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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20110
CROSSCOMM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-1513201
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
450 DONALD LYNCH BOULEVARD, MARLBOROUGH, MASSACHUSETTS 01752-4728
(Address of principal executive offices)
(508) 481-4060
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
------
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The aggregate market value of voting stock held by non-affiliates of the
registrant as of February 21, 1997 was approximately $65,392,000 (based upon the
average of the highest bid and lowest asked prices on such date as reported on
the Nasdaq National Market).
The number of outstanding shares of the Common Stock, $.01 par value per share,
on February 21, 1997 was 9,272,741.
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TABLE OF CONTENTS
Item Page
PART I
1. Business 3
2. Properties 7
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 7
PART II
5. Market For The Registrant's Common Stock And
Related Stockholder Matters 8
6. Selected Financial Data 8
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
8. Financial Statements and Supplementary Data 15
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 30
PART III
10. Directors and Executive Officers of the Registrant 31
11. Executive Compensation 32
12. Security Ownership of Certain Beneficial Owners and Management 36
13. Certain Relationships and Related Transactions 38
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 39
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PART I
ITEM 1. BUSINESS
GENERAL
CrossComm Corporation ("CrossComm" or the "Company") develops, manufactures,
markets and supports advanced networking products. These products concurrently
support bridging, multi-protocol routing and high speed local area network
("LAN") switching functions and asynchronous transfer mode ("ATM") switching.
The Company has marketed these products to customers transitioning
mission-critical business applications from legacy hierarchical computing
environments, typically dominated by IBM mainframe systems with Systems Network
Architecture ("SNA"), to client/server environments, where computing power is
distributed throughout the organization and interconnected by an enterprise-wide
network. CrossComm's product line, which consists of a family of multi-protocol
routers and high speed LAN and ATM switches, supports a variety of LAN and wide
area network ("WAN") connections and LAN communications protocols and can be
readily integrated with a customer's existing computer equipment. These products
are designed to provide non-stop scalable networks that are easy to use, install
and maintain and provide customers a migration path to high bandwidth ATM
networks. Because customers in the commercial computing environment have made
substantial investments in legacy networks, the Company believes that such
customers seek networking solutions that integrate easily into their existing
network environments and provide a seamless migration to high bandwidth switched
networks which can handle increasing voice, video and data traffic, while at the
same time delivering traditional benefits associated with networking, such as
greater computing power, better access to information and reduced costs. The
Company's product line enables it to offer its customers such a solution.
CrossComm markets its products in the United States and Canada through a direct
sales organization, complemented by value added resellers ("VARs") and system
integrators. The Company also sells its products internationally through a
network of international distributors and through a direct sales organization in
the United Kingdom. See "Marketing and Sales" below.
The Company was incorporated under the laws of the State of Delaware in April
1987. The Company's executive offices are located at 450 Donald Lynch Boulevard,
Marlborough, Massachusetts 01752. The Company's telephone number is (508)
481-4060.
On March 20, 1997, the Company entered into an Agreement and Plan of
Reorganization with Olicom A/S ("Olicom") whereby each outstanding share of the
Company will be exchanged for $5.00 in cash, .2667 shares of Olicom stock and a
three year warrant to acquire .1075 shares of Olicom common stock at an exercise
price of $19.74 for each full share of Olicom common stock. The business
combination is subject to certain conditions and approvals, including the
approval of both companies' shareholders.
CROSSCOMM PRODUCTS
The Company operates in one business segment known as enterprise networking. The
Company's products include a family of networking products that concurrently
support standard bridging, multi-protocol routing and high speed LAN and ATM
switching functions.
The Company's products include the XL80 backbone platform, the XL20 regional
product, and the XL10, XL5 and IBN branch office products. Each of these
products consists of a chassis which can be configured with one or more
networking modules (which perform bridging, multiprotocol routing or high speed
LAN and ATM switching) and is available with various software options and
protocol support. Collectively, these products form the ClearPath system.
ClearPath is a unified system of products designed to take hub and router based
networks to LAN and ATM switched environments. It is a highly modular,
standards-based system for building next generation enterprise networks. The
modular product suite includes ATM switching, LAN switching, routing and remote
office networking components. All of the hardware modules are managed by the
same software, CrossComm's Integrated Management System (IMS), which is
compatible with industry standard network management platforms such as HP
OpenView and can manage a complete line of network devices, locally and
remotely. ClearPath provides the ability to add new functionality to networks or
replace older technologies without sacrificing control and manageability.
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Modularity and scalability are the two structural elements of the ClearPath
system that allow for the transition from today's networks to LAN and ATM
switched architectures. This is accomplished through a family of hardware
platforms that accommodate the various CrossComm functional modules. These range
from small stand-alone units for remote routing or switching, to larger
multi-module platforms (with high speed backplane communications and redundant
power supplies) for multiple functions. The XL product line has been designed to
integrate routing, LAN switching and ATM technologies in a single platform.
Combinations of these technologies can be deployed in an individual network and
changed as networking needs evolve.
Two advanced multi-slot communication platforms, the XL80 and XL20, provide the
foundation for ClearPath's scalability and have the greatest range of options
for network interoperability and reliability. The XL80 is an intelligent chassis
that houses up to sixteen networking modules, and the XL20 can be populated with
up to four modules. The advantage to this scalable methodology is that it allows
for expansion of the number of ports or introduction of a new functionality as
network requirements grow or change. A third member of the ClearPath modular
family is the XL10. It is designed for workgroups or branch offices where the
need for technology integration is less critical. It can accommodate many of the
same modules as the XL80 and XL20.
Both the XL80 and XL20 contain an ATM CrossPoint Matrix (CPM) backplane. The CPM
is a full duplex, high speed interconnect scheme that builds an internal ATM
backbone network within the chassis. It supports simultaneous operation of
native ATM switching traffic, LAN to LAN routing, and switched virtual LAN
traffic. Having ATM on the backplane is an integral part of the ClearPath
design, as it allows for an eventual seamless transition to full ATM networks.
During 1996, the Company introduced several new products which are a part of the
growing family of ClearPath products. These include an ATM switch module, the
XLX, which supports between 8 and 16 ATM ports at OC3 speeds (155Mbps) and DS3
speeds (45 Mbps). Also introduced were the Ethernet Segment Switch and the
Ethernet Workgroup Switch which support a variety of 10Mbps and 100Mbps port
configurations.
A major software addition to the Company's product line during 1996 was the
CrossLAN Exchange which allows legacy Token Ring and Ethernet users to
communicate with directly attached ATM based servers. A full suite of LAN
Emulation software on the client and server side was introduced to achieve this.
MARKETING AND SALES
CrossComm utilizes a multi-channel distribution and sales network to market its
products. In the United States and Canada, the Company relies on a direct sales
organization complemented by VARs. From time to time, certain computer systems
companies purchase the Company's products for resale as part of an integrated
system offering to their end-users. The Company sells its products
internationally through distributors and through a direct sales organization in
the United Kingdom. The Company expects to expand its network of international
distributors.
Marketing Programs
The Company has established marketing programs designed to identify prospective
customers and educate them about the Company's products. These programs include
telemarketing, distribution of sales and product literature, trade shows,
seminars, and direct mail programs. The Company believes that its marketing
programs enhance its effectiveness in selling to organizations in the commercial
computing environment.
Domestic Sales
The Company serves the United States and Canadian markets primarily through a
direct sales organization complemented by a VAR channel. The Company believes
that such a complementary approach, assisted by a strong technical support
staff, is particularly well suited to addressing its customers' needs as well as
differentiating its products and solutions from those of its competitors. As of
February 21, 1997, the Company's domestic sales organization consisted of 34
individuals operating out of 15 sales locations in North America. As of February
21, 1997 the Company had also contracted with 50 VARs in cities across North
America to assist in the distribution of its products.
International Sales
The Company's international sales are conducted primarily through international
distributors located in Europe. As of February 21, 1997, the Company had 30 such
distributors. During 1996, 1995 and 1994, the Company's international sales were
approximately 37%, 25% and 18%, respectively, of total revenue. Sales to
international distributors are subject to government controls and other risks
associated with international sales, including difficulties in obtaining export
licenses, fluctuations in
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currency exchange rates, political instability, trade restrictions, changes in
duty rates and seasonality of purchases. To date, the Company has not
experienced any material difficulties related to such factors.
CUSTOMERS AND BACKLOG
As of December 31, 1996, the Company had shipped approximately 21,000 units of
its ILAN and XL products to more than 1,700 end-users. No single customer
accounted for more than 10% of total revenue during 1996, 1995 or 1994. Because
substantially all of the Company's products are shipped within 30 to 60 days of
receipt of the order, the Company does not believe that its backlog as of any
particular date is indicative of future sales levels.
CUSTOMER SUPPORT AND SERVICE
The Company services, repairs and provides technical support for its products.
The majority of the Company's service and support activities are related to
software and network configuration and are provided by telephone support and
remote telephone access from the Company's headquarters. Remote access is
accomplished through a telephone connection made directly from the Company's
office to the customer's network and enables the Company, in most instances, to
quickly diagnose network problems. With this remote diagnostic capability, the
Company's technicians can generally respond to problems without traveling to the
customer's location.
The Company typically offers customers a three month warranty on its products.
The Company also offers a number of maintenance and support contracts that
include on-site service and 24-hour telephone dial-in support. The Company
continues to invest in developing new network diagnostic tools, such as its IMS,
and in personnel and training in order to support its customers. The Company
supplements its customer service capabilities with third-party contractors, such
as General DataComm and IBM, that provide on-site service in over 300 cities
throughout North America.
RESEARCH AND DEVELOPMENT
The Company believes that its future success depends largely on its ability to
continue to enhance its existing products and to develop new products. The
Company maintains two product development organizations totaling 132 employees
as of February 21, 1997. One facility is located in the United States and the
other is located in Poland at the Company's wholly-owned subsidiary,
CrossComm-Poland Ltd. As of February 21, 1997, the Polish subsidiary employed
approximately 105 individuals, 90 of whom were engineers. These engineers are
engaged in the development of software for use in the Company's products. The
software developed in Poland is integrated with the Company's U.S.-developed
hardware and software and is maintained by the Company's U.S. employees. The
Company's policy is to employ English speaking software engineers in Poland to
permit easier communications with the Company's U.S.-based development
organization.
The Company believes that it achieves a significant cost advantage by developing
software in Poland. Of the Company's research and development expense for 1996,
approximately 35% was spent in Poland. While the Company believes that its
Polish subsidiary gives it a competitive cost advantage, it also presents
certain risks, including exposure to the political and economic environment in
Poland, the possibility of Polish-U.S. travel and technology transfer
restrictions and the difficulties arising from the large distances separating
its two research and development organizations. During 1996, 1995 and 1994, the
Company incurred expenses of $9,830,000, $13,359,000, and $12,285,000
respectively, on research and development activities.
MANUFACTURING
The Company's manufacturing operations primarily consist of final assembly, test
and quality control of subassemblies and systems. The Company presently uses
off-the-shelf subassemblies and third parties to manufacture circuit boards and
modules designed by the Company. The Company's management believes that this
approach permits the Company to more easily scale its production to match
demand, resulting in improved cost controls.
Although the Company generally uses standard parts and components for its
products, certain components are currently available only from single sources,
including microprocessors (Intel), various communications controller chips or
application-specific integrated circuits (Texas Instruments, LSI Logic, PMC
Sierra, and Advanced Micro Devices), and power supplies (Switching Power Supply,
Inc. and Total Power International, Inc.). Other components and subassemblies
are available only from limited sources. The Company has also contracted with
Lockheed Commercial Electronics to be the primary manufacturer of the networking
modules for the Company's XL networking platform. Although the Company believes
that these components, subassemblies and modules are sufficiently available from
alternate sources in a reasonable amount of time, the reduction or interruption
of supply, a significant price increase or engineering changes required by the
use of alternate components,
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subassemblies or modules could materially adversely affect the Company's
operating results. The Company expects that it will continue to be dependent on
single or limited source supplier relationships in the future.
COMPETITION
The market for networking systems and data communication products is highly
competitive and subject to rapid technological change. The Company's principal
competitors are Cisco Systems, Inc., Bay Networks, Inc., Fore Systems, Inc.,
Xylan Corporation, IBM and 3Com who are either offering competitive LAN and ATM
switching products or have announced their intentions to do so in the future.
The Company also competes with major system vendors, LAN hub vendors and
telecommunications companies, who are offering or could in the future offer
functionally competitive solutions. Many of the Company's current and potential
competitors have greater financial, research and development and marketing
resources than those of the Company and are better established than the Company.
The Company believes that the principal competitive factor in the market for
enterprise-wide network systems and solutions for customers with
mission-critical business applications is the ability to consolidate SNA, LAN
and WAN traffic without sacrificing network reliability and response time. In
addition, network availability, reliability, network performance, ease-of-use,
flexibility, scalability and service are key decision criteria. While the
Company believes it currently competes favorably with respect to these factors,
there can be no assurance that it will be able to compete successfully in the
future.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
The Company does not currently hold any patents and relies upon copyright,
trademark and trade secrets to establish and maintain its proprietary rights to
its products. Because the networking industry is characterized by rapid
technological change, the Company believes its success is more dependent upon
the experience of its employees and the frequency of product introduction than
on any legal protection afforded by patents.
In July 1994, the Company entered into a technology licensing and product
development agreement with MultiMedia Communications, Inc. ("MMC"). Terms of
this agreement provide for the licensing of existing MMC asynchronous transfer
mode ("ATM") technology to CrossComm. This licensed ATM technology has been used
in the design and development of an ATM switch subsystem by MMC for CrossComm.
The ATM switch subsystem has been incorporated into an ATM switch module that
was introduced by CrossComm in early 1996. The ATM switch module has been
designed to enable ATM switching functionality in accordance with adopted ATM
Forum standards, and has been incorporated into the Company's existing XL family
of products, thereby providing customers a path to evolving ATM switching
technology.
In July 1994, the Company also entered into a technology licensing and
manufacturing agreement with Applied Network Technology, Inc. ("ANT"). Terms of
this agreement provide for the licensing of existing ANT Ethernet switching
technology to CrossComm. This licensed technology has been used in the design
and development of certain Ethernet switch modules by ANT for CrossComm. These
modules have been incorporated into the Company's existing XL family of
products, thereby also providing customers a path to ethernet switching
technology.
EMPLOYEES
As of February 21, 1997, the Company employed 309 persons, including 105
employees of the Polish subsidiary. Of such employees, 132 employees were
primarily engaged in research and development, 81 in manufacturing and customer
support, 70 in sales and marketing and 26 in general management and finance.
Given employee turnover rates and the time necessary to fill vacated positions,
the Company does not believe that its head count figures as of any one
particular date are necessarily indicative of average personnel levels. The
Company has no collective bargaining agreement with its employees. The Company
has never experienced a work stoppage and believes that its employee relations
are good.
The Company maintains stock option plans under which key employees have been
granted options to purchase shares of the Company's common stock. The option
price per share under the plans is equal to the fair market value of the
Company's common stock on the date of option grant. In November 1996, options to
purchase 1,063,625 shares of the Company's common stock having option exercise
prices ranging from $5.88 to $12.94 per share, were repriced to $5.00 per share
by the Company's Board of Directors. Similarly, in April 1994, options to
purchase 729,068 shares of the Company's common stock, having option exercise
prices ranging from $12.75 to $31.25 per share, were repriced to $12.50 per
share by the Company's Board of Directors. These repricings were implemented in
order to retain key employees in light of recruiting practices in the highly
competitive networking industry. All other terms of these options, including the
vesting period and the number of shares associated with each option, remained
the same. No directors were subject to this option repricing.
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Competition for technical personnel in the Company's industry is intense. During
the course of 1996, the Company experienced increased competition in the hiring
and retention of its employees. The Company believes that its future success
will depend on its ability to attract and retain qualified personnel.
