SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 14, 1994
3COM CORPORATION
(Exact name of registrant as specified in its charter)
California 0-12867 94-2605794
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer)
incorporation or organization) Identification No.)
5400 Bayfront Plaza 95052
Santa Clara, California
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 764-5000
Item 2. Acquisition or Disposition of Assets
(a) On January 14, 1994, pursuant to an Agreement and Plan of
Reorganization dated December 16, 1993 (the "Agreement") among 3Com
Corporation (the "Company"), 3Sub Corporation, a Delaware corporation and
wholly-owned subsidiary of the Company ("3Sub"), and Synernetics Inc., a
Delaware corporation ("Synernetics"), 3Sub was merged with and into
Synernetics, which became a wholly-owned subsidiary of the Company. The
holders of capital stock of Synernetics received cash at the rate of
approximately $8.4402 per share. The negotiated value for the outstanding
shares of Synernetics stock was approximately $104,000,000 less (i) the
value of the Company's stock reserved for issuance in connection with the
post-merger exercise of vested Synernetics stock options assumed by 3Com
(including options that accelerated and became vested in connection with
the merger), (ii) severance payments made to certain employees of
Synernetics, and (iii) approximately $385,000 attributable to stock options
granted by Synernetics to three of its employees in December 1993 after the
terms of the merger had been substantially negotiated. Such amount was
paid using funds from the Company's working capital. Under the terms of
the Agreement, a portion of such amount was deposited into an escrow
account as security for the indemnification of the Company by Synernetics
for breaches of the representations, warranties and covenants of
Synernetics set forth in the Agreement. Such account is the sole and
exclusive source of any claim or remedy by the Company against Synernetics
or its stockholders in connection with the merger. Subject to reduction
based on outstanding or resolved claims, the funds in such account shall be
distributed to the Synernetics stockholders on a pro rata basis in the
future. In addition to the purchase price for outstanding shares of
Synernetics' stock, 3Com assumed all outstanding options held by
Synernetics' employees.
The Company and Synernetics have had a business relationship since
1991, when they entered into contracts under which (i) Synernetics granted
a non-exclusive license to the Company to permit the Company to develop,
manufacture and distribute products based on Synernetics' then-existing
products, (ii) the Company and Synernetics agreed to engage in certain
joint development efforts, and (iii) the Company and Synernetics were each
entitled to purchase, on an OEM basis, certain products manufactured by the
other. Except as set forth above, no material relationship existed between
the Company and Synernetics or any of its affiliates, any director or
officer of the Company, or any associate of any such director or officer.
Synernetics is engagaged in the business of developing,
manufacturing, marketing and servicing computer networking equipment. The
Company intends to continue selling such equipment and to integrate the
Synernetics product line and technology into the Company's business.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Synernetics is in the process of finalizing its year-end
financial statements. The Company intends to file all required financial
statements on or before March 30, 1994.
(b) Synernetics is in the process of finalizing its financial
statements. The Company intends to file all required pro forma financial
information on or before March 30, 1994.
(c) The following exhibits are attached hereto and filed herewith:
7.1* Agreement and Plan of Reorganization dated December 16,
1993 among 3Com Corporation, 3Sub Corporation and Synernetics, Inc.
7.2* Side Agreement Regarding Agreement and Plan of
Reorganization dated January 14, 1993 among 3Com Corporation, 3Sub
Corporation and Synernetics, Inc.
* Confidential treatment has been requested as to a portion of
this Exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
3COM CORPORATION
/s/ Christopher B. Paisley
January 28, 1994 By: --------------------------
Christopher B. Paisley,
Chief Financial Officer
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Document Page
7.1* Agreement and Plan of Reorganization dated
December 16, 1993 among 3Com Corporation,
3Sub Corporation and Synernetics, Inc.
7.2* Side Agreement Regarding Agreement and Plan of
Reorganization dated January 14, 1994 among
3Com Corporation, 3Sub Corporation and
Synernetics, Inc.
* Confidential treatment has been requested as to a portion of this
Exhibit.
CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
AGREEMENT
AND
PLAN OF REORGANIZATION
Dated December 16, 1993
BY AND AMONG
3COM CORPORATION, 3SUB CORPORATION
AND
SYNERNETICS, INC.
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Accelerated Options". . . . . . . . . . . . . . . . 1
1.2 "Affiliate". . . . . . . . . . . . . . . . . . . . . 1
1.3 "Cash Consideration" . . . . . . . . . . . . . . . . 1
1.4 "Closing" and "Closing Date" . . . . . . . . . . . . 1
1.5 "Code" . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 "Commission" . . . . . . . . . . . . . . . . . . . . 2
1.7 "Confidential Information" . . . . . . . . . . . . . 2
1.8 "Effective Time" . . . . . . . . . . . . . . . . . . 2
1.9 "Exchange Act" . . . . . . . . . . . . . . . . . . . 2
1.10 "Escrow Account" . . . . . . . . . . . . . . . . . . 2
1.11 "HSR Act". . . . . . . . . . . . . . . . . . . . . . 2
1.12 "Merger" . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "Options". . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Proprietary Rights" . . . . . . . . . . . . . . . . 2
1.15 "Scheduled Employees". . . . . . . . . . . . . . . . 2
1.16 "Securities" . . . . . . . . . . . . . . . . . . . . 2
1.17 "Securities Act" . . . . . . . . . . . . . . . . . . 2
1.18 "Severance or Other Amounts" . . . . . . . . . . . . 2
1.19 "Synernetics Products" . . . . . . . . . . . . . . . 2
1.20 "Synernetics Shares" . . . . . . . . . . . . . . . . 3
1.21 "Synernetics Share Price". . . . . . . . . . . . . . 3
1.22 "3Com Closing Price" . . . . . . . . . . . . . . . . 3
1.23 "Transaction Documents". . . . . . . . . . . . . . . 3
1.24 "Value of the December Options" and "December
Options" . . . . . . . . . . . . . . . . . . . . . . 3
1.25 "Vested Options" . . . . . . . . . . . . . . . . . . 3
2. Plan of Reorganization. . . . . . . . . . . . . . . . . . 3
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . 3
2.2 The Closing. . . . . . . . . . . . . . . . . . . . . 4
2.3 Effective Time . . . . . . . . . . . . . . . . . . . 4
2.4 Appraisal Rights . . . . . . . . . . . . . . . . . . 4
2.5 Escrow . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Surrender of Certificates. . . . . . . . . . . . . . 5
3. Representations and Warranties of Synernetics . . . . . . 6
3.1 Organization . . . . . . . . . . . . . . . . . . . . 6
3.2 Capitalization . . . . . . . . . . . . . . . . . . . 7
3.3 Authority Relative to this Agreement . . . . . . . . 7
3.4 Financial Statements . . . . . . . . . . . . . . . . 8
3.5 Tax Matters. . . . . . . . . . . . . . . . . . . . . 9
3.6 Absence of Certain Changes or Events . . . . . . . . 10
3.7 Title and Related Matters. . . . . . . . . . . . . . 11
3.8 Proprietary Rights . . . . . . . . . . . . . . . . . 11
3.9 Employee Benefit Plans . . . . . . . . . . . . . . . 13
3.10 Bank Accounts. . . . . . . . . . . . . . . . . . . . 13
3.11 Contracts. . . . . . . . . . . . . . . . . . . . . . 13
3.12 Orders, Commitments and Returns. . . . . . . . . . . 15
3.13 Compliance With Law. . . . . . . . . . . . . . . . . 16
3.14 Labor Difficulties . . . . . . . . . . . . . . . . . 16
3.15 Trade Regulation . . . . . . . . . . . . . . . . . . 16
3.16 Insider Transactions . . . . . . . . . . . . . . . . 17
3.17 Employees, Independent Contractors and
Consultants. . . . . . . . . . . . . . . . . . . . . 17
3.18 Insurance. . . . . . . . . . . . . . . . . . . . . . 17
3.19 Litigation . . . . . . . . . . . . . . . . . . . . . 17
3.20 Governmental Authorizations and Regulations. . . . . 17
3.21 Corporate Minutes, Etc . . . . . . . . . . . . . . . 18
3.22 Section 341(f)(2). . . . . . . . . . . . . . . . . . 18
3.23 Subsidiaries . . . . . . . . . . . . . . . . . . . . 18
3.24 Compliance with Environmental Requirements . . . . . 18
3.25 Corporate Documents. . . . . . . . . . . . . . . . . 18
3.26 No Brokers . . . . . . . . . . . . . . . . . . . . . 19
3.27 Synernetics Options. . . . . . . . . . . . . . . . . 19
4. Representations and Warranties of 3Com and Sub. . . . . . 20
4.1 Organization and Good Standing . . . . . . . . . . . 20
4.2 Power, Authorization and Validity. . . . . . . . . . 20
4.3 Capitalization . . . . . . . . . . . . . . . . . . . 20
4.4 No Violation of Existing Agreements. . . . . . . . . 20
4.5 Compliance With Other Instruments and Laws . . . . . 21
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . 21
4.7 SEC Documents. . . . . . . . . . . . . . . . . . . . 21
4.8 No Brokers . . . . . . . . . . . . . . . . . . . . . 21
5. Pre-Closing Covenants of Synernetics. . . . . . . . . . . 21
5.1 Advice of Changes. . . . . . . . . . . . . . . . . . 21
5.2 Conduct of Business. . . . . . . . . . . . . . . . . 21
5.3 Risk of Loss . . . . . . . . . . . . . . . . . . . . 23
5.4 Access to Information. . . . . . . . . . . . . . . . 23
5.5 Regulatory Approvals . . . . . . . . . . . . . . . . 23
5.6 Satisfaction of Conditions Precedent . . . . . . . . 23
5.7 Stockholder Vote . . . . . . . . . . . . . . . . . . 24
5.8 Key Employee Agreement . . . . . . . . . . . . . . . 24
5.9 Severance Agreements . . . . . . . . . . . . . . . . 24
5.10 Escrow Agreement . . . . . . . . . . . . . . . . . . 24
5.11 Notice Regarding Synernetics Options . . . . . . . . 25
6. Covenants of 3Com and Sub . . . . . . . . . . . . . . . . 25
6.1 Advice of Changes. . . . . . . . . . . . . . . . . . 25
6.2 Regulatory Approvals . . . . . . . . . . . . . . . . 25
6.3 Satisfaction of Conditions Precedent . . . . . . . . 25
6.4 Assumption of Synernetics Options. . . . . . . . . . 25
6.5 Indemnification of Directors, et . . . . . . . . . . 26
6.6 Payment of Bonuses . . . . . . . . . . . . . . . . . 26
7. Mutual Covenants. . . . . . . . . . . . . . . . . . . . . 26
7.1 Confidentiality. . . . . . . . . . . . . . . . . . . 26
7.2 Exclusivity. . . . . . . . . . . . . . . . . . . . . 27
7.3 HSR Act Filings. . . . . . . . . . . . . . . . . . . 28
7.4 Further Assurances . . . . . . . . . . . . . . . . . 28
8. The Closing . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Merger . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Additional Documents . . . . . . . . . . . . . . . . 28
9. Conditions to Synernetics' Obligations. . . . . . . . . . 29
9.1 Accuracy of Representations and Warranties . . . . . 29
9.2 Covenants. . . . . . . . . . . . . . . . . . . . . . 29
9.3 No Litigation. . . . . . . . . . . . . . . . . . . . 29
9.4 Authorizations . . . . . . . . . . . . . . . . . . . 29
9.5 Opinion of 3Com's Counsel. . . . . . . . . . . . . . 29
9.6 Government Consents. . . . . . . . . . . . . . . . . 29
9.7 Date of Closing. . . . . . . . . . . . . . . . . . . 30
9.8 Federal and State Securities Laws. . . . . . . . . . 30
10. Conditions to 3Com's and Sub's Obligations. . . . . . . . 30
10.1 Accuracy of Representations and Warranties . . . . . 30
10.2 Covenants. . . . . . . . . . . . . . . . . . . . . . 30
10.3 No Litigation. . . . . . . . . . . . . . . . . . . . 30
10.4 Authorizations . . . . . . . . . . . . . . . . . . . 30
10.5 No Adverse Development . . . . . . . . . . . . . . . 30
10.6 Required Consents. . . . . . . . . . . . . . . . . . 31
10.7 Opinion of Synernetics' Counsel. . . . . . . . . . . 31
10.8 Employment with 3Com . . . . . . . . . . . . . . . . 31
10.9 Government Consents. . . . . . . . . . . . . . . . . 31
10.10 Date of Closing . . . . . . . . . . . . . . . . 31
11. Termination of Agreement. . . . . . . . . . . . . . . . . 31
11.1 Termination. . . . . . . . . . . . . . . . . . . . . 31
11.2 No Liability; Effect of Termination. . . . . . . . . 31
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 32
12.1 Governing Laws . . . . . . . . . . . . . . . . . . . 32
12.2 Binding upon Successors and Assigns. . . . . . . . . 32
12.3 Severability . . . . . . . . . . . . . . . . . . . . 32
12.4 Entire Agreement . . . . . . . . . . . . . . . . . . 32
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . 32
12.6 Expenses . . . . . . . . . . . . . . . . . . . . . . 32
12.7 Other Remedies . . . . . . . . . . . . . . . . . . . 33
12.8 Amendment and Waivers. . . . . . . . . . . . . . . . 33
12.9 Survival of Agreements . . . . . . . . . . . . . . . 33
12.10 No Waiver . . . . . . . . . . . . . . . . . . . 33
12.11 Post-Closing Audit. . . . . . . . . . . . . . . 33
12.12 Notices . . . . . . . . . . . . . . . . . . . . 33
12.13 Construction of Agreement . . . . . . . . . . . 34
12.14 No Joint Venture. . . . . . . . . . . . . . . . 34
12.15 Pronouns. . . . . . . . . . . . . . . . . . . . 34
12.16 Further Assurances. . . . . . . . . . . . . . . 34
12.17 Absence of Third Party Beneficiary Rights . . . 34
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is entered into this 16th day of December 1993, by and among 3Com
Corporation, a California corporation ("3Com"), 3Sub Corporation,
a Delaware corporation and a wholly-owned subsidiary of 3Com
("Sub"), and Synernetics, Inc., a Delaware corporation
("Synernetics").
RECITAL
The parties intend that, subject to the terms and conditions
hereinafter set forth, Sub be merged into and with Synernetics,
with Synernetics the surviving corporation, pursuant to an
Agreement of Merger substantially in the form attached hereto as
Exhibit A (the "Agreement of Merger") and the applicable
provisions of the laws of the State of Delaware. Upon the
Merger, the holders of capital stock of Synernetics shall receive
cash and the holders of options of Synernetics shall receive
options to purchase 3Com Common Stock, in the manner and on the
basis determined herein, all as provided in the Agreement of
Merger.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in
and for the consideration and mutual covenants set forth herein,
the parties agree as follows:
1. Definitions.
1.1 "Accelerated Options" shall have the meaning set
forth in Section 5.9 (Severance Agreements).
1.2 "Affiliate" shall have the meaning set forth in
the rules and regulations promulgated by the Commission pursuant
to the Securities Act.
