase an aggregate of 2,102,346 Shares. Based upon the foregoing,
as of April 9, 1997, there were approximately 18,390,357 Shares outstanding on a
fully diluted basis. Neither Parent nor Purchaser beneficially owns any Shares.
Accordingly, the Minimum Condition would be satisfied if approximately 9,195,179
Shares are validly tendered pursuant to the Offer and not withdrawn.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions of
the Offer, Parent shall not be required to accept for payment or pay for any
Shares, and may terminate the Offer if (i) the Minimum Condition shall not have
been satisfied by June 4, 1997, (ii) the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall not
have expired or been terminated by June 4, 1997 or (iii) at any time on or after
April 9, 1997, prior to the acceptance for payment of Shares, any of the
following conditions exist:
(a) there shall be threatened, instituted or pending any action, suit,
investigation or proceeding by any government or governmental authority or
agency, domestic or foreign, or by any other person, domestic or foreign,
before any court or government authority or agency, domestic or foreign,
(i) challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of the
Offer, the acceptance for payment of or payment for some of or all of the
Shares pursuant to the Offer or the consummation of the Merger, seeking to
obtain material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Offer or the Merger, (ii) seeking to
restrain or prohibit Parent's ownership or operation (or that of its
respective subsidiaries or affiliates) of all or any material portion of
the business or assets of the Company and its subsidiaries, taken as a
whole, or of Parent and its subsidiaries, taken as a whole or to compel
Parent or any of its subsidiaries or affiliates to dispose of or hold
separate all or any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of Parent and its
subsidiaries, taken as a whole, (iii) seeking to impose or confirm material
limitations on the ability of Parent or any of its subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Parent or any of its subsidiaries or affiliates on all matters
properly presented to the Company's shareholders, or (iv) seeking to
require divestiture by Parent or any of its subsidiaries or affiliates of
any Shares, or (v) that otherwise is reasonably likely to have a material
adverse effect on the financial condition, business, assets or results of
operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect"), or to materially adversely affect Parent and
its subsidiaries, taken as a whole, or
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(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued
or deemed applicable to the Offer or the Merger, by any court, government or
governmental authority or agency, domestic or foreign other than the
application of the waiting period provisions of the HSR Act to the Offer or
the Merger that is reasonably likely, directly or indirectly, to result in any
of the consequences referred to in clauses (i) through (v) of paragraph (a)
above; or
(c) (i) there shall be initiated, threatened, instituted or pending
any action, suit, investigation or proceeding by any government or
governmental authority or agency, domestic or foreign, that, in the reasonable
judgment of Parent, would materially adversely affect the Company and its
subsidiaries, taken as a whole, or (ii) except as disclosed in writing to
Parent prior to April 9, 1997 there has been since December 31, 1996 any
event, occurrence or development or state of circumstances or facts which has
had or could reasonably be expected to have a Material Adverse Effect; or
(d) there shall have occurred a decline of at least 20% in either the
Dow Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from
April 9, 1997 through the date of termination or expiration of the Offer; or
(e) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger Agreement
or any of the representations and warranties of the Company set forth in the
Merger Agreement shall not be true in any material respect when made or at any
time prior to consummation of the Offer as if made at and as of such time
(except as to any representation or warranty, which speaks as of a specific
date which must be untrue as of such date); or
(f) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or an agreement in
principle with respect to any Acquisition Proposal (as hereinafter defined) or
the Board of Directors of the Company shall have withdrawn or materially
modified in any manner adverse to Parent the Board's approval or
recommendation of the Offer or the Merger; or
(g) any person or group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than
Parent, Purchaser or any affiliate thereof) shall have become the beneficial
owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of a
majority of the outstanding Shares; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms.
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The foregoing conditions are for the sole benefit of Parent and Purchaser
and may, subject to the terms of the Merger Agreement, be waived by Parent and
Purchaser in whole or in part at any time and from time to time in their
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time prior to the Effective Time (as hereinafter defined).
RECOMMENDATION. The Board has (i) unanimously determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, are fair to and in the best interest of the Company's shareholders, (ii)
unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger and (iii) unanimously resolved,
subject to their fiduciary duties as advised by counsel, to recommend acceptance
of the Offer and approval and adoption of the Merger Agreement and the Merger by
the Company's shareholders.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, at the time which the Company and the Purchaser file
the articles of merger (the "Articles of Merger") with the Secretary of State of
the Commonwealth of Massachusetts and make all other filings or recordings
required by Massachusetts Law in connection with the Merger, Purchaser shall be
merged with and into the Company in accordance with Massachusetts Law. The
Merger shall become effective at such time as the Articles of Merger are duly
filed with the Secretary of State of the Commonwealth of Massachusetts (the
"Effective Time"). As a result of the Merger, the separate corporate existence
of the Purchaser will cease and the Company will be the surviving corporation
(the "Surviving Corporation").
At the Effective Time (i) each Share held in the treasury of the Company or
owned by Parent or any subsidiary thereof (including Purchaser) shall be
canceled, and no payment shall be made with respect thereto, (ii) each share of
common stock of Purchaser then outstanding shall be converted into and become
one share of common stock of the Surviving Corporation, and (iii) each Share
outstanding immediately prior to the Effective Time shall, except as otherwise
provided in (i) above, Shares as to which appraisal rights have been properly
exercised and Shares of Option Restricted Stock (as hereinafter defined), be
converted into the right to receive $16.25 per Share in cash without interest.
The Merger Agreement provides that, at the Effective Time, the Articles of
Organization of Purchaser will be the Articles of Organization of the Surviving
Corporation, except that the name of the Surviving Corporation shall be
"Microcom, Inc."
OPTION RESTRICTED STOCK. With respect to any Share acquired upon exercise
of an option granted under any stock option or incentive plan of the Company
that as of the Effective Date is subject to contractual forfeiture or resale
restrictions ("Option Restricted Stock"), such Share shall be canceled
immediately prior to the Effective Time, and Parent shall grant, as of the
Effective
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Time, to each former holder of Restricted Stock, a number of shares of
Parent common stock having a market value, based on the most recent per share
closing price of Parent common stock on the New York Stock Exchange prior to the
Effective Date, equal to the product of (i) the number of Shares of Restricted
Stock formerly held by such holder multiplied by (ii) $16.25. Such Parent
common stock shall be subject to the same contractual forfeiture or resale
restrictions as applied to the Restricted Stock immediately prior to the
cancellation thereof.
AGREEMENTS OF PARENT, PURCHASER AND THE COMPANY. The Merger Agreement
provides that effective upon acceptance of payment pursuant to the Offer of a
number of Shares that satisfies the Minimum Condition, Parent shall be entitled
to designate the number of directors, rounded up to the next whole number, on
the Company's Board of Directors that equals the product of (i) the total number
of directors on the Board of Directors (giving effect to the election of any
additional directors pursuant to this paragraph) multiplied by (ii) the
percentage that the number of Shares beneficially owned by Parent (including
Shares accepted for payment) bears to the total number of Shares outstanding;
and the Company shall take all action necessary to cause the Parent's designees
to be elected or appointed to the Board of Directors, including, without
limitation, increasing the number of directors, and seeking and accepting
resignations of its incumbent directors. The Merger Agreement further provides
that the Company shall use its best efforts to cause at least three members of
the Company's Board of Directors as of the date of the Merger Agreement who are
not employees of the Company (the "Continuing Directors") to remain members of
the Board of Directors until the Effective Time.
If the Parent exercises its right to designate directors, the Parent
currently intends to designate one or more of the following persons to serve as
directors of the Company: Alan G. Lutz, J. David Cabello, Edward E. Olkkola,
Earl L. Mason and Robert W. Stearns. The foregoing information and certain
other information contained in this Statement and in the Information Statement
attached hereto as Annex II and incorporated by reference herein, are being
provided in accordance with the requirements of Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder.
Pursuant to the Merger Agreement, the Company shall cause a meeting of its
shareholders (the "Company Shareholder Meeting") to be duly called and held as
soon as reasonably practicable following consummation of the Offer for the
purpose of voting on the approval and adoption of the Merger Agreement, unless a
vote of shareholders by the Company is not required by Massachusetts Law.
The Merger Agreement provides that the Company will promptly prepare and
file with the Commission under the Exchange Act a proxy statement relating to
the Company Shareholder Meeting (the "Proxy Statement"). The Company has agreed
to use its best efforts to obtain the necessary approvals by its shareholders of
the Merger Agreement and the transactions contemplated thereby. Parent has
agreed to vote all Shares then beneficially owned by it in favor of adoption of
the Merger Agreement.
The Company has agreed that, prior to the Effective Time, the Company will
not adopt or propose any change in its Articles of Organization or by-laws; in
addition, the Company
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has agreed that prior to the Effective Time, the Company will not, and will not
permit any of its subsidiaries (each, a "Subsidiary") to (a) merge or
consolidate with any other Person or (other than purchases of materials or
products in the ordinary course of business) acquire a material amount of assets
of any other person; (b) sell, lease, license or otherwise dispose of any
material asset or property to any Person except (i) pursuant to existing
contracts or commitments, and (ii) in the ordinary course consistent with past
practice; (c) settle or compromise any suit or claims or threatened suit or
claim relating to the transactions contemplated under the Merger Agreement; (d)
agree or commit to do any of the foregoing; or (e) take or agree or commit to
take any action that would make any representation and warranty of the Company
under the Merger Agreement inaccurate in any respect at, or as of any time prior
to, the Effective Time.
Pursuant to the Merger Agreement, the Company has agreed that from the date
of the Merger Agreement until the termination thereof, the Company and the
Subsidiaries and the officers, directors, employees or other agents of the
Company and the Subsidiaries will not, directly or indirectly, (i) take any
action to solicit, initiate or encourage any Acquisition Proposal (as
hereinafter defined) or (ii) except as otherwise required by the fiduciary
duties of the Board of Directors as advised in writing by counsel, engage in
negotiations with, or disclose any nonpublic information relating to the Company
or any Subsidiary or afford access to the properties, books or records of the
Company or any Subsidiary to, any Person. The Company has agreed to notify
promptly Parent (and in no event later than 24 hours after receipt of a written
Acquisition Proposal) after (i) receipt of any Acquisition Proposal, (ii) the
Company has actual knowledge that any Person is considering making an
Acquisition Proposal or (iii) the Company has received any request for nonpublic
information relating to the Company or any Subsidiary or for access to the
properties, books or records of the Company or any Subsidiary by any Person that
the Company has actual knowledge is considering making, or has made, an
Acquisition Proposal and to keep Parent fully informed of the status and details
of any such Acquisition Proposal indication or request. "Acquisition Proposal"
means any offer or proposal for a merger or other business combination involving
the Company or any Subsidiary or the acquisition of any equity interest in, or a
substantial portion of the assets of, the Company or any Subsidiary, other than
the transactions contemplated by the Merger Agreement. The Company has agreed
not to engage in negotiations with, or disclose any nonpublic information to,
any Person unless it receives from such Person an executed confidentiality
agreement with terms no less favorable to the Company than the Confidentiality
Agreement between the Company and Parent dated April 9, 1997. Pursuant to the
Merger Agreement, the Company has agreed to cease immediately and cause to be
terminated all activities, discussions or negotiations, if any, with any Persons
conducted prior to April 9, 1997 with respect to any Acquisition Proposal.
Parent and the Company have agreed to appoint personnel from their
respective human relations departments that will meet and coordinate the manner
of transition of the insurance, compensation and other benefit plans of the
Company following the Merger. The parties have agreed that for two years
following the Effective Time, the Company's employees will be provided benefits
that are substantially comparable in the aggregate to those provided by the
Company to its employees as of April 9, 1997, excluding all forms of stock-based
or equity based compensation.
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Parent and Purchaser have agreed that for five years after the Effective
Time, Parent will cause the Surviving Corporation to indemnify and hold harmless
the present and former officers and directors of the Company in respect of acts
or omissions occurring prior to the Effective Time to the extent provided under
the Company's Articles of Organization and by-laws in effect on the date of the
Merger Agreement, subject to any limitation imposed from time to time under
applicable law. In addition, Parent has agreed that for five years after the
Effective Time, Parent will cause the Surviving Corporation to use its best
efforts to provide officers' and directors' liability insurance in respect of
acts or omissions occurring prior to the Effective Time covering each such
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date of the Merger Agreement. Parent
will not be obligated to cause the Surviving Corporation to pay premiums in
excess of 150% of the amount per annum the Company paid in the twelve months
ended December 31, 1996, which amount has been disclosed to Parent.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains customary
representations and warranties of the parties thereto including (a)
representations by the Company as to its corporate existence and power,
corporate authorizations, governmental authorizations, non-contravention,
capitalization, Subsidiaries, Commission filings, financial statements,
disclosure documents, absence of certain damages, absence of undisclosed
material liabilities, litigation, taxes, employee matters, compliance with laws,
finders' fees, patents and other proprietary rights, environmental matters, and
antitakeover provisions and (b) representations by the Parent as to its and the
Purchaser's corporate existence and power, corporate authorizations,
governmental authorizations, non-contravention, disclosure documents and
finders' fees.
CONDITIONS TO THE MERGER. The obligations of the Company, Parent and
Purchaser to consummate the Merger are subject to the satisfaction of the
following conditions: (i) if required by Massachusetts Law, the adoption by the
shareholders of the Company of the Merger Agreement in accordance with such law;
(ii) any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated; (iii) no provision of any applicable law
or regulation and no judgment, injunction, order or decree shall prohibit the
consummation of the Merger; and (iv) Purchaser shall have purchased Shares
pursuant to the Offer.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding any approval
of the Merger Agreement by the shareholders of the Company, (a) by mutual
written consent of the Company and Parent; (b) by either the Company or Parent,
if the Offer has not been consummated by June 4, 1997; (c) by either the Company
or Parent if there shall be any law or regulation that makes consummation of the
Offer or the Merger illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Parent or the Company from consummating
the Offer or the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; (d) by either the Company or Parent
if the Company shall have entered into, or shall have publicly announced its
intention to enter into, an agreement or an agreement in principle with respect
to any Acquisition Proposal; or (e) by Parent if any person or group (as defined
in Section 13(d)(3) of the Exchange Act) (other than Parent, Purchaser or any
affiliate thereof) shall have become the beneficial owner
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(as defined in Rule 13d-3 promulgated under the Exchange Act) of at least a
majority of the outstanding Shares. If the Merger Agreement is terminated, the
Merger Agreement will become void and of no effect with no liability on the part
of the Company, Parent or the Purchaser other than obligations of the Company
under certain provisions of the Merger Agreement to pay certain fees to and
expenses of Parent or Purchaser (as described below).
FEES AND EXPENSES. The Company has agreed that if the Merger Agreement is
terminated (i) in accordance with clause (b) under "Termination" above and (x)
the Company shall have failed to observe or perform in any material respect any
of its obligations under the Merger Agreement or (y) an Acquisition Proposal
shall have been received prior to June 4, 1997 and not publicly rejected by the
Company's Board of Directors, or (ii) in accordance with clauses (d) or (e)
above, the Company will pay to Parent, within two business days following such
event, a fee equal to $10,460,000 in cash.
The Company has agreed to pay Parent an amount in immediately available
funds equal to the sum of (i) Parent's out-of-pocket expenses in connection with
the transactions contemplated by the Merger Agreement (but not in excess of $2
million) and (ii) $2 million, after the termination of the Merger Agreement
pursuant to the provisions described in clause (b) under "Termination" above,
where any of the representations or warranties of the Company set forth in the
Merger Agreement were not true and correct as of the date of the Merger
Agreement.
Except as described in the preceding paragraphs, the Merger Agreement
provides that the Company, Parent and Purchaser shall each bear all expenses
incurred by it in connection with the Merger Agreement and the transactions
contemplated thereby.
AMENDMENT AND WAIVERS. Any provisions of the Merger Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed (i) in the case of any amendment, by the
Company, Parent and Purchaser or (ii) in the case of a waiver, by the party
against whom the waiver is to be effective. A termination or amendment of the
Merger Agreement requires, in the case of the Company, action by the Company's
Board of Directors or the duly authorized designee of the Company's Board of
Directors. In the event that Parent's designees are appointed or elected to the
Board of Directors of the Company after the consummation of the Offer and prior
to the Effective Time, the affirmative vote of at least a majority of the
Continuing Directors will be required for the Company to agree to amend, waive
compliance with or terminate the Merger Agreement.
APPRAISAL RIGHTS. If the Merger is consummated, shareholders of the
Company may have the right to dissent and demand appraisal of their Shares under
Massachusetts Law. Under Massachusetts Law, dissenting shareholders who comply
with the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of the
Shares could be based upon considerations other than or in addition to the price
paid in the Offer, the consideration per Share to be paid in the Merger and the
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market value of the Shares, including asset values and the investment value of
the Shares. Shareholders should recognize that the value so determined could be
higher or lower than the price per Share paid pursuant to the Offer or the
consideration per Share paid in the Merger.