ITEM 2. PROPERTIES
The Company's principal administrative, manufacturing, research and development,
sales and marketing and support organizations are located in a central facility
in Marlborough, Massachusetts. This facility consists of approximately 60,000
square feet and is under a lease that will expire in December 1997. The
Company's subsidiary, CrossComm-Poland Ltd., rents approximately 20,000 square
feet between two locations in Gdansk, Poland; one location under a renewable
short-term agreement and the other under a lease that will expire in December
1997. The Company also leases and occupies sales and technical support offices
in 14 additional locations throughout North America and 3 locations in Europe.
The Company believes that its existing facilities are adequate for its current
needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings and claims arising in the
ordinary course of business. Management believes that the disposition of these
matters, as well as the matters noted below, would not have a material adverse
effect on the consolidated financial position or results of operations of the
Company.
Mr. William R. Johnson, the former President and Chief Executive Officer of the
Company, has brought an action against the Company for allegedly unpaid
severance amounts. Mr. Johnson was the CEO and President of the Company from
approximately March 1996 until the beginning of October 1996. In conjunction
with his assumption of these positions, Mr. Johnson executed an employment
agreement on or about March 4, 1996. Mr. Johnson's employment was terminated in
October, 1996. The Company believes that, among other things, Mr. Johnson
breached certain provisions of his employment agreement and, accordingly, has
declined to pay severance and other amounts claimed by Mr. Johnson. This matter
is currently in the discovery stage.
On or about September 13, 1996, Datapoint Corporation ("Datapoint") commenced
litigation in the United States District Court for the Eastern District of New
York against CrossComm, Cisco Systems, Inc. Plaintree Systems Corporation,
Accton Technology Corporation, Cabletron Systems, Inc., Bay Networks, Inc. and
Asante Technologies, Inc. individually, and as representatives of a putative
class of all manufacturers, vendors and users of Fast Ethernet dual protocol
local-area network products. In its complaint, Datapoint alleges that the
defendants have been, and still are, directly infringing U.S. Patent No.
5,077,732 by making, using, selling and/or offering for sale products embodying
inventions claimed in that patent.
Similarly, Datapoint alleges that the defendants are also infringing U.S. Patent
No. 5,008,879 by using or selling products encompassed within that patent's
claims. Because it asserts that the manufacturers, vendors and users of the
implicated technology are so numerous as to make joinder of each and every one
impracticable, Datapoint seeks certification of a defendant class of such
entities for purposes of this litigation.
On or about December 30, 1996, the Company filed its Answer and Counterclaims to
Datapoint's complaint by denying the essential allegations; asserting defenses
that the cited patents are invalid and void; and seeking declaratory judgment of
patent non-infringement and invalidity under applicable sections of the United
States Code. Datapoint has not yet taken any action to seek a court order
certifying the class, and no party has initiated any discovery activities. As a
result, the outcome remains uncertain.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
last quarter of the period covered by this Form 10-K.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the Nasdaq National Market under the
symbol "XCOM". As of February 21, 1997, shareholders of the Company's common
stock totaled approximately 5,600 based on the number of record holders as well
as an estimate of the number of shareholders with shares registered in street
name. To date, the Company has not paid any dividends and it currently does not
expect to pay any dividends in the future. During the fourth quarter of 1996,
the Company did not sell any securities which were not registered under the
Securities Act of 1933, as amended. The following table displays, for the
periods indicated, the high ask and low bid prices per share of the Company's
common stock as reported on the Nasdaq National Market. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
1996 1995
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High Low High Low
------------------- -------------------
<S> <C> <C> <C> <C>
First quarter $11.88 $8.75 $14.50 $9.75
Second quarter $12.75 $9.88 $12.88 $9.00
Third quarter $10.88 $7.00 $14.50 $9.00
Fourth quarter $ 7.38 $4.75 $14.25 $9.50
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
Five-Year Comparison of Selected Financial Data
(In Thousands, Except Per Share Amounts)
<CAPTION>
Year Ended December 31,
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1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $44,874 $ 44,258 $ 50,319 $49,790 $29,325
Income (loss) from operations (9,233) (18,798) (14,189) 7,481 3,465
Net income (loss) (5,280) (13,803) (12,207) 6,095 1,902
Earnings (loss) per share $ (.58) $ (1.52) $ (1.37) $ .70 $ .30
BALANCE SHEET DATA:
Working capital $46,695 $ 47,624 $ 55,978 $71,749 $29,340
Total assets 66,859 71,346 79,298 89,746 37,625
Stockholders' equity $54,362 $ 57,363 $ 67,058 $79,798 $33,220
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
The table below shows certain operating data as a percentage of total revenues
and the percentage changes in such operating data for the periods presented. The
Company believes that period to period comparisons of its financial results are
not necessarily meaningful and should not be relied upon as an indicator of
future performance.
<CAPTION>
Percentage
Increase (Decrease)
Year Ended December 31, Year to Year
----------------------- --------------------
1995 1994
1996 1995 1994 to 1996 to 1995
<S> <C> <C> <C> <C> <C>
Revenues:
Product 76.0% 78.4% 88.0% (1.8)% (21.6)%
Service 24.0 21.6 12.0 12.9 57.8
-------------------------
Total revenues 100.0 100.0 100.0 1.4 (12.0)
Cost of revenues:
Cost of goods sold 40.8 40.6 46.0 2.0 (22.4)
Cost of services 12.9 16.9 7.9 (22.7) 88.3
-------------------------
Total cost of revenues 53.7 57.5 53.9 (5.3) (6.2)
-------------------------
Gross profit 46.3 42.5 46.1 10.4 (18.9)
Operating expenses:
Selling, general and administrative 43.2 52.4 46.0 (16.3) 0.1
Research and development 21.9 30.2 24.4 (26.4) 8.7
Non-recurring charges 1.7 2.4 3.9 * *
-------------------------
Total operating expenses 66.8 85.0 74.3 (20.2) 0.6
-------------------------
Income (loss) from operations (20.5) (42.5) (28.2) 50.9 (32.5)
Interest income, net 4.6 5.3 3.9 * *
Gain on sale of investments, net 4.6 6.3 -- * *
Other income (expense) (0.5) (0.3) 0.1 * *
-------------------------
Income (loss) before provision for
income taxes (11.8) (31.2) (24.2) 61.7 (13.5)
Provision for income taxes -- -- 0.1 * *
-------------------------
Net income (loss) (11.8)% (31.2)% (24.3)% 61.7% (13.1)%
=========================
* Not meaningful
</TABLE>
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Revenues
The Company's product revenues decreased from $44,265,000 in 1994 to $34,704,000
in 1995 to $34,083,000 in 1996. The decreases in 1995 and 1996 are primarily
attributable to the market transition from routing to switching technologies.
Declines in sales of the Company's router products and the later than
anticipated release of the Company's new switching products resulted in the 1995
and 1996 declines in product revenues. Both router volume and average selling
prices of router products have declined in 1996.
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The Company believes that levels of future product revenues will be highly
dependent on its ability to successfully complete and market ATM products, its
ability to expand and capitalize on new indirect and international sales
channels, its ability to bring other new products to market on a timely basis,
and upon stability within the Company's direct sales force.
Service revenues (i.e. maintenance and support contracts, billable product
repairs, customer training and product installations) increased from $6,054,000
in 1994 to $9,554,000 in 1995 to $10,791,000 in 1996. This growth of 58% in 1995
and 13% in 1996 is primarily attributable to increases in the number of
installed units, expansion of the Company's customer base, and the Company's
increased emphasis on the sale and marketing of services.
International revenues of approximately $9,209,000, $11,029,000 and $16,481,000
accounted for 18.3%, 24.9% and 36.7% of total revenues for the years ended
December 31, 1994, 1995 and 1996, respectively. The 1995 increase was primarily
attributable to revenue growth at the Company's subsidiary in the United Kingdom
("UK"), reflecting the successes of the reorganization begun in 1994 and
completed in 1995. The 1996 increase was due primarily to (i) increased revenue
related to the Company's European distributors, as these distributors are now
managed by the UK subsidiary, (ii) increased revenues from the UK subsidiary's
direct sales channel, and (iii) increased revenues from the Company's indirect
sales channel in Canada. The Company believes that international sales will
continue to represent a significant portion of the Company's revenues. However,
the percentage of total revenues derived from international sales may continue
to fluctuate based on changes in the levels of domestic revenues versus
international revenues, the timing of orders from international distributors,
end users and the Canadian indirect channel partner, and the addition of new
international distributors.
Gross Profit
Gross profit as a percentage of total revenues decreased from 46.1% in 1994 to
42.5% in 1995 and then increased to 46.3% in 1996. The decrease in gross profit
from 1994 to 1995 was primarily attributable to costs associated with the
product line transitions which were taking place in 1995.
The Company recorded approximately $3,200,000 of charges in the fourth quarter
of 1994 to address inventory valuation issues caused by the finalization of the
Company's router product line and changes in the Company's future product
direction toward high speed networking technologies. Approximately $2,000,000 of
these charges were attributable to (i) end of life excess supply issues
associated with certain of the Company's XL router modules which were supplanted
in 1995 with a new high-performance networking module and (ii) additional end of
life valuation provisions associated with the Company's predecessor ILAN
Universal Router product, which was no longer actively marketed and had been
replaced by the Company's XL branch office products in the fourth quarter of
1994. In addition, the Company recorded approximately $750,000 of charges
primarily related to customer hardware upgrades to enable a migration to high
speed switched networks. Finally, the Company incurred approximately $450,000 of
costs related to the provision of additional memory capacity on it's XL product
line, in order to support new product features which were then being introduced.
In the fourth quarter of 1995, the Company recorded approximately $2,976,000 of
charges to address asset valuation issues necessitated by the Company's entrance
into the ATM and LAN switching market and the related decision to de-emphasize
certain other older technologies and products. Approximately $2,538,000 of these
charges are attributable to end of life excess supply issues associated with
certain of the Company's router products, which have been de-emphasized given
the transition to ATM and LAN switching technologies. Additionally, the Company
incurred approximately $438,000 of costs primarily related to the write-off of
certain capitalized license technologies associated with these router products.
Other factors contributing to the decline in gross profit as a percentage of
revenues in 1995 include lower than expected levels of product revenues not
covering increased fixed manufacturing costs, significant increases in service
revenues as a percentage of total revenues as the Company realized lower margins
on service revenues, and costs associated with the introduction of new products.
The 1996 increase in gross profit as a percentage of total revenues was
primarily due to (i) the lack of significant inventory valuation charges that
the Company recognized in both 1995 and 1994, (ii) a reduction in manufacturing
costs, and (iii) increased gross profit margins on service revenues as the
Company was able to support the additional service revenue with the customer
support infrastructure it already had in place with minimal increases in
variable costs. These increases in gross profit as a percentage of total
revenues were offset partially by decreases in router product margins primarily
attributable to the decline in router product selling prices.
The Company believes that future gross profit levels as a percentage of total
revenues will be highly dependent on the continued transition from router
products to new switching technologies. Delays in the introduction of new XL
features and new ATM
- -10-
<PAGE> 11
features, engineering change orders related to existing products, the Company's
inability to generate sufficient volume to enable product unit cost decreases,
pricing pressures associated with switching products, or higher than expected
introductory costs of new ATM switching modules could negatively impact gross
profit levels. Additionally, to the extent the Company is successful at
increasing sales through indirect channels, gross profit as a percentage of
revenue could be adversely affected because of lower gross margins on such
sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $23,155,000, or
46.0% of total revenues in 1994 to $23,189,000, or 52.4% of revenues in 1995 and
then decreased to $19,402,000, or 43.2% of revenues in 1996.
Selling, general and administrative expenses in 1995 were essentially level with
1994, reflecting (i) a decline in payroll and related costs as a result of a
smaller direct sales force resulting from the timing of terminations and new
hires, (ii) a decline in commissions as a result of the decline in revenues and
(iii) lower costs associated with international operations as a result of the
late 1994 international reorganization. These declines were offset by
significantly increased marketing costs associated with market awareness
programs and incremental personnel costs, and approximately $1,553,000 of fourth
quarter charges, consisting primarily of (i) the write-down of certain
demonstration equipment used by the Company's sales organization, as it relates
to the router products discussed above, (ii) the settlement of a long-term
contract receivable and (iii) costs related to the Company's search for a new
Chief Executive Officer.
The decrease in selling, general and administrative expenses in 1996 was
attributable to (i) no charges similar to the $1,553,000 fourth quarter charges
recognized in 1995, (ii) a decrease in marketing costs associated with market
awareness programs, (iii) a decline in the amount of demonstration equipment
used by the sales organization and (iv) a decline in payroll and related costs
due to the 1995 fourth quarter restructuring and due to turnover in the
Company's sales force. These decreases were offset partially by higher
commission costs paid to the Company's sales force because 1996 incentive
compensation plans were based on quotas lower than those used for 1995, higher
costs of the Company's new senior management team (see Note 10 of Notes to
Consolidated Financial Statements for a further discussion of non-recurring
costs related to the termination of senior management personnel in the fourth
quarter of 1996) and costs incurred related to the purchase of the minority
interest in a consolidated subsidiary.
Selling, general and administrative expenses as a percentage of revenues may
fluctuate on a quarterly basis due to quarterly fluctuations in revenues, the
timing of spending for marketing programs and the timing of hiring sales,
marketing and administrative personnel.
Research and Development Expenses
Research and development expenses increased from $12,285,000, or 24.4% of total
revenues in 1994 to $13,359,000, or 30.2% of revenues in 1995 and then decreased
to $9,830,000, or 21.9% of revenues in 1996.
In the fourth quarter of 1994, the Company incurred approximately $2,000,000 of
incremental research and development charges consisting of (i) approximately
$1,000,000 of third-party research and development costs related primarily to
ATM and LAN switching technologies, (ii) approximately $600,000 related to the
write-off of previously capitalized licensed technology, which was not utilized
given the emergence of high speed ATM and LAN switching technologies in the
Company's new product plans and (iii) approximately $400,000 primarily related
to a change in estimate of the useful lives of certain equipment used by the
Company's research and development organization.
The increase in research and development expenses from 1994 to 1995 was
primarily due to the continued development of next generation high speed
networking modules involving ATM and LAN switching technologies required for the
XL product line, as well as the continued development of enhancements to the
Company's existing products. In the fourth quarter of 1995, the Company incurred
approximately $1,092,000 of incremental research and development charges
consisting primarily of (i) the write-off of certain capitalized license
technologies associated with de-emphasized router products and (ii) a change in
estimate of the useful lives of certain equipment used by the Company's research
and development organization, as necessitated by a corporate restructuring
undertaken in the fourth quarter of 1995. No significant third-party research
and development costs were incurred in 1995. Increased personnel and
experimental component costs required to perform in-house development throughout
1995 more than offset the decline in third-party costs from 1994.
The decrease in research and development expenses from 1995 to 1996 was
primarily due to (i) the lack of charges similar to the $1,092,000 fourth
quarter charges recognized in 1995, (ii) a decline in payroll costs related to
the corporate restructuring undertaken in the fourth quarter of 1995 together
with a further reduction in headcount costs as a result of employee turnover
-11-
<PAGE> 12
during 1996, and (iii) a decline in development costs associated with high speed
networking products involving ATM and LAN switching technologies due to the
Company's introduction of these products in 1996.
The Company believes that the markets for its products are characterized by
rapid rates of technological innovation for both hardware and software products.
The Company expects to continue to invest a significant amount of its resources
in new products, product enhancements and software development. If the Company
continues to experience an increase in the turnover of engineers and has
difficulty recruiting qualified replacements, its ability to compete in such a
fast moving technological market could be impeded and could have a negative
impact on revenue.