1.3 "Cash Consideration" shall mean the cash
consideration to be paid by 3Com to the stockholders of
Synernetics as consideration for the Merger, which shall be One
Hundred Four Million Dollars ($104,000,000.00) minus the sum of
(i) the Severance or Other Amounts, (ii) an amount equal to the
Synernetics Share Price multiplied by the number of Vested
Options which are unexercised as of the Closing, and (iii) the
Value of the December Options (as defined below).
1.4 "Closing" and "Closing Date" shall have the
meanings set forth in Section 2.2 (Closing).
1.5 "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.6 "Commission" shall mean the Securities and
Exchange Commission.
1.7 "Confidential Information" shall mean confidential
information of a party ("Disclosing Party") which is disclosed to
another party ("Receiving Party"). Confidential Information
shall include, but not be limited to, trade secrets, know-how,
inventions, techniques, processes, algorithms, software programs,
schematics, designs, contracts, customer lists, financial
information, sales and marketing plans and business information.
1.8 "Effective Time" shall have the meaning set forth
in Section 2.3 (Effective Time).
1.9 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or any similar federal statute and the
rules and regulations thereunder, all as the same shall be in
effect at the time.
1.10 "Escrow Account" shall have the meaning set forth
in Section 5.10 (Escrow Agreement).
1.11 "HSR Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or any similar
federal statute and the rules and regulations thereunder, all as
the same shall be in effect at the time.
1.12 "Merger" shall mean the merger of Sub with and
into Synernetics, on the terms and conditions described herein.
1.13 "Options" shall mean the outstanding options to
acquire Synernetics Common Stock pursuant to the Synernetics 1989
Stock Plan.
1.14 "Proprietary Rights" shall have the meaning set
forth in Section 3.8(a).
1.15 "Scheduled Employees" shall mean those employees
of Synernetics whose names are set forth on Exhibit B-2
(Scheduled Employees).
1.16 "Securities" shall mean the Synernetics Shares,
the shares to be canceled pursuant to Section 2.1(a)(ii),
Dissenting Shares and the Options.
1.17 "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules
and regulations thereunder, all as the same shall be in effect at
the time.
1.18 "Severance or Other Amounts" shall have the
meaning set forth in Section 5.9 (Severance Agreements).
1.19 "Synernetics Products" shall mean all versions and
implementations of any product which has been or is being
marketed by Synernetics or currently is under development, and
all patents, patent applications, trade secrets, copyrights,
trademarks, tradenames and other proprietary rights related
thereto.
1.20 "Synernetics Shares" shall mean the shares of
Synernetics capital stock issued and outstanding at the effective
time of the Merger, other than the shares to be canceled pursuant
to Section 2.1(a)(ii) and shares held by holders who perfect
their appraisal rights under Delaware law with respect thereto
("Dissenting Shares").
1.21 "Synernetics Share Price" shall mean the price per
share to be paid by 3Com for the Synernetics Shares outstanding
as of the Closing, calculated by dividing the Cash Consideration
by the sum of the number of Synernetics Shares and Dissenting
Shares.
1.22 "3Com Closing Price" shall mean the average of the
closing sales prices of 3Com Common Stock as reported by the
National Market System of the National Association of Securities
Dealers Automated Quotation System for the fifteen (15) trading
days preceding (but not including) the Closing Date.
1.23 "Transaction Documents" shall mean all documents
or agreements required to be delivered by any party hereunder
including the Agreement of Merger.
1.24 "Value of the December Options" and "December
Options" shall have the following meanings. "December Options"
shall mean the special options to acquire Synernetics Common
Stock granted on December 15, 1993 to certain key employees at an
exercise price of $4.00 per share. The "Value of the December
Options" shall be equal to the Synernetics Share Price
(calculated as if the December Options were not outstanding)
multiplied by the number of shares of Synernetics Common Stock
issuable upon exercise of the December Options, less the
aggregate exercise price of the December Options.
1.25 "Vested Options" shall mean the Options (including
Accelerated Options) which are vested and exercisable as of the
Closing Date.
2. Plan of Reorganization.
2.1 The Merger.
(a) Subject to the terms and conditions of this
Agreement and the Agreement of Merger, Sub shall be merged with
and into Synernetics in a statutory merger pursuant to the
Agreement of Merger and in accordance with applicable provisions
of Delaware law so that:
(i) Each share of capital stock of Sub
outstanding immediately prior to the Merger shall, by virtue of
the Merger, and without further action on the part of any holder
thereof, continue to be issued and shall be converted into one
share of Synernetics' common stock outstanding after the Merger;
(ii) Each share of Synernetics' capital
stock, if any, that is owned directly or indirectly by
Synernetics shall be canceled and no cash or other consideration
shall be delivered in exchange therefor.
(iii) Each Synernetics Share shall, by
virtue of the Merger, and without further action on the part of
any holder thereof, be canceled. 3Com shall pay the Cash
Consideration to Synernetics such that each holder of such
Synernetics Shares shall receive an amount equal to the number of
such shares held by such holder multiplied by the Synernetics
Share Price.
(iv) At the Effective Time, Section 4 of the
Certificate of Incorporation of Synernetics shall be amended in
its entirety to read as follows:
"The total number of shares of all classes of stock that
this Corporation is authorized to issue is 1,000 shares of
Common Stock, $.01 par value per share."
Except as provided in this Section 2.1(a)(iv), the Certificate of
Incorporation and Bylaws of Synernetics in effect immediately
prior to the Effective Time shall not be amended by virtue of the
Merger and shall remain the Certificate of Incorporation and
Bylaws, respectively, of Synernetics after the Effective Time
unless and until further amended as provided by law, such
Certificate of Incorporation and such Bylaws.
(v) The directors of Sub immediately prior
to the Effective Time shall be the directors of Synernetics after
the Effective Time, and the officers of Synernetics immediately
prior to the Effective Time shall continue to be the officers of
Synernetics after the Effective Time. Such directors and
officers shall hold their position as directors and officers
until the election and qualification of their respective
successors or until their tenure is otherwise terminated in
accordance with the Bylaws of Synernetics.
2.2 The Closing. Subject to termination of this
Agreement as provided in Section 11 (Termination of Agreement)
below, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Ware
& Freidenrich, A Professional Corporation, 400 Hamilton Avenue,
Palo Alto, California, as soon as possible upon the satisfaction
or waiver of all conditions set forth in Section 9 (Conditions to
Synernetics' Obligations) and Section 10 (Conditions to 3Com's
and Sub's Obligations) hereof (the "Closing Date").
2.3 Effective Time. Simultaneously with the Closing,
the Agreement of Merger shall be filed in the offices of the
Secretary of State of the State of Delaware. The Merger shall
become effective immediately upon the filing of the Agreement of
Merger with such offices. The date and time of the effectiveness
of the Merger under the laws of Delaware is hereinafter sometimes
referred to as the "Effective Time."
2.4 Appraisal Rights. If holders of Synernetics
capital stock are entitled to appraisal rights in connection with
the Merger under Section 262 of the Delaware General Corporation
Law, any Dissenting Shares shall not receive the Synernetics
Share Price in cash but shall be converted into the right to
receive such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to the law of the
State of Delaware. Synernetics shall give 3Com prompt notice of
any demand received by Synernetics for appraisal of Synernetics'
capital stock, and 3Com shall have the right to participate in
all negotiations and proceedings with respect to such demand.
Synernetics agrees that, except with the prior written consent of
3Com or as required under the Delaware General Corporation Law,
it will not voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for appraisal. Each
holder of Dissenting Shares ("Dissenting Shareholder") who,
pursuant to the provisions of the Delaware General Corporation
Law, becomes entitled to payment of the value of shares of
Synernetics' common stock or Synernetics' preferred stock shall
receive payment therefor (but only after the value therefor shall
have been agreed upon or finally determined pursuant to such
provisions). In the event of legal obligation, after the
effective time of the Merger, to deliver the Synernetics Share
Price to a holder of shares of Synernetics' capital stock who
shall have failed to make an effective demand for appraisal or
shall have lost his status as a Dissenting Shareholder, 3Com
shall deliver, upon surrender by such Dissenting Shareholder of
his certificate or certificates representing shares of
Synernetics' capital stock, as applicable, the cash to which such
Dissenting Shareholder is then entitled under this Section 2.4
(Appraisal Rights) and the Agreement of Merger.
2.5 Escrow. At the Effective Time, [CONFIDENTIAL
TREATMENT REQUESTED ] Dollars
($[CONFIDENTIAL TREATMENT REQUESTED]) of the Cash Consideration
shall be deposited intoan escrow account pursuant to
Section 5.10 (Escrow Agreement).
2.6 Surrender of Certificates.
(a) Surrender of Synernetics Certificates.
Immediately after the Effective Time, each holder of a
certificate or certificates representing Synernetics Shares
issued and outstanding immediately prior to the Effective Time
shall surrender such certificate(s) to an officer of Synernetics
designated for such purpose. Each certificate which immediately
before the Effective Time evidenced Synernetics Shares shall,
from and after the Effective Time until such certificate is
surrendered to Synernetics or its transfer agent, be deemed, for
all corporate purposes, to evidence the right to receive the
consideration described below; provided, however, that no
dividend or other distribution payable to the holder of such
certificate after the Effective Time shall be paid in respect of
such certificate until such certificate is so surrendered by such
holder.
(b) 3Com to Provide Cash. Promptly after the
Effective Time, 3Com shall make available to an officer of
Synernetics designated for such purpose the Cash Consideration
issuable pursuant to Section 2.1 (The Merger) in exchange for
outstanding shares of Synernetics capital stock, less the amount
deposited into the Escrow Account pursuant to Section 5.10.
(c) No Liability. Notwithstanding anything to
the contrary in this Section 2.6 (Surrender of Certificates), no
party hereto shall be liable to a holder of shares of Synernetics
Shares for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(d) Lost, Stolen or Destroyed Certificates. In
the event any Certificates evidencing Synernetics Shares shall
have been lost, stolen or destroyed, 3Com shall issue in exchange
for such lost, stolen or destroyed certificates, the cash amount
otherwise issuable under Section 2.1 (The Merger) upon the making
of an affidavit of that fact by the holder thereof, provided,
however, the 3Com may, in its discretion and as a condition
precedent to the issue thereof, require the owner of such lost,
stolen or destroyed Certificates to indemnify 3Com against any
claim that may be made against 3Com with respect to the
Certificate alleged to have been lost, stolen or destroyed.
3. Representations and Warranties of Synernetics.
Except as otherwise set forth in the "Synernetics
Disclosure Schedule" attached hereto as Exhibit C (Synernetics
Disclosure Schedule), Synernetics represents and warrants to 3Com
as set forth below. No fact or circumstance disclosed to 3Com
shall constitute an exception to these representations and
warranties unless such fact or circumstance is set forth in the
Synernetics Disclosure Schedule attached hereto or such
supplements thereto as may mutually be agreed upon in writing by
Synernetics and 3Com. Whenever the term "enforceable in
accordance with its terms" or like expression is used, it is
understood that excepted therefrom are any limitations on
enforceability under applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting the enforcement of creditor's rights.
3.1 Organization. Synernetics is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has corporate power and authority to
carry on its business as it is now being conducted. Synernetics
is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the nature of its business or
properties makes such qualification or licensing necessary except
to the extent that any failure to qualify or obtain licenses
would not in the aggregate have a material adverse effect on the
operations, assets or financial condition of Synernetics. The
Synernetics Disclosure Schedule contains a true and complete
listing of the locations of all sales offices, manufacturing
facilities, and any other offices or facilities of Synernetics
and a true and complete list of all states in which Synernetics
maintains any employees. The Synernetics Disclosure Schedule
contains a true and complete list of all states in which
Synernetics is duly qualified to transact business as a foreign
corporation. True and complete copies of Synernetics' of
Incorporation and By-laws, as in effect on the date hereof and as
to be in effect as of the Closing have been provided to 3Com or
its representatives.
3.2 Capitalization. The authorized capital stock of
Synernetics consists of (i) 14,000,000 shares of Common Stock,
$.01 par value per share ("Synernetics Common Stock"), (ii)
3,871,143 shares of Series A Convertible Preferred Stock, $.01
par value per share ("Series A Preferred"), (iii) 2,965,320
shares of Series B Convertible Preferred Stock, $.01 par value
per share ("Series B Preferred"), (iii) 1,904,062 shares of
Series C Convertible Preferred Stock, $.01 par value per share
("Series C Preferred"), and (iv) 8,721,689 shares of Preferred
Stock, $.01 par value ("Preferred Stock"). 1,847,075 shares of
Class A Common, no shares of Class B Common, 3,871,143 shares of
Series A Preferred, 2,946,484 shares of Series B Preferred,
1,904,062 shares of Series C Preferred and no shares of Preferred
Stock are issued and outstanding and held of record by
Synernetics' respective stockholders as set forth and identified
in the stockholder lists provided to 3Com or its representatives.
All of the outstanding Securities have been duly authorized and
are validly issued, fully paid and nonassessable. All
outstanding Securities were issued in compliance with applicable
securities laws. None of the outstanding shares were issued in
consideration in whole or in part for any contribution, transfer
or assignment of the Synernetics Products or any proprietary
rights incorporated therein or otherwise related thereto.
As of the date hereof, 2,532,600 shares of Synernetics
Common Stock are available or reserved for issuance under the
Synernetics 1989 Stock Option Plan, of which 2,074,240 are
subject to outstanding options.
Except for a warrant to purchase of 34,247 shares of
Synernetics Common Stock issued to Silicon Valley Bank and a
warrant to purchase 18,836 shares of Series B Preferred issued to
Pacific Credit, Inc., and as otherwise set forth in the
Synernetics Disclosure Schedule, Synernetics does not have any
other shares of its capital stock issued or outstanding and does
not have any other outstanding subscriptions, options, warrants,
rights or other agreements or commitments obligating Synernetics
to issue shares of its capital stock or other securities.
3.3 Authority Relative to this Agreement. Synernetics
has the corporate power to enter into this Agreement and the
other Transaction Documents to which it is a party and to carry
out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by its Board of Directors and no other
corporate proceedings on the part of Synernetics are necessary to
authorize this Agreement, the other Transaction Documents and the
transactions contemplated herein and therein other than the
consent of the outstanding shares of Synernetics. Synernetics is
not subject to or obligated under any charter, bylaw or material
contract provision or any material license, franchise or permit,
or subject to any order or decree, which would be breached or
violated by or in conflict with its executing and carrying out
this Agreement and the transactions contemplated hereunder and
under the Transaction Documents. Except as contemplated by this
Agreement, no consent of any person who is a party to a contract
which is material to Synernetics' business, nor consent of any
governmental authority, is required to be obtained on the part of
Synernetics to permit the transactions contemplated herein and
continue the business activities of Synernetics as previously
conducted by Synernetics without material adverse change. This
Agreement and the other Transaction Documents when executed by
Synernetics shall be the valid and binding obligations of
Synernetics enforceable in accordance with its terms.