MISCELLANEOUS. Such a merger or other similar business combination would
also have to comply with any applicable Federal law. In particular, unless the
Shares were deregistered under the Exchange Act prior to such transactions, if
such merger or other business combination were consummated more than one year
after termination of the Offer or did not provide for shareholders to receive
cash for their Shares in an amount at least equal to the price per Share paid
pursuant to the Offer, Purchaser may be required to comply with Rule 13e-3 under
the Exchange Act. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority shareholders in such a transaction be filed
with the Commission and distributed to such shareholders prior to consummation
of the transaction.
If Purchaser acquires Shares pursuant to the Offer and depending upon the
number of Shares so acquired and other factors relevant to Purchaser's equity
ownership in the Company, Purchaser may, subsequent to the consummation of the
Offer, seek to acquire additional Shares through open market purchases,
privately negotiated transactions, a tender or exchange offer or other
transactions or a combination of the foregoing on such terms and at such prices
as it shall determine, which may be different from the price paid for Shares in
the Offer. Purchaser also reserves the right to dispose of Shares which it has
acquired or may acquire. Purchaser may also consider engaging in a proxy
solicitation in order to elect its nominees to the Company's Board of Directors.
Except as described above or elsewhere in the Statement, the Company has no
present plans or proposals that would relate to or result in any extraordinary
corporate transaction involving the Company or any of its subsidiaries (such as
a merger, reorganization, liquidation, relocation of any operations or sale or
other transfer of a material amount of assets), any change in the Company's
capitalization or dividend policy or any other material change in the Company's
corporate structure or business.
CONFIDENTIALITY AGREEMENT. Effective as of April 9, 1997, the Company and
Parent entered into a letter agreement (the "Confidentiality Agreement"),
pursuant to which Parent agreed to keep confidential certain business and/or
technical information of the Company furnished to Parent in connection with the
subject matter of the Merger Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) BACKGROUND
In November, 1996, representatives of Parent contacted representatives of
the Company to explore a possible OEM relationship and several meetings between
the companies were held during December, 1996 and January, 1997 to pursue that
relationship.
10
<PAGE>
At a meeting in Boston, Massachusetts on January 9, 1997, originally
scheduled to discuss the nature and terms of an OEM relationship, Mr. Alan
Lutz, Senior Vice President and General Manager of Parent's Communication
Products Group first broached the subject of a possible acquisition of the
Company by the Parent with Messrs. Roland D. Pampel, then President and Chief
Executive Office of the Company and Lewis A. Bergins, then Executive Vice
President, International Operations and Modulation Business of the Company.
Mr. Pampel then reported the substance of that meeting in a telephone
meeting of the Company's Board of Directors (the "Board") on January 11, 1997.
Included in that meeting, in addition to the Board and senior Company
executives, were representatives of Morgan Stanley & Co. Incorporated, as
financial advisors to the Board ("Morgan Stanley"), and the Company's outside
counsel. At that meeting, Morgan Stanley was instructed to consult with
Parent's advisor, Greenhill & Co., LLC ("Greenhill"), to determine Parent's
timetable for the performance of due diligence and negotiations. At the
regularly scheduled Board meeting held January 15, 1997, the matter was again
discussed and representatives of Morgan Stanley reported on their conversations
with Greenhill to the effect that the Parent's timetable for discussions and
negotiations had lengthened although the Parent continued to express interest in
a possible acquisition.
On February 26, 1997, Mr. Bergins next discussed, in a telephone
conversation with Mr. Lutz, the timetable of due diligence and negotiations with
respect to a possible acquisition. The same day, Mr. Bergins reported the
results of his telephone conversation to the Board at its regularly scheduled
February meeting. During the meeting, the Board and Morgan Stanley discussed
issues relating to an acquisition, including timing and negotiation strategies.
On March 4 and 5, 1997, representatives of Parent, its outside counsel, its
outside auditors and Greenhill met in Boston with representatives of the
Company, the Company's outside counsel and Morgan Stanley to discuss matters
relating to the Company and its business.
Mr. Lutz then met with Mr. Bergins in Boston on March 6, 1997 to discuss a
possible transaction structure and Mr. Bergin's role with the Company following
consummation of such a transaction.
The following day, March 7, 1997, Mr. Lutz and representatives of Greenhill
met with the Company's outside counsel and Morgan Stanley to discuss potential
terms under which a transaction could be consummated. Initial proposals from
both sides were considered during this meeting. The Company's Board, after
informal discussion, instructed the Company's senior management and Morgan
Stanley to continue discussions. Messrs. Lutz and Bergins then had a telephone
discussion on Thursday, March 10, 1997, at which certain outstanding due
diligence issues were discussed.
On March 19, 1997, Messrs. Bergins, Pampel and Peter J. Minihane (the
Company's Chief Financial Officer), together with the Company's outside counsel
and several partners from the Company's outside auditors, met in Houston with
representatives of Parent, including Mr. Lutz and Parent's general counsel, to
continue discussions.
11
<PAGE>
The status of discussions was then reported at the Company's regularly
scheduled meeting of the Board on March 21, 1997, at which meeting Mr. Bergins
was directed to continue to negotiate to see if an acquisition with appropriate
price and other conditions satisfactory to the Company, could be structured.
Thereafter, on April 7, 1997, negotiations and discussions among
representatives of the Parent and the Company and their respective outside
counsel and financial advisors began with respect to the terms and conditions of
a merger agreement. Mr. Lutz and Mr. Bergins conferred by telephone on April 8,
1997, and again on April 9, 1997, to discuss specific terms, including price.
On April 9, 1997, the Company's Board met to consider a revised draft of
the Merger Agreement (incorporating the revisions set forth above) including a
price of $16.25 per Share presented by Mr. Lutz to Mr. Bergins in a telephone
conversation prior to the commencement of the Board meeting. In considering the
Merger Agreement, the Board considered and discussed among other things the
following: (i) the Company's business plan for the fiscal year ended March 31,
1998 and the various factors, including risks, attendant to successful
accomplishment of the plan's stated objectives; (ii) the opinion of Morgan
Stanley, described below; (iii) the premium and value accruing to the
shareholders of the Company as a result of the Offer and the Merger; (iv) the
potential effect on other potential bidders of the $10,460,000 fee or $2,000,000
fee (as the case may be) and the reimbursement of up to $2,000,000 in out-of-
pocket expenses that will become payable to Parent under specified circumstances
(including negotiations to reduce the scope or the circumstances under which
such fees and expenses would become payable); (v) the potential effect on other
potential bidders of limitations on the Company's ability to solicit or respond
to other competing bids, if any (including negotiations to reduce the scope of
such limitations); (vi) the history of the Company's experience with its major
OEM partners over the past nine months including a discussion by Morgan Stanley
of consolidations occurring in the data communications industry; and (vii) the
likelihood that the Offer by Parent and the Purchaser would be consummated.
By the unanimous vote of all directors, the Board (i) determined that the
Offer and the Merger, taken together, are fair to and in the best interests of
the Company's shareholders, (ii) approved the Merger Agreement and the
transactions contemplated thereby and (iii) resolved to recommend acceptance of
the Offer and approval and adoption of the Merger Agreement and the Merger by
the Company's shareholders. On April 9, 1997, the parties executed and
delivered the Merger Agreement.
The Board believes that the terms of the Offer and Merger are fair to and
in the best interests of the Company's shareholders. Accordingly, the Board has
approved the Merger Agreement and recommends that the Company's shareholders
accept the Offer and tender their Shares pursuant thereto.
The letter to the Company's shareholders communicating the Board's
recommendation is filed as Exhibit 2 to this Statement and is incorporated
herein by reference. The press release issued by Parent announcing the
execution of the Merger Agreement and the terms of
12
<PAGE>
the Offer and the Merger is filed as Exhibit 3 to this statement and is
incorporated herein by reference.
(B) FACTORS CONSIDERED BY THE BOARD
In determining to recommend to the Company's shareholders that they accept
the Offer and tender their Shares pursuant thereto, the Board and the Committee
considered a number of factors, including, without limitation, the following:
(i) the Board's familiarity with and review of the Company's business,
financial condition, results of operations, assets, liabilities, business
strategy and prospects and, in particular, the Company's business plan for the
fiscal year ended March 31, 1998 and the various factors, including risks,
attendant to successful accomplishment of the Plan's stated objectives;
(ii) the recent consolidations occurring in the Company's industry,
including acquisitions by certain of the Company's OEM partners;
(iii) the written opinion of Morgan Stanley dated April 9, 1997, financial
advisors to the Board, that as of such date the $16.25 per Share consideration
to be received by the shareholders of the Company pursuant to the Merger
Agreement is fair from a financial point of view to such holders; a copy of
such opinion, setting forth procedures followed, assumptions made, areas of
reliance and other matters considered by Morgan Stanley in arriving at their
opinion, is attached as Annex I to this Statement and is incorporated herein
by reference, and should be read in its entirety; in considering such opinion,
the Board was aware that upon delivery thereof, Morgan Stanley became entitled
to certain fees described in Item 5 in connection with its engagement by the
Company and that, in addition, Morgan Stanley expressed no opinion or
recommendation as to whether the Shareholders of the Company should accept the
Offer and the Merger;
(iv) the presentations of Morgan Stanley in connection with such opinion as
to various financial and other considerations deemed relevant to the Board's
evaluation of the Offer and the Merger. In connection with the preparation of
its opinion, Morgan Stanley informed the Board that it had (a) reviewed
certain publicly available financial statements and other information of the
Company and the Parent; (b) reviewed certain internal financial statements and
other financial and operating data concerning the Company prepared by the
management of the Company; (c) analyzed certain financial projections prepared
by the management of the Company; (d) discussed the past and current
operations and financial condition and the prospects of the Company with
senior executives of the Company; (e) reviewed the reported prices and trading
activity for the Common Stock; (f) compared the financial performance of the
Company and the prices and trading activity of the Common Stock with that of
certain other comparable publicly-traded companies and their securities; (g)
reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions; (h) participated in discussions and
negotiations among
13
<PAGE>
representatives of the Company and Parent and their financial and legal
advisors; (i) reviewed the Merger Agreement and certain related documents; (j)
participated in discussions with certain third parties, including Parent, who
expressed interest in acquiring the Company or certain assets of the Company,
which led to the proposed Merger; and (k) performed such other analyses and
considered such other factors as Morgan Stanley deemed appropriate;
(v) the historical and recent market prices of the Shares and the fact that
the $16.25 per Share Offer price represents, among other things, a premium of
55% over the closing price for the Shares on the Nasdaq National Market on the
day before the announcement of the Offer, a premium of 38% over the closing
price for the Shares on the Nasdaq National Market 30 days preceding such
announcement, and a premium of 44% over the 90 day average closing price for
the Shares;
(vi) the terms and conditions of the Offer and the Merger Agreement,
including the fact that the Offer is not subject to financing but is subject
to minimum tender conditions and that it contemplates the payment or
reimbursement to Parent, under certain circumstances and subject to certain
limits, of certain fees and expenses; in analyzing the conditions, the Board
of Directors considered, among other things, the risk of the Offer's non-
consummation; in assessing the termination fees, the Board of Directors
considered the likelihood of any third party making a proposal for a third
party transaction and that the effect of the termination fee would be to
increase by the amount of such termination fee the costs to a third party of
acquiring the Company;
(vii) the financial ability of the Parent to consummate the Offer and the
Merger;
(viii) the possible impact of the Offer and the Merger and of alternatives
thereto on the Company's business and prospects; and
(ix) the fact that following the consummation of the Offer and the Merger,
the current shareholders of the Company will no longer be able to participate
in any increases or decreases in the value of the Company's business and
profits.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the individual
factors considered in reaching their determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company engaged Morgan Stanley to render financial advisory services to
the Board in connection with the Offer and the Merger. In connection therewith
upon consummation of the transaction, Morgan Stanley will receive a fee of
approximately $2,499,000 in connection with its services against which a
$175,000 fee for strategic advisory services previously paid by the
14
<PAGE>
Company will be credited. In addition, the Company has agreed to reimburse
Morgan Stanley for its reasonable out-of-pocket expenses, including the fees and
disbursements of its legal counsel, estimated to be $50,000. The Company has
also agreed to indemnify Morgan Stanley and its affiliates and each of their
directors, employees and controlling persons against certain liabilities. From
time to time, Morgan Stanley and its affiliates provide financial advisory and
financing services to Compaq and have received customary fees on the rendering
of such services.
Other than as described in this Item 5, neither the Company nor any person
acting on its behalf currently intends to employ, retain or compensate any other
person to make solicitations or recommendations to security holders on its
behalf in connection with the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTEREST WITH RESPECT TO SECURITIES
(a) To the best of the Company's knowledge, no transactions in the Shares
have been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company other than 36,500
shares sold on February 20, 1997 by Roland D. Pampel.
(b) Except for those Shares held by such person(s) which, if tendered,
could cause such person(s) to incur liability under the provisions of Section
16(b) of the Exchange Act, to the best of the Company's knowledge, all of its
executive officers, directors and affiliates currently intend to tender pursuant
to the Offer all Shares which are owned beneficially or of record by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as referred to under Item 3(b) of this Statement, the Company is
not engaged in any negotiation in response to the Offer which relates to or
would result in:
(i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or
(iv) any material change in the present capitalization or dividend policy
of the Company.
(b) Except as referred to under Item 3(b) or Item 4 of this Statement,
there are no transactions, board resolutions, agreements in principle or signed
contracts in response to the Offer which relate to or would result in one or
more of the matters referred to in Item 7(a) of this Statement.
15
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Information provided pursuant to Rule 14f-1 under the Exchange Act. The
Information Statement attached as Annex II to this Statement is being furnished
to the Company's shareholders in connection with the designation by the
Purchaser of persons to the Board other than at a meeting of the Company's
shareholders, and such information is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 - Agreement and Plan of Merger dated April 9, 1997 by and among
Parent, the Purchaser and the Company
Exhibit 2* - Letter to Shareholders of the Company dated April 17, 1997
Exhibit 3 - Form of Press Release of Parent issued April 9, 1997
Exhibit 4* - Opinion Letter to the Board of Directors of the Company from
Morgan Stanley & Co. Incorporated dated April 9, 1997
(attached as Annex I hereto)
Exhibit 5 - Confidentiality Agreement dated April 9, 1997 between the
Company and Parent
- ----------
* Included with Schedule 14D-9 mailed to shareholders.
16
<PAGE>
SIGNATURE
After reasonable inquiry, and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dated: April 17, 1997
MICROCOM, INC.
By: /s/ Lewis A. Bergins
----------------------------------------
Name: Lewis A. Bergins
Title: President and Chief Executive
Officer
17
<PAGE>
ANNEX I
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 576-2000
April 9, 1997
Board of Directors
Microcom, Inc.
500 River Ridge Drive
Norwood, MA 02062-5028
Gentlemen:
We understand that Microcom, Inc. ("Microcom" or the "Company"), Compaq Computer
("Buyer") and Buyer Acquisition Corp., a wholly owned subsidiary of Buyer
("Acquisition Sub") have entered into an Agreement and Plan of Merger, dated as
of April 9, 1997 (the "Merger Agreement"), which provides, among other things,
for (i) the commencement by Acquisition Sub of a tender offer (the "Tender
Offer") for all issued and outstanding shares of common stock, par value $0.01
per share (the "Common Stock"), of Target for $16.25 per share net to the seller
in cash, and (ii) the subsequent merger (the "Merger") of Acquisition Sub with
and into the Company. Pursuant to the Merger, the Company will become a wholly
owned subsidiary of Buyer and each issued and outstanding share of Common Stock,
other than shares held in treasury or held by Buyer or any affiliate of Buyer or
as to which dissenters' rights have been perfected, will be converted into the
right to receive $16.25 per share in cash. The terms and conditions of the
Tender Offer and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and the Buyer;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
<PAGE>
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives of the Company and, Buyer and their financial and legal
advisors;
(ix) reviewed the Merger Agreement and certain related documents;
(x) participated in discussions with certain third parties, including
Buyer, who expressed interest in acquiring the Company or certain assets of
the Company, which led to the proposed Merger; and
(xi) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have relied upon, without independent verification, the assessment by the
management of the Company of the Company's technologies and products, and the
validity of, and risks associated with, the Company's existing and future
products and technologies. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Buyer and have received fees for
the rendering of these services.
<PAGE>
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent; except that this opinion may be included in any filing
with the Securities and Exchange Commission in connection with the Tender Offer
and the Merger. In addition, Morgan Stanley expresses no opinion or
recommendation as to whether holders of Common Stock should accept the Tender
Offer.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Charles R. Cory
-------------------
Charles R. Cory
Managing Director
<PAGE>
ANNEX II
MICROCOM, INC.
500 RIVER RIDGE DRIVE
NORWOOD, MASSACHUSETTS 02062
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
____________
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS
REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED
NOT TO SEND THE COMPANY A PROXY.