Non-Recurring Charges
In the fourth quarter of 1994, the Company incurred approximately $1,963,000 of
restructuring charges related to the reorganization of its international
operations. Approximately $1,641,000 of these charges consisted primarily of the
write-off of unamortized intangible assets related to the Company's operations
in the United Kingdom. The remaining restructuring charges of approximately
$322,000 consisted of severance, lease termination, and legal costs associated
with the reorganization of the Company's sales and service functions outside of
the United Kingdom. See Note 10 of Notes to Consolidated Financial Statements
for further discussion of the 1994 restructuring charges.
In the fourth quarter of 1995, the Company recorded approximately $1,074,000 of
charges related to a corporate restructuring of all functions, designed to
enable the Company to better address the ATM and LAN switching market
opportunity and to more appropriately align the Company's expense levels with
its revenues. Severance, benefits, and related costs associated with terminated
employees accounted for approximately $789,000 of the total charge. The
remaining $285,000 consisted of lease termination costs and professional fees
associated with the restructuring.
In the fourth quarter of 1996, the Company recorded approximately $874,000 of
non-recurring severance, benefits and related costs associated with the
termination of certain senior management personnel. These charges also included
the termination of certain research and development employees due to the
Company's decision not to fund previously planned development projects that it
considered outside the realm of the Company's current strategy.
Interest Income, Net
Interest income, net, generated from the investment of the proceeds from the
Company's initial public offering in June 1992 and the Company's secondary
offering in April 1993 was $1,987,000 in 1994, $2,349,000 in 1995 and $2,044,000
in 1996. The Company's use of cash to finance operations and capital
expenditures, and changes in the external interest rate environment for
short-term fixed income securities were the primary reasons for the fluctuations
over the periods.
Gain on Sale of Investments
In May 1995, the Company sold its minority equity interest in Applied Network
Technology, Inc. (ANT) to Fore Systems Inc. (Fore), in connection with Fore's
acquisition of ANT. In exchange for its ownership interest in ANT, the Company
received shares of Fore common stock, and recorded a gain on this transaction of
$2,100,000 during the second quarter of 1995. In July 1995, a portion of the
Fore shares were sold by the Company, whereby the Company realized an additional
gain of approximately $725,000. See Note 11 of Notes to Consolidated Financial
Statements for a further discussion of these transactions.
In September 1996, the Company realized an additional gain of $2,062,000 by
selling a second installment of the Fore Shares.
Income Taxes
Pursuant to Financial Accounting Standards No. 109, "Accounting for Income
Taxes", the Company has not recorded a benefit related to the operating losses
experienced in 1994, 1995 and 1996. As a result, in the event of future taxable
income, the Company's effective income tax rate in future periods could be
lower, as such income could be offset by the loss carryforwards. See Note 6 of
Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has satisfied its cash requirements principally with the
proceeds of equity financings. During 1996, the Company used $5,914,000 in cash
from operating activities compared to the use of $6,692,000 in the prior year.
The decline in cash used from operating activities is primarily attributable to
the decreased operating loss for 1996 as compared to 1995, and the timing of
changes in working capital in 1996 compared to 1995. At December 31, 1996, the
Company had $6,461,000 in cash and cash equivalents and $37,279,000 in
available-for-sale securities. The Company also has a credit line available for
- -12-
<PAGE> 13
international borrowings in the amount of $320,000. This line makes available
short term credit in the form of guarantees. Grant of credit and its continued
availability is at the sole discretion of the bank. At December 31, 1996, this
line was fully utilized.
The Company believes that existing cash and available-for-sale securities will
be sufficient to meet the Company's operating cash requirements for the
foreseeable future.
MERGER WITH OLICOM A/S
On March 20, 1997, the Company entered into an Agreement and Plan of
Reorganization with Olicom A/S ("Olicom") whereby each outstanding share of the
Company will be exchanged for $5.00 in cash, .2667 shares of Olicom common stock
and a three year warrant to acquire .1075 shares of Olicom common stock at an
exercise price of $19.74 for each full share of Olicom common stock. The
business combination is subject to certain conditions and approvals, including
the approval of both companies' shareholders.
Olicom develops and markets a broad range of Token-Ring, Fast Ethernet and ATM
local area network products. Olicom products are distributed worldwide by a
network of strategic partners and resellers. Founded in 1985, Olicom's corporate
headquarters is located in Copenhagen, Denmark and their stock is traded on the
Nasdaq National Market under the symbol OLCMF.
Achieving the anticipated benefits of the merger will depend on, among other
things, the integration of the companies' respective product offerings,
coordination of sales and marketing organizations, and research and development
efforts. There can be no assurances that integration will be accomplished
smoothly and successfully. The integration of certain operations following the
merger will require the dedication of management resources which may temporarily
distract the attention from the day-to-day business of the respective companies.
The inability of management to successfully integrate the operations of the two
companies could have an adverse effect on the business and results of operations
of the combined companies. In addition, there can be no assurance that present
and potential customers of the Company and Olicom will continue their current
buying patterns and any significant delay or reduction in orders could have an
adverse effect on the results of operations.
In the event the merger is not consummated, the Company's stock price may
decline and its results of operations could be materially and adversely
affected. In addition, the Company's relationships with its customers and
position in the industry could be materially and adversely affected. Further,
such failure could have a negative impact on the Company's ability to attract
and retain key personnel.
FACTORS THAT MAY AFFECT OPERATING RESULTS
The statements contained in this Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward-looking statements
include, among others: statements regarding future product revenue levels;
statements regarding future international sales; statements regarding future
gross profit levels; statements regarding the level of future selling, general
and administrative and research and development expenses; statements regarding
the sufficiency of the Company's existing cash and available-for-sale securities
to meet future operating cash requirements; and statements regarding the
Company's proposed merger with Olicom. All forward-looking statements included
in this document are based on information available to the Company on the date
hereof, and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. Some of the
factors that could cause actual results to differ materially are set forth
below.
The Company's future operating results could be adversely affected by a number
of factors, including, among other things, market conditions specific to the
highly competitive networking industry market, the degree and rate of growth of
the market in which the Company operates, the ability of the Company to develop,
market and forecast demand of new and existing products, customer acceptance of
new products introduced by the Company, dependence on suppliers, the Company's
ability to successfully increase distribution and the Company's ability to
attract and retain key personnel.
The networking products industry is highly competitive and subject to rapid
technological change. Significant competitive factors in the networking products
market include product features, performance, price, the timing of product
introductions, the emergence of new standards, quality and customer support. The
industry is dominated by much larger competitors that have substantially greater
technical, financial and marketing resources and greater name recognition than
the Company. The Company lacks the critical mass and product line breadth and
depth of these much larger competitors. Accordingly, the Company has had a
-13-
<PAGE> 14
difficult time getting opportunities to bid its products and services to
potential customers and to give these potential customers the confidence that
the Company has a sustainable business and has the ability to deliver its
products and services. The Company also competes against other companies that
focus on specific technologies within the networking products industry. The
Company's continued net losses during the past three years has made it very
difficult for the Company to retain customers and to attract new customers.
There can be no assurance that the Company will be able to compete successfully
in the future or that competitive pressures will not adversely affect the
Company's financial condition and results of operations.
The Company's continued net losses and the highly competitive networking
industry have also resulted in a high rate of employee turnover at the Company,
especially in the research and development and direct sales groups. The Company
expects to continue to have such a high rate of employee turnover for the near
future. In the highly competitive networking products industry, the Company has
also found it difficult to recruit qualified replacements. The Company believes
that its future success is contingent on its ability to attract and retain key
employees. If the Company continues to incur a high rate of employee turnover
and fails to recruit qualified replacements, its research and development
efforts, as well as sales and marketing, could be materially and adversely
affected, thereby resulting in a material adverse effect on the Company's
results of operations and financial position.
As customers require increased performance with nonstop availability, total
network connectivity and a migration path to high bandwidth switched networks,
the Company believes that future profitability is highly dependent on
successfully completing and marketing its new high speed ATM switching modules.
The success of these new modules will depend on the Company's ability to bring
them to market on a timely basis, successful product performance, market
acceptance of the modules and the Company's ability to produce the modules in
quantities sufficient to meet the expected demand.
The Company has decided not to proceed with further development of its recently
completed Ethernet switching products due to pricing pressures from competitors
and the Company's inability to manufacture these products at lower costs and
realize acceptable gross profit levels. Although the Company plans to support
all Ethernet switching products that have been sold, the decision to eliminate
further development could have a negative impact on the Company's ability to
sell its existing Ethernet switching products.
The Company is increasingly dependent on suppliers to deliver key components on
time, in quantities sufficient to meet demand. The failure of any of these
suppliers to deliver these components in sufficient quantities or on time could
have a material adverse effect on the Company's results of operations.
The Company's backlog at the beginning of each quarter is not necessarily
indicative of actual sales for any succeeding period. The Company's sales often
reflect orders shipped in the same quarter that they are received. Combining
this fact with the continuous introduction of new products, the lack of
historical sales trends for those new products and long purchasing lead times
for inventory components, there can be no assurance that the Company will have
the proper mix of inventory to fulfill all of the orders. If inventory is
purchased in anticipation of expected orders and the expected orders are not
received or are delayed, then this could have a material adverse effect on the
Company's financial position and results of operations.
The Company expects to continue to make significant investments in research and
development, sales and marketing and technical support staff. If the Company is
not able to increase revenue levels, results of operations could be materially
adversely affected.
- -14-
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
CROSSCOMM CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
--------------------------------
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,461,027 $ 2,244,382
Available-for-sale securities 37,279,483 44,528,825
Accounts receivable - trade, net of allowances of $997,000
at December 31, 1996 and $803,000 at December 31, 1995 8,276,496 7,141,395
Inventories, net 5,473,065 6,394,525
Prepaid expenses and other current assets 1,701,755 1,253,527
--------------------------------
Total current assets 59,191,826 61,562,654
Equipment and leasehold improvements, net of
accumulated depreciation of $14,448,916 at December 31,
1996 and $12,295,413 at December 31, 1995 5,463,578 7,079,290
Other assets, net 2,203,520 2,703,974
--------------------------------
Total assets $ 66,858,924 $ 71,345,918
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,536,566 $ 4,727,819
Accrued payroll and commissions 843,412 686,932
Accrued liabilities 3,615,317 3,795,658
Warranty reserves 1,162,334 1,380,000
Deferred revenue 3,338,954 3,348,157
--------------------------------
Total current liabilities 12,496,583 13,938,566
Commitments and contingent liabilities (Note 8)
Minority interest in consolidated subsidiary -- 44,485
Stockholders' equity:
Preferred stock, $.01 par value, 4,000,000 shares authorized, none issued
or outstanding at December 31, 1996 or December 31, 1995 -- --
Common stock, $.01 par value, 20,000,000 shares authorized, 9,236,132
shares issued and outstanding at December 31, 1996 and 9,147,557
shares issued and outstanding at December 31, 1995 92,361 91,476
Paid-in capital in excess of par value 72,533,642 71,949,833
Retained earnings (accumulated deficit) (21,449,166) (16,169,429)
Unrealized gain (loss) on available-for-sale securities 3,185,504 1,490,987
--------------------------------
Total stockholders' equity 54,362,341 57,362,867
--------------------------------
Total liabilities and stockholders' equity $ 66,858,924 $ 71,345,918
================================
</TABLE>
See accompanying notes.
-15-
<PAGE> 16
<TABLE>
CROSSCOMM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year ended December 31,
-------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Product $34,082,608 $ 34,704,046 $ 44,264,746
Service 10,791,311 9,554,380 6,054,002
-------------------------------------------------
Total revenues 44,873,919 44,258,426 50,318,748
Cost of revenues:
Cost of goods sold 18,317,385 17,954,065 23,130,911
Cost of services 5,780,425 7,480,637 3,973,351
-------------------------------------------------
Total cost of revenues 24,097,810 25,434,702 27,104,262
-------------------------------------------------
Gross profit 20,776,109 18,823,724 23,214,486
Operating expenses:
Selling, general & administrative 19,401,907 23,188,994 23,155,431
Research and development 9,829,719 13,358,542 12,285,426
Non-recurring charges 777,258 1,074,075 1,962,705
-------------------------------------------------
Total operating expenses 30,008,884 37,621,611 37,403,562
-------------------------------------------------
Income (loss) from operations (9,232,775) (18,797,887) (14,189,076)
Interest income, net 2,043,521 2,348,901 1,987,288
Gain on sale of investments 2,086,743 2,803,193 --
Other income (expense) (177,226) (157,318) 43,020
-------------------------------------------------
Income (loss) before provision
for income taxes (5,279,737) (13,803,111) (12,158,768)
Provision for income taxes -- -- 47,934
-------------------------------------------------
Net income (loss) $(5,279,737) $(13,803,111) $(12,206,702)
=================================================
Earnings (loss) per share $ (0.58) $ (1.52) $ (1.37)
=================================================
Shares used in computing earnings
(loss) per share 9,178,500 9,058,700 8,902,000
=================================================
</TABLE>
See accompanying notes.
- -16-
<PAGE> 17
<TABLE>
CROSSCOMM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Unrealized
Paid-in Retained Gain (Loss)
Common Stock Capital in Earnings on Available- Total
---------------------- Excess of (Accumulated for-Sale Stockholders'
Shares Amount Par Value Deficit) Securities Equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 8,835,099 $88,351 $69,869,201 $ 9,840,384 $ -- $ 79,797,936
Adjustment to beginning balance
for change in method of accounting
for investment securities -- -- -- -- 24,000 24,000
Adjustment to unrealized gain (loss)
on available-for-sale securities -- -- -- -- (1,195,000) (1,195,000)
Issuance of common stock under
stock option and stock purchase
plans 146,365 1,464 636,660 -- -- 638,124
Net income (loss) -- -- -- (12,206,702) -- (12,206,702)
--------------------------------------------------------------------------------------
Balance, December 31, 1994 8,981,464 89,815 70,505,861 (2,366,318) (1,171,000) 67,058,358
--------------------------------------------------------------------------------------
Issuance of common stock under
stock option and stock purchase
plans 166,093 1,661 1,443,972 -- -- 1,445,633
Adjustment to unrealized gain (loss)
on available-for-sale securities -- -- -- -- 2,661,987 2,661,987
Net income (loss) -- -- -- (13,803,111) -- (13,803,111)
--------------------------------------------------------------------------------------
Balance, December 31, 1995 9,147,557 91,476 71,949,833 (16,169,429) 1,490,987 57,362,867
--------------------------------------------------------------------------------------
Issuance of common stock under
stock option and stock purchase
plans 88,575 885 583,809 -- -- 584,694
Adjustment to unrealized gain (loss)
on available-for-sale securities -- -- -- -- 1,694,517 1,694,517
Net income (loss) -- -- -- (5,279,737) -- (5,279,737)
--------------------------------------------------------------------------------------
Balance, December 31, 1996 9,236,132 $92,361 $72,533,642 $(21,449,166) $ 3,185,504 $ 54,362,341
======================================================================================
</TABLE>
See accompanying notes.