3.4 Financial Statements.
(a) Synernetics has delivered to 3Com copies of
Synernetics' audited balance sheet as of January 3, 1993, and
unaudited balance sheet as of November 28, 1993 (the latter
referred to herein as the "Synernetics Balance Sheet") and
statements of income, stockholders' equity (as of January 3,
1993) and changes in financial position for the periods then
ended.
(b) All financial statements delivered pursuant
to Section 3.4(a) (collectively, the "Synernetics Financial
Statements") are complete and in accordance with the books and
records of Synernetics and present fairly the financial position
of Synernetics as of their historical dates. The Synernetics
Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with prior periods except with respect to the
unaudited financial statements for the absence of footnotes and
normal year-end adjustments. Except as to the extent reflected
or reserved against in such balance sheets (including the notes
thereto), Synernetics does not have, as of the dates of such
balance sheets, any liabilities or obligations (absolute or
contingent) of a nature required to be reflected in a balance
sheet (or the notes thereto) prepared in accordance with
generally accepted accounting principles. The statements of
income, stockholder's equity and changes in financial position
are complete and in accordance with the books and records of
Synernetics and present fairly the results of operations, equity
transactions and changes in financial position of Synernetics for
the periods indicated.
(c) Synernetics has no debt, liability, or
obligation of any nature, whether accrued, absolute, or
contingent that is not reflected or reserved against in the
Synernetics Financial Statements, except for those (i) that may
have been incurred after the date of the Synernetics Balance
Sheet or (ii) that are not required by generally accepted
accounting principles to be included in a balance sheet or the
notes thereto, except that Synernetics has not established any
reserves with respect to the costs and fees associated with this
Agreement and the transactions contemplated hereby. All material
debts, liabilities, and obligations incurred after the date of
the Synernetics Financial Statements were incurred in the
ordinary course of business or are usual and normal in amount
both individually and in the aggregate.
3.5 Tax Matters.
(a) Synernetics has fully and timely, properly
and accurately filed all tax returns and reports required to be
filed by it, including all federal, foreign, state and local tax
returns and estimates for all years and periods (and portions
thereof) for which any such returns, reports or estimates were
due. All such returns, reports and estimates were prepared in
the manner required by applicable law. All income, sales, use,
occupation, property or other taxes or assessments due from
Synernetics have been paid. There are no pending assessments,
asserted deficiencies or claims for additional taxes that have
not been paid. The reserves for taxes, if any, reflected on the
Synernetics Balance Sheet are adequate and there are no tax liens
on any property or assets of Synernetics. There have been no
examinations of any tax returns or reports by any applicable
governmental agency. No state of facts exists or has existed
which would constitute grounds for the assessment of any penalty
or of any further tax liability beyond that shown on the
respective tax reports, returns or estimates. There are no
outstanding agreements or waivers extending the statutory period
of limitation applicable to any federal income tax return or
report for any period.
(b) All taxes which Synernetics has been required
to collect or withhold have been duly withheld or collected and,
to the extent required, have been paid to the proper taxing
authority.
(c) Synernetics is not a party to any tax-sharing
agreement or similar arrangement with any other party.
(d) At no time has Synernetics been included in
the federal consolidated income tax return of any affiliated
group of corporations.
(e) Except for the effect of any payments made
pursuant to an employment or consulting agreement for a term of
service commencing on or after the Closing Date or any related
non-competition agreement, no payment which Synernetics is
obliged to pay to any director, officer, employee or independent
contractor pursuant to the terms of an employment agreement,
severance agreement or otherwise will constitute an excess
parachute payment as defined in Section 280G of the Code.
(f) Synernetics will not be required to include
any material adjustment in taxable income for any tax period (or
portion thereof) ending after the Closing Date pursuant to
Section 481(c) of the Code or any provision of the tax laws of
any jurisdiction requiring tax adjustments as a result of a
change in method of accounting implemented by Synernetics prior
the Closing Date for any tax period (or portion thereof) ending
on or before the Closing Date or pursuant to the provisions of
any agreement entered into by Synernetics prior to the Closing
Date with any taxing authority with regard to the tax liability
of Synernetics for any tax period (or portion thereof) ending on
or before the Closing Date.
(g) Synernetics is not currently under any
contractual obligation to pay any tax obligations of, or with
respect to any transaction relating to, any other person or to
indemnify any other person with respect to any tax.
3.6 Absence of Certain Changes or Events. Since the
date of the Synernetics Balance Sheet, Synernetics has not (a)
suffered any material adverse change in its financial condition
or in the operations of its business taken in its entirety; (b)
suffered any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting its
properties or businesses; (c) granted any increase in the
compensation payable or to become payable by Synernetics to its
officers or employees, except those occurring in the ordinary
course of business; (d) declared, set aside or paid any dividend
or made any other distribution on or in respect of the shares of
the capital stock of Synernetics or declared any direct or
indirect redemption, retirement, purchase or other acquisition by
Synernetics of such shares; (e) issued any shares of capital
stock of Synernetics or any warrants, rights, options or entered
into any commitment relating to the shares of Synernetics except
for the issuance of Synernetics Shares pursuant to the exercise
of outstanding Options and grants of the December Options and
options to newly hired employees; (f) made any change in the
accounting methods or practices it follows, whether for general
financial or tax purposes, or any change in depreciation or
amortization policies or rates adopted therein; (g) sold, leased,
abandoned or otherwise disposed of any real property or any
machinery, equipment or other operating property other than in
the ordinary course of business (h) sold, assigned, transferred,
licensed or otherwise disposed of any patent, trademark,
tradename, brand name, copyright (or pending application for any
patent, trademark or copyright) invention, process, know-how,
formula or trade secret or interest thereunder or other
intangible asset except in the ordinary course of its business;
(i) suffered any labor dispute; (j) entered into any material
commitment or transaction (including without limitation any
borrowing or capital expenditure) other than in the ordinary
course of business; (k) incurred any liabilities (other than the
Severance Amounts) except in the ordinary course of business and
consistent with past practice which would be required to be
disclosed in financial statements prepared in accordance with
generally accepted accounting principles; (l) permitted or
allowed any of its property or assets to be subjected to any
mortgage, deed of trust, pledge, lien, security interest or other
encumbrance of any kind, except those permitted under Section 3.7
(Title and Related Matters) hereof, other than any purchase money
security interests incurred in the ordinary course of business;
(m) made any capital expenditure or commitment for additions to
property, plant or equipment except in the ordinary course of
business; (n) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered
into any agreement or arrangement with any of its Affiliates,
officers, directors or stockholder or any Affiliate or associate
of any of the foregoing; (o) made any amendment to or terminated
any agreement which, if not so amended or terminated, would be
required to be disclosed on the Synernetics Disclosure Schedule;
or (p) agreed to take any action described in this Section 3.6
(Absence of Certain Changes or Events) or outside of its ordinary
course of business or which would constitute a breach of any of
the representations contained in this Agreement.
3.7 Title and Related Matters. Synernetics has good
and marketable title to all the properties, interests in
properties and assets, real and personal, reflected in the
Synernetics Balance Sheet or acquired after the date of the
Synernetics Balance Sheet (except properties, interests in
properties and assets sold or otherwise disposed of since the
date of the Synernetics Balance Sheet in the ordinary course of
business), free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except the lien
of current taxes not yet due and payable and except for liens
which in the aggregate do not secure more than Fifty Thousand
Dollars ($50,000) in liabilities. The equipment of Synernetics
necessary to the operation of its business is in good operating
condition and repair. All real or personal property leases to
which Synernetics is a party are valid, binding, enforceable and
effective in accordance with their respective terms. There is
not under any of such leases any existing material default or
event of default or event which, with notice or lapse of time or
both, would constitute a material default. The Synernetics
Disclosure Schedule contains a description of all real property
leased or owned by Synernetics, describing its interest in said
property and with respect to real property a description of each
parcel and a summary description of the buildings, structures and
improvements thereon. True and correct copies of Synernetics'
leases have been made available to 3Com or its representatives.
3.8 Proprietary Rights.
(a) Synernetics owns all right, title and
interest in and to all patents, copyrights, technology, software,
software tools, know-how, processes, trade secrets, trademarks,
service marks, trade names and other proprietary rights used in
or necessary for the conduct of Synernetics' business as
conducted to the date hereof or contemplated, including, without
limitation, the technology and all proprietary rights developed
or discovered in connection with or contained in the Synernetics
Products, free and clear of all liens, claims and encumbrances
(including without limitation distribution rights) (all of which
are referred to as "Proprietary Rights"). The foregoing
representation as it relates to Third Party Technology (as
hereinafter defined) is limited to Synernetics' interest pursuant
to the Third Party Licenses (as hereinafter defined), all of
which are valid and enforceable and in full force and effect and
which grant Synernetics such right to Third Party Technology as
are employed in or necessary to the business of Synernetics as
conducted or proposed to be conducted. The Synernetics
Disclosure Schedule contains an accurate and complete description
of (i) all patents, trademarks (with separate listings of
registered and unregistered trademarks), tradenames, and
registered copyrights in or related to the Synernetics Products,
all applications and registration statements therefor, and a list
of all licenses and other agreements relating thereto, and (ii) a
list of all licenses and other agreements with third parties (the
"Third Party Licenses") relating to any software, technology,
know-how, or processes that Synernetics is licensed or otherwise
authorized by such third parties to use, market, distribute or
incorporate into products distributed by Synernetics (such
software, technology, know-how and processes are collectively
referred to as the "Third Party Technology"). All of
Synernetics' trademark or tradename registrations related to the
Synernetics Products and all of Synernetics' copyrights in any of
the Synernetics Products are valid and in full force and effect;
and consummation of the transactions contemplated hereby will not
alter or impair any such rights. No claims have been asserted
against Synernetics (and Synernetics is not aware of any claims
which are likely to be asserted against Synernetics) by any
person challenging Synernetics' use or distribution of any
patents, trademarks, tradenames, copyrights, trade secrets,
software, technology, know-how or processes utilized by
Synernetics (including, without limitation, the Third Party
Technology) or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto
(including, without limitation, the Third Party Licenses). To
Synernetics' knowledge, none of the Synernetics Products nor the
use of any patents, trademarks, tradenames, copyrights, software,
technology, know-how or processes by Synernetics in its current
business infringes on the rights of, constitutes misappropriation
of, or in any way involves unfair competition with respect to,
any proprietary information or intangible property right of any
third person or entity, including without limitation any patent,
trade secret, copyright, trademark or tradename.
(b) Synernetics has not granted any third party
any right to manufacture, reproduce, distribute, market or
exploit any of the Synernetics Products or any adaptations,
translations, or derivative works based on the Synernetics
Products or any portion thereof. Except with respect to the
rights of third parties to the Third Party Technology, no third
party has any right to manufacture, reproduce, distribute, market
or exploit any works or materials of which any of the Synernetics
Products are a "derivative work" as that term is defined in the
United States Copyright Act, Title 17, U.S.C. Section 101.
(c) All designs, drawings, specifications, source
code, object code, documentation, flow charts and diagrams
incorporating, embodying or reflecting any of the Synernetics
Products at any stage of their development (the "Synernetics
Components") (i) were written, developed and created solely and
exclusively by employees of Synernetics without the assistance of
any third party or entity or (ii) were created by third parties
who assigned ownership of their rights to Synernetics in valid
and enforceable consultant confidentiality and invention
assignment agreements or (iii) to the extent such Synernetics
Components contain technology licensed from third parties, such
licenses are in full force and effect and permit Synernetics to
distribute the Synernetics Components without material
limitation. Synernetics has at all times used commercially
reasonable efforts to treat the Synernetics Products and
Synernetics Components as containing trade secrets and has not
disclosed or otherwise dealt with such items in such a manner as
to cause the loss of such trade secrets by release into the
public domain.
(d) To Synernetics' knowledge, no employee of
Synernetics is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with
Synernetics or, to the best of Synernetics' knowledge, any other
party because of the nature of the business conducted by
Synernetics or proposed to be conducted by Synernetics.
(e) Each person presently or previously employed
by Synernetics (including independent contractors, if any) with
access to confidential information has executed a confidentiality
and non-disclosure agreement pursuant to the form of agreement
previously provided to 3Com or its representatives. Such
confidentiality and non-disclosure agreements constitute valid
and binding obligations of Synernetics and such person,
enforceable in accordance with their respective terms. To the
best of Synernetics' knowledge, neither the execution or delivery
of such agreements, nor the carrying on of Synernetics' business
as employees by such persons, nor the conduct of Synernetics'
business as currently anticipated, will conflict with or result
in a breach of the terms, conditions or provisions of or
constitute a default under any material contract, covenant or
instrument under which any of such persons is obligated.
(f) No product liability or warranty claims which
individually or in the aggregate could exceed $50,000 have been
communicated to or, to Synernetics knowledge, threatened against
Synernetics nor, to the best of Synernetics' knowledge, is there
any specific situation, set of facts or occurrence out of which
such a claim is likely to arise. The Synernetics Disclosure
Schedule sets forth all bugs known to Synernetics in the
Synernetics Products.
3.9 Employee Benefit Plans. There is no unfunded
prior service cost with respect to any bonus, deferred
compensation, pension, profit-sharing, retirement, stock
purchase, stock option, or other employee benefit or fringe
benefit plans, whether formal or informal, maintained by
Synernetics. To Synernetics' knowledge, each bonus, deferred
compensation, pension, profit-sharing, retirement, stock
purchase, stock option, and other employee benefit or fringe
benefit plans, whether formal or informal, maintained by
Synernetics conforms in all material respects to all applicable
requirements of the Employees Retirement Income Security Act of
1974. The Synernetics Disclosure Schedule lists and describes
all profit-sharing, bonus, incentive, deferred compensation,
vacation, severance pay retirement, stock option, group insurance
or other plans (whether written or not) providing employee
benefits.
3.10 Bank Accounts. The Synernetics Disclosure
Schedule sets forth the names and locations of all banks, trusts,
companies, savings and loan associations, and other financial
institutions at which Synernetics maintains accounts of any
nature and the names of all persons authorized to draw thereon or
make withdrawals therefrom.
3.11 Contracts.
(a) Except as set forth in the Synernetics
Disclosure Schedule, Synernetics has no agreements, contracts or
commitments that provide for the sale, licensing or distribution
by Synernetics of any of its products, technology, know-how,
trademarks or tradenames except in the ordinary course of its
business. True and correct copies of each document or instrument
described in the Synernetics Disclosure Schedule pursuant to this
Subsection 3.11(a) have been made available to 3Com or its
representatives.
(b) Except as listed in the Synernetics
Disclosure Schedule and except as reflected in Synernetics'
backlog and accounts receivable, Synernetics has no agreements,
contracts or commitments that call for fixed and/or contingent
payments or expenditures by or to Synernetics of more than Fifty
Thousand Dollars ($50,000). True and correct copies of each
document or instrument set forth in the Synernetics Disclosure
Schedule pursuant to this Section 3.11(b) have been made
available to 3Com or its representatives.