____________
This Information Statement, which is being mailed on or about April 17,
1997, to the holders of record of shares of the Common Stock, $.01 par value per
share (the "Shares"), of Microcom, Inc. (the "Company"), is part of the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9"). Unless otherwise defined herein, capitalized terms used herein are
used as defined in the Schedule 14D-9. You are receiving this Information
Statement in connection with the possible election of persons designated by
Compaq Computer Corporation, a Delaware corporation ("Parent"), to a majority of
the seats on the Board of Directors of the Company (the "Board"). The Company
expects that Parent's designees will constitute such a majority promptly
following the purchase by Compaq-Boston, Inc., a Massachusetts corporation (the
"Purchaser"), of Shares pursuant to the Offer, which the Company anticipates
will be on or after May 13, 1997. This Information Statement is required by
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14f-1 promulgated thereunder. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action.
Pursuant to the Merger Agreement, on April 16, 1997 the Purchaser commenced
the Offer, which is currently scheduled to expire on May 13, 1997, at which
time, if the Offer is not extended and all conditions of the Offer have been
satisfied or waived, the Purchaser is obligated to purchase all Shares validly
tendered pursuant to the Offer and not withdrawn.
Promptly upon the acceptance of payment pursuant to the Offer of a number
of Shares that satisfies the Minimum Condition, Parent shall be entitled to
designate such number of directors of the Company, rounded up to the next whole
number, that equals the product of the total number of directors on the Board
(giving effect to the election of any directors pursuant to this paragraph)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Parent (including Shares accepted for payment) bears to the total
number of outstanding Shares. The Company shall, at such time, cause Parent's
designees to be so elected, including, without limitation, increasing the number
of directors, and seeking and accepting the resignations of its incumbent
directors as is necessary to enable Parent's designees to be elected.
IN THE EVENT THAT THE PURCHASER DOES NOT ACQUIRE ANY SHARES PURSUANT TO THE
OFFER, OR TERMINATES THE OFFER, OR IF THE MERGER
II-1
<PAGE>
AGREEMENT IS TERMINATED PURSUANT TO ITS TERMS BY THE PURCHASER, PARENT OR THE
COMPANY PRIOR TO THE ELECTION OR APPOINTMENT OF THE PARENT DESIGNEES, PARENT
WILL NOT HAVE ANY RIGHT UNDER THE MERGER AGREEMENT TO HAVE THE PARENT DESIGNEES
ELECTED OR APPOINTED TO THE COMPANY'S BOARD OF DIRECTORS.
The information contained in this Information Statement concerning Parent
and the Purchaser Designees (hereinafter defined) has been furnished to the
Company by Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote on each matter to be considered
at meetings of shareholders, including the election of directors. As of April
9, 1997, there were 16,288,011 Shares outstanding.
The following table sets forth, as of April 9, 1997, the beneficial
ownership of the Company's common stock: (i) by each shareholder known by the
Company to own beneficially at least 5% of the Shares; (ii) by each director;
(iii) by certain executive officers; and (iv) by all executive officers and
directors as a group. Except as otherwise indicated below, each named
beneficial owner has sole voting and investment power with respect to the Shares
listed.
<TABLE>
<CAPTION>
Shares Owned
------------
Beneficial Owner Number Percent
- --------------------------------------- ------------ --------
<S> <C> <C>
Lewis A. Bergins(1) 415,762 2.5%
Peter J. Minihane(2) 157,200 1.0
Mark Freitas(3) 71,897 *
Roland D. Pampel(4) 155,000 *
James M. Dow(5) 414,086 2.5%
Fred L. Luconi(6) 120,995 *
John C. Rutherford(7) 484,473 3.0%
Michael I. Schneider(8) 67,752 *
Donald G. Kennedy(9) 35,000 *
Executive officers and directors as a 1,922,165 11.4%
group (9 persons) (10)
</TABLE>
___________________
* Less than 1%.
(1) Includes 279,235 shares issuable upon the exercise of currently exercisable
options and 12,762 shares held by Mr. Bergins' wife.
(2) Includes 70,225 shares issuable upon the exercise of currently exercisable
options. Also includes 6,000 shares held for the benefit of Mr. Minihane's
children, as to all of which Mr. Minihane disclaims beneficial ownership.
II-2
<PAGE>
(3) Includes 63,352 shares issuable upon the exercise of currently exercisable
options and 4,506 shares issuable upon the exercise of currently
exercisable options held by Mr. Freitas' wife. Also includes 1,039 shares
held by Mr. Freitas' wife.
(4) Includes 120,000 shares issuable upon the exercise of currently exercisable
options.
(5) Includes 20,000 shares issuable upon the exercise of currently exercisable
options. Also includes 33,666 shares held for the benefit of certain
members of Mr. Dow's family, as to all of which shares Mr. Dow disclaims
beneficial ownership.
(6) Includes 20,000 shares issuable upon the exercise of currently exercisable
options and 21,000 shares as to which Dr. Luconi has shared voting power
with his wife. Also includes 2,500 shares held in trust for the benefit of
certain members of Dr. Luconi's family, as to all of which Dr. Luconi
disclaims beneficial ownership.
(7) Includes 20,000 shares issuable upon the exercise of currently exercisable
options and 58,394 shares owned by Parthenon, Inc. in which Mr. Rutherford
is a managing director.
(8) Includes 14,700 shares issuable upon the exercise of currently exercisable
options and 38,500 shares as to which Dr. Schneider has shared voting power
with his wife.
(9) Includes 20,000 shares issuable upon the exercise of currently exercisable
options.
(10) Includes 632,018 shares issuable upon the exercise of currently exercisable
options granted to such directors and executive officers.
DIRECTORS OF THE COMPANY
The Company's Board of Directors is currently composed of seven directors.
The Company's Articles of Organization provide for three classes of Directors,
and each director serves a three-year term.
THE PURCHASER DESIGNEES
Pursuant to the provisions of the Merger Agreement described in the
Schedule 14D-9, Parent may designate from among the persons identified below the
persons to be elected to the Board (the "Parent Designees"). It is expected
that the Parent Designees will assume office promptly upon the acceptance for
payment pursuant to the Offer of a number of Shares that satisfies the Minimum
Condition, which the Company expects will be on or after May 13, 1997, and that
they will thereafter constitute at least a majority of the Board. Parent has
informed the Company that each of the Parent Designees has consented to act as a
director, if so designated.
None of the executive officers and directors of Parent or the Purchaser
currently is a director of, or holds any position with, the Company. The
Company has been advised that, to the best knowledge of Parent and the
Purchaser, none of Parent's or the Purchaser's directors, executive officers,
affiliates or associates beneficially owns any equity securities, or rights to
acquire any equity securities, of the Company and none has been involved in any
transactions with the Company or any of its directors, executive officers,
affiliates or associates which are required to be disclosed pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"Commission") other than those described herein.
The following sets forth the name, age, present principal occupation or
employment and five-year employment history of each of the Parent Designees, as
of April 16, 1997. The business address of each Parent Designee is 20555 SH
249, Houston, Texas 77070. Unless otherwise indicated, each occupation set
forth opposite a Parent Designee's name refers to employment with Parent. Each
Parent Designee is a citizen of the United States, and there are no family
relationships among any of the Parent Designees.
II-3
<PAGE>
Alan G. Lutz, age 51, Senior Vice President, Communication Products Group,
since November 1996; Executive Vice President and President, Computer Systems
Group, of Unisys Corporation from 1994 to 1996; President of Kassandra Group
from 1993 to 1994; Senior Vice President and President, Public Networks of
Northern Telecom LTD from 1987 to 1997.
J. David Cabello, age 45, Senior Vice President, General Counsel and
Secretary since December 1996; Vice President and Assistant General Counsel from
1995 to 1996; Patent Counsel from 1987 to 1993
Earl L. Mason, age 49, Senior Vice President and Chief Financial Officer
since 1996; Senior Vice President, Inland Steel Industries, Inc. ("ISI"), from
1995 to 1996; Chief Financial Officer and President, Inland International, Inc.
from 1994 to 1996; Vice President, ISI, from 1994 to 1995; Vice President -
Finance and Principal Financial Officer, ISI, from 1991 to 1994.
Edward E. Olkkola, age 37, Vice President, Communication Products Division,
Communication Products Group, since 1996; Director of Business Development from
1993 to 1996; Director of Systems Networking of Motorola Information Systems
Group prior thereto.
Robert W. Stearns, age 46, Senior Vice President, Technology and Corporate
Development, since 1996; Vice President, Corporate Development from 1993 to
1996; consultant with McKinsey & Co. from 1992 to 1993; Vice President,
Corporate Marketing of Motorola/Codex from 1986 to 1992.
CURRENT DIRECTORS
The following sets forth the name, age, present principal occupation or
employment and five-year employment history of each of the current directors, as
of April 16, 1997. Unless otherwise indicated, each occupation set forth
opposite a current director's name refers to employment with the Company.
Lewis A. Bergins, age 58, Director, President and Chief Executive Officer
since January, 1997 (currently serving as a Class II Director for a term
expiring at the 1999 Annual Meeting of Shareholders); Executive Vice President
(in various management capacities) since 1989.
James M. Dow, age 46, Director since 1980 and Chairman of the Board since
1994 (currently serving as a Class III Director for a term expiring at the 1997
Annual Meeting of Shareholders); President and Chief Executive Officer from 1980
to 1994.
Fred L. Luconi, age 55, Director since 1992 and Vice-Chairman since 1994
(currently serving as a Class III Director for a term expiring at the 1997
Annual Meeting of Shareholders); visiting faculty member at the Sloan School of
Management at the Massachusetts Institute of Technology and a private investor
since 1992; President of Index Technology Corporation (predecessor to Intersolv
Inc.) from 1988 to 1991.
Roland D. Pampel, age 62, Director, since 1994 (currently serving as a
Class I Director for a term expiring at the 1998 Annual Meeting of
Shareholders); President and Chief Executive Officer
II-4
<PAGE>
from 1994 to January 1997; Director, President and Chief Executive Officer of
Nicolet Instrument Corporation from 1991 to 1994.
Donald G. Kennedy, age 71, Director since 1985 (currently serving as a
Class I Director for a term expiring at the 1998 Annual Meeting of
Shareholders); independent management consultant since 1985; a member of the
Panel of Arbitrators of the American Arbitration Association since 1987; an
arbitrator for the National Association of Securities Dealers since 1993.
John C. Rutherford, age 47, a Director since 1994 (currently serving as a
Class II Director for a term expiring at the 1999 Annual Meeting of
Shareholders); Managing Director and a principal stockholder of The Parthenon
Group, Inc. since 1991.
Michael I. Schneider, age 60, a Director since 1986 (currently serving as a
Class II Director for a term expiring at the 1999 Annual Meeting of
Shareholders); a Vice President (in various management capacities) at Data
General Corporation since 1979.
REPORTS OF DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Commission. Such executive officers, directors and greater than 10%
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) reports they file.
Based solely on the Company's review of the copies of the reports furnished
to the Company or written representations from certain subject persons that no
reports were required for those persons, the Company believes that, during the
fiscal year ended March 31, 1997, its executive officers, directors and greater
than 10% shareholders complied with all Section 16(a) filing requirements
applicable to them.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The business of the Company is managed under the direction of the Board of
Directors. The Board meets during the Company's fiscal year to review
significant developments affecting the Company and to act on matters requiring
Board approval.
The Board of Directors has established Audit, Compensation and Nominating
Committees which devote attention to specific subjects and assist the Board of
Directors in the discharge of its responsibilities. The functions of each
committee and its current members are described below.
The Audit Committee reviews the internal accounting procedures of the
Company and consults with and reviews the services provided by the Company's
independent auditors. The directors currently serving on the Audit Committee
are Mr. Kennedy and Dr. Luconi. The Audit Committee met 4 times in fiscal 1997.
II-5
<PAGE>
The Compensation Committee reviews and recommends to the Board the
compensation and benefits of all executive officers of the Company and reviews
general policy relating to compensation and benefits of employees of the
Company. The Compensation Committee also administers the issuance of stock
options. The directors currently serving on the Compensation Committee are Mr.
Kennedy and Dr. Schneider. The Compensation Committee met 5 times in fiscal
1997.
The Nominating Committee, which was established in 1994, identifies and
nominates candidates for election to the Board. The Committee also considers
nominees for directors nominated by shareholders. Such recommendations, with
relevant supporting data, should be submitted to the Clerk of the Company. The
directors currently serving on the Nominating Committee are Messrs. Dow and
Rutherford. The Nominating Committee did not formally meet in fiscal 1997 but
its members consulted as to nominees at various times.
During fiscal 1997, the Board of Directors held 18 meetings. Each
incumbent director attended at least 75% of the aggregate number of the meetings
of the Board and the meetings of the committees of the Board on which he served.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company is entitled to receive $10,000
annually (paid at the rate of $2,500 per quarter) for serving as a director and
an additional $1,000 for each Board meeting attended. The non-employee
directors of the Company are Drs. Luconi and Schneider and Messrs. Dow, Kennedy,
Pampel and Rutherford. The Company also reimburses non-employee directors for
expenses incurred in attending Board meetings. No additional compensation is
paid to directors for attending Board or committee meetings.
Under the Company's 1993 Non-Employee Director Stock Option Plan (the
"Directors Plan"), each non-employee director of the Company is entitled to
receive an option exercisable for 4,000 shares of common stock on April 15 of
each year, exercisable at the fair market value of the common stock on the date
of grant. In addition, any person who first becomes a non-employee director on
or after March 17, 1995 shall receive an option to purchase 16,000 shares,
exercisable at the fair market value of the common stock on the date of grant.
EXECUTIVE OFFICERS OF THE COMPANY
CURRENT EXECUTIVE OFFICERS
The executive officers of the Company, their respective ages and positions
held are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lewis A. Bergins 58 President, Chief Executive Officer and Director
Mark J. Freitas 40 Executive Vice President, Central Site Business Unit
Peter J. Minihane 48 Executive Vice President of Operations, Chief
Financial Officer and Treasurer
</TABLE>
II-6
<PAGE>
BUSINESS EXPERIENCE
Information concerning the business experience of Mr. Bergins is provided
in the section entitled "Directors of the Company."
Mr. Freitas joined the Company in 1986 and has served as Executive Vice
President, Central Site Business Unit since November 1995 and Vice President,
Systems Management and Customer Support from May 1994 to November 1995. Prior
to May 1994, Mr Freitas held various software development positions with the
Company.
Mr. Minihane joined the Company in 1985 and has served as Executive Vice
President, Chief Financial Officer and Treasurer since January 1989. Mr.
Minihane was named Executive Vice President of Operations in November 1995.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during the Company's fiscal year ended March 31, 1997 to the Company's
Chief Executive Officer and each of the Company's other most highly compensated
officers who earned in excess of $100,000, based on salary and bonus earned
during fiscal 1997 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Name and Fiscal
Principal Position Year Salary Bonus Options(4)
- -------------------------------------- ------ -------- ------- ----------
<S> <C> <C> <C> <C>
Lewis A. Bergins, 1997 $356,650 $10,000 218,000
President and
Chief Executive Officer(1) 1996 348,188 30,000 15,000
1995 239,817 20,000 18,000
Mark Freitas 1997 158,490 25,000 58,000
Vice President, 1996 133,975 21,980 10,000
Central Site Business Unit 1995 126,700 16,600 12,000
Peter J. Minihane, 1997 181,500 35,000 18,000
Executive Vice President, 1996 169,813 28,800 15,000
Chief Financial Officer 1995 165,000 9,120 18,000
and Treasurer
Richard A. Barbari, 1997 242,905 10,000 18,000
Corporate Vice 1996 206,708 66,708 15,000
President, International Sales(3)
1995 124,402 40,000
Robert Lamkin 1997 206,109 79,000 37,000
Vice President, America Sales 1996 94,340 60,000 33,333
and Strategic Relationships(2)
</TABLE>
(1) Mr. Bergins' salary includes $153,587, $178,374 and $74,812 in sales
commissions paid in fiscal 1997, 1996 and 1995, respectively.
II-7
<PAGE>
(2) Mr. Lamkin's salary includes $66,223 in sales commissions paid in fiscal
1997.
(3) Mr. Barbari's salary includes $102,905 and $66,708 in sales commissions
paid in fiscal 1997 and 1996, respectively.
(4) Options to acquire shares of Common Stock.
OPTION GRANTS DURING 1997 FISCAL YEAR
The following table sets forth certain information related to options
granted to the Named Executive Officers during fiscal 1997.