-17-
<PAGE> 18
<TABLE>
CROSSCOMM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year ended December 31,
--------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (5,279,737) $(13,803,111) $(12,206,702)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation expense 2,239,391 5,406,007 4,335,318
Amortization expense 849,820 1,128,165 950,176
Non-recurring charges and other write-offs -- 367,600 2,136,044
Provision for accounts receivable allowances 370,203 838,186 376,754
Provision for inventory reserves (366,617) 2,244,345 3,568,426
Deferred income taxes -- -- 19,000
Gain on sale of investments (2,086,743) (2,803,193) --
Other 274,805 274,846 341,420
Changes in operating assets and liabilities:
Accounts receivable (1,227,349) 2,343,928 840,085
Inventories 1,202,189 (4,527,621) (2,639,692)
Prepaid expenses and other current assets (448,228) 93,872 283,835
Accounts payable (1,191,253) (872,769) 961,187
Accrued liabilities, payroll and commissions (241,527) 1,499,289 2,038,560
Deferred revenue (9,203) 1,118,689 541,070
--------------------------------------------------
Total adjustments (634,512) 7,111,344 13,752,183
--------------------------------------------------
Net cash provided (used) by operating activities (5,914,249) (6,691,767) 1,545,481
INVESTING ACTIVITIES
Purchases of available-for-sale securities (46,495,324) (74,579,071) (30,566,542)
Sales and maturities of available-for-sale securities 57,526,027 78,679,886 37,901,567
Acquisition of fixed assets (537,791) (4,199,726) (6,259,246)
Additions to other assets (946,712) (1,137,231) (2,456,617)
--------------------------------------------------
Net cash provided (used) by investing activities 9,546,200 (1,236,142) (1,380,838)
FINANCING ACTIVITIES
Payments of capital lease obligations -- (4,010) (16,327)
Proceeds from employee stock plans 584,694 1,445,633 638,124
--------------------------------------------------
Net cash provided (used) by financing activities 584,694 1,441,623 621,797
--------------------------------------------------
Net increase (decrease) in cash and cash equivalents 4,216,645 (6,486,286) 786,440
Cash and cash equivalents at beginning of period 2,244,382 8,730,668 7,944,228
--------------------------------------------------
Cash and cash equivalents at end of period $ 6,461,027 $ 2,244,382 $ 8,730,668
==================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-monetary transactions:
Intangible asset and minority interest acquisitions effected
through trade receivable and notes receivable offsets -- -- $ 1,305,077
==================================================
Equity securities received as consideration for investment sold -- $ 2,431,220 --
==================================================
</TABLE>
See accompanying notes.
- -18-
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
CrossComm Corporation (the Company) develops, manufactures, markets and supports
advanced networking products. The Company markets its products and services
principally in North America and Western Europe through a direct sales
organization, as well through indirect channels consisting of value added
resellers (VARs), systems integrators and international distributors.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Minority interest at December 31, 1995 represented a minority stockholder's
proportionate share of the equity of a foreign consolidated subsidiary. In 1996,
the Company purchased the minority stockholder's shares in the subsidiary.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The Company's inventories, capitalized technologies, and demonstration and
service equipment consist primarily of items which are susceptible to
technological obsolescence; a fact which has been considered in determining
asset valuation reserves as of December 31, 1996 and 1995. However, in the event
of certain circumstances, such as the emergence of otherwise unforeseen new
technologies and significant changes in anticipated market requirements and
conditions, additional reserves related to assets held as of December 31, 1996
could be required in the future.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposit accounts,
commercial paper, money market funds and U.S. Government obligations having
maturities of three months or less when purchased. These investments are highly
liquid and are considered cash equivalents. Cash and cash equivalents are stated
at cost which approximates market. Government agency obligations and commercial
paper are classified as cash equivalents and are "A" rated or better investment
grade securities, with no significant concentrations in any one issue.
Available-for-Sale Securities
Available-for-sale securities generally consist principally of U.S. Government
obligations maturing within one to three years. The Company considers these
investments, which represent funds available for current operations, an integral
component of its cash management activities. Management determines the
appropriate classification of debt securities at the time of purchase and
reevaluates such designation on an ongoing basis. Available-for-sale securities
at December 31, 1996 also include certain restricted equity securities of Fore
Systems, Inc. (Fore), received upon Fore's acquisition of an entity in which the
Company held a minority equity interest (see Note 11). These securities,
although not salable until mid-1997, are considered available-for-sale pursuant
to Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," and are accounted for as such.
Available-for-sale securities are carried at fair value, inclusive of accrued
interest receivable, with unrealized gains and losses reported in a separate
component of stockholders' equity. Debt securities in this category are adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization or accretion is included in investment income. Realized gains and
losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on available-for-sale securities are included in investment income.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market.
-19-
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Depreciation is
computed using the straight-line method based upon the shorter of the estimated
useful lives or remaining lease terms, generally 3 to 5 years. Depreciation
expense for 1996, 1995 and 1994 includes approximately $352,000, $763,000 and
$613,000, respectively, resulting from changes in estimates of the depreciable
lives of certain equipment. Depreciation expense for 1996, 1995 and 1994 also
includes approximately $100,000, $1,224,000 and $750,000, respectively, related
to the obsolescence of certain demonstration and service equipment.
Software Development Costs and Other Intangibles
The Company capitalizes certain software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed." The Company
amortizes these costs over the shorter of three years or the product's estimated
useful life. At December 31, 1996 and 1995, capitalized software development
costs, net of accumulated amortization, aggregated approximately $82,000 and
$214,000, respectively. Amortization expense related to capitalized software
costs approximated $232,000, $198,000 and $172,000 for the years ended December
31, 1996, 1995 and 1994, respectively.
Other intangibles included in other assets total approximately $2,825,000 at
December 31, 1996 and 1995. These consist primarily of software technology
license fees which are being amortized on a straight-line basis over the shorter
of three years or the product's estimated useful life beginning in the year that
the related technology is used in Company products. Accumulated amortization
related to other intangibles approximated $1,908,000 and $1,290,000 at December
31, 1996 and 1995, respectively. During 1995 and 1994 software technology
license fees with unamortized costs aggregating approximately $710,000 and
$600,000, respectively, were written-off, as it was determined that the related
technology would not be used in the Company's products given changes in the
Company's product line direction in 1995 and 1996. There were no license fees
written off in 1996.
Accounting Changes
In the first quarter of 1996, the Company adopted Financial Accounting Standards
Board Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The effect of adoption did not have a material impact on the Company's
financial position or results of operations.
Stock-Based Compensation
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). This statement establishes financial accounting and reporting standards
for stock based employee compensation plans, including incentive or
non-qualified stock options for the purchase of common stock provided for under
the Company's Option Plans and shares purchased under the Employee Stock
Purchase Plan. As allowed under SFAS 123, the Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related interpretations in accounting for its
stock-based employee benefit plans, as opposed to the alternative fair value
accounting provided for under SFAS 123. Because the exercise price of the
Company's employee stock options granted to date equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized
under APB25.
Revenue Recognition
The Company generally recognizes product revenue upon shipment. Revenues for
products under evaluation are recognized upon customer acceptance. Revenue from
sale-type leases are generally recognized upon shipment. Service revenues are
recognized ratably over the contractual periods. The Company provides for the
estimated cost of warranty at the time of product shipment.
Advertising Costs
Costs associated with advertising the Company's products and services are
expensed as incurred. Advertising expense for the years ended December 31, 1996,
1995, and 1994 approximated $317,000, $1,551,000, and $1,021,000, respectively.
- -20-
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation
Gains and losses resulting from foreign currency transactions are included in
income as they occur. Foreign currency translation gains and losses are also
included in income. Foreign currency gains and losses were not material for the
years ended December 31, 1996, 1995, and 1994.
Earnings (Loss) Per Share
Earnings (loss) per share data are computed using the weighted average number of
shares of common stock outstanding.
Reclassifications
Certain information in the 1995 and 1994 consolidated financial statements has
been reclassified to conform with the 1996 presentation.
2. AVAILABLE-FOR-SALE SECURITIES
<TABLE>
Available-for-sale securities consist of the following:
<CAPTION>
December 31, 1996
-------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government obligations $33,453,279 $ 34,217 $(96,929) $33,390,567
Equity securities 640,700 3,248,216 -- 3,888,916
-------------------------------------------------------------------
$34,093,979 $3,282,433 $(96,929) $37,279,483
===================================================================
<CAPTION>
December 31, 1995
-------------------------------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------
U.S. Government obligations $42,718,446 $ 116,445 $(63,518) $42,771,373
Equity securities 319,392 1,438,060 -- 1,757,452
-------------------------------------------------------------------
$43,037,838 $1,554,505 $(63,518) $44,528,825
===================================================================
</TABLE>
The fair value of available-for-sale securities is determined using the
published closing prices of these securities. Realized gains on sales of
available-for-sale securities during the years ended December 31, 1996 and 1995
approximated $2,093,000 ($2,062,000 of which related to a single transaction)
and $740,000 ($725,000 of which related to a single transaction), respectively
(see Note 11). Realized losses on sales of available-for-sale securities during
the year ended December 31, 1996 and 1995 approximated $6,000 and $37,000,
respectively.
The equity securities held at December 31, 1996 and 1995 represent restricted
common stock of Fore Systems, Inc. (Fore), acquired upon Fore's acquisition of
an entity in which the Company held a minority equity interest (see Note 11).
The cost of these securities represents the market value of Fore common stock on
the date received, as reduced to reflect certain restrictions related to the
timing of the disposition of the shares received.
Subsequent to December 31, 1996 the market value of these equity securities
declined in value such that the effect on available-for-sale securities and
shareholders equity would be a reduction of approximately $592,000 at January
28, 1997. This decline is not considered to be anything other than temporary at
this time.
-21-
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
The amortized cost and fair value of available-for-sale securities as of
December 31, 1996, by contractual maturity, are as follows:
<CAPTION>
Fair
Cost Value
----------------------------
<S> <C> <C>
U.S. Government obligations:
Due in one year or less $17,248,055 $17,257,545
Due after one year through two years 16,205,224 16,133,022
----------------------------
33,453,279 33,390,567
Equity securities 640,700 3,888,916
----------------------------
$34,093,979 $37,279,483
============================
</TABLE>
3. INVENTORIES
<TABLE>
Inventories, net of reserves of approximately $2,240,000 and $4,036,000 at
December 31, 1996 and 1995, respectively, were composed of the following:
<CAPTION>
December 31,
----------------------------
1996 1995
<S> <C> <C>
Raw materials $1,253,906 $2,250,349
Work in process 1,628,055 1,826,143
Finished goods 2,591,104 2,318,033
----------------------------
$5,473,065 $6,394,525
============================
</TABLE>
During 1996 and 1995, the Company recorded inventory provisions of $366,617 and
$2,244,345, respectively, primarily for end of life excess supply issues related
to planned product discontinuance or product valuation issues caused by changes
in the Company's product line direction.
4. LINES OF CREDIT
The Company has a demand line of credit available for international guarantees
in the amount of $320,000 at December 31, 1996. The grant of credit and its
continued availability is at the sole discretion of the bank. At December 31,
1996, the credit facility was fully utilized. This borrowing has been secured by
cash collateral.
5. STOCKHOLDERS' EQUITY
Undesignated Preferred Stock
The Company has 4,000,000 authorized shares of undesignated preferred stock,
$.01 par value. The Board of Directors has the authority to issue shares of such
preferred stock and to determine the relative rights, preferences and
limitations thereon.
Stock Options
Options to purchase shares of the Company's common stock have been granted to
executives and key employees under the Company's Incentive Stock Option Plans
and to directors of the Company under the Directors' Option Plan (collectively,
the "Options Plans"). The terms and provisions of the employee plans are
similar, in all material respects, while the directors' plan provides annual
option grants. Options are granted for terms of up to 10 years and are
exercisable over varying periods, generally commencing in the quarter of or
quarter after date of grant and continuing in quarterly installments over three
to five year periods. The option price per share under the Option Plans is not
less than the fair market value of the shares on the date of grant. At December
31, 1996 and 1995, 2,429,434 shares and 1,755,137 shares, respectively, were
reserved for future issuance under the Option Plans.
- -22-
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Stock option activity for the three year period ended December 31, 1996 is as
follows:
<CAPTION>
Number of Weighted Average
Options Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding, January 1, 1994 1,046,933 $18.21
Granted 1,609,819 $11.88
Exercised (83,934) $ 2.54
Canceled (1,091,418) $19.52
----------
Outstanding, December 31, 1994 1,481,400 $11.17
Granted 858,750 $ 2.16
Exercised (112,680) $ 8.28
Canceled (536,720) $11.69
----------
Outstanding, December 31, 1995 1,690,750 $11.70
Granted 2,697,125 $ 7.02
Exercised (28,203) $ 6.79
Canceled (2,553,356) $10.64
----------
Outstanding, December 31, 1996 1,806,316 $ 6.29
==========
Exercisable at December 31, 1996 722,831 $ 7.68
==========
Exercisable at December 31, 1995 563,522 $11.19
==========
Available for grant at December 31, 1996 623,117
==========
</TABLE>
In 1994, 729,068 options outstanding under the Company's 1992 Incentive Stock
Option Plan, ranging in option price from $12.75 to $31.25 per share, were
repriced to $12.50 per share by canceling the existing options and granting new
options at $12.50 per share. All other terms of these options, including the
vesting period and the number of shares associated with each option remained the
same.
For the year ended December 31, 1996, 1,063,625 options outstanding under the
Company's 1992 and 1994 Incentive Stock Option Plans, ranging in option price
from $5.88 to $12.94 per share, were repriced to $5.00 per share by canceling
the existing options and granting new options at $5.00 per share. All other
terms of these options, including the vesting period and the number of shares
associated with each option, remained the same.
<TABLE>
The following table summarizes the status of the Company's stock options,
outstanding and exercisable at December 31, 1996:
<CAPTION>
Stock Options Stock Options
Outstanding Exercisable
----------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 4.50 11,450 3.14 Years $ 1.16 11,450 $ 1.16
$ 5.00 - $ 6.00 1,528,064 8.73 Years $ 5.04 506,662 $ 5.08
$ 8.50 - $12.50 156,115 8.04 Years $10.96 110,240 $11.21
$12.94 - $13.88 83,187 8.07 Years $13.38 66,979 $13.37
$28.50 - $31.50 27,500 6.42 Years $30.14 27,500 $30.14
--------- -------
1,806,316 722,831
========= =======
</TABLE>
-23-
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Purchase Plan
Under the Company's Employee Stock Purchase Plan, substantially all employees
may purchase shares of the Company's common stock, during pre-defined offering
periods, at a price per share equal to 85% of the lesser of the common stock
price at the beginning or end of such periods. During 1994, 62,431 shares were
issued under this Plan, 29,820 at $8.08 per share and 32,611 at $7.86 per share.
During 1995, 53,413 shares were issued under this Plan, 26,920 at $9.62 per
share and 26,493 at $9.67 per share. During 1996, 60,372 shares were issued
under this Plan, 25,301 at $8.71 per share and 35,071 at $4.46 per share. At
December 31, 1996, the Company has reserved an additional 163,135 shares for
issuance under this Plan.
Accounting for Stock Based Employee Benefits
Pro forma information regarding net income and earnings per share, as if the
Company had accounted for stock options and stock purchase shares under the fair
value method of SFAS 123, is presented below. The fair value of stock options
and stock purchase shares was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions as of the date of grant: a risk free interest rate of 6.23% for 1995
and 6.12% for 1996; no dividend yields; volatility factors of the expected
market price of the Company's common stock of .66; and a weighted-average
expected life of the option of 3.74 years for 1995 and 3.17 years for 1996.