(c) Without limiting the provisions of
Section 3.8 (Proprietary Rights) and except for any agreements
with 3Com, Synernetics has not granted to any third party
(including, without limitation, OEMs and site license customers)
any rights to reproduce or manufacture any of the Synernetics
Products, nor has Synernetics granted to any third party any
exclusive rights of any kind with respect to any of the
Synernetics Products, including, without limitation, territorial
exclusivity or exclusivity with respect to particular versions,
implementations or translations of any of the Synernetics
Products, nor has Synernetics granted any third party any right
to market any of the Synernetics Products under any "private
label" arrangements pursuant to which Synernetics is not
identified as the source of such goods. True and correct copies
of each document or instrument listed on the Synernetics
Disclosure Schedule pursuant to this Section 3.11(c) have been
made available to 3Com or its representatives.
(d) Synernetics has no purchase agreement,
contract or commitment that calls for fixed and/or contingent
payments by Synernetics that are in excess of the normal,
ordinary and usual requirements of business.
(e) There is no outstanding sales contract,
commitment or proposal (including, without limitation, porting
and development projects) of Synernetics that is currently
expected to result in any loss (before allocation of overhead and
administrative costs) upon completion or performance thereof.
(f) Synernetics has no outstanding agreements,
contracts or commitments with officers, employees, agents,
consultants, advisors, salesmen, sales representatives,
distributors or dealers that are not cancelable by it on notice
of not longer than thirty (30) days and without liability,
penalty or premium.
(g) Synernetics has no employment, independent
contractor or similar agreement, contract or commitment that is
not terminable on no more than thirty (30) days' notice without
penalty or liability of any type, including without limitation
severance or termination pay.
(h) Synernetics has no currently effective
collective bargaining or union agreements, contracts or
commitments.
(i) Synernetics is not restricted by agreement
from carrying on its business anywhere in the world.
(j) Synernetics is under no liability or
obligation, and no such outstanding claim has been made, with
respect to the return of inventory or merchandise in the
possession of wholesalers, distributors, retailers, or other
customers, except such liabilities, obligations and claims as, in
the aggregate, do not exceed Fifty Thousand Dollars ($50,000).
(k) Synernetics has not guaranteed any
obligations of other persons or made any agreements to acquire or
guarantee any obligations of other persons.
(l) Synernetics has no outstanding loan or
advance to any person; nor is it party to any line of credit,
standby financing, revolving credit or other similar financing
arrangement of any sort which would permit the borrowing by
Synernetics of any sum not reflected in the financial statements
delivered pursuant to Section 3.4 (Financial Statements).
(m) All material contracts, agreements and
instruments to which Synernetics is a party are valid, binding,
in full force and effect, and enforceable by Synernetics in
accordance with their respective terms. No such material
contract, agreement or instrument contains any material
liquidated-damages, penalty or similar provision. To the best of
Synernetics' knowledge, no party to any such material contract,
agreement or instrument intends to cancel, withdraw, modify or
amend such contract, agreement or arrangement.
(n) The Synernetics Disclosure Schedule lists all
material agreements pursuant to which Synernetics has agreed to
manufacture for or supply to any third party any Synernetics
Products or components thereto. True and correct copies of each
document or instrument listed on the Synernetics Disclosure
Schedule pursuant to this Section 3.11(m) have been provided to
3Com or its representatives. The Synernetics Disclosure Schedule
also lists each vendor who manufactures for or supplies to
Synernetics any material product or component or is the sole
source for any product or component.
(o) Synernetics is not in default under or in
breach or violation of any contract, commitment or restriction to
which Synernetics is a party or to which it or any of its
properties is bound, where such defaults, breaches, or violations
would, in the aggregate, have a material adverse effect on the
operations, assets, financial condition or prospects of
Synernetics. To the best of Synernetics' knowledge, no other
party is in default under or in breach or violation of, nor is
there any valid basis for any claim of default by any other party
under or any breach or violation by any other party of, any
material contract, commitment, or restriction to which
Synernetics is bound or by which any of its properties is bound,
where such defaults, breaches, or violations would, in the
aggregate, have a material adverse effect on the operations,
assets, financial condition or prospects of Synernetics.
3.12 Orders, Commitments and Returns. All accepted and
unfilled orders entered into by Synernetics for the sale,
license, or lease or other disposition by Synernetics of its
products, and all agreements, contracts, or commitments for the
purchase of supplies, were made in the ordinary course of
business. No outstanding purchase or outstanding lease
commitment of Synernetics is in excess of the normal, ordinary
and usual requirements of its business or was made at any price
(on both a per unit and aggregate basis) materially in excess of
the current market price at the time made, or contains terms and
conditions materially more onerous to Synernetics than those
usual and customary in the industry.
3.13 Compliance With Law. Synernetics is in compliance
with all applicable laws and regulations in all material
respects. Neither Synernetics nor, to the best of Synernetics'
knowledge, any of its employees has directly or indirectly paid
or delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government
official or other party in the United States or any other
country, that was or is in violation of any federal, state, or
local statute or law or of any statute or law of any other
country having jurisdiction. Synernetics has not participated
directly or indirectly in any boycotts or other similar practices
affecting any of its customers. Synernetics has complied at all
times with any and all applicable federal, state and foreign
laws, rules, regulations, proclamations and orders relating to
the importation or exportation of its products.
3.14 Labor Difficulties.
(a) Synernetics is not engaged in any unfair
labor practice and is not in material violation of any applicable
laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours.
(b) There is no unfair labor practice complaint
against Synernetics actually pending or threatened before the
National Labor Relations Board.
(c) There is no strike, labor dispute, slowdown,
or stoppage actually pending or threatened against Synernetics.
(d) No union representation question exists
respecting the employees of Synernetics and to the best of
Synernetics' knowledge no union organizing activities are taking
place.
(e) No grievance that might have an adverse
effect on Synernetics or the conduct of its business, nor any
arbitration proceeding arising out of or under any collective
bargaining agreement is pending and no claims therefor exist.
(f) No collective bargaining agreement that is
binding on Synernetics restricts it from relocating or closing
any of its operations.
(g) Synernetics has not experienced any material
work stoppage or other material labor difficulty.
3.15 Trade Regulation. Synernetics has not terminated
its relationship with or refused to ship Synernetics Products to
any dealer, distributor, OEM, third party marketing entity or
customer which had theretofore paid or been obligated to pay
Synernetics in excess of One Hundred Thousand Dollars ($100,000)
over any consecutive twelve (12) month period. All of the prices
charged by Synernetics in connection with the marketing or sale
of any products or services have been in compliance with all
applicable laws and regulations. No claims have been
communicated or threatened against Synernetics with respect to
wrongful termination of any dealer, distributor or any other
marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other violation of any
laws or regulations relating to anti-competitive practices or
unfair trade practices of any kind, and there is no specific
situation, set of facts, or occurrence out of which a claim is
likely to be asserted.
3.16 Insider Transactions. No Affiliate of Synernetics
has any interest in (i) any material equipment or other property,
real or personal, tangible or intangible, including, without
limitation, any item of intellectual property, used in connection
with or pertaining to the business of Synernetics, or (ii) any
creditor, supplier, customer, manufacturer, agent,
representative, or distributor of products of Synernetics;
provided, however, that no such Affiliate or other person shall
be deemed to have such an interest solely by virtue of the
ownership of less than 1% of the outstanding stock or debt
securities of any publicly-held company, the stock or debt
securities of which are traded on a recognized stock exchange or
quoted on the National Association of Securities Dealers
Automated Quotation System.
3.17 Employees, Independent Contractors and
Consultants. The Synernetics Disclosure Schedule lists and
describes all currently effective consulting, independent
contractor and/or employment agreements and other material
agreements concluded with individual employees, independent
contractors or consultants to which Synernetics is a party. True
and correct copies of all such written agreements have been
provided to 3Com or its representatives. All salaries and wages
paid by Synernetics are in compliance with applicable federal,
state and local laws. Also shown on the Synernetics Disclosure
Schedule are the names of all persons whose annual rate of
compensation, including bonuses and other payments of any kind,
is in excess of Fifty Thousand Dollars ($50,000) and the names of
all employees with a title of "Director" of a department or above
and the salaries for each such person. Synernetics' aggregate
accrued vacation and severance pay as of November 28, 1993 was
approximately Two Hundred Twenty-Six Thousand Dollars ($226,000).
3.18 Insurance. The Synernetics Disclosure Schedule
contains a list of the principal policies of fire, liability and
other forms of insurance held by Synernetics. Synernetics has
not done anything, either by way of action or inaction, that
might invalidate such policies in whole or in part.
3.19 Litigation. There are no suits, actions or
proceedings pending or, to the best of Synernetics' knowledge,
threatened against or affecting Synernetics or which questions or
challenges the validity of this Agreement. There is no judgment,
decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator
outstanding against Synernetics.
3.20 Governmental Authorizations and Regulations. All
licenses, franchises, permits and other governmental
authorizations held by Synernetics and material to its business
are valid and sufficient for the business presently carried on by
Synernetics. The business of Synernetics is not being conducted
in violation of any law, ordinance or regulation of any
governmental entity, except for violations which either singly or
in the aggregate do not and will not have a material adverse
effect on the operations, assets or financial condition of
Synernetics.
3.21 Corporate Minutes, Etc. The corporate minute
books, stock certificate books, stock registers and other
corporate records of Synernetics are complete and accurate in all
material respects, and the signatures appearing on all documents
contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in
such books and records were duly and validly taken in compliance
with the laws of the applicable jurisdiction. True and correct
copies of such records have been made available to 3Com or its
representatives.
3.22 Section 341(f)(2). Synernetics has not, with
regard to any property or assets held, acquired or to be acquired
by it, at any time, filed a consent to the application of Section
341(f)(2) of the Code nor will any such consent be filed before
the Closing.
3.23 Subsidiaries. Synernetics has no subsidiaries.
Synernetics does not own or control (directly or indirectly) any
capital stock, bonds or other securities of, and does not have
any proprietary interest in, any other corporation, general or
limited partnership, firm, association or business organization,
entity or enterprise, and Synernetics does not control (directly
or indirectly) the management or policies of any other
corporation, partnership, firm, association or business
organization, entity or enterprise.
3.24 Compliance with Environmental Requirements.
Synernetics has obtained all material permits, licenses and other
authorizations which are required under federal, state and local
laws relating to pollution or protection of the environment,
including laws or provisions relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials, substances, or wastes into air,
surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials, substances, or wastes. Except as
set forth in the Synernetics Disclosure Schedule, Synernetics is
in material compliance with all terms and conditions of the
required permits, licenses and authorizations. Except as set
forth in the Synernetics Disclosure Schedule, Synernetics is not
aware of, nor has Synernetics received notice of, any conditions,
circumstances, activities, practices, incidents, or actions which
may form the basis of any claim, action, suit, proceeding,
hearing, or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge,
release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic substance, material
or waste.
3.25 Corporate Documents. Synernetics has furnished to
3Com for its examination: (i) copies of its Certificate of
Incorporation and Bylaws; (ii) its Minute Book containing all
records required to be set forth of all proceedings, consents,
actions, and meetings of the stockholders, the board of directors
and any committees thereof; (iii) all permits, orders, and
consents issued by any regulatory agency with respect to
Synernetics, or any securities of Synernetics, and all
applications for such permits, orders, and consents; and (iv) the
stock transfer books of Synernetics setting forth all transfers
of any capital stock.
3.26 No Brokers. Neither Synernetics nor to the best
of Synernetics' knowledge any Synernetics stockholder, is
obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation or execution of
this Agreement or the Agreement of Merger or in connection with
any transaction contemplated hereby or thereby.
3.27 Synernetics Options.
(a) A list, as of the date of this Agreement, of
all holders of outstanding Options has been provided to 3Com.
(b) All Options outstanding as of the Effective
Time have been issued in accordance with the terms of the
Synernetics 1989 Stock Plan and pursuant to the standard forms of
option agreement previously provided to legal counsel for 3Com.
(c) Except for an adjustment described in
paragraph 13B of the Synernetics 1989 Stock Plan, no Option will
by its terms require an adjustment in connection with the Merger.
(d) Neither the transactions contemplated by this
Agreement nor any action taken by Synernetics will result in (i)
any acceleration of vesting in favor of any optionee under an
Option, except for such acceleration as may be provided pursuant
to the Synernetics 1989 Stock Plan, a standard form of option
agreement previously provided to legal counsel for 3Com, or
Section 5.9 of this Agreement pertaining to Severance Agreements;
(ii) any additional benefits for any optionee under an Option; or
(iii) the inability of 3Com after the Effective Time to exercise
any right or benefit held by Synernetics prior to the Effective
Time with respect to an Option assumed by 3Com, including,
without limitation, the right to repurchase an optionee's
unvested shares on termination of such optionee's employment.
(e) The assumption by 3Com of Options in
accordance with Section 6.4 will not give the optionees
additional benefits which they did not have under their Options
prior to such assumption (after taking into account the existing
provisions of the Options, such as their respective exercise
prices and vesting schedules.
(f) The assumption of Options by 3Com pursuant to
Section 6.4 will not constitute a breach of the Synernetics 1989
Stock Plan or any agreement entered into pursuant to such plan.
4. Representations and Warranties of 3Com and Sub.
Except as set forth on Exhibit D (3Com Disclosure
Schedule), 3Com and Sub jointly and severally represent and
warrant to Synernetics that:
4.1 Organization and Good Standing. 3Com and Sub are
corporations duly organized, validly existing and in good
standing under the laws of the States of California and Delaware,
respectively, and have full power and authority to carry on their
businesses as now conducted. 3Com and Sub are each qualified as
foreign corporations in any jurisdiction in which a failure to
qualify would have a material adverse effect on the operations or
financial condition of 3Com and/or Sub.
4.2 Power, Authorization and Validity.
(a) 3Com and Sub have the right, power, legal
capacity and authority to enter into and perform their respective
obligations under this Agreement.
(b) The execution, delivery and performance of
this Agreement and the Agreement of Merger have been, or will
have been prior to the Closing, duly and validly approved and
authorized by the Boards of Directors of 3Com and Sub and the
shareholder of Sub. No authorization or approval, governmental
or otherwise, is necessary in order to enable 3Com and Sub to
enter into and to perform the terms of this Agreement or the
Agreement of Merger on their parts to be performed.
(c) This Agreement and any agreements which are
exhibits to this Agreement are the valid and binding obligations
of 3Com and Sub enforceable in accordance with their terms.
(d) Upon delivery in accordance herewith the
Agreement of Merger shall be a binding obligation of 3Com and Sub
enforceable in accordance with its terms.
4.3 Capitalization. The authorized capital of 3Com
consists of One Hundred Million (100,000,000) shares of Common
Stock, of which thirty two million eight hundred sixty nine
thousand (32,869,000) shares were issued and outstanding on
November 30, 1993. The authorized capital of Sub consists of one
thousand shares (1,000) of Common Stock, all of which are issued
and outstanding and are owned of record and beneficially by 3Com.
All the issued and outstanding shares have been duly authorized
and validly issued, are fully paid and non assessable are not
subject to any right or claim of rescission, and have been
offered, issued, sold and delivered by 3Com in compliance with
all applicable federal and state securities laws.