OPTION GRANTS DURING 1997 FISCAL YEAR
POTENTIAL REALIZABLE VALUE/(1)/
<TABLE>
<CAPTION>
% of Total
Number of Options
Shares Granted to
Underlying Exercise Employees
Expiration Options Price Per Time in Fiscal Potential Potential
Date Granted(2) Share Extension Remaining Year 5% Realizable Value 10% Realizable Value
---------- --------- --------- --------- --------- --------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lewis A. Bergins 01/23/06 200,000 11.875 2,375,000 9 18.44 3,684,405 1,309,405 5,600,126 3,225,126
07/25/06 18,000 6.000 108,000 9 1.66 167,543 59,543 254,658 146,658
Mark Freitas 07/25/06 18,000 6.000 108,000 9 1.66 167,543 59,543 254,658 146,658
07/25/02 30,000 6.000 180,000 5 2.77 229,731 49,731 289,892 109,892
01/29/03 10,000 11.625 116,250 6 0.92 155,786 39,536 205,944 89,694
Peter Minihane 07/25/06 18,000 6.000 108,000 9 1.66 167,543 59,543 254,658 146,658
Richard Barbari 07/25/06 12,000 6.000 72,000 9 1.11 111,696 39,696 169,772 97,772
Robert Lamkin 07/23/02 25,000 $ 6.125 $ 153,125 5 2.31% $ 195,431 $ 42,306 $ 246,609 $ 93,484
07/25/06 12,000 6.000 72,000 9 1.11 111,696 39,696 169,772 97,772
</TABLE>
________________________
(1) The "Potential Realizable Value" portion of the table illustrates what
might be realized upon exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
appreciation of the Common Stock over the terms of the options. The total
of all stock options granted to employees, including executive officers,
during fiscal 1997 was approximately 4.7% of the total shares of common
stock outstanding at the end of the fiscal year.
(2) Consists of options to acquire shares of Common Stock. Options are
exercisable as set forth in, and subject to the terms of, the related option
agreements.
AGGREGATED OPTION EXERCISES DURING 1997 FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following option exercise and year-end value table sets forth
information with respect to the exercise of stock options by the Named Executive
Officers during fiscal 1997 and the number and unrealized value (the difference
between the exercise price and the market value) of unexercised options issued
by the Company and held by such officers at March 31, 1997. All of such options
were then exercisable, but some of the underlying shares were unvested.
Unvested shares are subject to repurchase by the Company at a price equal to the
exercise price paid for such shares by the optionee.
II-8
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Number of Securities Underlying
Shares Unexercised Options At Fiscal Year End Value of Unexercised In-The-
Acquired Dollar (All xercisable at Fiscal Year-End) Money Options At Fiscal Year End
on Value ----------------------------------- --------------------------------
Name Exercise Realized Vested Unvested Total Vested Unvested Total
---- -------- -------- ------ -------- ----- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lewis A. Bergins - - 33,235 269,000 302,235 $133,631 $265,250 $398,881
Mark Freitas - - 19,769 64,914 84,683 66,311 141,219 207,530
Peter J. Minihane - - 24,475 68,750 93,225 97,822 251,875 349,697
Richard Barbari - - 15,000 27,000 42,000 35,000 52,000 87,000
Robert Lamkin - - 9,027 49,306 58,333 0 68,750 $ 68,750
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Bergins on
January 16, 1997 pursuant to which he is paid an annual base salary of $285,000
and may be granted an incentive bonus of up to $35,000 in fiscal 1997. Under the
employment agreement, Mr. Bergins' base salary is subject to annual review for
increases by the Compensation Committee. In the event of an involuntary
termination of Mr. Bergins' employment other than "for cause," Mr. Bergins will
receive severance compensation of one year's salary continuance at the annual
base compensation rate in effect at the time of termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
It is the duty of the Compensation Committee of the Company's Board of
Directors (the "Committee") to recommend and administer policies that govern the
compensation of the Company's executive officers, including the Chief Executive
Officer, and the granting of stock options to all key employees. The Committee
is composed of two non-employee directors of the Company. The Committee's
general policy with respect to compensating the Company's executive officers is
to establish compensation levels which, while providing appropriate incentives
for Company and individual performances, remain competitive within the data
communications industry allowing the Company to attract, retain and reward
executive officers who contribute to the long term success of the Company.
EXECUTIVE COMPENSATION
The primary components of the Company's executive officer compensation
programs are base salary, incentive cash bonus, stock options and, in the case
of executives with sales responsibilities, commissions.
II-9
<PAGE>
1. Base Salary. A base salary is established for each executive which is
deemed to be competitive with comparable positions in both computer hardware
and software companies (including data communications companies) of similar
size and appropriate to the executive's level of responsibility within the
Company. The aim is to arrive at salary levels in the middle of the range of
comparables. These comparables are not necessarily the same as the companies
included in the industry index shown on the performance graph following this
report.
2. Incentive Bonus. Each year, the Board of Directors reviews and approves a
business plan for the Company which outlines the financial and operational
goals of the Company. This business plan becomes the primary bench mark for
measuring the performance of the executive management team. Bonuses are based
primarily on the broad performance of the Company as measured against the
business plan and in terms of increases in net revenue, operating income and
earnings per share. In addition, executives are measured against specific
objectives directly related to their respective functions. These factors are
considered, weighted and applied in the discretion of the Committee and not
pursuant to an established formula.
3. Commissions. In the case of executives with sales responsibilities,
commissions are based on net revenue and contribution in the executive's
geographic area of responsibility.
4. Stock Option Program. Stock options have been a key component of executive
compensation since the Company was founded. The Committee believes that stock
options, as a component of performance compensation arrangements, are
beneficial in aligning management's and employees' interests and incentives
with stockholders' interests toward the enhancement of stockholder value. The
Committee further believes that stock option programs with future vesting
dates are an effective means to encourage employees to remain with the Company
and increase its long-term value. In determining the size of option grants,
the Committee considers the number of options previously granted to the
recipient, the recipient's equity interest in the Company generally, as well
as the recipient's performance and the importance of the recipient to
achieving the Company's long-term performance goals. The options granted have
been at exercise prices equal to the fair market value of the underlying
common stock on the date of grant and generally have vested over four years.
In keeping with their belief in the importance of these options, the Committee
and the Board of Directors amended the Company's Stock Option and Stock
Purchase Plan to increase the number of shares available for option grants
thereunder by 700,000. This amendment is being presented to the stockholders
for a vote of approval with this proxy statement as noted below. The
Committee further refined its policies with respect to combining stock based
performance compensation arrangements with incentive cash bonuses by the
adoption of the Long Term Performance Plan which was approved by stockholders
at the Annual Meeting in July, 1994. Last year, the Committee and the Board
of Directors increased the number of shares available under that plan which
increase was approved by stockholders at the Annual Meeting in July 1995, and
remains committed to its use as an effective incentive component to
compensation.
II-10
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Lewis A. Bergins was hired as the Company's President and Chief
Executive Officer effective January 16, 1997. Mr. Bergins' base salary for
fiscal 1997 was set at $285,000 per year and he was granted an option to
purchase 200,000 shares under the Company's Stock Option Program. In addition,
as part of his employment agreement, Mr. Bergins may be granted an incentive
bonus of up to $35,000.
DISCUSSION OF CORPORATE TAX DEDUCTION IN EXCESS OF ONE MILLION DOLLARS
($1,000,000) A YEAR
Internal Revenue Code Section 162(m), enacted in 1993, precludes a
public corporation from taking deductions in 1994 or subsequent years for
compensation in excess of one million dollars ($1,000,000) for its Chief
Executive Officer or any of its four other highest paid officers. Certain
performance based compensation, however, is specifically exempt from the
deduction limit. The terms of the Company's Stock Option and Stock Purchase
Plan and the Long Term Performance Plan, are designed to meet the requirements
of the proposed regulations so that options granted under both plans will be
excluded from the deduction limit.
The Committee believes that executive compensation should be related
to both short-term and long-term Company performance as shown by the policies
described above and that its determination of fiscal 1997 compensation was
reflective of those policies consistently applied.
This Compensation Committee Report will not be deemed to be
incorporated by reference in any filing by the Company under the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, except to the
extent that the Company specifically incorporates this Compensation Committee
Report by reference.
CORPORATE PERFORMANCE GRAPH
The following graph assumes an investment of $100 on March 31, 1992
and compares annual changes thereafter in the market price of the Company's
common stock with a broad market index (S&P 500) and an industry index (S&P
Computer Software and Services). The Company paid no dividends during the
period shown; the performance of the indexes is shown on a total return
(dividend reinvestment) basis. The graph lines merely connect fiscal year-end
dates and do not reflect fluctuations between these dates.
II-11
<PAGE>
[PERFORMANCE GRAPH APPEARS]
TOTAL SHAREHOLDER RETURNS
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Microcom, Inc. 100.00 32.61 51.09 98.64 259.78 77.17
S&P 500 Index 100.00 115.23 116.93 135.13 178.51 213.89
Computer Software & Services 100.00 132.12 148.24 199.96 282.67 396.73
</TABLE>
The stock price performance depicted in the Corporate Performance Graph is
not necessarily indicative of future price performance. The Compensation
Committee Report and the Comparison of Cumulative Total Shareholder Returns
above shall not be deemed "soliciting material" or incorporated by reference
into any of the Company's filings with the Securities and Exchange Commission by
implication or by any reference in any such filing to this Information
Statement.
II-12
<PAGE>
CERTAIN TRANSACTIONS
In October 1993, the Board established a loan program primarily for
the purpose of permitting senior officers and directors of the Company to borrow
from the Company in order to exercise stock options. Principal is payable in
full nine years from the date of each loan. Interest accrues and is due and
payable annually, unless forgiven. The following table sets forth information
with respect to all loans made under the loan program as of March 31, 1997.
<TABLE>
<CAPTION>
TOTAL HIGHEST
OUTSTANDING AMOUNT IN
NAME AND AMOUNTS AS OF FISCAL 1997 INTEREST
PRINCIPAL POSITION MARCH 31, 1997 (1) OUTSTANDING (1) RATE
- ------------------ ------------------ --------------- ---------
<S> <C> <C> <C>
James M. Dow $659,873 $659,873 6.83%
Chairman of the Board
Roland D. Pampel 206,293 206,293 5.73%
Director 112,684 112,684 6.74%
Richard Barbari 152,578 199,525 6.92%
Corporate Vice President,
International Sales
Lewis A. Bergins 526,787 526,787 4.92%
President and Chief Executive Officer
Peter J. Minihane 263,791 263,791 4.92%
Executive Vice President,
Chief Financial Officer and Treasurer
Gregory Pearson 127,209 127,209 4.92%
Senior Vice President,
Technology Management
Donald G. Kennedy 10,891 10,891 4.92%
Director 55,967 55,967 5.32%
John C. Rutherford 62,065 62,065 5.88%
Director
Michael I. Schneider 36,308 36,308 4.92%
Director 56,302 56,302 5.00%
64,168 64,168 6.10%
Fred L. Luconi 179,807 179,807 5.00%
Director
</TABLE>
- ------------------
(1) Includes accrued interest
II-13
<PAGE>
The Parthenon Group, Inc. ("Parthenon"), a management consulting
investment company of which Mr. Rutherford, a director of the Company, is a
managing director and fifty percent stockholder, was first hired by the Company
in 1993 to work with the Company in reviewing and revising the Company's
approach to its products and marketplace. During fiscal 1997, the Company
granted Parthenon, for various consulting services rendered, options for 58,394
Shares at an exercise price of $8.5625 per Share, which options have since been
exercised in full.
April 17, 1997
Microcom, Inc.
II-14
<PAGE>
EXHIBIT INDEX
Subsequently Numbered
Exhibit No. Page
---------- ----
1 Agreement and Plan of Merger
dated April 9, 1997 by and
among Parent, the Purchaser
and the Company
2* Letter to Shareholders of the
Company dated April 17, 1997
3 Form of Press Release of Parent
Issued April 9, 1997
4* Opinion Letter to the Board of
Directors of the Company from
Morgan Stanley & Co.
Incorporated dated April 9, 1997
(attached as Annex I hereto)
5 Confidentiality Agreement dated
April 9, 1997 between the Company
and Parent
_______________
*Included with Schedule 14D-9 mailed to shareholders.
II-15
<PAGE>
EXHIBIT 1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
dated as of
April 9, 1997
among
MICROCOM, INC.
COMPAQ COMPUTER CORPORATION
and
COMPAQ-BOSTON, INC.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer....................................... 1
SECTION 1.2. Company Action.................................. 2
SECTION 1.3. Directors....................................... 3
ARTICLE 2
THE MERGER
SECTION 2.1. The Merger...................................... 3
SECTION 2.2. Conversion of Shares............................ 4
SECTION 2.3. Surrender and Payment........................... 4
SECTION 2.4. Dissenting Shares............................... 6
SECTION 2.6 Employee Stock Purchase Plan.................... 7
SECTION 2.7 Option Restricted Stock......................... 7
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Organization........................ 8
SECTION 3.2. Bylaws.......................................... 8
SECTION 3.3. Directors and Officers.......................... 8
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Corporate Existence and Power................... 8
SECTION 4.2. Corporate Authorization......................... 9
SECTION 4.3. Governmental Authorization...................... 9
SECTION 4.4. Non-Contravention............................... 9
SECTION 4.5. Capitalization.................................. 10
SECTION 4.6. Subsidiaries.................................... 10
SECTION 4.7. SEC Filings..................................... 11
SECTION 4.8. Financial Statements............................ 11
SECTION 4.9. Disclosure Documents............................ 12
SECTION 4.10. Absence of Certain Changes...................... 12
SECTION 4.11. No Undisclosed Material Liabilities............. 14
SECTION 4.12. Litigation...................................... 14
SECTION 4.13. Taxes........................................... 14
SECTION 4.14. ERISA........................................... 15
SECTION 4.15. Compliance with Laws............................ 16
SECTION 4.16. Finders' Fees................................... 16
SECTION 4.17. Patents and Other Proprietary Rights............ 16
SECTION 4.18. Environmental Matters........................... 17
SECTION 4.19. Approvals; Antitakeover Provisions.............. 18
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 5.1. Corporate Existence and Power.................... 19
SECTION 5.2. Corporate Authorization.......................... 19
SECTION 5.3. Governmental Authorization....................... 19
SECTION 5.4. Non-Contravention................................ 19
SECTION 5.5. Disclosure Documents............................. 20
SECTION 5.6. Finders' Fees.................................... 20
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.1. Conduct of the Company........................... 20
SECTION 6.2. Stockholder Meeting; Proxy Material.............. 21
SECTION 6.3. Access to Information............................ 21
SECTION 6.4. Other Offers..................................... 22
ARTICLE 7
COVENANTS OF BUYER
SECTION 7.1. Obligations of Merger Subsidiary................. 23
SECTION 7.2. Voting of Shares................................. 23
SECTION 7.3. Director and Officer Liability................... 23
SECTION 7.4. Tax Certification................................ 23
ARTICLE 8
COVENANTS OF BUYER AND THE COMPANY
SECTION 8.1. Best Efforts..................................... 24
SECTION 8.2. Certain Filings.................................. 24
SECTION 8.3. Public Announcements............................. 24
SECTION 8.4. Notices of Certain Events........................ 24
SECTION 8.5. Employee Benefits................................ 25
SECTION 8.6. Further Assurances............................... 25
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.1. Conditions to the Obligations of Each Party...... 25
ARTICLE 10
TERMINATION
SECTION 10.1. Termination..................................... 26
SECTION 10.2. Effect of Termination........................... 26
SECTION 11.1. Notices......................................... 26
SECTION 11.2. Survival of Representations and Warranties...... 27
SECTION 11.3. Amendments; No Waivers.......................... 28
SECTION 11.4. Fees and Expenses............................... 28
SECTION 11.5. Successors and Assigns.......................... 29
SECTION 11.6. Governing Law................................... 29
SECTION 11.7. Counterparts; Effectiveness..................... 29
SECTION 11.8. Entire Agreement................................ 29
SECTION 11.9. Definitions..................................... 30
</TABLE>
5
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 9, 1997 among Microcom,
Inc., a Massachusetts corporation (the "COMPANY"), Compaq Computer Corporation,
a Delaware corporation ("BUYER"), and Compaq-Boston, Inc., a Massachusetts
corporation and a wholly-owned subsidiary of Buyer ("MERGER SUBSIDIARY").
The parties hereto agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer. (a) Provided that nothing shall have occurred
---------
that would result in a failure to satisfy any of the conditions set forth in
Annex I hereto, Merger Subsidiary shall, as promptly as practicable after the
date hereof, but in no event later than five business days following the public
announcement of the terms of this Agreement, commence an offer (the "OFFER") to
purchase all of the outstanding shares (the "SHARES") of common stock, $0.01 par
value per share, of the Company (the "COMMON STOCK") at a price of $16.25 per
Share, net to the seller in cash. The Offer shall be subject to the condition
that a number of Shares which, together with the Shares then owned by Buyer,
represents at least a majority of the Shares outstanding on a fully diluted
basis shall be validly tendered in accordance with the terms of the Offer prior
to the expiration date of the Offer and not withdrawn (the "MINIMUM CONDITION")
and to the other conditions set forth in Annex I hereto. Merger Subsidiary
expressly reserves the right to waive the Minimum Condition or any of the other
conditions to the Offer and to make any change in the terms or conditions of the
Offer; provided that no change may be made which changes the form of
--------
consideration to be paid or decreases the price per Share or the number of
Shares sought in the Offer or which imposes conditions to the Offer in addition
to those set forth in Annex I or amends the terms and conditions of the Offer in
a manner adverse to the Company.