<TABLE>
For purpose of pro forma disclosures, the estimated fair value of the stock
options is amortized to expense over the option vesting period. The Company's
pro forma information, assuming a weighted average net value per share of
options granted during the year of $3.10 in 1996 and $6.40 in 1995, follows:
<CAPTION>
1996 1995
------------------------------
<S> <C> <C>
Pro forma net income (loss) $(8,125,835) $(15,164,129)
Pro forma earnings (loss) per share $ (0.89) $ (1.67)
</TABLE>
6. INCOME TAXES
At December 31, 1996, the Company has net operating loss and tax credit
carryforwards of approximately $20,965,000 and $694,000, respectively for
federal income tax purposes that expire in 2009 through 2011. The net operating
loss carryforward does not reflect the tax benefit available from the 1996 and
1995 exercise of incentive stock options and subsequent sale of the related
common stock and the exercise of non-qualified stock options. For financial
reporting purposes, a valuation allowance has been recognized to offset all net
deferred tax assets, including those related to the net operating loss and tax
credit carryforwards.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
- -24-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
Significant components of the Company's deferred tax liabilities and assets are
as follows:
<CAPTION>
1996
-------------------------------------------------------
Total Current Non-current
-------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Unrealized gain on securities $ (1,104,000) $(1,104,000) $ --
Unremitted foreign earnings (349,000) -- (349,000)
Equity securities (167,000) (167,000) --
Capitalized software (31,000) -- (31,000)
Prepaid expenses and other (56,000) (56,000) --
-------------------------------------------------------
Total deferred tax liabilities (1,707,000) (1,327,000) (380,000)
-------------------------------------------------------
Deferred tax assets:
Asset valuation allowances 2,758,000 2,758,000 --
Intangible asset amortization 728,000 57,000 671,000
Accrued warranty costs 442,000 442,000 --
Depreciation expense 551,000 -- 551,000
Tax credit carryforwards 1,109,000 -- 1,109,000
Net operating loss carryforwards 8,063,000 -- 8,063,000
Other 235,000 235,000 --
-------------------------------------------------------
Total deferred tax assets 13,886,000 3,492,000 10,394,000
-------------------------------------------------------
Valuation allowance for deferred tax assets (12,179,000) (2,165,000) (10,014,000)
-------------------------------------------------------
Net deferred tax assets 1,707,000 1,327,000 380,000
-------------------------------------------------------
Net deferred tax asset (liability) $ -- $ -- $ --
=======================================================
<CAPTION>
1995
-------------------------------------------------------
Total Current Non-current
-------------------------------------------------------
Deferred tax liabilities:
Contract revenue $ (190,000) $ (57,000) $ (133,000)
Unrealized gain on securities (507,000) (507,000) --
Unremitted foreign earnings (349,000) -- (349,000)
Equity securities (251,000) (84,000) (167,000)
Capitalized software (81,000) -- (81,000)
Prepaid expenses and other (50,000) (50,000) --
-------------------------------------------------------
Total deferred tax liabilities (1,428,000) (698,000) (730,000)
-------------------------------------------------------
Deferred tax assets:
Asset valuation allowances 3,202,000 3,202,000 --
Intangible asset amortization 658,000 49,000 609,000
Accrued warranty costs 524,000 524,000 --
Depreciation expense 500,000 -- 500,000
Tax credit carryforwards 867,000 -- 867,000
Net operating loss carryforwards 6,057,000 -- 6,057,000
Other 306,000 306,000 --
-------------------------------------------------------
Total deferred tax assets 12,114,000 4,081,000 8,033,000
Valuation allowance for deferred tax assets (10,686,000) (3,383,000) (7,303,000)
-------------------------------------------------------
Net deferred tax assets 1,428,000 698,000 730,000
-------------------------------------------------------
Net deferred tax asset (liability) $ -- $ -- $ --
=======================================================
</TABLE>
-25-
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rates to income tax expense is as follows:
<CAPTION>
1996 1995 1994
------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates $(1,795,110) (34%) $(4,693,058) (34%) $(4,133,981) (34%)
Tax exempt interest -- -- (25,789) (131,160) (1)
Unbenefitted loss 1,752,212 33 4,673,683 34 4,193,159 34
Other 42,898 1 45,164 -- 119,916 1
------------------------------------------------------------------------------
$ -- -- $ -- -- $ 47,934 --
==============================================================================
</TABLE>
7. CONCENTRATIONS AND EXPORT SALES
Credit Risk
The Company operates in a single industry segment encompassing the development,
manufacture, marketing and support of advanced networking products. Accordingly,
the Company's customers include distributors and resellers of high technology
equipment, along with end users of such equipment. The Company performs periodic
credit evaluations of its customers' financial condition and extends trade
credit to its customers under normal terms. No single customer accounted for
more than 10% of revenues in 1996, 1995 or 1994. However, in 1996 the Company
recognized $2,302,000 of revenue under a sales-type lease from one customer.
Lease receivables from this customer, recorded at their present value and
included in prepaid and other current assets and other assets, aggregate
$1,902,000 at December 31, 1996.
Financial Information By Geographic Area
<TABLE>
Net sales, operating income and assets by major geographic area for 1996 and
1995 are summarized below. Prior to 1995, North America was the only significant
geographic area. Prices to foreign subsidiaries are at prices that approximate
market.
<CAPTION>
North Consolidated
America Europe Elimination Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
Net sales to unaffiliated customers $ 38,641,663 $ 6,232,256 $ 44,873,919
Transfers between areas 2,124,010 4,296,739 $ (6,420,749)
-----------------------------------------------------------------------
40,765,673 10,528,995 (6,420,749) 44,873,919
Operating income (8,073,709) (1,159,066) (9,232,775)
Identifiable assets 61,075,629 5,783,295 66,858,924
1995:
Net sales to unaffiliated customers $ 39,310,136 $ 4,948,290 $ 44,258,426
Transfers between areas 2,187,316 3,547,591 $(5,734,907)
-----------------------------------------------------------------------
41,497,452 8,495,881 (5,734,907) 44,258,426
Operating income (17,485,179) (1,312,708) (18,797,887)
Identifiable assets 65,281,289 6,064,629 71,345,918
</TABLE>
Included in North America net sales are export sales of $10,249,000 in 1996 and
$6,081,000 in 1995. North America export sales to unaffiliated customers in 1994
totaled $6,777,000.
Suppliers
Although the Company generally uses standard parts and components for its
products, certain components are currently available only from single sources,
including microprocessors, various communications controller chips, and power
supplies. Other components and subassemblies are available only from limited
sources. The Company has also contracted with a contract
- -26-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
manufacturer to be the primary manufacturer of the Company's networking modules.
Although the Company believes that these components, subassemblies and modules
are sufficiently available from alternate sources in a reasonable amount of
time, the reduction or interruption of supply, a significant price increase or
engineering changes required by the use of alternate components, subassemblies
or modules could adversely affect the Company's operating results.
8. COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office space under operating lease agreements. The Company
leases its main office and manufacturing facility under an operating lease
agreement which expires at the end of 1997. This lease contains an escalation
clause and an initial free rent period. The accompanying consolidated statements
of operations reflect rent expense on a straight-line basis over the term of the
lease.
<TABLE>
The following is a schedule of future minimum lease payments required under
operating leases as of December 31, 1996:
<CAPTION>
Year ended December 31,
<S> <C>
1997 $625,000
1998 160,000
1999 75,000
--------
Total minimum lease payments $860,000
========
</TABLE>
Rent expense related to operating leases for the years ended December 31, 1996,
1995, and 1994 approximated $1,292,000, $1,408,000, and $1,240,000,
respectively.
9. RELATED PARTY TRANSACTIONS
In July, 1993, the Company, together with its primary distributor in the United
Kingdom (the U.K. distributor), formed CrossComm (UK) Limited (CCUK), a
consolidated subsidiary of the Company organized to increase market share in the
U.K. networking market. In exchange for their contribution of assets to the
joint venture, the Company and the U.K. distributor received ownership interests
in CCUK of 51% and 49%, respectively. Effective March 31, 1994, the Company
purchased the U.K. distributor's ownership interest in CCUK and the U.K.
distributor's router distribution business for approximately $1,750,000. As a
result of these transactions, CCUK became a wholly-owned subsidiary of the
Company. Intangible assets arising from the initial joint venture and subsequent
purchase of the router distribution business totaled approximately $2,153,000
and were subsequently written-off (see Note 10).
There were no sales to the U.K. distributor for the year ended December 31,
1996. In the years ended December 31, 1995 and 1994 sales were approximately
$60,000, and $415,000, respectively, of which no amounts were outstanding at
December 31, 1996 and 1995.
10. NON-RECURRING CHARGES
In the fourth quarter of 1996, the Company recorded approximately $874,000 of
non-recurring severance, benefits and related costs associated with the
termination of certain senior management personnel. These charges also included
the termination of certain research and development employees due to the
Company's decision not to fund previously planned development projects that it
considered outside the realm of the Company's current strategy. The Company
expects to pay all of these costs in 1997.
In the fourth quarter of 1995, the Company recorded approximately $1,074,000 of
non-recurring charges related to its corporate restructuring designed to enable
the Company to better address ATM and LAN switching market opportunities and to
more appropriately align the Company's expense levels with it's revenues.
Severance, benefits, and related costs associated with terminated employees
accounted for approximately $789,000 of the total charge. The remaining $285,000
consisted of lease termination costs and other costs associated with the
restructuring. The majority of these charges were paid by the Company in 1996.
In 1996, the Company determined that its estimate of 1995 fourth quarter charges
was high by $97,000 and, accordingly, reduced accruals and 1996 non-recurring
charges by that amount.
In the fourth quarter of 1994, the Company recorded approximately $1,963,000 of
restructuring charges related to the reorganization of its international
operations. Approximately $1,641,000 of these charges related primarily to the
write-off of unamortized intangible assets arising from the Company's March 1994
U.K. acquisitions (see Note 9). These intangible assets, consisting principally
of values ascribed to customer lists, a covenant not to compete, and goodwill
established at the organization of the joint venture, were considered
permanently impaired, based upon the lower than expected revenues and sales
-27-
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
prospects derived from it's U.K. subsidiary after the passage of an initial
transition period and after the Company's completion of its branch office
networking product line introduction in September and October of 1994. The
remaining charges of approximately $322,000 consisted primarily of severance and
other costs associated with the Company's reorganization of its international
sales and service functions outside of the United Kingdom. The majority of these
remaining charges were paid in 1995.
11. SALE OF INVESTMENT
In May 1995, the Company sold its minority equity interest in Applied Network
Technology, Inc. (ANT) to Fore Systems Inc. (Fore), in connection with Fore's
acquisition of ANT. In exchange for its ownership interest in ANT, the Company
received shares of Fore common stock, and recorded a gain of $2,100,000 during
the second quarter of 1995, based on the difference between the carrying value
of the Company's investment in ANT and the market value of Fore common stock on
the date of Fore's acquisition of ANT, as reduced to reflect certain
restrictions related to the timing of the disposition of the shares received. In
July 1995, a portion of the Fore shares were sold by the Company, whereby the
Company realized a gain of approximately $725,000, reflecting the appreciation
in the share price of the Fore stock between May 1995 and the date of sale. In
September 1996 the Company realized a gain of $2,062,000 from the sale of
another portion of Fore shares. The remaining shares are carried in
available-for-sale securities at December 31, 1996 (see Note 2). As a result of
the reclassification of shares of Fore common stock to a short term investment,
the unrealized gain increased during 1996. This was due to the shares being
recorded at market value, as they became salable within twelve months of
December 31, 1996.
12. SUBSEQUENT EVENT
On March 20, 1997, the Company entered into an Agreement and Plan of
Reorganization with Olicom A/S ("Olicom"), whereby each outstanding share of the
Company will be exchanged for $5.00 in cash, .2667 shares of Olicom common stock
and a three year warrant to acquire .1075 shares of Olicom common stock at an
exercise price of $19.74 for each full share of Olicom common stock. The
business combination is subject to certain conditions and approvals, including
the approval of both companies' shareholders and will be accounted for by Olicom
under the purchase method of accounting.
- -28-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
13. SELECTED QUARTERLY DATA (UNAUDITED)
<CAPTION>
In Thousands, Except Per Share Amounts
Earnings
Gross Net Income (Loss)
Revenue Profit (Loss) Per Share
----------------------------------------------------------
1996
<S> <C> <C> <C> <C>
First quarter $10,658 $ 4,973 $ (1,595) $(0.17)
Second quarter 11,802 5,659 (1,720) (0.19)
Third quarter 10,865 4,680 (464) (0.05)
Fourth quarter 11,549 5,464 (1,501) (0.16)
----------------------------------------------------------
$44,874 $20,776 $ (5,280) $(0.58)
==========================================================
<CAPTION>
Earnings
Gross Net Income (Loss)
Revenue Profit (Loss) Per Share
----------------------------------------------------------
1995
First quarter $13,202 $ 7,213 $ 107 $ .01
Second quarter 11,533 5,870 122 .01
Third quarter 10,048 4,652 (3,033) (.33)
Fourth quarter 9,475 1,089 (10,999) (1.21)
----------------------------------------------------------
$44,258 $18,824 $(13,803) $(1.52)
==========================================================
</TABLE>
Earnings (loss) per share calculations for each of the quarters is based on the
weighted average number of shares outstanding for each period including common
stock equivalents when dilutive. Accordingly, the sum of the quarters may not
necessarily be equal to the full year earnings (loss) per share amount.
The results of the fourth quarter of 1996 include approximately $874,000 of
non-recurring severance, benefits and related costs associated with the
termination of certain senior management personnel. These charges also included
the termination of certain research and development employees due to the
Company's decision not to fund previously planned development projects that it
considered outside the realm of the Company's current strategy.
The results of the fourth quarter of 1995 include (i) approximately $1,074,000
of non-recurring charges related to the Company's corporate restructuring; (ii)
approximately $4,000,000 of charges to address asset valuation issues primarily
resulting from the Company's entrance into the LAN and ATM switching market and
related decision to de-emphasize certain other older technologies and products;
and (iii) approximately $1,600,000 of other charges, including $500,000 related
to the settlement of a long-term contract receivable.
See Management's Discussion and Analysis for a further discussion of the 1996
and 1995 fourth quarter charges.
-29-
<PAGE> 30
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
CrossComm Corporation
We have audited the accompanying consolidated balance sheets of CrossComm
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CrossComm Corporation at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 28, 1997, except for Note 12, as to
which the date is March 20, 1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
- -30-
<PAGE> 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company and their ages as of
March 14, 1997 are as follows:
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
Tadeusz Witkowicz 47 President, Chief Executive Officer and
Chairman of the Board of Directors#
Douglas G. Bryant 39 Chief Financial Officer and Treasurer
Nigel C. Machin 42 President, Enterprise Products
Nancy Casey 37 Director +#
Alexander M. Levine 65 Director *
Michael C. Ruettgers 54 Director +*
- ----------
+ Member of the Audit Committee
* Member of the Compensation and Stock Option Committees
# Member of the Nominating Committee
Mr. Witkowicz, the founder of the Company, has been Chairman of the Board of
Directors since the Company's inception in April 1987 and was President and
Chief Executive Officer of the Company from April 1987 to March 3, 1996. In
October 1996, Mr. Witkowicz was re-appointed President and Chief Executive
Officer of the Company. Prior to founding the Company, Mr. Witkowicz was a
co-founder and President of Artel Communications Corporation, a supplier of
fiber optic products for long distance television and computer communications.
Mr. Bryant was appointed Chief Financial Officer of the Company in November
1996. From July 1996 to November 1996, Mr.Bryant served as acting Chief
Financial Officer. From September 1989 to June 1996, Mr. Bryant served as the
Company's Controller.
Mr. Machin was appointed President, Enterprise Products Division of the Company
on October 1, 1996. From July 1995 to September 1996, Mr. Machin served as the
Company's Vice President of Business Development. From July 1994 to June 1995,
Mr. Machin served as the Company's General Manager of High Speed Networking
Development. From October 1993 to June 1994, Mr. Machin served as the Company's
Vice President of Strategic Sales and from May 1988 to September 1993, Mr.
Machin served as the Company's Vice President of Sales.
Ms. Casey has been a director of the Company since November 1991. She is a
General Partner of Valhallar Capital Management, L.P., a private investment
partnership, a position she has held since April 1996. From February 1992 to
April 1996, she was a special partner of Tiedemann Boltres Partners, a private
limited partnership providing asset management services. From November 1987
until February 1992, Ms. Casey was a General Partner of Euclid Partners III,
L.P., a venture capital firm. Prior to joining Euclid Partners III, L.P.,
Ms. Casey was a Co-Manager of Metropolitan Life Insurance Company's venture
capital portfolio.
Mr. Levine has been a director of the Company since July 1989. Mr. Levine is a
senior adviser (previously a vice president) and a director of Leggett & Platt,
Incorporated, a manufacturer of components for the bedding and furniture
industry. Mr. Levine is currently Managing Director of Waterline Capital LLC, a
firm which specializes in early stage venture capital investments.
Mr. Ruettgers has been a director of the Company since April 1993. He has been
the President of EMC Corporation, a manufacturer of high performance storage
products for mainframe and mid-range computer systems, since October 1989.