4.4 No Violation of Existing Agreements. Neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will conflict with, or
result in a material breach or violation of, any provision of
3Com's Articles of Incorporation or Sub's Certificate of
Incorporation, or their respective Bylaws, as currently in
effect, any instrument or contract to which 3Com or Sub is a
party or by which any such party is bound, or any federal, state
or local judgment, writ, decree, order, statute, rule or
regulation applicable to any such person. Neither the execution
and delivery of this Agreement, nor any Agreement attached hereto
as an Exhibit, nor the consummation of the transactions
contemplated hereby or thereby will directly have a material
adverse effect on the operations, assets, financial condition or
prospects of 3Com.
4.5 Compliance With Other Instruments and Laws. 3Com
is not in violation of any provisions of its Articles of
Incorporation or Bylaws as currently in effect or in effect at
the Closing, or any federal, state or local judgment, writ,
decree, or order applicable to 3Com. The operations of 3Com have
not violated any federal, state or local laws, regulations or
orders with which failure to comply would have a material adverse
effect on the operations, assets, financial conditions or
prospects of 3Com.
4.6 Litigation. There is no action, proceeding, claim
or investigation pending or, to the best of 3Com's knowledge,
threatened against 3Com and Sub before any court or
administrative agency which could have a material adverse effect
on the operations, assets, financial condition or prospects of
3Com or Sub and which is not set forth in the SEC Documents, as
defined below.
4.7 SEC Documents. 3Com has delivered to Synernetics
true, accurate and complete copies of 3Com's most recent reports
on Forms 10-K, 10-Q and any report on Form 8-K filed since the
most recent 10-Q (collectively, the "SEC Documents"). As of
their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or
the Securities Act, and taken together, the SEC Documents
contained no untrue statement of a material fact and did not omit
to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading except to
the extent corrected by a subsequently filed SEC Document.
4.8 No Brokers. Neither 3Com nor Sub is obligated for
the payment of fees or expenses of any broker or finder in
connection with the origin, negotiation or execution of this
Agreement or the Agreement of Merger or in connection with any
transaction contemplated hereby or thereby.
5. Pre-Closing Covenants of Synernetics.
5.1 Advice of Changes. Synernetics will promptly
advise 3Com in writing (i) of any event occurring subsequent to
the date of this Agreement which would render any representation
or warranty of Synernetics contained in this Agreement, if made
on or as of the date of such event or the Closing Date, untrue or
inaccurate in any material respect and (ii) of any material
adverse change in Synernetics' business, taken as a whole.
5.2 Conduct of Business. Until the Closing,
Synernetics will continue to conduct its business and maintain
its business relationships in the ordinary and usual course and
will not, without the prior written consent of 3Com:
(a) borrow any money which borrowings exceed in
the aggregate $50,000, except for borrowings of up to $350,000
under the line of credit agreement with Fleet Financial;
(b) incur any liability other than in the
ordinary and usual course of business or in connection with the
performance or consummation of this Agreement;
(c) encumber or permit to be encumbered any of
its assets except in the ordinary course of its business;
(d) dispose of any of its assets, except
inventory in the regular and ordinary course of business;
(e) enter into any lease or contract for the
purchase or sale of any property, real or personal involving the
payment or receipt of $50,000, except in the ordinary course of
business;
(f) fail to maintain its equipment and other
assets in good working condition and repair according to the
standards it has maintained up to the date of this Agreement,
subject only to ordinary wear and tear;
(g) pay any bonus, increased salary, or special
remuneration to any officer or employee, including any amounts
for accrued but unpaid salary or bonuses (other than amounts not
in excess of normal payments made on a regular basis or amounts
accrued as disclosed to 3Com prior to payment);
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital, or redeem
or otherwise acquire any of its capital stock;
(j) amend or terminate any material contract,
agreement or license to which it is a party except in the
ordinary course of business;
(k) loan any amount to any person or entity, or
guaranty or act as a surety for any obligation other than normal
travel and other advances;
(l) waive or release any right or claim, except
in the ordinary course of business;
(m) issue or sell any shares of its capital stock
of any class or any other of its securities, or issue or create
any warrants, obligations, subscriptions, options, convertible
securities, or other commitments to issue shares of capital
stock, except pursuant to the exercise of outstanding options;
(n) split or combine the outstanding shares of
its capital stock of any class or enter into any recapitalization
affecting the number of outstanding shares of its capital stock
of any class or affecting any other of its securities;
(o) merge, consolidate or reorganize with any
entity;
(p) amend its Certificate of Incorporation or
Bylaws;
(q) make or change any election, change any
annual accounting period, adopt or change any accounting method,
file any amended tax return, enter into any closing agreement,
settle any tax claim or assessment relating to Synernetics,
surrender any right to claim refund of taxes, consent to any
extension or waiver of the limitation period applicable to any
tax claim or assessment relating to Synernetics, or take any
other action or omit to take any action, if any such election,
adoption, change, amendment, agreement, settlement, surrender,
consent or other action or omission would have the effect of
increasing the tax liability of Synernetics or 3Com (provided
that 3Com will not unreasonably withhold or delay consent
hereunder); or
(r) agree to do any of the things described in
the preceding clauses 5.2(a) through 5.2(q).
5.3 Risk of Loss. Except as otherwise provided in
this Agreement, until the Closing, all risk of loss, damage or
destruction to Synernetics' assets shall be borne by Synernetics.
5.4 Access to Information. Until the Closing,
Synernetics shall allow 3Com and its agents free access upon
reasonable notice and during normal working hours to its files,
books, records, and offices, including, without limitation, any
and all information relating to taxes, commitments, contracts,
leases, licenses, and personal property and financial condition.
Until the Closing, Synernetics shall cause its accountants to
cooperate with 3Com and its agents or accountants in making
available all financial information requested, including without
limitation the right of 3Com's accountants to examine all working
papers pertaining to all financial statements prepared or audited
by such accountants.
5.5 Regulatory Approvals. Prior to the Closing,
Synernetics shall execute and file, or join in the execution and
filing, of any application or other document which may be
necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state or local, which
may be reasonably required, or which 3Com may reasonably request,
in connection with the consummation of the transactions
contemplated by this Agreement. Such persons and entities shall
use commercially reasonable efforts to obtain all such
authorizations, approvals and consents.
5.6 Satisfaction of Conditions Precedent. Synernetics
will use its best efforts to satisfy or cause to be satisfied all
the conditions precedent which are set forth in Section 10
(Conditions to 3Com's Obligations), and Synernetics will use its
best efforts to cause the transactions contemplated by this
Agreement to be consummated, and, without limiting the generality
of the foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all notices
to, third parties which may be necessary or reasonably required
on its part in order to effect the transactions contemplated
hereby.
5.7 Stockholder Vote. Prior to the Closing, whether
by special meeting or written consent of its stockholders,
Synernetics will submit this Agreement and related matters to its
stockholders for consideration and approval, and the Board of
Directors of Synernetics will recommend such approval to the
Synernetics stockholders.
5.8 Key Employee Agreement. Prior to the Closing,
Synernetics shall use commercially reasonable efforts to conclude
a Key Employee Agreement in the form attached hereto as Exhibit
B-1 (Form of Key Employee Agreement) with Leon Woo (the "Key
Employee"). In addition, (i) Allan Wallack shall enter into a
form of consulting agreement providing that he will act as a
consultant to 3Com for a period of up to two months following the
Closing, and (ii) the Scheduled Employees will enter into an
agreement in the form set forth on Exhibit B-2 (Scheduled
Employees) with such changes as such employees and 3Com may
reasonably agree.
5.9 Severance Agreements. 3Com and Synernetics agree
that Synernetics may enter into severance agreements providing
for the payment of severance amounts (payable either before or
after the Closing) to the Scheduled Employees and/or
acceleration, in whole or in part, of the vesting of Options held
by such Scheduled Employees. Synernetics shall give 3Com notice
of the amount of severance payments ("Severance or Other
Amounts") and/or acceleration of vesting ("Accelerated Options")
it has determined to pay to such Scheduled Employees prior to
entering into any such agreements.
5.10 Escrow Agreement. 3Com and Synernetics agree that
on the Closing Date, 3Com shall deposit [CONFIDENTIAL TREATMENT
REQUESTED ] Dollars ($[CONFIDENTIAL
TREATMENT REQUESTED]) of the Cash Consideration into an escrow
account (the "Escrow Account") maintained by an escrow agent
mutually agreeable to Synernetics and 3Com. The Escrow Account
shall be subject to the terms of the Escrow Agreement substantially
in the form attached hereto as Exhibit E (Form of Escrow Agreement).
[CONFIDENTIAL TREATMENT REQUESTED
]
Notwithstanding anything to the contrary set forth in this
Agreement or in any of the other Transaction Documents: (a) the
Escrow Account shall be the sole and exclusive source of any
claim or remedy by 3Com or Sub arising out of the breach or
alleged breach by Synernetics of any of its representations,
warranties, covenants or agreements in this Agreement or in any
of the other Transaction Documents, (b) no stockholder, officer,
director or employee of Synernetics shall have any liability for
any breach by Synernetics of this Agreement or of any of the
other Transaction Documents and (c) except as specifically
provided in Section 1(b) of the Escrow Agreement, Synernetics
shall be liable only as to [CONFIDENTIAL TREATMENT REQUESTED
], Synernetics' maximum liability shall not
exceed the amounts maintained in the Escrow Account at the time
any indemnification claim is resolved, all as more specifically
provided in the Escrow Agreement.
5.11 Notice Regarding Synernetics Options. No later
than five days prior to the Effective Time, Synernetics shall
deliver or cause to be delivered to each holder of an Option a
notice pursuant to clause (ii) of paragraph 13B of the
Synernetics 1989 Stock Plan (the "Notice"). The Notice shall
provide that any Option or portion thereof which has not been
exercised, to the extent permitted under the terms of the
Synernetics 1989 Stock Plan, prior to the close of business on
the day immediately preceding the Effective Time shall terminate
effective as of the Effective Time.
6. Covenants of 3Com and Sub.
6.1 Advice of Changes. 3Com and Sub will promptly
advise Synernetics in writing of any event occurring subsequent
to the date of this Agreement which would render any
representation or warranty of 3Com or Sub contained in this
Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect.
6.2 Regulatory Approvals. Prior to the Closing, 3Com
and Sub shall execute and file, or join in the execution and
filing, of any application or other document which may be
necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state or local, which
may be reasonably required, or which Synernetics may reasonably
request, in connection with the consummation of the transactions
contemplated by this Agreement. Such persons and entities shall
use commercially reasonable efforts to obtain all such
authorizations, approvals and consents.
6.3 Satisfaction of Conditions Precedent. 3Com and
Sub will use their best efforts to satisfy or cause to be
satisfied all the conditions precedent which are set forth in
Section 9 (Conditions to Synernetics' Obligations), and 3Com and
Sub will use their best efforts to cause the transactions
contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents
and authorizations of third parties and to make all filings with,
and give all notices to, third parties which may be necessary or
reasonably required on its part in order to effect the
transactions contemplated hereby.
6.4 Assumption of Synernetics Options.
(a) Immediately upon the Effective Time, 3Com
shall offer to enter into an agreement with each holder of an
Option any portion of which has not been exercised prior to the
Effective Time providing for the assumption by 3Com of the
obligations of Synernetics under such Option in a form reasonably
acceptable to Synernetics and its counsel (the "Option Assumption
Agreement"). Each Option Assumption Agreement shall provide that
the Option assumed by 3Com thereby will continue to be
exercisable on the terms and conditions set forth in the option
agreement evidencing such Option, except that: (i) the Option
shall be deemed not to have terminated in accordance with the
Notice described in Section 5.11, (ii) the Option shall be
exercisable for a number of shares of 3Com Common Stock equal to
the number of shares of Synernetics common stock subject to such
Option immediately prior to the Effective Time multiplied by a
fraction, the numerator of which is the Synernetics Share Price
and the denominator of which is the 3Com Closing Price (with the
resulting number of shares of 3Com Common Stock rounded down to
the nearest whole number), (iii) the per share exercise price
shall be an amount equal to the aggregate exercise price prior to
the Merger divided by the number of shares of 3Com Common Stock
subject to such Option rounded up to the nearest whole cent, and
(iv) continuous employment with Synernetics, whether occurring
before or after the Effective Time, shall be credited to an
optionee for purposes of determining the number of shares subject
to exercise, vesting or repurchase after the Effective Time. It
is the intention of the parties that the Options assumed by 3Com
qualify following the Effective Time as incentive stock options
as defined in Section 422 of the Code ("incentive stock options")
to the extent the Options qualified as incentive stock options
prior to the Effective Time.
(b) 3Com and Synernetics agree that neither of
them will treat the consideration received pursuant to Section
2.1 with respect to Synernetics Shares issued upon exercise of
incentive stock options exercised prior to the Effective Time as
wages and will not make wage withholding with respect thereto,
provided that such Options are irrevocably exercised at least two
days prior to the Closing and the exercise price therefor
deposited in Synernetics bank account for the benefit of
Synernetics at least two days prior to the Closing.
6.5 Indemnification of Directors, etc. 3Com agrees to
cause Synernetics to maintain in effect for six years from and
after the Closing Date any provisions of the Certificate of
Incorporation or Bylaws of Synernetics and any successor
corporation relating to the rights to indemnification of
directors and officers of Synernetics with respect to acts or
omissions occurring before the Effective Time. In the event 3Com
takes any action which would impair Synernetics' ability to
fulfill its obligations thereunder, 3Com will assume in all
respects the performance by Synernetics after the Effective Time
of Synernetics' indemnification obligations under its Certificate
of Incorporation and Bylaws.
6.6 Payment of Bonuses. 3Com agrees that it will pay
or cause Synernetics to pay all amounts payable under the
Synernetics Bonus Plan with respect to the year ended January 2,
1994 upon completion of the financial statements of Synernetics
for such year, or if 3Com has elected in writing prior to January
2, 1994 to complete an audit of such financials for such fiscal
year, then upon completion of such audit.
7. Mutual Covenants.
7.1 Confidentiality. Each party acknowledges that in
the course of the performance of this Agreement, it may obtain
the Confidential Information of the other party. The Receiving
Party (as defined in Section 1.10 (Confidential Information))
shall, at all times, both during the term of this Agreement and
thereafter, keep in confidence and trust all of the Disclosing
Party's (as defined in Section 1.10 (Confidential Information))
Confidential Information received by it. The Receiving Party
shall not use the Confidential Information of the Disclosing
Party other than as expressly permitted under the terms of this
Agreement or by a separate written agreement. The Receiving
Party shall take all reasonable steps to prevent unauthorized
disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain
or into the possession of unauthorized persons. The Receiving
Party shall not disclose Confidential Information of the
Disclosing Party to any person or entity other than its officers
or employees (or outside legal or accounting advisors) who need
access to such Confidential Information in order to effect the
intent of this Agreement and who have entered into
confidentiality agreements with such person's employer or who are
subject to ethical restrictions on disclosure which protects the
Confidential Information of the Disclosing Party. The Receiving
Party shall immediately give notice to the Disclosing Party of
any unauthorized use or disclosure of Disclosing Party's
Confidential Information. The Receiving Party agrees to assist
the Disclosing Party to remedy such unauthorized use or
disclosure of its Confidential Information. These obligations
shall not apply to the extent that Confidential Information
includes information which:
(a) is already known to the Receiving Party at
the time of disclosure, which knowledge the Receiving Party shall
have the burden of proving;
(b) is, or, through no act or failure to act of
the Receiving Party, becomes publicly known;
(c) is received by the Receiving Party from a
third party without restriction on disclosure (although this
exception shall not apply if such third party is itself violating
a confidentially obligation by making such disclosure);
(d) is independently developed by the Receiving
Party without reference to the Confidential Information of the
Disclosing Party, which independent development the Receiving
Party will have the burden of proving;
(e) is approved for release by written
authorization of the Disclosing Party; or
(f) is required to be disclosed by a government
agency to further the objectives of this Agreement or by a proper
order of a court of competent jurisdiction; provided, however
that the Receiving Party will use its best efforts to minimize
such disclosure and will consult with and assist the Disclosing
Party in obtaining a protective order prior to such disclosure.