(b) As soon as practicable on the date of commencement of the Offer,
Merger Subsidiary shall file with the SEC (as defined in Section 4.7) a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer which will contain
the offer to purchase and form of the related letter of transmittal (together
with any supplements or amendments thereto, collectively the "OFFER DOCUMENTS").
Buyer and the Company each agrees promptly to correct any information provided
by it for use in the Offer
6
<PAGE>
Documents if and to the extent that it shall have become false or misleading in
any material respect. Merger Subsidiary agrees to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel shall be given
an opportunity to review and comment on the Schedule 14D-1 prior to its being
filed with the SEC.
SECTION 1.2. Company Action. (a) The Company hereby consents to the
--------------
Offer and represents that its Board of Directors, at a meeting duly called and
held, has (i) unanimously determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as defined in Section
2.1), are fair to and in the best interest of the Company's stockholders, (ii)
unanimously approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, which approval satisfies in full any
applicable requirements of the Business Corporation Law of the Commonwealth of
Massachusetts ("MASSACHUSETTS LAW" OR "MBCL") and any applicable requirements of
Chapters 110C, 110D, 110E and 110F of the Massachusetts General Laws, and (iii)
unanimously resolved, except as may be required, in response to an unsolicited
bona fide written Acquisition Proposal (as defined in Section 6.4), in order to
comply with the fiduciary duties of the Board of Directors under applicable law
as advised in writing by Choate, Hall & Stewart ("COMPANY COUNSEL"), to
recommend acceptance of the Offer and approval and adoption of this Agreement
and the Merger by its stockholders. The Company further represents that Morgan
Stanley & Co. Incorporated has delivered to the Company's Board of Directors its
written opinion that the consideration to be paid in the Offer and the Merger is
fair to the holders of Shares from a financial point of view. The Company has
been advised that all of its directors and executive officers intend either to
tender their Shares pursuant to the Offer or to vote in favor of the Merger.
The Company will promptly furnish Buyer with a list of its stockholders, mailing
labels and any available listing or computer file containing the names and
addresses of all record holders of Shares and lists of securities positions of
Shares held in stock depositories, in each case true and correct as of the most
recent practicable date, and will provide to Buyer such additional information
(including, without limitation, updated lists of stockholders, mailing labels
and lists of securities positions) and such other assistance as Buyer may
reasonably request in connection with the Offer. Buyer will return such
materials promptly if the Offer is not consummated.
(b) As soon as practicable on the day that the Offer is commenced, the
Company will file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "SCHEDULE 14D-9") which shall reflect the recommendations of
the Company's Board of Directors referred to above. The Company and Buyer each
agree promptly to correct any information provided by it for use in the Schedule
14D-9 if and to the extent that it shall have become false or misleading in any
material respect. The Company agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and
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to the extent required by applicable federal securities laws. Buyer and its
counsel shall be given an opportunity to review and comment on the Schedule 14D-
9 prior to its being filed with the SEC.
SECTION 1.3. Directors. (a) Effective upon the acceptance for payment
---------
pursuant to the Offer of a number of Shares that satisfies the Minimum
Condition, Buyer shall be entitled to designate the number of directors, rounded
up to the next whole number, on the Company's Board of Directors that equals the
product of (i) the total number of directors on the Company's Board of Directors
(giving effect to the election of any additional directors pursuant to this
Section) multiplied by (ii) the percentage that the number of Shares
beneficially owned by Buyer (including Shares accepted for payment) bears to the
total number of Shares outstanding; and the Company shall take all action
necessary to cause Buyer's designees to be elected or appointed to the Company's
Board of Directors, including, without limitation, increasing the number of
directors and seeking and accepting resignations of incumbent directors. At
such times, the Company will use its best efforts to cause individuals
designated by Buyer to constitute the same percentage as such individuals
represent on the Company's Board of Directors of (A) each committee of the Board
and (B) each board of directors (and committee thereof) of each Subsidiary (as
defined in Section 4.6). Notwithstanding the foregoing, the Company shall use
its best efforts to cause at least three members of the Company's Board of
Directors as of the date hereof who are not employees of the Company (the
"CONTINUING DIRECTORS") to remain members of the Board of Directors until the
Effective Time (as defined in Section 2.1(b)), and the Buyer consents thereto.
(b) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act (as defined in
Section 4.3) and Rule 14f-1 promulgated thereunder. The Company shall promptly
take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section and shall include in the Schedule
14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill its
obligations under this Section. Buyer will supply to the Company in writing and
be solely responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
ARTICLE 2
THE MERGER
SECTION 2.1. The Merger. (a) At the Effective Time (as defined below),
----------
Merger Subsidiary shall be merged (the "MERGER") with and into the Company in
accordance with Section 78 of the MBCL, whereupon the separate existence of
Merger
8
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Subsidiary shall cease, and the Company shall be the surviving corporation (the
"SURVIVING CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file articles of merger ("ARTICLES OF MERGER") with the
Secretary of State of the Commonwealth of Massachusetts and make all other
filings or recordings required by Massachusetts Law in connection with the
Merger. The Merger shall become effective at such time as the Articles of
Merger are duly filed with the Secretary of State of the Commonwealth of
Massachusetts (the "EFFECTIVE TIME").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restric tions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under Massachusetts Law.
SECTION 2.2. Conversion of Shares. At the Effective Time:
--------------------
(a) each Share held by the Company as treasury stock or owned by Buyer
or any subsidiary of Buyer immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto;
(b) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation; and
(c) each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 2.2(a) or as provided in
Section 2.4 with respect to Shares as to which appraisal rights have been
exercised or as provided in Section 2.7 with respect to Option Restricted
Stock, be converted into the right to receive $16.25 in cash, without
interest (the "MERGER CONSIDERATION").
SECTION 2.3. Surrender and Payment. (a) Prior to the Effective Time,
---------------------
Buyer shall appoint an agent (the "EXCHANGE AGENT") for the purpose of
exchanging certificates representing Shares for the Merger Consideration. Buyer
will make available to the Exchange Agent, in such amounts as may be needed from
time to time, the Merger Consideration to be paid in respect of the Shares.
Promptly after the Effective Time, Buyer will send, or will cause the Exchange
Agent to send, to each holder of Shares at the Effective Time a letter of
transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing Shares to the Exchange Agent).
9
<PAGE>
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a certificate
or certi ficates representing such Shares, together with a properly completed
letter of transmittal covering such Shares, will be entitled to receive the
Merger Consideration payable in respect of such Shares. From and after the
Effective Time, all Shares which have been so converted shall no longer be
outstanding and shall automatically be canceled and retired, and each such
certificate shall, after the Effective Time, represent for all purposes, only
the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the Shares represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to such
payment that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person
requesting such payment shall pay to the Exchange Agent any transfer or other
taxes required as a result of such payment to a Person other than the registered
holder of such Shares or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable. For purposes of this Agreement,
"PERSON" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 2.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.3(a) that remains unclaimed by the holders of Shares
six months after the Effective Time shall be returned to Buyer, upon demand, and
any such holder who has not exchanged Shares for the Merger Consideration in
accordance with this Section 2.3 prior to that time shall thereafter look only
to Buyer for payment of the Merger Consideration in respect of Shares.
Notwithstanding the foregoing, Buyer shall not be liable to any holder of Shares
for any amount paid to a public official pursuant to applicable abandoned
property laws. Any amounts remaining unclaimed by holders of Shares two years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
Buyer free and clear of any claims or interest of any Person previously entitled
thereto.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.3(a) to pay for Shares for which appraisal rights
have been perfected shall be returned to Buyer, upon demand.
10
<PAGE>
SECTION 2.4. Dissenting Shares. Notwithstanding Section 2.2, Shares
-----------------
which are held of record by stockholders who shall not have voted such Shares in
favor of the Merger, if applicable, and who shall have properly exercised rights
to demand payment of the fair value of such Shares in accordance with Sections
86 through 98, inclusive, of the MBCL shall not be converted into the right to
receive the Merger Consideration, but the holders thereof instead shall be
entitled to payment of the fair value of such Shares in accordance with the
provisions of Sections 86 to 92, inclusive, of the MBCL, provided, however, that
(i) if such a holder fails to file a notice of election to dissent in accordance
with Section 86 of the MBCL or, after filing such notice of election,
subsequently delivers an effective written withdrawal of such notice or fails to
establish his entitlement to appraisal rights as provided in Sections 87 through
98, inclusive, of the MBCL, or (ii) if such holder shall otherwise lose his
appraisal rights, then in either of such cases such Shares shall be treated as
if they had been converted as of the Effective Time into a right to receive the
Merger Consideration. The Company shall give Buyer prompt notice of any demands
received by the Company for the payment of fair value for Shares, and Buyer
shall have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Buyer, make any payment with respect to, or settle or offer to
settle, any such demands.
SECTION 2.5 Stock Options. (a) At the Effective Time, each option to
-------------
purchase shares of Common Stock outstanding under any employee stock option or
compensation plan or arrangement of the Company (except for the Microcom, Inc.
1987 Employee Stock Purchase Plan (the "COMPANY STOCK PURCHASE PLAN")) that is
vested and exercisable (including any option that becomes vested and exercisable
by its terms as a result of the transactions contemplated hereby) held by (i)
the Chief Executive Officer of the Company, (ii) the Chief Financial Officer of
the Company or (iii) any director or former director of the Company shall be
canceled, and Buyer shall pay each such holder in cash at the Effective Time for
each such option an amount determined by multiplying (A) the excess, if any, of
the Merger Consideration over the applicable exercise price per share of such
option by (B) the number of shares to which such option relates.
(b) Except as otherwise provided in Section 2.5(a) above, at the Effective
Time, each option to purchase shares of Common Stock outstanding under any
employee stock option or compensation plan or arrangement of the Company (except
for the Company Stock Purchase Plan), whether or not vested or exercisable,
shall be canceled, and Buyer shall issue in exchange therefor an option to
purchase shares of common stock of Buyer (a "SUBSTITUTE OPTION"). The number of
shares of Buyer's common stock subject to such Substitute Option and the
exercise price thereunder shall be computed in compliance with the requirements
of Section 424(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "CODE"). Such Substitute
Option shall vest in accordance with the same schedule and shall have
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<PAGE>
the same term as the original option in respect of which it is granted, and
shall otherwise be subject to all of the other terms and conditions of options
granted under the employee stock option or compensation plan or arrangement of
Buyer. The Substitute Option will not qualify as an incentive stock option under
Section 422 of the Code. Notwithstanding the foregoing, in the case of any
Substitute Option issued in exchange for an option exercisable for shares of
Common Stock which shares would upon exercise, as of the Effective Time, be
subject to contractual forfeiture or resale restrictions ("FORFEITURE
PROVISIONS"), the Substitute Option shall become exercisable according to a
schedule that mirrors the expiration of such Forfeiture Provisions, but the
shares of Buyer's common stock acquired upon exercise of the Substitute Option
shall not be subject to Forfeiture Provisions.
(c) Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of the Company's stock option or
compensation plans or arrangements) that are necessary to give effect to the
transactions contemplated by Sections 2.5(a) and 2.5(b).
SECTION 2.6 Employee Stock Purchase Plan. (a) As of the Effective Time,
----------------------------
the Company Stock Purchase Plan shall be terminated. Buyer shall pay each
participant in any current offering under such Plan in cash at or promptly after
the Effective Time, in cancellation of all rights under such Plan, the amount of
such participant's account balance under the Plan.
(b) Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of the Company Stock Purchase
Plan) that are necessary to give effect to the transactions contemplated by
Section 2.6(a).
SECTION 2.7 Option Restricted Stock. The provisions of this Section 2.7
-----------------------
shall apply to each share of Common Stock acquired upon exercise of an option
granted under any stock option or incentive plan of the Company that as of the
Effective Date is subject to Forfeiture Provisions ("OPTION RESTRICTED STOCK").
Notwithstanding Section 2.2, the Option Restricted Stock shall not be tendered
by any holder thereof into the Offer and shall be canceled immediately prior to
the Effective Time. In consideration of such forbearance and cancellation,
Buyer shall grant, as of the Effective Time, to each former holder of Option
Restricted Stock, a number of shares of Buyer common stock having a market
value, based on the most recent per share closing price of Buyer common stock on
the New York Stock Exchange prior to the Effective Date, equal to the product of
(i) the number of shares of Option Restricted Stock formerly held by such holder
and (ii) the Merger Consideration. Such Buyer common stock shall be subject to
the same Forfeiture Provisions as applied to the Option Restricted Stock
immediately prior to the cancellation thereof. The Company shall use its best
efforts to obtain such consents by the affected
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<PAGE>
holders of Option Restricted Stock as are necessary to effect the provisions of
this Section 2.7.
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.1. Articles of Organization. (a) The Articles of Organization
------------------------
of the Surviving Corporation shall be amended pursuant to the Articles of Merger
to read in their entirety as set forth in the Articles of Organization of Merger
Subsidiary, except that the name of the Surviving Corporation shall be
"Microcom, Inc."
(b) The Surviving Corporation shall initially be authorized to issue up to
100,000 shares of its common stock, par value $.01 per share.
(c) The purposes of the Surviving Corporation shall be as set forth in the
Articles of Organization of Merger Subsidiary as in effect on the date hereof
until such time as such purposes may be amended as provided in the Articles of
Organization of the Surviving Corporation and by applicable law.
SECTION 3.2. Bylaws. The bylaws of Merger Subsidiary in effect at the
------
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.3. Directors and Officers. From and after the Effective Time,
----------------------
until successors are duly elected or appointed and qualified in accordance with
applicable law, (a) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (b) the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 4.1. Corporate Existence and Power. The Company is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all corporate powers and all material
govern-
13
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mental licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the financial condition, business, assets or results
of operations of the Company and the Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT"). The Company has heretofore delivered to Buyer true and
complete copies of the Company's Articles of Organization and bylaws as
currently in effect.
SECTION 4.2. Corporate Authorization. The execution, delivery and
-----------------------
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except as set forth in the following sentence, have been duly
authorized by all necessary corporate action. The affirmative vote of the
holders of a majority of the Shares approving this Agreement is the only vote of
the holders of the Company's capital stock necessary to approve the transactions
contemplated by this Agreement. This Agreement constitutes a valid and binding
agreement of the Company.
SECTION 4.3. Governmental Authorization. The execution, delivery and
--------------------------
performance by the Company of this Agreement and the consummation of the Merger
by the Company require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (a) the filing of
the Articles of Merger in accordance with Massachusetts Law; (b) compliance with
any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR ACT"); and (c) compliance with any applicable requirements of
the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (the "EXCHANGE ACT").
SECTION 4.4. Non-Contravention. The execution, delivery and performance
-----------------
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with the Articles of Organization or bylaws of the Company, (b) assuming
compliance with the matters referred to in Section 4.3, contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the Company
or any Subsidiary, (c) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or any Subsidiary or to a loss of any benefit to which the Company or
any Subsidiary is entitled under any provision of any agreement, contract or
other instrument binding upon the Company or any Subsidiary or any license,
franchise, permit or other similar authorization held by the Company or any
Subsidiary, or (d) result in the creation or imposition of any Lien on any asset
of the Company or any Subsidiary except, in the case of clauses (b), (c) and
(d), for such matters as would not, individually
14
<PAGE>
or in the aggregate, have a Material Adverse Effect. For purposes of this
Agreement, "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
SECTION 4.5. Capitalization. The authorized capital stock of the Company
--------------
consists of 30,000,000 shares of Common Stock, $0.01 par value per share. As of
April 9, 1997, there were outstanding 16,288,011 shares of Common Stock and
stock options to purchase an aggregate of 2,102,346 shares of Common Stock (all
of which are currently exercisable) at an average exercise price of $8.24 per
share (of which options to purchase an aggregate of 687,608 shares of Common
Stock were vested). All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
All shares of Common Stock issuable upon exercise of outstanding stock options
have been duly authorized and will have been validly issued and will be fully
paid and nonassessable. Except as set forth in this Section and except for
changes since April 9, 1997 resulting from the exercise of stock options and
purchase rights outstanding on such date, there are outstanding (a) no shares of
capital stock or other voting securities of the Company, (b) no securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company and (c) no options or other rights to acquire
from the Company, and no obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company (the items in clauses (a), (b) and (c)
being referred to collectively as the "COMPANY SECURITIES"). There are no
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Company Securities.
SECTION 4.6. Subsidiaries. (a) Each Subsidiary is a corporation duly
------------
incorporated, validly existing and, if applicable, in good standing under the
laws of its jurisdiction of incorporation, has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. For purposes of this Agreement, "SUBSIDIARY" means any
corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned by
the Company. All Subsidiaries and their respective jurisdictions of
incorporation are identified in the Company's annual report on Form 10-K for the
fiscal year ended March 31, 1996 (the "COMPANY 10-K").