Mr. Ruettgers has been Chief Executive Officer of EMC Corporation since January
1992. From July 1988 to September 1989, he was Executive Vice-President,
Operations, of EMC Corporation. Before joining EMC Corporation, he was Chief
Operations Officer of TFS, a high technology consulting company which he joined
in February 1987. Mr. Ruettgers is a director of EMC Corporation, Keane, Inc., a
software application consulting firm and Commonwealth Energy Corporation, a
utility company.
Officers are elected on an annual basis and serve at the discretion of the Board
of Directors.
-31-
<PAGE> 32
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors, executive officers and holders of more
than 10% of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Common Stock of the Company. The Company believes that all officers,
directors and holders of 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements, except as set forth below:
In June 1995, pursuant to the 1992 Directors' Option Plan, the Company granted
an option to purchase 5,000 shares of Common Stock of the Company to each of
Alexander Levine, Michael Ruettgers and Nancy Casey, each of whom failed to
timely file a Form 5.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Prior to November 5, 1996, non-employee directors ("outside directors") of the
Company received an annual fee of $2,500 plus $500 for attendance at each
meeting of the full Board of Directors or any committee thereof. Commencing
November 5, 1996, the Company began to pay non-employee directors an annual
retainer of $15,000 plus $2,500 per meeting attended and $2,500 for each
committee meeting of the Board of Directors attended (not in conjunction with a
full Board of Directors meeting). Directors are reimbursed for any related
travel expenses.
Outside directors are entitled to participate in the Company's 1992 Directors'
Option Plan (the "Director Plan") which provides for automatic grants of
non-statutory stock options to non-employee directors. The Director Plan
provides for the grant of options to purchase 12,500 shares of Common Stock to
directors of the Company who were not officers or employees of the Company or of
any subsidiary of the Company on March 10, 1992, or, for persons not then
serving as directors, on the date such persons first become directors. The
Director Plan also provides for the grant of options to purchase 5,000 shares of
Common Stock on June 30 of each year commencing on the June 30 following the
year in which such director's initial option was granted. Each initial option
granted under the Director Plan vests in three equal annual installments
beginning on the first anniversary of the date of grant, and each subsequent
option granted under the Director Plan vests in full three years from the date
of grant. All unvested options granted under the Director Plan become
immediately exercisable upon a change in control of the Company.
- -32-
<PAGE> 33
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all cash compensation paid by the Company during
the fiscal years ended December 31, 1996, 1995 and 1994 to each individual who
served as the Company's Chief Executive Officer and the Company's two most
highly compensated executive officers (other than the Chief Executive Officer)
whose total cash compensation exceeded $100,000 in 1996 (the "Named
Executives").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-term~Compensation
---------------------------------------------- -----------------------
Other
Annual Securities
Compensation Underlying
Name and Principal Position Year Salary ($) Bonus ($) ($)(1) Options Granted(#)
--------------------------- ---- ---------- --------- ------ ------------------
<S> <C> <C> <C> <C> <C>
Tadeusz Witkowicz
President and Chief 1996 $ 4 $ 648 -- --
Executive Officer (2) 1995 10,751 -- -- --
1994 173,184 -- -- --
Nigel C. Machin
President, Enterprise Products (3) 1996 98,504 -- -- 200,000
Douglas G. Bryant
Chief Financial Officer 1996 109,958 14,809 -- 52,500
and Treasurer (4)
William R. Johnson
Former Chief Executive 1996 120,504 100,000 -- 350,000
Officer (5)
- ------------
(1) Other annual compensation in the form of perquisites and other personal
benefits has been omitted in those instances where such perquisites and
other personal benefits constituted less than the lesser of $50,000 or 10%
of the total salary and bonus for each named executive officer for such
year.
(2) Mr. Witkowicz volunteered to have his salary reduced to $1 per quarter in
late January 1995.
(3) Mr. Machin was appointed President, Enterprise Products Division on
October 1, 1996. From July 1995 to September 1996, Mr. Machin served as the
Company's Vice President of Business Development. From July 1994 to June
1995, Mr. Machin served as the Company's General Manager of High Speed
Networking Development. From October 1993 to June 1994, Mr. Machin served
as the Company's Vice President of Strategic Sales and from May 1988 to
September 1993, Mr. Machin served as the Company's Vice President of Sales.
(4) Mr. Bryant was appointed Chief Financial Officer of the Company in
November, 1996. From July 1996 to November 1996, Mr. Bryant served as
acting Chief Financial Officer. From September 1989 to June 1996,
Mr. Bryant served as the Company's Controller.
(5) Mr. Johnson was appointed Chief Executive Officer and President on March 4,
1996. Mr. Johnson left the Company on October 7, 1996.
</TABLE>
-33-
<PAGE> 34
<TABLE>
The following table sets forth certain information regarding options granted
during the year ended December 31, 1996 by the Company to the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
-----------------------------------------------------------------
Percent of
Number of Total Options Potential Realizable Value
Securities Granted to at Assumed Annual Rates of Stock
Underlying Employees in Exercise or Price Appreciation for Option Term(1)
Options Fiscal Base Price Expiration -------------------------------------
Name Granted (#) Year ($/Sh) Date 5% ($) 10%($)
- -------------------- --------------- ------------ ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Tadeusz Witkowicz -- -- -- -- -- --
Nigel C. Machin 110,000 $ 5.00 11/05/06 $ 345,892 $ 876,558
40,000 5.00 2/23/03 71,989 164,637
30,000 5.00 12/09/04 72,628 174,406
20,000 5.00 11/17/05 55,382 136,535
------- ------------------------
200,000 7.40% $ 545,891 $1,352,136
------- ------------------------
Douglas G. Bryant 5,000 9.50 9/03/06 $ 29,872 $ 75,703
10,000 5.00 11/05/06 31,445 79,687
2,500 5.00 1/28/04 5,287 12,399
4,000 5.00 4/14/02 6,077 13,584
13,500 5.00 2/23/03 24,296 55,565
5,000 5.00 7/13/04 11,378 27,018
2,500 5.00 8/11/05 6,670 16,320
5,000 5.00 11/17/05 13,845 34,134
5,000 5.00 9/03/06 15,381 38,786
------- ------------------------
52,500 1.95% $ 144,251 $ 353,196
------- ------------------------
William R. Johnson 350,000 12.98% 10.00 3/04/06(2) $2,201,131 $5,578,099
<FN>
- --------
(1) Amounts represent hypothetical gains that could be achieved if the option
were exercised at the end of the option term. These gains are based on
assumed rates of Common Stock price appreciation of 5% and 10% compounded
annually from the date the option was granted to its expiration date. This
table does not take into account any appreciation in the price of the
Common Stock to date, if any. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock and the
date on which the option is exercised.
(2) Unvested options canceled upon October 7, 1996 termination. Vested options
canceled on October 17, 1996.
</TABLE>
- -34-
<PAGE> 35
<TABLE>
The following table sets forth certain information regarding stock options
exercised during the year ended December 31, 1996 and the value of the stock
options held as of December 31, 1996 by the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money
Shares at Fiscal Year-End (#) Options at Fiscal Year-End($)(1)
Acquired on Value -------------------------- --------------------------------
Name Exercise (#) Received Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tadeusz Witkowicz -- -- -- -- -- --
Nigel C. Machin -- -- 63,507 136,492 $15,877 $34,123
Douglas G. Bryant -- -- 29,875 27,625 47,469 6,906
William R. Johnson -- -- -- -- -- --
<FN>
- ----------
(1) Total value of unexercised options is based on $5.25, the last sale price
of the Common Stock on the Nasdaq National Market on December 31, 1996.
Value is calculated on the basis of the difference between the option
exercise price and $5.25 multiplied by the number of shares of Common Stock
underlying the option.
</TABLE>
-35-
<PAGE> 36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information as of March 14, 1997, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
current director of the Company, (ii) the Named Executives, (iii) all directors
and executive officers of the Company as a group and (iv) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock of the Company.
<CAPTION>
Beneficial Owner Number of Shares
Beneficially Percentage of Common
Owned (1) Stock Outstanding (2)
--------- ---------------------
<S> <C> <C>
Tadeusz Witkowicz (3) 1,574,125 17.0%
c/o CrossComm Corporation
450 Donald Lynch Boulevard
Marlborough, Massachusetts 01752
Douglas G. Bryant (4) 34,860 *
Nigel C. Machin (5) 75,093 *
Nancy Casey(6) 18,100 *
Alexander M. Levine (7) 77,500 *
Michael C. Ruettgers (8) 12,500 *
All directors and executive officers as a group
(6 persons) (9) 1,792,178 19.0%
5% Stockholders (excluding Mr. Witkowicz)
- -----------------------------------------
Trimark Financial Corporation
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5 (10) 909,000 9.8%
Kopp Investment Advisors, Inc.
LeRoy C. Kopp
6600 France Avenue South
Suite 672~Edina, MN 55435 (11) 728,200 7.8%
Pioneering Management Corporation
William H. Keough
60 State Street
Boston, MA 02109 (12) 918,000 9.9%
Travelers Group Inc.
388 Greenwich Street
New York, NY 10013 (13) 573,300 6.2%
</TABLE>
- --------
* Less than 1%
(1) The number of shares of Common Stock beneficially owned by each person or
entity is determined under rules promulgated by the Securities and Exchange
Commission (the "Commission"). Under such rules, beneficial ownership
- -36-
<PAGE> 37
includes any shares as to which the person or entity has sole or shared
voting power or investment power, and also includes any shares which the
person or entity has the right to acquire within 60 days after March 14,
1997 through the exercise of any stock option or other right. Unless
otherwise indicated, each person or entity referred to above has sole
voting and investment power with respect to the shares listed. The
inclusion herein or any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
(2) Percentage of Common Stock Outstanding is based on 9,284,584 shares of
Common Stock Outstanding as of March 14, 1997. For purposes of calculating
the percentage of Common Stock outstanding, the number of outstanding
shares of Common Stock of the Company is adjusted for each director and
executive officer to include the number of shares of Common Stock into
which any options held by such person are exercisable within 60 days after
March 14, 1997.
(3) Includes 10,000 share held by Mr. Witkowicz's wife, as to which Mr.
Witkowicz disclaims beneficial ownership, and 11,400 shares held in
separate custodial accounts for the benefit of his two minor children. Mr.
Witkowicz's address is c/o CrossComm Corporation, 450 Donald Lynch
Boulevard, Marlborough, Massachusetts 01752.
(4) Includes 33,875 shares which Mr. Bryant may acquire upon the exercise of
options within 60 days of March 14, 1997.
(5) Includes 75,093 shares which Mr. Machin may acquire upon the exercise of
options within 60 days of March 14, 1997.
(6) Includes 17,500 shares which Ms. Casey may acquire upon the exercise of
options within 60 days after March 14, 1997.
(7) Includes 17,500 shares which Mr. Levine may acquire upon the exercise of
options within 60 days after March 14, 1997.
(8) Includes 12,500 shares which Mr. Ruettgers may acquire upon the exercise of
options within 60 days after March 14, 1997.
(9) Includes 156,468 shares which all directors and executive officers as a
group may acquire upon the exercise of options within 60 days after
March 14, 1997.
(10) Certain Trimark mutual funds (the "Funds"), which are trusts organized
under the laws of Ontario, Canada, are owners of record of the securities
covered by this report. Trimark Investment Management Inc. ("TIMI"), a
corporation incorporated under the laws of Canada, is a manager and trustee
of the Funds. TIMI is qualified to act as an investment adviser and manager
of the Funds in the province of Ontario pursuant to a registration under
the Securities Act (Ontario). Trimark Financial Corporation ("TFC") is a
corporation incorporated under the laws of Ontario, Canada. It owns 100% of
the voting equity securities of TIMI. Consequently, TFC may be deemed to be
the beneficial owner of such securities. The above information was based on
Schedule 13G/A filed with the Commission by Trimark Financial Corporation
on or about February 5, 1997.
(11) Shares were owned beneficially at December 31, 1996 by LeRoy C. Kopp. Mr.
Kopp is 100% owner of Kopp Investment Advisors, Inc., an investment advisor
registered under the Advisors Act. Kopp Investment Advisors, Inc. exercises
discretion as to 641,000 of these shares. Neither Kopp Investment Advisors,
Inc. nor Mr. Kopp vote the vast majority of these shares and neither is the
record owner of them. As 100% owner of Kopp Investment Advisors, Inc., Mr.
Kopp may be deemed to be a beneficial owner of the shares held by Kopp
Investment Advisors, Inc. The above information is based on Schedule 13G/A
filed with the Commission by Kopp Investment Advisors, Inc. on or about
January 28, 1997.
(12) Shares were owned beneficially at December 31, 1996 by Pioneering
Management Corporation, an investment advisor registered under the Advisors
Act. The above information is based on Schedule 13G filed with the
Commission by Pioneering Management Corporation on or about January 14,
1997.
(13) Shares were owned beneficially at December 31, 1996 by Travelers Group
Inc., an investment advisor registered under the Advisors Act. The above
information is based on Schedule 13G filed with the Commission by Travelers
Group Inc. on or about February 14, 1997.
-37-
<PAGE> 38
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the terms of an Employment Agreement dated March 4, 1996 between the
Company and William R. Johnson, Mr. Johnson agreed to serve as the Company's
President and Chief Executive Officer. Mr. Johnson received a base salary of
$200,000, and an annual incentive payment of up to $200,000 based on the
achievement of objectives determined by the Compensation Committee. For calendar
year 1996, the incentive payment was guaranteed to the extent of $100,000, which
Mr. Johnson received in the form of a signing bonus in March 1996. The balance
of the incentive payment of $100,000 was based upon the accomplishment of
objectives determined by the Compensation Committee. The Employment Agreement
also provided that, if Mr. Johnson was terminated without cause prior to March
5, 1997, the Company agreed to pay Mr. Johnson an amount equal to twice his
annual base salary; if Mr. Johnson was terminated without cause between March 6,
1997 and August 6, 1997, he was entitled to an amount equal to one and one half
times his annual base salary; and, if Mr. Johnson was terminated without cause
after August 6, 1997, he was entitled to receive an amount equal to his annual
salary. The Company terminated Mr. Johnson on October 7, 1996. Mr. Johnson has
brought an action against the Company for allegedly unpaid severance amounts.
See Item 3, Legal Proceedings.
Pursuant to the terms of an Employee Retention Agreement dated March 9, 1997
between the Company and Nigel C. Machin, President, Enterprise Products (the
"Agreement"), if Mr. Machin's employment is terminated by the Company (other
than for cause, disability or his death) or by him for "Good Reason," as defined
in the Agreement, within 24 months following a "Change in Control" of the
Company, as defined in the Agreement, he is entitled to a severance payment
equal to one month' salary plus and additional one month's salary for each year
of service.
Pursuant to the terms of an Employee Retention Agreement dated March 9, 1997
between the Company and Douglas G. Bryant, Chief Financial Officer and Treasurer
(the "Agreement"), if Mr. Bryant's employment is terminated by the Company
(other than for cause, disability or his death) or by him for "Good Reason," as
defined in the Agreement, within 24 months following a "Change in Control" of
the Company, as defined in the Agreement, he is entitled to a severance payment
equal to one month's salary plus and additional one month's salary for each year
of service.
On March 20, 1997, the Company entered into a License Agreement (the
"Agreement") with Tadeusz Witkowicz, Chief Executive Officer and President, that
provides Mr. Witkowicz with a non-exclusive license to use the Company's
partially developed Network Delta software. The Network Delta software was being
developed to, among other things, enable the Company to deliver monitoring
services to its customers. The Company discontinued development of this software
in 1996 because it failed to meet expectations and was inconsistent with the
Company's strategic plan. The Company decided instead to utilize a third-party
solution to offer monitoring services to its customers. Under the terms of the
Agreement, Mr. Witkowicz will pay $30,000 for the license and an additional $25
royalty fee for each copy sold through the end of 1998 and $5 per copy
thereafter. The Agreement also allows Mr. Witkowicz to hire up to six engineers
from the Company.