7.2 Exclusivity. Until January 31, 1994, Synernetics
agrees that it will not (and that it will use best efforts to
assure that its employees, agents and affiliates do not on its
behalf) discuss or enter any agreement concerning the sale or
acquisition of Synernetics, its stock (including by means of any
public offering thereof, but excluding issuance of stock and
options to employees in the ordinary course of business
consistent with past practices) or a substantial part of its
assets with any party other than 3Com, and that any such
discussions presently in progress will be terminated or suspended
during that period. Until January 31, 1994, 3Com agrees that it
will not (and that it will use best efforts to assure that its
employees, agents and affiliates do not on its behalf) discuss or
enter into any agreement concerning the purchase or acquisition
by 3Com of, an investment by 3Com in, or an OEM relationship of
3Com with any direct competitor of Synernetics, and that any such
discussions presently in progress will be terminated or suspended
during that period.
7.3 HSR Act Filings. 3Com and Synernetics shall
promptly make their respective filings, and shall thereafter make
any required submissions, under the HSR Act with respect to the
Merger and shall cooperate with each other with respect to the
foregoing. Synernetics shall not participate in any meeting with
the Federal Trade Commission or the Department of Justice with
respect to the filing of Synernetics under the HSR Act or any
review by either of the foregoing agencies without giving 3Com
prior notice of such meetings and offering 3Com the opportunity
to attend and participate in such meetings.
7.4 Further Assurances. Each party agrees to
cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such
further written assurances, as may be reasonably requested by any
other party to better evidence and reflect the transactions
described herein and contemplated hereby.
8. The Closing.
8.1 Merger.
(a) On the date of the Closing, but not prior to
the Closing, the Agreement of Merger shall be filed with the
offices of the Secretary of State of the State of Delaware and
the merger of Sub with and into Synernetics shall be consummated.
(b) At the Closing, Synernetics shall deliver or
cause to be delivered to 3Com certificates and documents
evidencing the Synernetics Shares held by its stockholders. The
certificates and documents evidencing such Synernetics Shares so
delivered shall be properly endorsed for transfer or accompanied
by duly executed stock powers. Concurrently with the delivery of
such certificates and documents, 3Com shall deliver to the
holders of Synernetics Shares the Cash Consideration (less
amounts deposited into the Escrow Account pursuant to Section
5.10 (Escrow Agreement)) by check or wire transfer, as set forth
in the Agreement of Merger.
8.2 Additional Documents.
(a) At any time and from time to time at or after
the Closing, the parties shall at the request of the other party
execute and deliver or cause to be executed and delivered all
such assignments, consents and other documents and take or cause
to be taken all such other actions as either party may reasonably
deem necessary or desirable, in order to more fully and
effectively carry out the intents and purposes of this Agreement.
(b) Synernetics shall execute and deliver to 3Com
a statement meeting the requirements of Treasury Regulation
Section 1.897-2(h)(2) stating that interests in Synernetics are
not United States real property interests.
9. Conditions to Synernetics' Obligations.
Synernetics' obligations hereunder are subject to the
fulfillment or satisfaction on and as of the Closing, of each of
the following conditions (any one or more of which may be waived
by Synernetics, but only in a writing signed by Synernetics):
9.1 Accuracy of Representations and Warranties. The
representations and warranties of 3Com and Sub set forth in
Section 4 (Representations and Warranties of 3Com and Sub) shall
be true on in all material respects and as of the Closing with
the same force and effect as if they had been made at the
Closing, and Synernetics shall receive a certificate to such
effect from the President or a Vice President of 3Com and Sub,
respectively.
9.2 Covenants. 3Com shall have performed and complied
in all material respects with all of its covenants contained in
Sections 6 (Pre-Closing Covenants of 3Com and Sub) and 7 (Mutual
Covenants) on or before the Closing, and Synernetics shall
receive a certificate from 3Com to such effect signed by the
President and Chief Financial Officer of Synernetics.
9.3 No Litigation. No litigation or proceeding shall
be threatened or pending against 3Com and Sub with the purpose or
with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement, and Synernetics shall receive a certificate to such
effect signed by the President or a Vice President of 3Com and
Sub, respectively.
9.4 Authorizations. Synernetics shall have received
from 3Com and Sub written evidence that the execution, delivery
and performance of 3Com and Sub's obligations under this
Agreement and the Agreement of Merger have been duly and validly
approved and authorized by the Board of Directors of 3Com and
Sub, respectively, and the shareholder of Sub.
9.5 Opinion of 3Com's Counsel. Synernetics shall have
received from Gray Cary Ware & Freidenrich, counsel for 3Com, an
opinion in substantially the form attached hereto as Exhibit F
(Opinion of Gray Cary Ware & Freidenrich).
9.6 Government Consents. There shall have been
obtained at or prior to the date of Closing such permits or
authorizations, and there shall have been taken such other
action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the
actions herein proposed to be taken, including, but not limited
to, expiration or early termination of the notice periods
contemplated by the HSR Act.
9.7 Date of Closing. The Closing shall occur on or
before January 31, 1994.
9.8 Federal and State Securities Laws. Synernetics
and 3Com shall have complied with all applicable federal and
state securities laws.
10. Conditions to 3Com's and Sub's Obligations.
The obligations of 3Com and Sub hereunder are subject
to the fulfillment or satisfaction on, and as of the Closing, of
each of the following conditions (any one or more of which may be
waived by 3Com, but only in a writing signed by 3Com):
10.1 Accuracy of Representations and Warranties. The
representations and warranties of Synernetics contained in
Section 3 (Representations and Warranties of Synernetics) shall
be true in all material respects and as of the Closing with the
same force and effect as if they had been made at the Closing,
and 3Com shall receive a certificate from Synernetics to such
effect with respect to the representations and warranties of
Synernetics executed by the President and Chief Financial Officer
of Synernetics.
10.2 Covenants. Synernetics shall have performed and
complied in all material respects with all of its covenants
contained in Sections 5 (Pre-Closing Covenants of Synernetics)
and 7 (Mutual Covenants) on or before the Closing, and 3Com shall
receive a certificate from Synernetics to such effect signed by
the President and Chief Financial Officer of Synernetics.
10.3 No Litigation. On and as of the Closing, no
litigation or proceeding shall be threatened or pending against
Synernetics for the purpose or with the probable effect of
enjoining or preventing the consummation of any of the
transactions contemplated by this Agreement and 3Com shall
receive a certificate from Synernetics to such effect signed by
the President and Chief Financial Officer of Synernetics.
10.4 Authorizations. 3Com shall have received from
Synernetics written evidence that (i) the execution, delivery and
performance of this Agreement and the Agreement of Merger have
been duly and validly approved and authorized by its Board of
Directors and by the stockholders of Synernetics, and (ii)
stockholders of Synernetics holding no more than fifteen percent
(15%) of the outstanding shares of Synernetics capital stock
have, or might be able to perfect, dissenters' rights in
connection with the Merger. 3Com shall have received a
certificate from Synernetics to such effect signed by the
President and Chief Financial Officer of Synernetics.
10.5 No Adverse Development. There shall not have been
any material adverse changes in the financial condition, results
of operations, assets liabilities, or business of Synernetics
since the date of this Agreement. Notwithstanding the foregoing,
no change in the status of the development of the ASIC for the
2000 project shall be considered a material adverse change in
condition for purposes of this Section 10.5 (No Adverse
Development).
10.6 Required Consents. 3Com shall have received all
written consents, assignments, waivers, authorizations or other
certificates reasonably deemed necessary by 3Com's legal counsel
to provide for the continuation in full force and effect of any
and all contracts and leases of Synernetics.
10.7 Opinion of Synernetics' Counsel. 3Com shall have
received from Testa, Hurwitz & Thibeault, counsel to Synernetics,
an opinion in substantially the form attached hereto as Exhibit G
(Opinion of Testa, Hurwitz & Thibeault).
10.8 Employment with 3Com. The Key Employee shall have
entered into a Key Employee Agreement in the form attached hereto
as Exhibit B-1 (Key Employee Agreement).
10.9 Government Consents. There shall have been
obtained at or prior to the date of Closing such permits or
authorizations and there shall have been taken such other action,
as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the
actions herein proposed to be taken, including, but not limited
to, compliance with applicable state and federal securities laws
and expiration or early termination of the notice periods
contemplated by the HSR Act.
10.10 Date of Closing. The Closing shall occur on
or before January 31, 1994.
11. Termination of Agreement.
11.1 Termination. This Agreement may be terminated at
any time prior to the Closing by the mutual written consent of
each of the parties hereto. This Agreement may also be
terminated and abandoned:
(a) By 3Com if any of the conditions precedent to
3Com's obligations pursuant to Section 10 (Conditions to 3Com's
and Sub's Obligations) shall not have been fulfilled at and as of
the Closing; or
(b) By Synernetics if any of the conditions
precedent to Synernetics' obligations pursuant to Section 9
(Conditions to Synernetics' Obligations) above shall not have
been fulfilled at and as of the Closing.
Any termination of this Agreement under this Section 11.1
(Termination) shall be effective by the delivery of written
notice of the terminating party to the other parties hereto.
11.2 No Liability; Effect of Termination. Any
termination of this Agreement pursuant to this Section 11
(Termination of Agreement) shall be without further obligation or
liability upon any party in favor of any other party hereto;
provided, that if such termination shall result from the willful
failure of a party to carry out its obligations under this
Agreement, then such party shall be liable for losses incurred by
the other parties. The provisions of this Section 11.2 (No
Liability) and of Section 7.1 (Confidentiality) shall survive
termination.
12. Miscellaneous.
12.1 Governing Laws. It is the intention of the
parties hereto that the internal laws of the State of California
(irrespective of its choice of law principles) shall govern the
validity of this Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of
the parties hereto.
12.2 Binding upon Successors and Assigns. Subject to,
and unless otherwise provided in, this Agreement, each and all of
the covenants, terms, provisions, and agreements contained herein
shall be binding upon, and inure to the benefit of, the permitted
successors, executors, heirs, representatives, administrators and
assigns of the parties hereto.
12.3 Severability. If any provision of this Agreement,
or the application thereof, shall for any reason and to any
extent be invalid or unenforceable, the remainder of this
Agreement and application of such provision to other persons or
circumstances shall be interpreted so as best to reasonably
effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision which will
achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.4 Entire Agreement. This Agreement, the exhibits
hereto, the documents referenced herein, and the exhibits
thereto, constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and
thereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and
thereto. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any
of the terms hereof.
12.5 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original as
against any party whose signature appears thereon and all of
which together shall constitute one and the same instrument.
This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
12.6 Expenses. Except as provided to the contrary
herein, each party shall pay all of its own costs and expenses
incurred with respect to the negotiation, execution and delivery
of this Agreement and the exhibits hereto.
12.7 Other Remedies. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a
party shall be deemed cumulative with and not exclusive of any
other remedy conferred hereby or by law on such party, and the
exercise of any one remedy shall not preclude the exercise of any
other. Notwithstanding the foregoing, if the Closing occurs, the
sole and exclusive remedy of 3Com and Sub shall be as set forth
in Section 5.10 (Escrow Agreement) and the Escrow Agreement.
12.8 Amendment and Waivers. Any term or provision of
this Agreement may be amended, and the observance of any term of
this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a
party of any breach hereof for default in payment of any amount
due hereunder or default in the performance hereof shall not be
deemed to constitute a waiver of any other default or any
succeeding breach or default.
12. Survival of Agreements. All covenants,
agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
notwithstanding any investigation of the parties hereto and shall
terminate on the date one year after the Closing Date.
12.10 No Waiver. The failure of any party to
enforce any of the provisions hereof shall not be construed to be
a waiver of the right of such party thereafter to enforce such
provisions.
12.11 Post-Closing Audit. The parties agree that
within 30 days after the Closing they shall complete an inventory
of Synernetics' fixed assets which shall set forth the aggregate
net book value of Synernetics' assets. The result of such
inventory shall be used for purposes of the Escrow Account as
provided in the Escrow Agreement.
12.12 Notices. Any notice provided for or
permitted under this Agreement will be treated as having been
given when (a) delivered personally, (b) sent by confirmed telex
or telecopy, (c) sent by commercial overnight courier with
written verification of receipt, or (d) mailed postage prepaid by
certified or registered mail, return receipt requested, to the
party to be notified, at the address set forth below, or at such
other place of which the other party has been notified in
accordance with the provisions of this Section 12.12 (Notices).
Synernetics: Synernetics, Inc.
85 Rangeway Road
North Billerica, MA 01862
Attention: President
With copy to: Testa, Hurwitz & Thibeault
Exchange Place
53 State Street
Boston, MA 92109
Attention: Linda DeRenzo
3Com: 3Com Corporation
5400 Bayfront Plaza
Santa Clara, CA 95052
Attention: General Counsel
With copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: J. Howard Clowes
Such notice will be treated as having been received upon actual
receipt by all necessary parties.
12.13 Construction of Agreement. This Agreement
has been negotiated by the respective parties hereto and their
attorneys and the language hereof shall not be construed for or
against any party. The titles and headings herein are for
reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a
whole.
12.14 No Joint Venture. Nothing contained in this
Agreement shall be deemed or construed as creating a joint
venture or partnership between any of the parties hereto. No
party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party
shall have the power to control the activities and operations of
any other and their status is, and at all times, will continue to
be, that of independent contractors with respect to each other.
No party shall have any power or authority to bind or commit any
other. No party shall hold itself out as having any authority or
relationship in contravention of this Section 12.14 (No Joint
Venture).
12.15 Pronouns. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the person,
persons, entity or entities may require.
12.16 Further Assurances. Each party agrees to
cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such
further written assurances, as may be reasonably requested by any
other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement.
12.17 Absence of Third Party Beneficiary Rights.
No provisions of this Agreement are intended, nor shall be
interpreted, to provide or create any third party beneficiary
rights or any other rights of any kind in any client, customer,
affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof shall be
personal solely between the parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
3COM CORPORATION SYNERNETICS, INC.