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary, is owned by the Company, directly or
indirectly,
15
<PAGE>
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such stock or other securities or ownership interests). There are no outstanding
(i) securities of the Company or any Subsidiary convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
any Subsidiary and (ii) options or other rights to acquire from the Company or
any Subsidiary, or other obligation of the Company or any Subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary (the items in clauses (i)
and (ii) being referred to collectively as the "SUBSIDIARY SECURITIES"). There
are no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 4.7. SEC Filings. (a) The Company has delivered to Buyer (i)
-----------
the Company's annual reports on Form 10-K for its fiscal years ended March 31,
1994, 1995, and 1996, (ii) its quarterly report on Form 10-Q for its fiscal
quarter ended December 31, 1996 (the "COMPANY 10-Q"), (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held since March 31, 1996 and (iv)
all of its other reports, statements, schedules and registration statements
filed with the Securities and Exchange Commission (the "SEC") since March 31,
1996.
(b) As of its filing date, each such report or statement filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(c) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act of 1933 as of the date such
statement or amendment became effective did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
SECTION 4.8. Financial Statements. The audited consolidated financial
--------------------
statements and unaudited consolidated interim financial statements of the
Company included in its annual reports on Form 10-K referred to in Section 4.7
and the Company 10-Q fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements). For purposes of this Agreement, "BALANCE SHEET" means the
consolidated
16
<PAGE>
balance sheet of the Company as of December 31, 1996 set forth in the Company
10-Q and "BALANCE SHEET DATE" means December 31, 1996.
SECTION 4.9. Disclosure Documents. (a) Each document required to be
--------------------
filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including,
without limitation, the Schedule 14D-9, the proxy or information statement of
the Company (the "COMPANY PROXY STATEMENT"), if any, to be filed with the SEC in
connection with the Merger, and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company and at the time such
stockholders vote on adoption of this Agreement, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. At the time of the filing of any Company Disclosure
Document other than the Company Proxy Statement, at the time of any distribution
thereof and at the time of consummation of the Offer, such Company Disclosure
Document will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 4.9(b) will not apply
to statements or omissions included in the Company Disclosure Documents based
upon information furnished to the Company in writing by Buyer specifically for
use therein.
(c) The information with respect to the Company or any Subsidiary that the
Company furnishes to Buyer in writing specifically for use in the Offer
Documents will not, at the time of the filing thereof, at the time of any
distribution thereof and at the time of the consummation of the Offer, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 4.10. Absence of Certain Changes. Except as disclosed in writing
--------------------------
to Buyer prior to the date hereof, since the Balance Sheet Date, the Company and
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development or state of circumstances or
facts which has had or could reasonably be expected to have a Material
Adverse Effect;
17
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(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or
any repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding security of
the Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with
past practices;
(e) any creation or assumption by the Company or any Subsidiary of any
Lien on any material asset other than in the ordinary course of business
consistent with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past practices or any amendment
of the terms of any loan to executive officers or directors;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any Subsidiary which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other
right, in either case, material to the Company and the Subsidiaries taken
as a whole, other than transactions and commitments in the ordinary course
of business consistent with past practice and those contemplated by this
Agreement;
(i) any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of
a concurrent change in generally accepted accounting principles or in
Regulation S-X promulgated under the Exchange Act;
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(j) any tax election, other than those consistent with past practice, not
required by law or any settlement or compromise of any tax liability in
either case that is material to the Company and the Subsidiaries;
(k) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary, (ii) increase in
benefits payable under any existing severance or termination pay policies
or employment agreements, (iii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of the Company
or any Subsidiary or (iv) increase in compensation, bonus or other benefits
payable to directors, officers or employees of the Company or any
Subsidiary, other than any such increases payable to employees other than
directors or officers in the ordinary course of business consistent with
past practice; or
(l) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any Subsidiary, which employees
were not subject to a collective bargaining agreement at the Balance Sheet
Date, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to such employees.
SECTION 4.11. No Undisclosed Material Liabilities. There are no material
-----------------------------------
liabilities or obligations of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability or obligation,
other than:
(a) liabilities or obligations disclosed or provided for in the Balance
Sheet;
(b) liabilities or obligations incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date,
which in the aggregate are not material to the Company and the
Subsidiaries,taken as a whole; and
(c) liabilities or obligations under this Agreement.
SECTION 4.12. Litigation. Except as set forth in the Company 10-K, there
----------
is no action, suit, investigation or proceeding pending, or to the knowledge of
the Company threatened, against or affecting the Company or any Subsidiary or
any of their respective properties or any of their respective officers or
directors in their capacity as officers or directors of the Company (or any
basis therefor) before any court or arbitrator or before or by any governmental
body, agency or official (x) as of the date hereof, or (y)
19
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which could reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 4.13. Taxes. The Company has filed all material tax returns,
-----
statements, reports and forms required to be filed with any tax authority when
due and in accordance with all applicable laws, and all taxes shown as due and
payable thereon have been timely paid, or withheld and remitted, to the
appropriate taxing authority. No deficiency in payment of any taxes for any
period has been asserted by any taxing authority which remains unsettled at the
date hereof except for deficiencies which would not have a Material Adverse
Effect. The Company and Subsidiaries do not own any interest in real property
in the State of New York or in any other jurisdiction in which a tax is imposed
on the transfer of a controlling interest in an entity that owns any interest in
real property.
SECTION 4.14. ERISA. (a) The Company has provided Buyer with a list
-----
identifying each "EMPLOYEE BENEFIT PLAN", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), each employment,
severance or similar contract, plan, arrangement or policy and each plan or
arrangement (written or oral) providing for compensation, bonuses, profit-
sharing, stock option or other stock related rights or other forms of incentive
or deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) which is maintained, administered or
contributed to by the Company or any affiliate (as defined below) and covers any
employee or former employee of the Company or any affiliate or under which the
Company or any affiliate has any liability. Copies of such plans (and, if
applicable, related trust agreements) and all amendments thereto and written
interpretations thereof have been furnished to Buyer together with the three
most recent annual reports (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with any such plan. Such plans are referred to
collectively herein as the "EMPLOYEE PLANS". For purposes of this Section,
"AFFILIATE" of any Person means any other Person which, together with such
Person, would be treated as a single employer under Section 414 of the Code. At
no time has the Company or any Person who from time to time is or was an
affiliate of the Company ever maintained an employee benefit plan that is
subject to Title IV of ERISA.
(b) Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any Employee Plan has or will make the
Company or any Subsidiary, any officer or director of the Company or any
Subsidiary subject to any liability under Title I of ERISA or liable for any tax
pursuant to Section 4975 of the Code that could have a Material Adverse Effect.
20
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(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to the
Buyer copies of the most recent Internal Revenue Service determination letters
with respect to each such Plan. Each Employee Plan has been maintained in
material compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, which are applicable to such Plan.
(d) Subject to Section 8.5 and except as disclosed in writing to Buyer
prior to the date hereof, no employee of the Company or any Subsidiary will
become entitled to any retirement, severance or similar benefit or enhanced or
accelerated benefit solely as a result of the transactions contemplated hereby.
Without limiting the generality of the foregoing, no amount required to be paid
or payable to or with respect to any employee of the Company or any Subsidiary
in connection with the transactions contemplated hereby (either solely as a
result thereof or as a result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the meaning of Section 280G
of the Code.
(e) No Employee Plan provides post-retirement health and medical, life or
other insurance benefits for retired employees of the Company and its
affiliates.
(f) Except as disclosed in writing to Buyer prior to the date hereof,
there has been no amendment to, written interpretation or announcement (whether
or not written) by the Company or any of its affiliates relating to, or change
in employee participation or coverage under, any Employee Plan which would
increase materially the expense of maintaining such Employee Plan above the
level of the expense incurred in respect thereof for the twelve months ended on
the Balance Sheet Date.
(g) Except as disclosed in writing to Buyer prior to the date hereof,
neither the Company nor any Subsidiary is a party to or subject to any union
contract or any employment contract or arrangement with any officer, consultant,
director or employee.
SECTION 4.15. Compliance with Laws. Neither the Company nor any
--------------------
Subsidiary is in violation of, or has violated, any applicable provisions of any
laws, statutes, ordinances or regulations, except for any such violation that,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.16. Finders' Fees. Except for Morgan Stanley & Co.
-------------
Incorporated and Vannevar Management, Inc., copies of whose engagement
agreements have been provided to Buyer, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf, of the
21
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Company or any Subsidiary who might be entitled to any fee or commission from
Buyer or any of its affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.17. Patents and Other Proprietary Rights. The Company and
------------------------------------
Subsidiaries have rights to use, whether through ownership, licensing or
otherwise, all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of which
the Company is aware that are necessary for its business as now conducted
(collectively the "INTELLECTUAL PROPERTY RIGHTS"). The Company and Subsidiaries
have not assigned, hypothecated or otherwise encumbered any of the Intellectual
Property Rights and none of the licenses included in the Intellectual Property
Rights purport to grant sole or exclusive licenses to another entity or person,
including, without limitation sole or exclusive licenses limited to specific
fields of use. To the best of the Company's knowledge, the patents owned by the
Company and Subsidiaries are valid and enforceable and any patent issuing from
patent applications of the Company and Subsidiaries will be valid and
enforceable, except as such invalidity or unenforceability would not have a
Material Adverse Effect. Except as disclosed in writing to Buyer prior to the
date hereof: (i) the Company has no knowledge of any infringement by any other
party of any of the Intellectual Property Rights, and (ii) the Company and
Subsidiaries have not entered into any agreement to indemnify any other party
against any charge of infringement of any of its Intellectual Property Rights
except for such matters as would not, individually or in the aggregate, have a
Material Adverse Effect. To the best of the Company's knowledge, the Company
and Subsidiaries have not and do not violate or infringe any intellectual
property right of any other person or entity, and the Company and Subsidiaries
have not received any communication alleging that it violates or infringes the
intellectual property right of any other person or entity, except as disclosed
in writing to Buyer prior to the date hereof and except for any such violations
or infringements as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company and Subsidiaries have not been sued for infringing
any intellectual property right of another entity or person. Except as
disclosed in writing to Buyer prior to the date hereof, none of the processes,
techniques and formulae, research and development results and other know-how
relating to the business of the Company and Subsidiaries, the value of which to
the Company is contingent upon maintenance of the confidentiality thereof, has
been disclosed by the Company or any affiliate thereof to any person or entity
other than those persons or entities who are bound to hold such information in
confidence pursuant to confidentiality agreements or by operation of law.
SECTION 4.18. Environmental Matters. (a) Except as set forth in the
---------------------
Company 10-K:
(i) no notice, notification, demand, request for information, citation,
summons, complaint or order has been received by, or, to the knowledge of
the
22
<PAGE>
Company, is pending or threatened by any Person against, the Company or
any Subsidiary nor has any material penalty been assessed against the
Company or any Subsidiary with respect to any (A) alleged violation of any
Environmental Law or liability thereunder, (B) alleged failure to have any
permit, certificate, license, approval, registration or authorization
required under any Environmental Law, (C) generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance or (D)
discharge, emission or release of any Hazardous Substance; and
(ii) there are no Environmental Liabilities that have had or could
reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in writing to Buyer prior to the date hereof, there
has been no environmental investigation, study, audit, test, review or other
analysis conducted of which the Company has knowledge in relation to the current
or prior business of the Company or any property or facility now or previously
owned or leased by the Company or any Subsidiary which has not been delivered to
Buyer prior to the date hereof.
(c) For purposes of this Section 4.18, the following terms shall have the
meanings set forth below:
"COMPANY" and "SUBSIDIARY" shall include any entity which is, in whole
or in part, a predecessor of the Company or any Subsidiary;
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law,
treaty, judicial decision, regulation, rule, judgment, order, decree,
injunction, permit, agreement or governmental restriction or
requirement relating to human health, the environment or pollutants,
contaminants, chemicals, toxins, hazardous substances or wastes.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities of or
relating to the Company and any Subsidiary, whether contingent or
fixed, actual or potential, known or unknown, which (i) arise under or
relate to matters covered by Environmental Laws and (ii) relate to
actions occurring or conditions existing on or prior to the Effective
Time; and
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, corrosive or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing characteristics,
which in any event is regulated under Environmental Laws.
23
<PAGE>
SECTION 4.19 Approvals; Antitakeover Provisions. The Company has taken
----------------------------------
all action necessary to approve the Offer and the Merger such that the approval
is sufficient to render entirely inapplicable to the Offer and Merger or Buyer
or Merger Subsidiary the provisions of Chapter 110C, 110D, 110E and 110F of the
Massachusetts General Laws. No other antitakeover or similar statute or
regulation applies or purports to apply to the transactions contemplated by this
Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to the Company that:
SECTION 5.1. Corporate Existence and Power. Each of Buyer and Merger
-----------------------------
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
Since the date of its incorporation, Merger Subsidiary has not engaged in any
activities other than in connection with or as contemplated by this Agreement or
in connection with arranging any financing required to consummate the
transactions contemplated hereby.
SECTION 5.2. Corporate Authorization. The execution, delivery and
-----------------------
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Buyer and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Buyer and Merger
Subsidiary.
SECTION 5.3. Governmental Authorization. The execution, delivery and
---------------------------
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions contemplated by
this Agreement require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (a) the filing of
the Articles of Merger in accordance with Massachusetts Law, (b) compliance with
any applicable requirements of the HSR Act; and (c) compliance with any
applicable requirements of the Exchange Act.
SECTION 5.4. Non-Contravention. The execution, delivery and performance
-----------------
by Buyer and Merger Subsidiary of this Agreement and the consummation by Buyer
and Merger Subsidiary of the transactions contemplated hereby do not and will
not (a) contravene or conflict with the certificate of incorporation or bylaws
of Buyer or
24
<PAGE>
the Articles of Organization or bylaws of Merger Subsidiary, (b) assuming
compliance with the matters referred to in Section 5.3, contravene or conflict
with any provision of law, regulation, judgment, order or decree binding upon
Buyer or Merger Subsidiary, or (c) constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of Buyer or Merger Subsidiary or to a loss of any benefit to which
Buyer or Merger Subsidiary is entitled under any agreement, contract or other
instrument binding upon Buyer or Merger Subsidiary, except, in the case of (b)
and (c), for such matters as would not materially adversely effect the ability
of Buyer and Merger Subsidiary to consummate the transactions contemplated by
this Agreement.
SECTION 5.5. Disclosure Documents. (a) The information with respect to
--------------------
Buyer and its subsidiaries that Buyer furnishes to the Company in writing
specifically for use in any Company Disclosure Document will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading (i) in the case of the Company Proxy
Statement at the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company and at the time the
stockholders vote on adoption of this Agreement, and (ii) in the case of any
Company Disclosure Document other than the Company Proxy Statement, at the time
of the filing thereof, at the time of any distribution thereof, and at the time
of consummation of the Offer.
(b) The Offer Documents, when filed, will comply as to form in all
material respects with the applicable requirements of the Exchange Act and will
not at the time of the filing thereof, at the time of any distribution thereof
or at the time of consummation of the Offer, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, provided, that this representation and warranty will not
--------
apply to statements or omissions in the Offer Documents based upon information
furnished to Buyer or Merger Subsidiary in writing by the Company specifically
for use therein.
SECTION 5.6. Finders' Fees. Except for Greenhill & Co., LLC, whose fees
-------------
will be paid by Buyer, there is no investment banker, broker, finder or other
intermediary who might be entitled to any fee or commission from the Company or
any of its affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE 6
COVENANTS OF THE COMPANY
25
<PAGE>
SECTION 6.1. Conduct of the Company. From the date hereof until the
----------------------
Effective Time, the Company and the Subsidiaries shall conduct their business in
the ordinary course consistent with past practice and shall use their best
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time:
(a) the Company will not adopt or propose any change in its Articles of
Organization or bylaws;
(b) the Company will not, and will not permit any Subsidiary to, merge
or consolidate with any other Person or acquire a material amount of assets
of any other Person, other than purchases of materials or products in the
ordinary course of business;
(c) the Company will not, and will not permit any Subsidiary to, sell,
lease, license or otherwise dispose of any material assets or property
except (i) pursuant to existing contracts or commitments and (ii) in the
ordinary course consistent with past practice;
(d) the Company will not, and will not permit any Subsidiary to, settle
or compromise any suit or claims or threatened suit or claim relating to
the transactions contemplated hereby;
(e) the Company will not, and will not permit any Subsidiary to, agree
or commit to do any of the foregoing; and
(f) the Company will not, and will not permit any Subsidiary to, take or
agree or commit to take any action that would make any representation and
warranty of the Company hereunder inaccurate in any respect at, or as of
any time prior to, the Effective Time.
SECTION 6.2. Stockholder Meeting; Proxy Material. The Company shall
-----------------------------------
cause a meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be
duly called and held as soon as reasonably practicable following the
consummation of the Offer for the purpose of voting on the approval and adoption
of this Agreement, unless a vote shall not be required under Massachusetts Law.