- -38-
<PAGE> 39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (SEE ITEM 8)
The consolidated financial statements of CrossComm Corporation can be found in
this document on the following pages:
PAGE(S)
Selected Financial Data 8
Consolidated Balance Sheets as of December 31, 1996 and 1995 15
Consolidated Statements of Operations for the Years
ended December 31, 1996, 1995 and 1994 16
Consolidated Statements of Stockholders' Equity for the Years
ended December 31, 1996, 1995 and 1994 17
Consolidated Statements of Cash Flows for the Years
ended December 31, 1996, 1995 and 1994 18
Notes to Consolidated Financial Statements 19 - 29
Report of Independent Auditors 30
(a) (2) INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule of CrossComm Corporation
is filed as part of this Form 10-K:
Schedule II - Valuation and Qualifying Accounts 40
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
(a) (3) INDEX TO EXHIBITS
The exhibits filed as part of this Form10-K are listed on the Exhibit Index
immediately preceding such exhibits, which Exhibit Index is incorporated herein
by reference.
The Company's current management contracts and executive compensation plans and
arrangements are listed in the Exhibit Index incorporated herein by reference at
Exhibit Nos. 10.3, 10.8, 10.9 10.10, 10.11, 10.12, 10.13, 10.15, 10.21, 10.22,
10.23, 10.25, 10.26, 10.27, 10.28, 10.29, 10.30, 10.31, 10.32 and 10.34.
(a) (4) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed by the Company during the last quarter
of the period covered by this Form 10-K.
-39-
<PAGE> 40
SCHEDULE II
<TABLE>
CROSSCOMM CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged to Balance
Beginning Cost and Other at End
Description of Period Expenses Accounts Deductions (1) of Period
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Accounts receivable allowances $803,000 $480,000 $ 0 $286,000 $997,000
========================================================================
Year ended December 31, 1995:
Accounts receivable allowances $787,000 $838,000 $ 0 $822,000 $803,000
========================================================================
Year ended December 31, 1994:
Accounts receivable allowances $475,000 $377,000 $ 0 $ 65,000 $787,000
========================================================================
(1) Uncollectible accounts receivable written-off, net of recoveries
</TABLE>
- -40-
<PAGE> 41
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 * Agreement and Plan of Reorganization by and among Olicom A/S, PW
Acquisition Corporation and CrossComm Corporation dated March 20,
1997
3.1(1) Amended and Restated Certificate of Incorporation of the Company
3.3(2) By-Laws, as amended, of the Company
4.1(2) Specimen certificate representing shares of Common Stock, $.01
par value, of the Company
10.1(2) Lease Agreement dated as of April 30, 1992 by and between the
Company and New England Mutual Life Insurance Company
10.2(3) First Amendment to Lease dated January 15, 1993 by and between
the Company and Cigna Investments, Inc. (successor in interest to
New England Mutual Life Insurance Company)
10.3(2) Non-Competition Agreement dated as of July 24, 1989 between the
Company and Tadeusz Witkowicz
10.4(2) Indemnification Agreement dated January 19, 1990 by and between
the Company and Tadeusz Witkowicz
10.5(2) Indemnification Agreement dated November 6, 1991 by and between
the Company and Nancy Casey
10.6(2) Indemnification Agreement dated January 19, 1990 by and between
the Company and Allan M. Kline
10.7(2) Indemnification Agreement dated January 19, 1990 by and between
the Company and Alexander M. Levine
10.8(2) Amended 1988 Incentive Stock Option Plan
10.9(2) Amended 1989 Incentive Stock Option Plan
10.10(2) 1991 Incentive Stock Option Plan, as amended
10.11(2) 1992 Stock Option Plan, as amended
10.12(2) 1992 Directors' Option Plan
10.13(2) 1992 Employee Stock Purchase Plan
10.14(4) Manufacturing Agreement dated as of April 21, 1993 between the
Company and Lockheed Commercial Electronics Company
10.15(7) 1994 Stock Option Plan
-41-
<PAGE> 42
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.16* Amendment to Manufacturing Agreement dated February 11, 1994
between the Company and Lockheed Commercial Electronics Company
10.17(5)# Share Acquisition and Asset Purchase Agreement dated March 31,
1994 by and between the Company and CrossComm (UK) Limited and
Tricom Group Ltd., Tricom Borer Ltd. and Tricom Communication
PLC.
10.18(6)# Technology License and Manufacturing Agreement dated July 14,
1994 by and between the Company and Multimedia Communications,
Inc.
10.19(6)# Product Development, Technology License and Manufacturing
Agreement dated July 19, 1994 by and between the Company and
Applied Network Technology, Inc.
10.20(7)# Amendment dated October 1, 1995 to Product Development,
Technology License and Manufacturing Agreement dated July 19,
1994 by and between the Company and Applied Network Technology,
Inc.
10.21(7) Form of 1995 Employee Stock Purchase Plan
10.22(8) Employment Agreement dated March 4, 1996 by and between the
Company and William R. Johnson
10.23* 1996 Stock Option Plan
10.24* Amendment to Manufacturing Agreement dated February 14, 1997
between the Company and Lockheed Commercial Electronics Company
10.25* Amendments to Amended 1988 Incentive Stock Option Plan
10.26* Amendments to Amended 1989 Incentive Stock Option Plan
10.27* Amendments to 1991 Incentive Stock Option Plan, as amended
10.28* Amendments to 1992 Stock Option Plan, as amended
10.29* Amendments to 1992 Directors' Option Plan
10.30* Amendments to 1994 Stock Option Plan, as amended
10.31* Amendment to 1995 Employee Stock Purchase Plan
10.32* Amendment to 1996 Stock Option Plan
10.33* Engagement letter dated November 18, 1996 between the Company
and Montgomery Securities
10.34* License Agreement dated March 20, 1997 between the Company and
Tadeusz Witkowicz
21(7) Subsidiaries of the Company
23* Consent of Ernst & Young LLP
27* Financial Data Schedule
- -----------------------
- -42-
<PAGE> 43
* Filed herewith
# Confidential treatment granted as to certain portions thereof
(1) Incorporated by reference to the Company's Registration Statement on Form
S-8 (No. 33-82476), as filed with the Securities and Exchange Commission on
August 5, 1994
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-47321), as filed with the Securities and Exchange Commission on
April 20, 1992 and amended on May 27, 1992, June 3, 1992 and June 12, 1992
(3) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-59700), as filed with the Securities and Exchange Commission on
March 18, 1993
(4) Incorporated by reference to the Company's Form 10-Q for the quarter ended
June 30, 1993, as filed with the Securities and Exchange Commission on
August 16, 1993
(5) Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1994, as filed with the Securities and Exchange Commission on May
16, 1994
(6) Incorporated by reference to the Company's Form 10-Q for the quarter ended
September 30, 1994, as filed with the Securities and Exchange Commission on
November 14, 1994
(7) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1995 as filed with the Securities and Exchange Commission on
March 19, 1996
(8) Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1996, as filed with the Securities and Exchange Commission on May
2, 1996
-43-
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CROSSCOMM CORPORATION
March 28, 1997
/s/ Douglas G. Bryant
---------------------------------
DOUGLAS G. BRYANT
CHIEF FINANCIAL OFFICER AND TREASURER
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Tadeusz Witkowicz President, Chief Executive Officer and March 28, 1997
- ------------------------------- Chairman of the Board of Directors
TADEUSZ WITKOWICZ (Principal Executive Officer)
/s/ Douglas G. Bryant Chief Financial Officer and March 28, 1997
- ------------------------------- Treasurer (Principal Financial
DOUGLAS G. BRYANT and Accounting Officer)
/s/ Nancy Casey Director March 28, 1997
- -------------------------------
NANCY CASEY
/s/ Alexander M. Levine Director March 28, 1997
- -------------------------------
ALEXANDER M. LEVINE
/s/ Michael C. Ruettgers Director March 28, 1997
- -------------------------------
MICHAEL C. RUETTGERS
</TABLE>
- -44-
<PAGE> 45
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
CrossComm Corporation
450 Donald Lynch Boulevard
Marlborough, Massachusetts 01752-4728
Telephone: (508) 481-4060
Internet Address: http://www.crosscomm.com
REGISTRAR AND TRANSFER AGENT
Bank of Boston
c/o Boston EquiServe
P.O. Box 8040
Boston, Massachusetts 02266-8040
Telephone: (617) 575-3400
Internet Address: http://www.EquiServe.Com
COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
DIRECTORS AND EXECUTIVE OFFICERS
Tadeusz Witkowicz
President, Chief Executive Officer and
Chairman of the Board of Directors
Nigel C. Machin
President, Enterprise Products Division
Douglas G. Bryant
Chief Financial Officer and Treasurer
Nancy Casey, Director (1)
Alexander M. Levine, Director (2)
Michael C. Ruettgers, Director (1) (2)
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation and Stock Option Committees
-45-
<PAGE> 46
CROSSCOMM CORPORATE HEADQUARTERS
450 Donald Lynch Boulevard
Marlborough, Massachusetts 01752
Telephone: (508) 481-4060
Telephone: (800) 388-1200
Fax: (508) 229-5535
http://www.crosscomm.com
INTERNATIONAL CROSSCOMM OFFICES
CROSSCOMM CANADA
145 Wellington Street West
Suite 750
Toronto, Ontario M5J 1H8
Canada
Telephone: (416) 977-2400
Fax: (416) 977-2660
CROSSCOMM UK LTD.
Swan House, Peregrine Business Park
Gomm Road
High Wycombe
Bucks HP13 7DL
United Kingdom
Telephone: +(44) 1494 556600
Fax: +(44) 1494 556616
CROSSCOMM POLAND
Ul. Uphagena 27
80-237 Gdansk
Poland
Telephone: +(48) 58 461274
Fax: +(48) 58 461238
CROSSCOMM SOUTHERN EUROPE
Parc Club - Batiment D
2 rue Jean Rostand
91893 Orsay Cedex
France
Telephone: +(33) 1 69 85 24 18
Fax: +(33) 1 69 41 81 15
- -46-
<PAGE> 1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
OLICOM A/S,
PW ACQUISITION CORPORATION
AND
CROSSCOMM CORPORATION
MARCH 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE MERGER........................................................ 1
1.1 The Merger................................................. 1
1.2 Closing; Effective Time.................................... 1
1.3 Effect of the Merger....................................... 2
1.4 Certificate of Incorporation; Bylaws....................... 2
1.5 Directors and Officers..................................... 2
1.6 Effect on Capital Stock.................................... 2
1.7 Dissenting Shares. ........................................ 5
1.8 Surrender of Certificates.................................. 5
1.9 No Further Ownership Rights in CrossComm Common Stock...... 7
1.10 Lost, Stolen or Destroyed Certificates..................... 7
1.11 Taking of Necessary Action; Further Action................. 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF CROSSCOMM...................... 8
2.1 Organization, Standing and Power........................... 8
2.2 Capital Structure.......................................... 8
2.3 Authority................................................. 10
2.4 Governmental Authorization................................ 10
2.5 SEC Documents............................................. 11
2.6 Financial Statements...................................... 11
2.7 Absence of Certain Changes................................ 12
2.8 Absence of Undisclosed Liabilities........................ 12
2.9 Litigation................................................ 12
2.10 Restrictions on Business Activities....................... 12
2.11 Title to Property......................................... 13
2.12 Intellectual Property..................................... 13
2.13 Environmental Matters..................................... 15
2.14 Taxes..................................................... 15
2.15 Employee Benefit Plans.................................... 16
2.16 Employee Matters.......................................... 19
2.17 Certain Agreements........................................ 20
2.18 Compliance With Laws...................................... 20
2.19 Customers and Suppliers................................... 20
2.20 Brokers' and Finders' Fees................................ 20
2.21 Registration Statement; Joint Proxy Statement/Prospectus.. 20
2.22 Opinion of Financial Advisor.............................. 21
2.23 Vote Required............................................. 21
2.24 Board Approval............................................ 21
2.25 Section 203 of Delaware Law Not Applicable................ 22
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF OLICOM AND
MERGERSUB....................................................... 22
3.1 Organization, Standing and Power.......................... 22
3.2 Capital Structure......................................... 22
3.3 Authority................................................. 23
3.4 Governmental Authorization................................ 24
3.5 SEC Documents............................................. 25
3.6 Financial Statements...................................... 25
3.7 Absence of Certain Changes................................ 25
3.8 Absence of Undisclosed Liabilities........................ 26
3.9 Litigation................................................ 26
3.10 Restrictions on Business Activities....................... 26
3.11 Title to Property......................................... 26
3.12 Intellectual Property..................................... 27
3.13 Environmental Matters..................................... 27
3.14 Taxes..................................................... 28
3.15 Employee Benefit Plans.................................... 28
3.16 Employee Matters.......................................... 30
3.17 Certain Agreements........................................ 30
3.18 Compliance With Laws...................................... 30
3.19 Brokers' and Finders' Fees................................ 30
3.20 Registration Statement; Joint Proxy Statement/Prospectus.. 31
3.21 Opinion of Financial Advisor.............................. 31
3.22 Vote Required............................................. 31
3.23 Board Approval............................................ 31
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................. 32
4.1 Conduct of Business of CrossComm and Olicom............... 32
4.2 Conduct of Business of CrossComm.......................... 33
4.3 No Solicitation........................................... 35
ARTICLE V ADDITIONAL AGREEMENTS............................................ 37
5.1 Joint Proxy Statement/Prospectus; Registration Statement.. 37
5.2 Meetings of Stockholders.................................. 38
5.3 Access to Information; Advice of Changes.................. 39
5.4 Confidentiality........................................... 39
5.5 Public Disclosure......................................... 40
5.6 Consents; Cooperation..................................... 40
5.7 Affiliate Agreements...................................... 40
5.8 Voting Agreements......................................... 41
5.9 Legal Requirements........................................ 41
5.10 Blue Sky Laws............................................. 41
5.11 Employee Benefit Plans.................................... 41
5.12 Letter of Olicom's and CrossComm's Accountants............ 43
5.13 Directorship.............................................. 43
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
5.14 Form S-8.................................................. 43
5.15 Indemnification........................................... 44
5.16 Listing of Additional Shares, Warrants and Warrant Shares. 45
5.17 Best Efforts and Further Assurances....................... 45
ARTICLE VI CONDITIONS TO THE MERGER........................................ 45
6.1 Conditions to Obligations of Each Party to Effect the
Merger.................................................... 45
6.2 Additional Conditions to Obligations of CrossComm......... 47
6.3 Additional Conditions to the Obligations of Olicom and
MergerSub................................................. 48
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................. 49
7.1 Termination............................................... 49
7.2 Effect of Termination..................................... 51
7.3 Expenses and Termination Fees............................. 51
7.4 Amendment................................................. 53
7.5 Extension; Waiver......................................... 53
ARTICLE VIII DEFINITIONS................................................... 54
8.1 Defined Terms............................................. 54
ARTICLE IX GENERAL PROVISIONS.............................................. 55
9.1 Non-Survival at Effective Time............................ 55
9.2 Notices................................................... 55
9.3 Interpretation............................................ 56
9.4 Counterparts.............................................. 56
9.5 Entire Agreement; Nonassignability; Parties in Interest... 56
9.6 Severability.............................................. 57
9.7 Remedies Cumulative....................................... 57
9.8 Governing Law............................................. 57
9.9 Rules of Construction..................................... 57
</TABLE>
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Form of Warrant Certificate
Exhibit C - CrossComm Affiliates Agreement
Exhibit D - Voting Agreement - CrossComm Affiliates
Exhibit E - Voting Agreement - Olicom Affiliates
- iii -
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of March 20, 1997, by and among Olicom A/S, a corporation
organized under the laws of the Kingdom of Denmark ("Olicom"), PW Acquisition
Corporation, a corporation organized under the laws of the State of Delaware and
wholly-owned subsidiary of Olicom ("MergerSub"), and CrossComm Corporation, a
corporation organized under the laws of the State of Delaware ("CrossComm").