/s/ Eric Benhamou /s/ Allan Wallack
By: ------------------------ By: -------------------------
Eric Benhamou, President Allan Wallack, President
3SUB CORPORATION
/s/ Eric Benhamou
By: ------------------------
Eric Benhamou, President
EXHIBIT E
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is entered into as
of January 14, 1994 by and among 3Com Corporation, a California
corporation ("3Com"), Synernetics, Inc., a Delaware corporation
("Synernetics"), the Representative named in Section 7 hereof and
the Escrow Agent named herein.
RECITALS
A. 3Com, 3Sub Corporation, a Delaware corporation and a
wholly-owned subsidiary of 3Com ("Sub"), and Synernetics have
entered into an Agreement and Plan of Reorganization dated as of
December 16, 1993 (the "Plan") pursuant to which Sub will merge
with and into Synernetics, with Synernetics surviving the Merger.
Capitalized terms used in this Agreement and not otherwise
defined herein will have the meanings given them in the Plan.
B. The Plan provides for [CONFIDENTIAL TREATMENT REQUESTED
] Dollars ($[CONFIDENTIAL TREATMENT
REQUESTED]) of the Cash Consideration (the "Escrow Amount") to be
placed in an escrow account (the "Escrow Account") to secure certain
obligations to 3Com under the Plan on the terms and conditions
set forth herein.
C. The parties hereto desire to establish the terms and
conditions pursuant to which the Escrow Amount will be deposited,
held in, and disbursed from the Escrow Account.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Escrow.
(a) Escrow of Escrow Amount. The Escrow Amount will
be held in escrow by The First National Bank of Boston (the
"Escrow Agent"), as collateral for obligations of Synernetics
under Section 5.10 (Escrow Agreement) of the Plan, until 3Com is
required to release such Escrow Amount pursuant to the terms of
this Agreement. The Escrow Agent agrees to accept delivery of
the Escrow Amount and to hold such Escrow Amount in escrow
subject to the terms and conditions of this Agreement.
(b) Payment for Breach of Representations and
Warranties. Synernetics agrees to pay 3Com for breaches of those
certain representations and warranties of Synernetics set forth
in Section 5.10 (Escrow Agreement) of the Plan. The parties
agree that the Escrow Amount will be security for this
obligation. Promptly after the receipt by 3Com of notice or
discovery of any claim, damage or legal action or proceeding
giving rise to rights under Section 5.10 (Escrow Agreement) of
the Plan, 3Com will give the Representative and the Escrow Agent
written notice of such claim, damage, legal action or proceeding
(a "Claim") in accordance with Section 3 hereof. 3Com shall
notify the Representative of the status or progress of any such
Claim.
Notwithstanding anything to the contrary set forth in this
Agreement or in any of the other Transaction Documents: (a) the
Escrow Account shall be the sole and exclusive source of any
claim or remedy by 3Com or Sub arising out of the breach or
alleged breach by Synernetics of any of its representations,
warranties, covenants or agreements in the Plan or in any of the
other Transaction Documents, (b) no stockholder, officer,
director or employee of Synernetics shall have any liability for
any breach by Synernetics of the Plan or of any of the other
Transaction Documents, and (c) except as specifically provided in
the following paragraph, Synernetics shall be liable only as to
any individual claim [CONFIDENTIAL TREATMENT REQUESTED
] Synernetics' maximum liability shall not exceed the
amounts maintained in the Escrow Account at the time any
indemnification claim is resolved. The amount of the [CONFIDENTIAL
TREATMENT REQUESTED] shall be increased by the amount of any excess
reserves on the Synernetics November 28, 1993 Balance Sheet
delivered to 3Com (the "Closing Balance Sheet") as determined when
the relevant asset category is fully realized (for example once all
inventory reflected on the Closing Balance Sheet is either sold or
written-off, any unapplied reserve will be added to the
[CONFIDENTIAL TREATMENT REQUESTED]), provided however that with
respect to any excess reserves for fixed assets, if any, the
[CONFIDENTIAL TREATMENT REQUESTED] shall be increased by only one-
half of such amount. 3Com agrees to make decisions affecting
Synernetics' financial statements and related reserves in a
manner consistent with 3Com's internal policies.
Synernetics has authorized a severance or similar
arrangement for the following Synernetics' employees: Steve
Anderson, Sean Welch and Melissa Weiksnar (the "Certain
Employees"). One Hundred Forty Four Thousand Three Hundred
Seventy Dollars ($144,370) of the Escrow Amount shall relate only
to claims for severance pursuant to such arrangements made by the
Certain Employees in connection with such employee's termination
within six months of the Closing Date. 3Com may not make claims
against such $144,370 amount (a) for any matter other than such
severance amounts or (b) in the event a Certain Employee is
terminated on a date subsequent to the six month anniversary of
the Closing Date. The limitations under subsection (c) of the
immediately preceding paragraph shall not apply to any claim made
by 3Com against the escrow for such severance amounts.
(c) Limitation on Liability. The maximum liability of
Synernetics for any matter set forth in this Agreement shall not
exceed the forfeiture of the entire Cash Consideration that is
held in escrow. Payments for Claims shall be deducted from the
Escrow Amount of each shareholder of Synernetics immediately
prior to the Closing (collectively "Holders") in proportion to
the ratio of the number of Synernetics Shares held by such Holder
over the total number of Synernetics Shares held by all Holders
immediately prior to the closing of the Merger.
2. Deposit of Escrow Amount; Release from Escrow.
(a) Delivery of Escrow Amount. On the Closing Date
(i) the Escrow Amount will be delivered by 3Com to the Escrow
Agent by check made payable to the Escrow Account.
(b) Distribution to Holders. [CONFIDENTIAL TREATMENT
REQUESTED ] the Escrow Agent
shall release from escrow to the Holders an aggregate of
[CONFIDENTIAL TREATMENT REQUESTED] Dollars ($[CONFIDENTIAL
TREATMENT REQUESTED]), less (i) any amounts delivered to
3Com in satisfaction of Claims by 3Com and (ii) any amounts
withheld with respect to any pending but unresolved Claims of
3Com (the "Released Amount"), such that each Holder shall receive
such Holder's pro rata portion of the Released Amount. In the
event that on the six month anniversary of the Closing Date none
(or less than all) of the Certain Employees have made a claim for
severance pursuant to Section 1(b), the Escrow Agent shall
release to the Holders, in the manner described in this
Section 2(b), in addition to the Released Amount, the sum of One
Hundred Forty Four Thousand Three Hundred and Seventy Dollars
($144,370) less any severance amounts, if any, paid to a Certain
Employee pursuant to Section 1(b). The balance of the Escrow
Amount less any amounts described in clause (i) or (ii) of the
first sentence of this Paragraph shall be released [CONFIDENTIAL
TREATMENT REQUESTED] after the Closing Date.
(c) Release of Escrow Amount. The Escrow Amount will
be held by the Escrow Agent until required to be released
pursuant to Section 2(b) above. Within 5 business days after the
release condition is met, the Escrow Agent will deliver to each
Holder the requisite Released Amount to be released on such date
as identified by 3Com and the Representative to the Escrow Agent
in writing, together with interest accrued on such requisite
Released Amount. 3Com and Representative undertake to deliver a
notice to Escrow Agent identifying the Escrow Amount to be
released within such five-day period. Released Amounts shall be
released to the respective Holders in proportion to their
respective interests.
(d) Investment of Escrow Account. Escrow Agent shall
invest the Escrow Account as directed in writing by the
Representative (or by 3Com if the Representative does not so
direct) in any of the following:
(i) obligations issued or guaranteed by The
United States of America or any agency or instrumentality
thereof;
(ii) certificates of deposit or interest bearing
accounts with national banks or corporations endowed with trust
powers having capital and surplus in excess of $500,000,000;
(iii) commercial paper that at the time of
investment is rated A-1 by Standard & Poor's Corporation or
Prime-1 by Moody's Investors Service, Inc.;
(iv) repurchase agreements with any bank or
corporation described in clause (ii) fully secured by obligations
described in clause (i); or
(v) the 1784 Institutional U.S. Treasury Money
Market Fund.
(e) Interest. Accrued interest on each Release Amount
shall be paid to the Holders on [CONFIDENTIAL TREATMENT REQUESTED].
Accrued interest on the balance of the escrow amount due the Holders
at the expiration of the escrow period shall be paid to the Holders.
Accrued interest on any amounts delivered to 3Com in satisfaction
of Claims by 3Com shall be paid to 3Com at the time such amount
is delivered to 3Com. The parties hereto and the Holders agree
to provide the Escrow Agent with certified taxpayer
identification numbers prior to the release of any funds from the
Escrow Account.
(f) No Encumbrance. No interest in the Escrow Amount
or any beneficial interest therein may be pledged, sold, assigned
or transferred, including by operation of law, by a Holder or be
taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of a Holder, prior to
the delivery to such Holder of the Released Amount by the Escrow
Agent.
3. Notice of Claim.
(a) Each notice of a Claim by 3Com (the "Notice of
Claim") shall be in writing to the Representative and the Escrow
Agent and shall contain the following information to the extent
it is reasonably available to 3Com:
(i) 3Com's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Damages; and
(ii) A brief description in reasonable detail of
the facts, circumstances or events giving rise to the alleged
Damages based on 3Com's good faith belief thereof.
(b) 3Com shall provide written notice of any third
party claim which could result in a Notice of Claim promptly
after 3Com becomes aware of such third party claim. 3Com agrees
not to settle such claims without the prior written consent of
Representative, which shall not be unreasonably withheld. 3Com
further agrees that it will not on its own initiative seek a
resolution of any third party claim prior to March 1, 1994.
(c) The Escrow Agent will not release any of the
Escrow Amount held in the Escrow Account to 3Com pursuant to a
Notice of Claim until such Notice of Claim has been resolved in
accordance with Section 4 below.
(d) In the event 3Com receives a claim from a third
party for damages caused by one or more breaches of the
representations and warranties set forth in Section 5.10 (Escrow
Agreement) of the Plan, 3Com shall promptly send a Notice of
Claim in accordance with this Section 3 and shall keep the
Representative and Escrow Agent informed of the status of such
claim. In the event a claim is made involving in excess of
$150,000, 3Com agrees to keep the Representative regularly
informed of the status thereof and solicit the recommendations of
the Representative regarding the disposition of such matter. The
parties agree that a claim against 3Com alleging an infringement
of patents or other rights based on the sale by 3Com of
Synernetics products prior to the Closing shall be deemed to be a
claim to which this escrow applies, and that the Representative
shall be entitled to the same rights with respect to such claims
as are provided for claims against Synernetics.
4. Resolution of Notice of Claim and Transfer of Escrow
Shares. Any Notice of Claim received by Representative and the
Escrow Agent pursuant to Section 3 above will be resolved as
follows:
(a) Uncontested Claims. In the event that the
Representative does not contest a Notice of Claim in writing to
the Escrow Agent and 3Com or pay the amount demanded within
30 calendar days after such Notice of Claim is deemed delivered
pursuant to Section 7 below, the Escrow Agent will immediately
deliver to 3Com an amount equal to the amount specified in the
Notice of Claim and notify the Representative of such transfer.
(b) Contested Claims. In the event that the
Representative gives written notice contesting all or a portion
of a Notice of Claim to 3Com and the Escrow Agent (a "Contested
Claim") within the 30-day period provided above, the matter will
be settled by binding arbitration. Any portion of the Notice of
Claim which is not contested shall be resolved as set forth above
in Section 4(a). The final decision of the arbitrator shall be
furnished to the Escrow Agent, the Representative, the Holders
and 3Com in writing and will constitute a conclusive
determination of the issue in question, binding upon the Holders,
the Representative and 3Com and shall not be contested by any of
them. After notice that the Notice of Claim is contested by the
Representative, the Escrow Agent will continue to hold in the
Escrow Account an Escrow Amount sufficient to cover such Claim
(notwithstanding the expiration of [CONFIDENTIAL TREATMENT
REQUESTED] and subject to Released Amounts released prior to
receipt by Representative and Escrow Agent of the Notice of
Claim for such Contested Claim) until (i) execution of a settlement
agreement by 3Com and the Representative setting forth a resolution
of the Notice of Claim, or (ii) receipt of a copy of the final
award of the arbitrator.
(i) Arbitration. Any Contested Claim shall be
settled by arbitration in Santa Clara, California and, except as
herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA
Rules") then in effect. However, in all events, these
arbitration provisions shall govern over any conflicting rules
which may now or hereafter be contained in the AAA Rules. Any
judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction over the subject matter thereof.
The arbitrator shall have the authority to grant any equitable
and legal remedies that would be available in any judicial
proceeding instituted to resolve a Contested Claim.
(ii) Compensation of Arbitrator. Any such
arbitration shall be conducted before a single arbitrator who
shall be compensated for his or her services at a rate to be
determined by the parties or by the American Arbitration
Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to
agree upon his or her rate of compensation.
(iii) Selection of Arbitrator. The AAA Rules
for the selection of the arbitrator shall be followed.
(iv) Payment of Costs. 3Com and the Holders as a
group shall each advance fifty percent (50%) of the initial
compensation to be paid to the arbitrator in any such arbitration
and fifty percent (50%) of the costs of transcripts and other
normal and regular expenses of the arbitration proceedings;
provided, however, that the arbitrator shall have the discretion
to grant to the prevailing party in any arbitration an award of
attorneys' fees and costs, and all costs of arbitration.
(v) Discovery. The parties shall be entitled to
conduct discovery proceedings in accordance with the provisions
of the Federal Rules of Civil Procedure, subject to any
limitation imposed by the arbitrator.
.DOC Burden of Proof. For any claim submitted to
arbitration, the burden of proof shall be as it would be if the
claim were litigated in a judicial proceedings.
(vii) Judgment. Upon the conclusion of any
arbitration proceedings hereunder, the arbitrator shall render
findings of fact and conclusions of law and a written opinion
setting forth the basis and reasons for any decision reached by
him or her and shall deliver such documents to each party to the
Agreement along with a signed copy of the award.
(viii) Terms of Arbitration. The arbitrator
chosen in accordance with these provisions shall not have the
power to alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of this Agreement or the
Plan.
(ix) Exclusive Remedy. Except as specifically
provided in this Agreement or the Plan, arbitration shall be the
sole and exclusive remedy of the parties for any Contested Claim
arising out of such Agreement or Plan.
(c) No Exhaustion of Remedies. The parties
acknowledge that no other action need be taken by 3Com before
proceeding directly in accordance with the provisions of this
Agreement.
5. Inventory. The parties have agreed that an inventory
of fixed assets shall be conducted as provided in Section 12.1 of
the Plan. The parties agree that, should the aggregate net book
value of such fixed assets as indicated by such inventory exceed
the net book value of the Synernetics fixed assets as set forth
in the Synernetics Balance Sheet (as defined in the Plan), no
Claim may be made by 3Com with respect to the condition or
existence of any Synernetics' fixed assets. Further, the parties
agree that any excess of the net book value of fixed assets on
the Synernetics Balance Sheet over the net book value as
demonstrated by such inventory shall constitute a Claim.