The Directors of the Company shall, except as may be required, in response to an
unsolicited bona fide written Acquisition Proposal (as defined in Section 6.4),
in order to comply with the fiduciary duties of the Board of Directors under
applicable law as advised in writing by Company Counsel, recommend approval and
adoption of this Agreement by the Company's stockholders. In connection with
such meeting, the Company (a) will promptly prepare and file with the SEC, will
use its best efforts to have cleared by the SEC and will
26
<PAGE>
thereafter mail to its stockholders as promptly as practicable the Company Proxy
Statement and all other proxy materials for such meeting, (b) will use its best
efforts to obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby and (c) will otherwise comply with all
legal requirements applicable to such meeting.
SECTION 6.3. Access to Information. From the date hereof until the
---------------------
Effective Time, the Company will give Buyer, its counsel, financial advisors,
auditors and other authorized representatives reasonable access to the offices,
properties, books and records of the Company and the Subsidiaries and such
financial and operating data and other information as such Persons may
reasonably request and will instruct the Company's employees, counsel and
financial advisors to cooperate with Buyer in its investigation of the business
of the Company and the Subsidiaries; provided that no investigation pursuant to
--------
this Section 6.3, shall affect any representation or warranty given by the
Company to Buyer hereunder.
SECTION 6.4. Other Offers. From the date hereof until the termination
------------
hereof, the Company and the Subsidiaries and the officers, directors, employees
or other agents of the Company and the Subsidiaries will not, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal or (ii) except as may be required, in response to an
unsolicited bona fide written Acquisition Proposal, in order to comply with the
fiduciary duties of the Board of Directors under applicable law as advised in
writing by Company Counsel, engage in negotiations with, or disclose any
nonpublic information relating to the Company or any Subsidiary or afford access
to the properties, books or records of the Company or any Subsidiary to, any
Person. The Company will promptly (and in no event later than 24 hours after
receipt of the relevant Acquisition Proposal) notify (which notice shall be
provided orally and in writing and shall identify the Person making the relevant
Acquisition Proposal and set forth the material terms thereof) Buyer after (i)
the Company has received any Acquisition Proposal, (ii) the Company has actual
knowledge that any Person is considering making an Acquisition Proposal, or
(iii) the Company has received any request for nonpublic information relating to
the Company or any Subsidiary, or for access to the properties, books or records
of the Company or any Subsidiary, by any Person that the Company has actual
knowledge is considering making, or has made, an Acquisition Proposal. The
Company will keep Buyer fully informed of the status and details of any such
Acquisition Proposal or request. The Company shall not engage in negotiations
with, or disclose any nonpublic information to, any such Person unless it
receives from such Person an executed confidentiality agreement with terms no
less favorable to the Company than the Confidentiality Agreement (as defined in
Section 11.9). The Company shall, and shall cause its Subsidiaries and the
Company's directors, officers, employees, financial advisors and other agents or
representatives to, cease immediately and cause to be terminated all activities,
discussions or negotiations, if any, with any Persons conducted heretofore with
respect to any Acquisition Proposal. For purposes of this
27
<PAGE>
Agreement, "ACQUISITION PROPOSAL" means any offer or proposal for a merger or
other business combination involving the Company or any Subsidiary or the
acquisition of any equity interest in, or a substantial portion of the assets
of, the Company or any Subsidiary, other than the transactions contemplated by
this Agreement.
ARTICLE 7
COVENANTS OF BUYER
SECTION 7.1. Obligations of Merger Subsidiary. Buyer will take all
--------------------------------
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 7.2. Voting of Shares. Buyer agrees to vote all Shares
----------------
beneficially owned by it in favor of adoption of this Agreement at the Company
Stockholder Meeting.
SECTION 7.3. Director and Officer Liability. For five years after the
------------------------------
Effective Time, Buyer will cause the Surviving Corporation to indemnify and hold
harmless the present and former officers and directors of the Company in respect
of acts or omissions occurring prior to the Effective Time to the extent
provided under the Company's Articles of Organization and bylaws in effect on
the date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For five years after
the Effective Time, Buyer will cause the Surviving Corporation to use its best
efforts to provide officers' and directors' liability insurance in respect of
acts or omissions occurring prior to the Effective Time covering each such
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof, provided that in
--------
satisfying its obligation under this Section, Buyer shall not be obligated to
cause the Surviving Corporation to pay premiums in excess of 150% of the amount
per annum the Company paid in the twelve months ended December 31, 1996, which
amount has been disclosed to Buyer. Buyer, Merger Subsidiary and the Company
acknowledge and agree that any directors and officers, present or former, of the
Company are third party beneficiaries under this Section 7.3 and, as such, shall
be entitled to the benefits of all covenants and obligations of Buyer hereunder.
SECTION 7.4. Tax Certification. At any time during the period beginning
-----------------
on the date hereof and ending on the Effective Time, the Company shall provide
to Buyer, within two business days of a request by Buyer, a certificate meeting
the requirements of Treas. Reg. Sec. 1.897-2(h) to the effect that the Company
is not, nor has
28
<PAGE>
it been within 5 years of the date thereof, a "United States real property
holding corporation" as defined in Section 897 of the Code.
ARTICLE 8
COVENANTS OF BUYER
AND THE COMPANY
SECTION 8.1. Best Efforts. Subject to the terms and conditions of this
------------
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
SECTION 8.2. Certain Filings. The Company and Buyer shall cooperate with
---------------
one another (a) in connection with the preparation of the Company Disclosure
Documents and the Offer Documents, (b) in determining whether any action by or
in respect of, or filing with, any governmental body, agency or official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and (c)
in seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Company Disclosure Documents or the Offer Documents and seeking timely to obtain
any such actions, consents, approvals or waivers.
SECTION 8.3. Public Announcements. Buyer and the Company will consult
--------------------
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange or automated quotation system, will not issue any
such press release or make any such public statement prior to such consultation.
SECTION 8.4. Notices of Certain Events. The Company shall promptly
-------------------------
notify Buyer, and Buyer shall promptly notify the Company, of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
29
<PAGE>
(c) with respect only to the Company, any actions, suits, claims,
investigations or proceedings commenced or, to the best of its knowledge
threatened which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 4.12 or which relate to
the consummation of the transactions contemplated by this Agreement.
SECTION 8.5. Employee Benefits. Buyer and the Company agree to appoint
-----------------
personnel from their respective human relations departments that will meet and
coordinate the manner of transition of the insurance, compensation and other
benefit plans of the Company following the Merger. The parties agree that for
two years following the Effective Time, the Company's employees will be provided
benefits that are substantially comparable in the aggregate to those provided by
the Company to its employees as of the date hereof, excluding all forms of
stock-based or equity-based compensation.
SECTION 8.6. Further Assurances. At and after the Effective Time, the
------------------
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.1. Conditions to the Obligations of Each Party. The
-------------------------------------------
obligations of the Company, Buyer and Merger Subsidiary to consummate the Merger
are subject to the satisfaction of the following conditions:
(a) if required by Massachusetts Law, this Agreement shall have been
adopted by the stockholders of the Company in accordance with such law;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or has been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
and
(d) Buyer shall have purchased Shares pursuant to the Offer.
30
<PAGE>
ARTICLE 10
TERMINATION
SECTION 10.1. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer, if the Offer has not been
consummated by June 4, 1997;
(c) by either the Company or Buyer, if there shall be any law or
regulation that makes consummation of the Offer or the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Buyer or the Company from consummating the Offer or the Merger is
entered and such judgment, injunction, order or decree shall become final
and nonappealable;
(d) by Buyer, upon the occurrence of any Trigger Event described in
clauses (i) or (ii) of Section 11.4(b); or
(e) by the Company, upon the occurrence of any Trigger Event described in
clause (i)(A) of Section 11.4(b).
The party desiring to terminate this Agreement pursuant to clauses (b), (c) or
(d) shall give written notice of such termination to the other party in
accordance with Section 11.1.
SECTION 10.2. Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that the agreements
contained in Section 11.4 shall survive the termination hereof.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Notices. All notices, requests and other communications to
-------
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
31
<PAGE>
if to Buyer or Merger
Subsidiary to: Alan G. Lutz
Senior Vice President
Communication Products Group
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
with copies to: J. David Cabello, Esq.
Senior Vice President
General Counsel and Secretary
Compaq Computer Corporation
20555 SH 249
Houston, TX 77070
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Att: Christopher Mayer, Esq.
if to the Company, to: Microcom, Inc.
500 River Ridge Drive
Norwood, MA 02062-5028
Att: Lewis A. Bergins
President and Chief Executive Officer
with a copy to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Att: William C. Rogers, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
32
<PAGE>
SECTION 11.2. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement except for the agreements
set forth in Section 11.4.
SECTION 11.3. Amendments; No Waivers. (a) Any provision of this
----------------------
Agreement may be amended or waived prior to the Effective Time if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Buyer and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) A termination of this Agreement pursuant to Section 10.01 or an
amendment of this Agreement in accordance with Section 11.3(a) shall, in order
to be effective, require in the case of the Company action by its Board of
Directors or the duly authorized designee of its Board of Directors. In the
event that Buyer's designees are appointed or elected to the Board of Directors
of the Company as provided in Section 1.3, after the consummation of the Offer
and prior to the Effective Time, the affirmative vote of at least a majority of
the Continuing Directors shall be required for the Company to agree to amend,
waive compliance with or terminate this Agreement.
(c) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.4. Fees and Expenses. (a) Except as otherwise provided in
-----------------
this Section, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) The Company agrees to pay Buyer a fee in immediately available funds
equal to $10,460,000 promptly, but in no event later than two business days,
after the termination of this Agreement as a result of the occurrence of any of
the events set forth below (a "TRIGGER EVENT"):
(i) (A) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or an agreement in
principle with respect to any Acquisition Proposal, or (B) the Board
of Directors of the Company shall have withdrawn or materially
modified in a manner adverse to Buyer the Board's approval or
recommendation of the Offer or the Merger;
33
<PAGE>
(ii) any person or group (as defined in Section 13(d)(3) of the
Exchange Act) (other than Buyer, the Merger Subsidiary or any
affiliate thereof) shall have become the beneficial owner (as defined
in Rule 13d-3 promulgated under the Exchange Act) of a majority of the
outstanding Shares; or
(iii) this Agreement shall have been terminated in accordance
with Section 10.1(b) and (x) the Company shall have failed to observe
or perform in any material respect any of its obligations under this
Agreement or (y) an Acquisition Proposal is received prior to June 4,
1997 and not publicly rejected by the Company's Board of Directors.
(c) The Company agrees to pay Buyer an amount in immediately available
funds equal to the sum of (i) Buyer's out-of-pocket expenses incurred in
connection with this transaction (but not to exceed $2 million ) and (ii) $ 2
million, if this Agreement shall have been terminated in accordance with Section
10.1(b) and any representation or warranty made by the Company in this Agreement
shall not have been true and correct as of the date hereof; provided that in the
-------- ----
event the Company has made a payment to Buyer pursuant to Section 11.4(b) it
shall not be required to make any further payment to Buyer pursuant to this
Section 11.4(c).
SECTION 11.5. Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
--------
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase shares pursuant to the Offer, but any such
transfer or assignment will not relieve Buyer of its obligations under the Offer
or prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
SECTION 11.6. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of Delaware.
SECTION 11.7. Counterparts; Effectiveness; Third Party Beneficiaries.
------------------------------------------------------
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of the other
parties hereto. Except for Section 7.3 hereof, no provision of this Agreement is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
34
<PAGE>
SECTION 11.8. Entire Agreement. This Agreement and the Confidentiality
----------------
and Nondisclosure Agreement effective as of April 9, 1997 between Buyer and the
Company ("CONFIDENTIALITY AGREEMENT") constitute the entire agreement among
Buyer, Merger Subsidiary and the Company with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written and
oral, among Buyer, Merger Subsidiary and the Company with respect to the subject
matter hereof.
SECTION 11.9. Definitions. Each of the following terms is defined in the
-----------
Section set forth opposite such term:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquisition Proposal 6.4
Articles of Merger 2.1
Balance Sheet 4.8
Balance Sheet Date 4.8
Code 2.5
Common Stock 1.1
Company Counsel 1.2
Company Disclosure Documents 4.9
Company Proxy Statement 4.9
Company Securities 4.5
Company Stockholder Meeting 6.2
Company Stock Purchase Plan 2.5
Company 10-K 4.6
Company 10-Q 4.7
Confidentiality Agreement 11.8
Continuing Directors 1.3
Effective Time 2.1
Employee Plans 4.14
Environmental Laws 4.18
Environmental Liabilities 4.18
ERISA 4.14
Exchange Act 4.3
Exchange Agent 2.3
Hazardous Substances 4.18
HSR Act 4.3
Lien 4.4
Massachusetts Law 1.2
Material Adverse Effect 4.1
MBCL 1.2
Merger 2.1
Merger Consideration 2.2
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
Minimum Condition 1.1
Offer 1.1
Offer Documents 1.1
Option Restricted Stock 2.7
Person 2.3
Schedule 14D-9 1.2
SEC 4.7
Shares 1.1
Subsidiary 4.6
Subsidiary Securities 4.6
Substitute Option 2.5
Surviving Corporation 2.1
Trigger Event 11.4
</TABLE>
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as an instrument under seal by their respective authorized
officers as of the day and year first above written.
MICROCOM, INC.
By: /s/ Lewis A. Bergins
-------------------------------------
Lewis A. Bergins
President
By: /s/ Peter Minihane
-------------------------------------
Peter Minihane
Treasurer
COMPAQ COMPUTER CORPORATION
By: /s/ Eckhard Pfieffer
-------------------------------------
Eckhard Pfeiffer
President and Chief Executive Officer
COMPAQ-BOSTON, INC.
By: /s/ Alan G. Lutz
-------------------------------------
Alan G. Lutz
President
By: /s/ Earl L. Mason
-------------------------------------
Earl L. Mason
Treasurer
37
<PAGE>
ANNEX I
Notwithstanding any other provision of the Offer, Buyer shall not be
required to accept for payment or pay for any Shares, and may terminate the
Offer, if (i) the Minimum Condition has not been satisfied by June 4, 1997, (ii)
the applicable waiting period under the HSR Act shall not have expired or been
terminated by June 4, 1997, or (iii) at any time on or after April 9, 1997 and
prior to the acceptance for payment of Shares, any of the following conditions
exist:
(a) there shall be threatened, instituted or pending any action, suit,
investigation or proceeding by any government or governmental authority or
agency, domestic or foreign, or by any other person, domestic or foreign,
before any court or governmental authority or agency, domestic or foreign,
(i) challenging or seeking to make illegal, to delay materially or otherwise
directly or indirectly to restrain or prohibit the making of the Offer, the
acceptance for payment of or payment for some of or all the Shares pursuant
to the Offer or the consummation of the Merger, seeking to obtain material
damages or otherwise directly or indirectly relating to the transactions
contemplated by the Offer or the Merger, (ii) seeking to restrain or prohibit
Buyer's ownership or operation (or that of its respective subsidiaries or
affiliates) of all or any material portion of the business or assets of the
Company and the Subsidiaries, taken as a whole, or of Buyer and its
subsidiaries, taken as a whole, or to compel Buyer or any of its subsidiaries
or affiliates to dispose of or hold separate all or any material portion of
the business or assets of the Company and the Subsidiaries, taken as a whole,
or of Buyer and its subsidiaries, taken as a whole, (iii) seeking to impose
or confirm material limitations on the ability of Buyer or any of its
subsidiaries or affiliates effectively to exercise full rights of ownership
of the Shares, including, without limitation, the right to vote any Shares
acquired or owned by Buyer or any of its subsidiaries or affiliates on all
matters properly presented to the Company's stockholders, or (iv) seeking to
require divestiture by Buyer or any of its subsidiaries or affiliates of any
Shares, or (v) that otherwise is reasonably likely to have a Material Adverse
Effect or materially adversely affect Buyer and its subsidiaries, taken as a
whole; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued
or deemed applicable to the Offer or the Merger, by any court, government or
governmental authority or agency, domestic or foreign other than the
application of the waiting period provisions of the HSR Act to the Offer or
the Merger that is reasonably likely,
38
<PAGE>
directly or indirectly, to result in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above; or
(c) (i) there shall be initiated, threatened, instituted or pending any
action, suit, investigation or proceeding by any government or governmental
authority or agency, domestic or foreign, that, in the reasonable judgment of
Buyer, would materially adversely affect the Company and its Subsidiaries,
taken as a whole, or (ii) except as disclosed in writing to Buyer prior to
the date hereof, there has been since the Balance Sheet Date any event,
occurrence or development or state of circumstances or facts which has had or
could reasonably be expected to have a Material Adverse Effect; or
(d) there shall have occurred a decline of at least 20% in either the Dow
Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from
the date of this Agreement through the date of termination or expiration of
the Offer; or
(e) the Company shall have breached or failed to perform in any material
respect any of its covenants or agreements under the Merger Agreement, or any
of the representations and warranties of the Company set forth in the Merger
Agreement shall not be true in any material respect when made or at any time
prior to consummation of the Offer as if made at and as of such time (except
as to any representation or warranty which speaks as of a specific date,
which must be untrue as of such date); or
(f) the Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or an agreement in principle with
respect to any Acquisition Proposal or the Board of Directors of the Company
shall have withdrawn or materially modified in a manner adverse to Buyer the
Board's approval or recommendation of the Offer or the Merger; or
(g) any person or group (as defined in Section 13(d)(3) of the Exchange
Act) (other than Buyer, the Merger Subsidiary or any affiliate thereof) shall
have become the beneficial owner (as defined in Rule 13d-3 promulgated under
the Exchange Act) of a majority of the outstanding Shares; or
(h) the Merger Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Buyer and Merger
Subsidiary and may, subject to the terms of the Agreement, be waived by Buyer
and Merger Subsidiary in whole or in part at any time and from time to time in
their discretion. The failure by Buyer or Merger Subsidiary at any time to
exercise any of the
39
<PAGE>
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances, and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time prior to the Effective Time.
40
<PAGE>
EXHIBIT 2
[MICROCOM LETTERHEAD APPEARS HERE]
April 17, 1997
Dear Shareholder:
Your Board of Directors is pleased to inform you that on April 9,
1997, Microcom, Inc. ("Microcom") entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Compaq Computer Corporation ("Compaq") and Compaq-
Boston, Inc. (the "Purchaser"), a wholly-owned subsidiary of Compaq, pursuant to
which the Purchaser has commenced on April 16, 1996 a cash tender offer (the
"Offer") to purchase all outstanding shares of Microcom common stock at a price
of $16.25 per share in cash (the "Offer Price"). Following the completion of the
Offer, upon the terms and subject to the conditions of the Merger Agreement, the
Purchaser will be merged into Microcom (the "Merger") and each of the Microcom
shares not owned by Compaq or its affiliates or by dissenting shareholders or by
holders of shares of Option Restricted Stock (as defined in the Schedule 14D-9
referred to below) will be converted into the right to receive in cash the Offer
Price.
Your Board of Directors has unanimously determined that the Offer and
the Merger are fair to and in the best interests of the shareholders, and it
recommends that shareholders accept the Offer and tender all of their shares
pursuant to the Offer.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed with the Securities and Exchange Commission. Among other
things, your Board considered the opinion of Morgan Stanley & Co. Incorporated,
to the effect that the consideration to be received pursuant to the Offer and
the Merger is fair, from a financial point of view, to the shareholders of
Microcom. The enclosed Schedule 14D-9 describes the Board's decision and
contains other important information relating to that decision. We urge you to
read it carefully.
Accompanying this letter, in addition to the Schedule 14D-9, is the
Offer to Purchase, together with related materials including a Letter of
Transmittal for use in tendering shares. These documents set forth the terms
and conditions of the tender offer and provide instructions as to how you can
tender your shares. I urge you to read the enclosed materials carefully and
consider all the factors set forth therein before making your decision with
respect to the Offer.
Your Board of Directors, management and employees thank you most
sincerely for your loyal support.
Sincerely,
\s\ James M. Dow
James M. Dow
Chairman of the Board
<PAGE>
EXHIBIT 3
COMPAQ
FOR IMMEDIATE RELEASE
---------------------
COMPAQ REACHES AGREEMENT TO ACQUIRE MICROCOM
ADVANCES COMPAQ'S EVOLUTION OF COMMUNICATION PRODUCTS BUSINESS;
ALLOWS END-TO-END HIGH-PERFORMANCE MODEM AND ISDN CONNECTIVITY
HOUSTON, April 10, 1997 - As another bold step to broaden its
communication products lineup, Compaq Computer Corporation (NYSE: CPQ)
today announced it has reached a definitive agreement to acquire Microcom,
Inc. (NASDAQ: MNPI), a maker of remote access technologies and solutions.
A wholly-owned subsidiary of Compaq will promptly commence a tender
offer to acquire all of the outstanding shares of Microcom, Inc. for $16.25
per share in cash, representing an aggregate approximate purchase price of
$280 million. Microcom's Board of Directors and management team have
approved the acquisition and will recommend shareholder acceptance.
"Development of the strategically important and rapidly growing remote
access market is a top priority in Compaq's move to expand its
communication products business," said Alan Lutz, Senior Vice President and
General Manager, Communication Products Group, Compaq. "Combining
Microcom's superb modem and access technologies with Compaq's renowned
experience in NT platforms allows us to drive remote access
price/performance advancements just as we have done in the NT server
market. We believe the joint synergy will allow us to offer our customers
the most attractive connectivity solutions. With Microcom, we can now
deliver complete end-to-end high performance modem and ISDN/1/ connectivity
- solutions with both high connect rates/2/ and high throughput/3/," Lutz
said. Compaq is the number one worldwide market share leader in servers
and the number four worldwide market share leader in client modems/4/.
"Microcom has been a standards-setter and technology pioneer in remote
access," Lutz continued. "A generation of computer users has taken
advantage of its well-engineered hardware and software solutions to connect
- remotely by telephone - their PCs to their networks. Combining this with
Compaq's distributions and marketing strength yields a potential world
class market force. The Microcom acquisition further enhances our goal of
bringing access to our customers, connecting people with people and people
with information," he concluded.
Lew Bergins, who will continue as President of the wholly owned
subsidiary stated, "The Synergies between the two companies are very
strong. This combination permits
- ------------
/1/ Integrated Services Digital Network
/2/ "Connect rate" is the percentage of all connection attempts that succeed.
/3/ "Throughput" is the amount of information that is passed through the
connection.
/4/ Compaq estimates compiled from various sources.
<PAGE>
Microcom to be more competitive in achieving the highest quality products
and cost effectiveness."
Completion of the transaction is subject to certain conditions,
including clearance under the Hart-Scott-Rodino Antitrust Improvements Act.
Following the successful completion of the offer, all of the remaining
shares of Microcom will be acquired pursuant to a merger.
A remote access server provides the link between a local area network
(LAN) and the many remote PC users who need to connect to the LAN by modem.
The server usually has numerous telephone lines (ports) plus the connection
to the LAN. It requires special hardware and software to make the remote
connections both fast and secure. The demand for remote access servers is
expected to grow dramatically from $3.0 billion in 1996 to $8.3 billion in
2000/5/ concurrent with the growth of the Internet, telecommuting and
portable computing.
COMPANY BACKGROUND
Compaq Computer Corporation, a Fortune 100 company, is the fifth
largest computer company in the world and the largest global supplier of
personal computers, delivering useful innovation through products that
connect people with people and people with information. The company is an
industry leader in environmentally friendly programs and business
practices. Compaq is strategically organized to meet the current and
future needs of its customers, offering Internet and enterprise computing
solutions, networking products, commercial PC products and consumer PCs.
As the leader in distributed enterprise solutions, Compaq has shipped over
a million servers. In 1996, the company reported worldwide sales of $18.1
billion. Compaq products are sold and supported in more than 100 countries
through a network of authorized Compaq marketing partners. Customer support
and information about Compaq and its products can be found at
http://www.compaq.com or by calling 1-800-OK-COMPAQ. Product information
and reseller locations can be obtained by calling 1-800-345-1518.
Headquartered in Norwood, Mass., Microcom is a worldwide leader in
providing central site and remote access solutions to OEMs, Internet
service providers, regional Bell operating companies, corporations,
universities and individual mobile PC users. The company's products enable
users to access and communicate with corporate Local Area Networks (LANs),
the Internet, intranets and online services from remote locations.
Microcom's products and technologies include modems, central site systems,
OEM solutions, network security, network management, remote access and
remote control software.
# # #
Compaq, Registered U.S. Patent and Trademark Office. Product names mentioned
herein may be trademarks and/or registered trademarks of their respective
companies.
For further editorial information, contact:
Compaq Computer Corporation John Sweney 713-514-0484
[email protected]
Miller/Shandwick Technologies Eric Grodziski 617-536-0470
[email protected]
- ------------
/5/ Compaq estimates compiled from various sources.
<PAGE>
EXHIBIT 4
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 576-2000
April 9, 1997
Board of Directors
Microcom, Inc.
500 River Ridge Drive
Norwood, MA 02062-5028
Gentlemen:
We understand that Microcom, Inc. ("Microcom" or the "Company"), Compaq Computer
("Buyer") and Buyer Acquisition Corp., a wholly owned subsidiary of Buyer
("Acquisition Sub") have entered into an Agreement and Plan of Merger, dated as
of April 9, 1997 (the "Merger Agreement"), which provides, among other things,
for (i) the commencement by Acquisition Sub of a tender offer (the "Tender
Offer") for all issued and outstanding shares of common stock, par value $0.01
per share (the "Common Stock"), of Target for $16.25 per share net to the seller
in cash, and (ii) the subsequent merger (the "Merger") of Acquisition Sub with
and into the Company. Pursuant to the Merger, the Company will become a wholly
owned subsidiary of Buyer and each issued and outstanding share of Common Stock,
other than shares held in treasury or held by Buyer or any affiliate of Buyer or
as to which dissenters' rights have been perfected, will be converted into the
right to receive $16.25 per share in cash. The terms and conditions of the
Tender Offer and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be received by
the holders of shares of Common Stock pursuant to the Merger Agreement is fair
from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and the Buyer;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
<PAGE>
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives of the Company and, Buyer and their financial and legal
advisors;
(ix) reviewed the Merger Agreement and certain related documents;
(x) participated in discussions with certain third parties, including
Buyer, who expressed interest in acquiring the Company or certain assets of
the Company, which led to the proposed Merger; and
(xi) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have relied upon, without independent verification, the assessment by the
management of the Company of the Company's technologies and products, and the
validity of, and risks associated with, the Company's existing and future
products and technologies. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Buyer and have received fees for
the rendering of these services.
<PAGE>
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent; except that this opinion may be included in any filing
with the Securities and Exchange Commission in connection with the Tender Offer
and the Merger. In addition, Morgan Stanley expresses no opinion or
recommendation as to whether holders of Common Stock should accept the Tender
Offer.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Charles R. Cory
-------------------
Charles R. Cory
Managing Director
<PAGE>
EXHIBIT 5
April 11, 1997
Alan G. Lutz, Senior Vice President
and General Manager, Communications
Products Group
Compaq Computer Corporation
20555 SH249
Houston, Texas 77070
CONFIDENTIALITY AGREEMENT
-------------------------
Dear Alan:
In connection with your possible interest in the acquisition of all or part of
the equity or assets as contemplated by that certain draft Agreement and Plan of
Merger, (any, a "Transaction") of Microcom, Inc. (the "Company"), you have
requested that we or our representatives furnish you or your representatives
with certain information relating to the Company or the Transaction. All such
information (whether written or oral) furnished (whether before or after the
date hereof) by us or our directors, officers, employees, affiliates,
representatives (including, without limitation, financial advisors, attorneys
and accountants) or agents (collectively, "our Representatives") to you or your
directors, officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents or your
potential sources of financing for the Transaction (collectively, "your
Representatives") and all analyses, compilations, forecasts, studies or other
documents prepared by you or your Representatives in connection with your or
their review of, or your interest in, the Transaction which contain or reflect
any such information is hereinafter referred to as the "Information". The term
Information will not, however, include information which (i) is or becomes
publicly available other than as a result of a disclosure by you or your
Representatives or (ii) is or becomes available to you on a nonconfidential
basis from a source (other than us or our Representatives) which, to the best of
your knowledge after due inquiry, is not prohibited from disclosing such
information to you by a legal, contractual or fiduciary obligation to us.
Accordingly, you hereby agree that:
1. You and your Representatives (i) will keep the Information confidential and
will not (except as required by applicable law, regulation or legal
process, and only after compliance with
<PAGE>
paragraph 3 below), without our prior written consent, disclose any
Information in any manner whatsoever, and (ii) will not use any Information
other than in connection with the Transaction; provided, however, that you
-------- -------
may reveal the Information to your Representatives (a) who need to know the
Information for the purpose of evaluating the Transaction, (b) who are
informed by you of the confidential nature of the Information and (c) who
agree to act in accordance with the terms of this letter agreement. You
will cause your Representatives to observe the terms of this letter
agreement, and you will be responsible for any breach of this letter
agreement by any of your Representatives.
2. In the event that you or any of your Representatives are requested pursuant
to, or required by, applicable law, regulation or legal process to disclose
any of the Information, you will notify us promptly so that we may seek a
protective order or other appropriate remedy or, in our sole discretion,
waive compliance with the terms of this letter agreement. In the event
that no such protective order or other remedy is obtained, or that the
Company waives compliance with the terms of this letter agreement, you will
furnish only that portion of the Information which you are advised by
counsel is legally required and will exercise all reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded the
Information.
3. If you determine not to proceed with the Transaction, you will promptly
inform our Representative, Morgan Stanley & Co. Incorporated ("Morgan
Stanley"), of that decision and, in that case, and at any time upon the
request of the Company or any of our Representatives, you will either (i)
promptly destroy all copies of the written Information in your or your
Representatives' possession and confirm such destruction to us in writing,
or (ii) promptly deliver to the Company at your own expense all copies of
the written Information in your or your Representatives' possession. Any
oral Information will continue to be subject to the terms of this letter
agreement.
4. You acknowledge that neither we, nor Morgan Stanley or its affiliates, nor
our other Representatives, nor any of our or their respective officers,
directors, employees, agents or controlling persons within the meaning of
Section 20 of the Securities Exchange Act of 1934, as amended, makes any
express or implied representation or warranty as to the accuracy or
completeness of the Information, and you agree that no such person will
have any liability relating to the Information or for any errors therein or
omissions therefrom. You further agree that you are not entitled to rely on
the accuracy or completeness of the Information and that you will be
entitled to rely solely on such representations and warranties as may be
included in any definitive agreement with respect to the Transaction,
subject to such limitations and restrictions as may be contained therein.
<PAGE>
5. You are aware, and you will advise your Representatives who are informed of
the matters that are the subject of this letter agreement, of the
restrictions imposed by the United States securities laws on the purchase
or sale of securities by any person who has received material, non-public
information from the issuer of such securities and on the communication of
such information to any other person when it is reasonably foreseeable that
such other person is likely to purchase or sell such securities in reliance
upon such information.
6. You agree that, for a period of two years from the date of this letter
agreement, you will not, directly or indirectly, solicit for employment or
hire any employee of the Company or any of its subsidiaries with whom you
have had contact or who were discussed with you in connection with your
consideration of the Transaction; provided, however, that the foregoing
provision will not prevent you from employing any such person who (i)
contacts you on his or her own initiative without any direct or indirect
solicitation by you (it being understood that any public general
solicitation not directed toward any particular individual or group of
individuals will not constitute solicitation for these purposes) or (ii)
who is terminated by such person's employer prior to commencement of
discussions with you.
7. Prior to execution of any definitive agreement with respect to the
Transaction, you agree that all (i) communications regarding the
Transaction, (ii) requests for additional information, facility tours or
management meetings, and (iii) discussions or questions regarding
procedures with respect to the Transaction, will be first submitted or
directed to Morgan Stanley and not to the Company. You acknowledge and
agree that (a) we may, without limitation, negotiate with any prospective
buyer and enter into a preliminary or definitive agreement without prior
notice to you or any other person, (b) we reserve the right, in our sole
discretion, to change the procedures relating to our consideration of the
Transaction at any time without prior notice to you or any other person, to
reject any and all proposals made by you or any of your Representatives
with regard to the Transaction, and to terminate discussions and
negotiations with you at any time and for any reason, and (c) unless and
until a written definitive agreement concerning the Transaction has been
executed, neither we nor any of our Representatives will have any liability
to you with respect to the Transaction, whether by virtue of this letter
agreement, any other written or oral expression with respect to the
Transaction or otherwise.
8. You acknowledge that remedies at law may be inadequate to protect us
against any actual or threatened breach of this letter agreement by you or
by your Representatives, and, without prejudice to any other rights and
remedies otherwise available to us, you agree to the granting of injunctive
relief in our favor without proof of actual damages. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines in a final, nonappealable order that this letter
agreement has been breached by you or by your
<PAGE>
Representatives, then you will reimburse the Company for its costs and
expenses (including, without limitation, legal fees and expenses) incurred
in connection with all such litigation.
9. You agree that no failure or delay by us in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege hereunder.
10. This letter agreement will be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts applicable to contracts
between residents of that State and executed in and to be performed in that
State.
11. This letter agreement contains the entire agreement between you and us
concerning the confidentiality of the Information, and no modifications of
this letter agreement or waiver of the terms and conditions hereof will be
binding upon you or us, unless approved in writing by each of you and us.
Please confirm your agreement with the foregoing by signing and returning to the
undersigned the duplicate copy of this letter enclosed herewith.
Very truly yours,
MICROCOM, INC.
By: /s/ Peter J. Minihane
-------------------------------------
Name: Peter J. Minihane
-----------------------------------
Title: Executive Vice President, CFO and
----------------------------------
Treasurer
---------
Accepted and Agreed as of the date
first written above:
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
---------------------
Name: Earl L. Mason
---------------------
Title: Senior Vice President
---------------------