6. Limitation of Escrow Agent's Liability.
(a) The Escrow Agent will incur no liability with
respect to any action taken or suffered by it in reliance upon
any notice, direction, instruction, consent, statement or other
document believed by it to be genuine and duly authorized, nor
for any other action or inaction, except its own willful
misconduct or negligence. The Escrow Agent will not be
responsible for the validity or sufficiency of this Agreement or
any agreement amendatory or supplemental hereto. In all
questions arising under the Agreement, the Escrow Agent may rely
on the advice or opinion of counsel, and for anything done,
omitted or suffered in good faith by the Escrow Agent based on
such advice or opinion, the Escrow Agent will not be liable to
anyone. The Escrow Agent will not be required to take any action
hereunder involving any expense unless the payment of such
expense is made or provided for in a manner satisfactory to it.
(b) In the event conflicting demands are made or
notices are served upon the Escrow Agent with respect to the
Escrow Account, the Escrow Agent will have the absolute right, at
the Escrow Agent's election, to do either or both of the
following: resign so a successor can be appointed pursuant to
Section 11 or file a suit in interpleader and obtain an order
from a court of competent jurisdiction requiring the parties to
interplead and litigate in such court their several claims and
rights among themselves. In the event such interpleader suit is
brought, the Escrow Agent will thereby be fully released and
discharged from all further obligations imposed upon it under
this Agreement, and 3Com will pay the Escrow Agent (subject to
reimbursement from the Holders pursuant to Section 10 hereof) all
costs, expenses and reasonable attorneys' fees expended or
incurred by the Escrow Agent pursuant to the exercise of Escrow
Agent's rights under this Section 6 (such costs, fees and
expenses shall be treated as extraordinary fees and expenses for
the purposes of Section 10 hereof).
(c) In consideration of its acceptance of the
appointment as Escrow Agent, the other parties hereto, jointly
and severally, agree to indemnify and hold the Escrow Agent
harmless as to any liability incurred by it to any person, firm
or corporation by reason of its having accepted the same or in
carrying out any of the terms hereof, and to reimburse the Escrow
Agent for all its costs and expenses, including, but not limited
to, reasonable counsel fees and expenses, incurred by reason of
any matter as to which an indemnity is paid; provided, however,
that no indemnity need be paid in the case of the Escrow Agent's
negligence or willful misconduct.
7. Holders' Representative. For purposes of this
Agreement the Holders, without any further action on the part of
any such Holders, shall be deemed to have consented to the
appointment of Allan Wallack as the initial representative of the
Holders (the "Representative"), as the attorney-in-fact for and
on behalf of each Holder, and the taking by the Representative of
any and all actions and the making of any decisions required or
permitted to be taken by him under this Agreement, including,
without limitation, the exercise of the power to (i) authorize
delivery to 3Com of the Escrow Amount, or any portion thereof, in
satisfaction of Claims, (ii) agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply
with orders of courts and awards of arbitrators with respect to
such Claims, (iii) resolve any Claims and (iv) take all actions
necessary in the judgment of the Representative for the
accomplishment of the foregoing and all of the other terms,
conditions and limitations of this Agreement. Accordingly, the
Representative has unlimited authority and power to act on behalf
of Synernetics and each Holder with respect to this Agreement and
the disposition, settlement or other handling of all Claims,
rights or obligations arising under this Agreement. The Holders
will be bound by all actions taken by the Representative in
connection with this Agreement and 3Com shall be entitled to rely
on any action or decision of the Representative. In performing
his functions hereunder, the Representative will not be liable in
any manner whatsoever to the Holders. At any time during the
term of this Agreement, Holders of a majority of the Synernetics
Shares immediately prior to the closing of the Merger can appoint
a new Representative by written consent by sending notice and a
copy of the written consent appointing such new Representative
signed by such Holders of a majority of the Synernetics Shares to
3Com and the Escrow Agent. Such appointment will be effective
upon the later of the date indicated in the consent or the date
such consent is received by 3Com and the Escrow Agent.
8. Notices. Any notice provided for or permitted under
this Agreement will be treated as having been given when
(i) delivered personally, (ii) sent by confirmed telex or
telecopy, (iii) sent by commercial overnight courier with written
verification of receipt, or (iv) mailed postage prepaid by
certified or registered mail, return receipt requested, to the
party to be notified, at the address set forth below, or at such
other place of which the other party has been notified in
accordance with the provisions of Section 13.12 of the Plan.
Synernetics: Synernetics, Inc.
85 Rangeway Road
North Billerica, MA 01862
Attention: President
With copy to: Testa, Hurwitz & Thibeault
Exchange Place
53 State Street
Boston, MA 92109
Attention: Linda DeRenzo
3Com: 3Com Corporation
5400 Bayfront Plaza
Santa Clara, CA 95052
Attention: General Counsel
With copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, CA 94301
Attention: J. Howard Clowes
Escrow Agent: The First National Bank of Boston
150 Royall Street, Mail Stop 45-02-15
Canton, MA 02021
Attention: Tracy Martin
Representative:Allan Wallack
67 Thompson Drive
Sudbury, MA 01776
Such notice will be treated as having been received upon actual
receipt by all necessary parties.
9. General.
(a) Governing Law, Assigns. This Agreement will be
governed by and construed in accordance with the internal laws of
the State of California without regard to conflict-of-law
principles and will be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns.
(b) Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
(c) Entire Agreement. Except as set forth in the Plan
and the Agreement of Merger between 3Com and Synernetics, this
Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter of this Agreement
and supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter
hereof.
(d) Waivers. The observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby. The waiver by a
party of any breach hereof for default in payment of any amount
due hereunder or default in the performance hereof shall not be
deemed to constitute a waiver of any other default or any
succeeding breach or default.
10. Expenses.
(a) Escrow Agent and Arbitrator. All fees and
expenses of the Escrow Agent incurred in the ordinary course of
performing its responsibilities hereunder will be paid by 3Com
upon receipt of a written invoice by Escrow Agent. Any
extraordinary fees and expenses, including without limitation any
fees or expenses incurred by the Escrow Agent in connection with
a dispute over the distribution of the Escrow Amount or the
validity of a Notice of Claim, will be paid fifty percent (50%)
by 3Com and fifty percent (50%) by Synernetics. Synernetics'
liability for the fees and expenses of the Escrow Agent or of the
arbitrator appointed under Section 4 may be paid by 3Com and
recovered as a Claim hereunder out of the Escrow Amount. If 3Com
has paid the Holders' portion of such fees and expenses as
permitted hereunder, then the Escrow Agent will, upon demand by
3Com, deliver to 3Com a portion of the Escrow Amount equal to
such portion of fees and expenses.
(b) Representative. The Representative shall not be
entitled to receive any compensation from 3Com or the Holders in
connection with this Agreement. Any fees and expenses incurred
by the Representative in connection with actions taken pursuant
to the terms of this Agreement shall be paid by 3Com and
recovered as a Claim hereunder out of the Escrow Account.
11. Successor Escrow Agent. In the event the Escrow Agent
becomes unavailable or unwilling to continue in its capacity
herewith, the Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving resignation to the
parties to this Agreement, specifying not less than sixty (60)
days' prior written notice of such a date when such resignation
will take effect. 3Com shall designate a successor Escrow Agent
prior to the expiration of such 60-day period by giving written
notice to the Escrow Agent and the Representative. 3Com may
appoint a successor Escrow Agent with the consent of the
Representative, which will not be unreasonably withheld. The
Escrow Agent will promptly deliver the Escrow Amount remaining in
the Escrow Account at such time to such designated successor.
12. Limitation of Responsibility; Notices. The Escrow
Agent's duties are limited to those set forth in this at and the
Escrow Agent may rely upon the written notices delivered to the
Escrow Agent hereunder.
13. Amendment. This Agreement may be amended with the
written consent of 3Com, the Escrow Agent and the Representative,
provided that if the Escrow Agent does not agree to an amendment
agreed upon by 3Com and the Representative, 3Com shall appoint a
successor Escrow Agent in accordance with Section 10 above.
14. Miscellaneous. Escrow Agent may execute any of its
powers or responsibilities hereunder and exercise any rights
hereunder either directly or by or through its agents or
attorneys. Nothing in this Escrow Agreement shall be deemed to
impose upon Escrow Agent any duty to qualify to do business or
act as fiduciary or otherwise in any jurisdiction other than The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written and shall be
effective as to all the Holders when executed by 3Com, the Escrow
Agent, the Representative and Holders holding a majority of the
Synernetics Shares outstanding immediately prior to the closing
of the Merger.
3COM CORPORATION REPRESENTATIVE:
/s/ Mark Michael /s/ Allan L. Wallack
By: --------------------------- -----------------------------
Allan L. Wallack
V.P. General Counsel &
Secretary
Title: ------------------------
SYNERNETICS, INC.
/s/ Allan L. Wallack
By: ---------------------------
President & CEO
Title: ------------------------
ESCROW AGENT:
THE FIRST NATIONAL BANK OF BOSTON
/s/ Mark Nelson
By: ---------------------------
Authorized Officer
Title: ------------------------
CONFIDENTIAL TREATMENT REQUESTED
SIDE AGREEMENT REGARDING
AGREEMENT AND PLAN OF REORGANIZATION
Effective as of the 16th day of December 1993, by and among
3Com Corporation, a California corporation ("3Com"), 3Sub
Corporation, a Delaware corporation and a wholly-owned subsidiary
of 3Com ("Sub"), and Synernetics, Inc., a Delaware corporation
("Synernetics"), entered into an AGREEMENT AND PLAN OF
REORGANIZATION (the "Agreement"), and this SIDE AGREEMENT
regarding the Agreement is entered into this 14th day of January
1994 in order to set forth certain additional understandings of
the parties with respect to the Agreement.
RECITAL
The parties intend to clarify certain matters that have
arisen with respect to the provisions of the Agreement and the
transactions contemplated thereby and, subject to the terms and
conditions hereinafter set forth, to agree upon the manner in
which certain matters are to be handled.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in
and for the consideration and mutual covenants set forth herein,
the parties agree as follows:
1. Definitions. Capitalized terms shall have the meanings
provided in the Agreement unless otherwise defined herein.
2. Amendments to the Agreement and other Documents. The
parties agree that each of the following provisions of the
Agreement are hereby amended as set forth below.
(a) Section 10.6 of the Agreement is amended to read
in full as follows:
Required Consents. 3Com shall have received
all material written consents, assignments,
waivers, authorizations or other certificates
reasonably deemed necessary by 3Com's legal
counsel to provide for the continuation in
full force and effect of any and all material
contracts and leases of Synernetics.
(b) Section 6.4(b) of the Agreement is amended to read
in full as follows:
(b) 3Com and Synernetics agree that neither of
them will treat the consideration received
pursuant to Section 2.1 with respect to
Synernetics Shares issued upon exercise of
incentive stock options exercised prior to the
Effective Time as wages and will not make wage
withholding with respect thereto, provided that
such Options are irrevocably exercised at least
two days prior to the Closing and the exercise
price therefor deposited in Synernetics bank
account for the benefit of Synernetics at least
two days prior to the Closing, and provided
further that with respect to any portion of any
option which is, or as of the date of exercise
becomes, subject to any repurchase right that by
its terms lapses under certain conditions in the
future, that a form of election under IRC Section
83(B) is filed prior to the Closing.
(c) Section 5 of the Escrow Agreement is amended to
read in full as follows:
Inventory. The parties have agreed that an
inventory of fixed assets shall be conducted as
provided in Section 12.1 of the Plan. The parties
agree that, should the aggregate net book value of
such fixed assets as indicated by such inventory
exceed the net book value of the Synernetics'
fixed assets as set forth in the Synernetics'
Balance Sheet (as defined in the Plan), no Claim
may be made by 3Com with respect to the condition
or existence of any Synernetics' fixed assets.
Further, the parties agree that any excess of the
net book value of fixed assets on the Synernetics
Balance Sheet over the net book value as
demonstrated by such inventory shall constitute a
Claim.
(d) The penultimate sentence of the second paragraph
of Section 1(b) of the Escrow Agreement is amended to read in
full as follows:
The amount of the [CONFIDENTIAL TREATMENT REQUESTED*]
shall be increased by the amount of any excess
reserves on the Synernetics November 28, 1993
Balance Sheet delivered to 3Com (the "Closing
Balance Sheet") as determined when the relevant
asset category is fully realized (for example once
all inventory reflected on the Closing Balance Sheet
is either sold or written-off, any unapplied reserve
will be added to the [CONFIDENTIAL TREATMENT REQUESTED*]),
provided however that with respect to any excess
reserves for fixed assets, if any, the [CONFIDENTIAL
TREATMENT REQUESTED*] shall be increased by only
one-half of such amount.
* CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
3. Synernetics Representation regarding Options.
Synernetics represents that it has reviewed its books and records
regarding Options to be assumed by 3Com and represents that all
such Options were granted pursuant to Rule 701.
4. 3Com Agreement regarding Common Stock issued upon
Exercise of Options. 3Com agrees that, based in part upon the
representation in Section 3 above, the shares of Common Stock
issued upon exercise of Options after assumption thereof by 3Com
are subject to Rule 701 and the provisions thereof permitting the
sale of such shares without registration.
5. Synernetics Representation regarding Wallack Options
and Severance. Synernetics represents that it has reviewed its
books and records and reviewed with its Board of Directors the
circumstances surrounding the granting of incentive stock options
to Allan L. Wallack (the "Wallack Options") and the terms of the
Employment Agreement with Allan L. Wallack dated June 15, 1990
(the "Wallack Employment Agreement"). Synernetics represents
that (i) it was the intention of Synernetics and of its Board of
Directors that the Wallack Options contain a term, referenced in
the Wallack Employment Agreement, providing that the vesting of
the shares issuable to Allan L. Wallack would in the event of
certain mergers, etc, be accelerated by two years, (ii) the
Wallack Employment Agreement was not a modification of the
Wallack Options and (iii) the reference to one year of
acceleration in the Wallack Options rather than two was an
administrative oversight. Synernetics further represents that
the amount set forth in Section 1(b) of the Escrow Agreement as
the Severance amount payable to the persons specified in such
Section is the sole and exclusive severance amount of any kind
offered to or arranged for such persons by Synernetics. These
representations shall have the same effect as if set forth in the
Agreement, and the Agreement shall be deemed amended to include
such representations.
6. Closing Matters. Synernetics and 3Com have agreed that
all payments to Synernetics stockholders will be made directly by
3Com pursuant to a schedule provided by Synernetics. It shall be
an additional closing condition that no employee shall have
exercised any portion of an option which would be unvested
immediately following the Effective Time of the Merger. Further,
3Com acknowledges that the conditions described in Section
6.4(b), as amended above, to avoid withholding on exercise of
incentive stock options as to which exercise forms have been
delivered to 3Com (or its legal counsel) as of the Closing, and
that 3Com will not withhold with respect to any of such option
exercises.
7. No Other Amendments. Except as modified hereby the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
3COM CORPORATION SYNERNETICS, INC.
/s/ Eric Benhamou /s/ Allan Wallack
By: --------------------------- By: -------------------------
Eric Benhamou, President Allan Wallack, President
3SUB CORPORATION
/s/ Eric Benhamou
By: ---------------------------
Eric Benhamou, President