The Boards of Directors of CrossComm, Olicom and MergerSub believe it is
in the best interests of their respective companies and the stockholders of
their respective companies that CrossComm and MergerSub combine into a single
company through the statutory merger, pursuant to the Delaware General
Corporation Law, as amended ("Delaware Law"), of MergerSub with and into
CrossComm (the "Merger") and, in furtherance thereof, have approved the Merger.
Pursuant to the Merger, among other things, each outstanding share of
common stock in CrossComm, par value $0.01 per share ("CrossComm Common Stock"),
shall be exchanged for the Merger Consideration (as defined in Section 1.6(b)).
CrossComm, Olicom and MergerSub desire to make certain representations and
warranties and other agreements in connection with the Merger.
Concurrent with the execution and delivery of this Agreement and as an
inducement to Olicom and MergerSub to enter into this Agreement, certain
affiliates of CrossComm and Olicom have on the date hereof entered into an
agreement to vote the shares of capital stock in CrossComm and Olicom, as the
case may be, owned by such persons to approve the Merger and against any
competing proposals.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger attached hereto as Exhibit A (the "Certificate of Merger") and the
applicable provisions of Delaware Law, MergerSub shall be merged with and into
CrossComm, the separate corporate existence of MergerSub shall cease and
CrossComm shall continue as the surviving corporation (CrossComm, as the
surviving corporation subsequent to the Merger, is hereinafter sometimes
referred to as the "Surviving Corporation").
1.2 Closing; Effective Time. The closing of the transactions contemplated
hereby (the "Closing") shall take place (i) no later than the second business
day after satisfaction of the latest to occur of the conditions set forth in
Sections 6.1, 6.2(b) (other
<PAGE> 6
than the delivery of the officers' certificates referred to therein) and 6.3(b)
(other than the delivery of the officers' certificates referred to therein)
(provided that the other closing conditions set forth in Article VI have been
met or waived as provided in Article VI at or prior to the Closing), or (ii) at
such other time no later than June 30, 1997, as the parties hereto agree (the
"Closing Date"). The Closing shall take place at the offices of Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., 2200 Ross Avenue, Suite 900, Dallas, Texas, or at
such other location as the parties hereto agree. In connection with the Closing,
the parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger with the Secretary of State of Delaware and with the
Recorder of the county in which the registered office of each of CrossComm and
MergerSub is located, in accordance with the relevant provisions of Delaware Law
(the time of such filing being referred to herein as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all of the property,
rights, privileges, powers and franchises of CrossComm and MergerSub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of CrossComm
and MergerSub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
MergerSub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is CrossComm Corporation."
(b) The bylaws of MergerSub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors and
officers of the Surviving Corporation shall be the initial directors and
officers of MergerSub, until their respective successors are duly elected or
appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of MergerSub, CrossComm or the holders of any of the
following securities:
(a) Prior to the Effective Time, Surviving Corporation and/or the
Exchange Agent (as defined in Section 1.8(a)) each shall be authorized to take
all actions that either of them may deem necessary or desirable to effect the
transfer of the Merger
- 2 -
<PAGE> 7
Consideration (as defined in Section 1.6(b)) to the holders of CrossComm Common
Stock and the contribution of the Surviving Corporation Stock to Olicom. Upon
and after the approval of this Agreement by the CrossComm stockholders,
CrossComm shall be authorized to take all such actions that it may deem
necessary or desirable to effect the transfer of the Merger Consideration to the
holders of CrossComm Common Stock, including the preparation, filing and
delivery of the subscription list required under the Companies Act of the
Kingdom of Denmark (the "Companies Act") in order to effect the delivery of the
Olicom Common Stock (as defined in Section 1.6(b)) to be delivered pursuant to
this Agreement. At the Effective Time, (i) each share of CrossComm Common Stock
issued and outstanding immediately prior to the Effective Time (other than any
shares of CrossComm Common Stock to be canceled pursuant to Section 1.6(d) and
Dissenting Shares (as defined in Section 1.7(a)) shall be exchanged for the
Merger Consideration, and (ii) that number of shares of Surviving Corporation
Stock that is equal to the number of shares of CrossComm Common Stock (other
than any shares of CrossComm Common Stock to be canceled pursuant to Section
1.6(d)) and the Dissenting Shares shall be contributed to Olicom (the "Surviving
Corporation Stock").
(b) At the Effective Time, each holder of a share of CrossComm
Common Stock shall be entitled only to receive upon surrender of each such share
of CrossComm Common Stock (i) 0.2667 shares of common stock in Olicom, nominal
value DKK 0.25 per share ("Olicom Common Stock") (the "Exchange Ratio"), (ii)
the sum of $5.00 in cash, and (iii) three-year warrants (each a "Warrant") to
purchase 0.1075 shares (the "Warrant Exchange Ratio") of Olicom Common Stock at
an exercise price of $19.74 per share (clauses (i), (ii) and (iii) are
collectively referred to as the "Merger Consideration"). Each such Warrant shall
contain the terms and provisions substantially as set forth in Exhibit B.
Notwithstanding the foregoing, (x) in the event that the average of the high and
low sales prices of a share of Olicom Common Stock for the ten trading days
immediately preceding (but excluding) the fifth trading day before the CrossComm
Stockholders' Meeting (as defined in Section 2.21), as reported on the Nasdaq
National Market (the "Final Closing Price"), is less than $12.50, Olicom shall
have the right to increase the Exchange Ratio to the number which, when
multiplied by the Final Closing Price, equals $3.33 (and if Olicom shall not so
increase the Exchange Ratio, CrossComm shall have the right to terminate this
Agreement pursuant to Section 7.1(i)); and (y) in the event that the Final
Closing Price is more than $20.83, Olicom shall have the right to decrease the
Exchange Ratio to the number which, when multiplied by the Final Closing Price,
equals $5.56 (and if Olicom so decreases the Exchange Ratio, CrossComm shall
have the right to terminate this Agreement pursuant to Section 7.1(i)). In the
event that the Final Closing Price triggers the provisions of clauses (x) or (y)
and Olicom desires to exercise its rights hereunder to increase or decrease the
Exchange Ratio, as the case may be, Olicom shall notify CrossComm of any such
increase or decrease, as the case may be, no later than 3:00 p.m., Dallas time,
on the fifth trading day prior to the date of the CrossComm Stockholders'
Meeting by telephone followed by telecopied confirmation thereof.
- 3 -
<PAGE> 8
(c) The Exchange Ratio and the Warrant Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Olicom Common Stock or CrossComm Common Stock), reorganization, recapitalization
or other like change with respect to Olicom Common Stock or CrossComm Common
Stock occurring after the date hereof and prior to the Effective Time.
Information regarding any adjustments to the Exchange Ratio and the Warrant
Exchange Ratio shall be made available by Olicom and CrossComm to their
respective stockholders through the use of a 1-800 phone number prior to the
CrossComm Stockholders' Meeting (as defined in Section 2.21) and Olicom
Stockholders' Meeting (as defined in Section 3.20).
(d) At the Effective Time, all shares of CrossComm Common Stock
that are owned by CrossComm as treasury stock, and each share of CrossComm
Common Stock owned by Olicom or any direct or indirect wholly-owned subsidiary
of Olicom or of CrossComm immediately prior to the Effective Time, shall be
canceled and extinguished without any conversion thereof.
(e) At or prior to the Effective Time and upon approval of the
Agreement by the stockholders of CrossComm, the Exchange Agent (as defined in
Section 1.8(a)) and/or CrossComm shall deliver to Olicom a duly executed
subscription list relating to the subscription for the Olicom Common Stock
included in the Merger Consideration, such subscription list to be in compliance
with the requirements of the Companies Act and in a form reasonably acceptable
to Olicom.
(f) At the Effective Time, the CrossComm Option Plans (as defined
in Section 8.1) and all options to purchase CrossComm Common Stock then
outstanding under the CrossComm Option Plans shall be assumed by Olicom in
accordance with Section 5.11.
(g) At the Effective Time, each share of common stock, par value
$0.01 per share, of MergerSub ("MergerSub Common Stock"), issued and outstanding
immediately prior to the Effective Time shall be cancelled and extinguished
without any exchange thereof.
(h) No fraction of a share of Olicom Common Stock shall be issued,
but in lieu thereof each holder of a share of CrossComm Common Stock who would
otherwise be entitled to a fraction of a share of Olicom Common Stock (after
aggregating all fractional shares of Olicom Common Stock to be received by such
holder) shall receive from Olicom an amount in cash (rounded to the nearest
whole cent) equal to the product of (i) such fraction, multiplied by (ii) the
Final Closing Price. No fraction of a Warrant shall be issued, but in lieu
thereof each holder of a Warrant who would otherwise be entitled to a fraction
of a Warrant (after aggregating all fractional Warrants
- 4 -
<PAGE> 9
to be received by such holder) shall receive from Olicom an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the Warrant Unit Consideration (as defined in Section
5.11(a)).
1.7 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means
shares of CrossComm Common Stock held as of the Effective Time by a stockholder
of record of CrossComm who has not voted such shares of CrossComm Common Stock
in favor of the Merger and with respect to which appraisal rights shall have
been duly demanded and perfected in accordance with Section 262 of Delaware Law
and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be exchanged into or represent the right to receive
the consideration which the holders of CrossComm Common Stock are entitled to
receive pursuant to Section 1.6(a) or (b) unless the holder thereof shall have
forfeited his or her right to appraisal under Delaware Law or withdrawn, with
the consent of CrossComm, his or her demand for appraisal. If such stockholder
has so forfeited or withdrawn his or her right to appraisal of Dissenting
Shares, then, as of the occurrence of such event, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Consideration pursuant to Section
1.6(a).
(b) CrossComm shall give Olicom (i) prompt notice of any written
demands for appraisal of any shares of CrossComm Common Stock, withdrawals of
such demands, and any other instruments that relate to such demands received by
CrossComm, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under Delaware Law. CrossComm shall not,
except with the prior consent of Olicom, make any payment with respect to any
demands for appraisal of shares of CrossComm Common Stock or offer to settle or
settle any such demands.
1.8 Surrender of Certificates.
(a) American Stock Transfer & Trust Company shall act as exchange
agent (the "Exchange Agent") in the Merger.
(b) Promptly after the Effective Time, Olicom shall make available
to the Exchange Agent for exchange in accordance with this Article I, through
such reasonable procedures as Olicom may adopt, (i) the shares of Olicom Common
Stock and Warrants issuable, and cash payable, pursuant to Section 1.6(b) in
exchange for the Surviving Corporation Stock, and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares and fractional
Warrants pursuant to Section 1.6(h) (collectively, the "Exchange Fund").
- 5 -
<PAGE> 10
(c) Promptly after the Effective Time (but in no event more than
five business days), the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates (the
"Certificates") of CrossComm Common Stock, (i) a letter of transmittal in form
reasonably acceptable to Olicom and CrossComm (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Exchange Agent, and shall be in
such form and have such other provisions as Olicom may reasonably specify), and
(ii) instructions for use in effecting the surrender of the Certificates and
obtaining delivery of whole shares of Olicom Common Stock and Warrants, and the
cash portion of the Merger Consideration (together with cash in lieu of
fractional shares of Olicom Common Stock and fractional Warrants). Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive certificates evidencing the number of whole shares of Olicom Common
Stock, the number of whole Warrants, the cash portion of the Merger
Consideration, and payment in lieu of fractional shares of Olicom Common Stock
and fractional Warrants which such holder has the right to receive pursuant to
Section 1.6. Until so surrendered, (i) each outstanding Certificate for shares
of CrossComm Common Stock shall be deemed from and after the Effective Time
other than the payment of dividends, to evidence for all corporate purposes
(including the right to vote at meetings of Olicom's stockholders), the number
of whole shares of Olicom Common Stock, the number of whole Warrants, the cash
portion of the Merger Consideration for which such shares of CrossComm Common
Stock shall have been so exchanged, and the right to receive an amount in cash
in lieu of the issuance of any fractional shares of Olicom Common Stock or
fractional Warrants in accordance with Section 1.6. No interest will be paid or
accrued on any amount payable or due on the surrender of the Certificates.
(d) No dividends or other distributions with respect to Olicom
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Olicom Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of any such dividends or other distributions with a record date after
the Effective Time theretofore payable (but for the provisions of this Section
1.8(d)) with respect to such shares of Olicom Common Stock.
(e) If any certificate for shares of Olicom Common Stock or any
certificate evidencing Warrants is to be issued in a name other than that in
which the Certificate originally surrendered with respect thereto is registered,
it shall be a condition of the issuance thereof that the Certificate so
surrendered shall be properly endorsed, and otherwise be in proper form for
transfer, and that the person requesting such exchange shall have paid to Olicom
or any agent designated by it any transfer or other
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taxes required by reason of the issuance of a certificate for shares of Olicom
Common Stock or Warrants in any name other than that of the registered holder of
the Certificate originally surrendered, or shall have established to the
satisfaction of Olicom or any agent designated by it that such tax has been paid
or is not payable.
(f) Any portion of the Exchange Fund which remains undistributed to
the stockholders of CrossComm for 180 days after the Effective Time shall be
delivered to Olicom, upon demand, and any stockholders of CrossComm who have not
previously complied with this Section 1.8 shall thereafter look only to Olicom
for payment of their claim for Merger Consideration (including any cash in lieu
of fractional shares of Olicom Common Stock or fractional Warrants, and any
dividends or distributions with respect to Olicom Common Stock.
(g) Notwithstanding anything to the contrary in this Section 1.8,
none of the Exchange Agent, the Surviving Corporation or any party hereto shall
be liable to any person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in CrossComm Common Stock. All shares of
Olicom Common Stock and Warrants issued, together with the cash portion of the
Merger Consideration paid, upon the surrender of a Certificate in accordance
with the terms hereof (including any cash paid in lieu of fractional shares of
Olicom Common Stock or fractional Warrants) shall be deemed to have been issued
and paid in full satisfaction of all rights received with respect thereto, and
there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of CrossComm Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue and pay in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Olicom Common Stock, Warrants and the cash portion of the Merger Consideration
(and cash in lieu of fractional shares of Olicom Common Stock and Warrants) as
may be required pursuant to Section 1.6; provided, however, that Olicom may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Olicom, the Surviving Corporation or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and
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possession to all assets, property, rights, privileges, powers and franchises of
CrossComm and MergerSub, the officers and directors of CrossComm and MergerSub
are fully authorized in the name of their respective corporations or otherwise
to take, and shall take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CROSSCOMM
Except as disclosed in a document of even date herewith delivered by
CrossComm to Olicom prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the
"CrossComm Disclosure Letter"), CrossComm represents and warrants to Olicom and
MergerSub as follows:
2.1 Organization, Standing and Power. Each of CrossComm and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of CrossComm
and its subsidiaries has the corporate power to own its properties and to carry
on its business as now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect (as defined in Section
8.1) on CrossComm and its subsidiaries, taken as a whole, or on CrossComm-Poland
Ltd. ("CrossComm - Poland"), or on CrossComm (UK) Ltd. ("CrossComm (UK)").
CrossComm has delivered to Olicom a true and correct copy of its amended and
restated certificate of incorporation, as amended (the "Certificate of
Incorporation"), bylaws, as amended (the "Bylaws"), or equivalent charter or
organizational documents, as applicable, of CrossComm and each of its
subsidiaries, each as amended to date. Neither CrossComm nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation, Bylaws or equivalent charter or organizational documents.
2.2 Capital Structure.
(a) The authorized capital stock of CrossComm, as of March 14,
1997, consisted of 20,000,000 shares of CrossComm Common Stock and 4,000,000
shares of preferred stock, par value $0.01 per share, of which there were issued
and outstanding 9,284,584 shares of CrossComm Common Stock and no shares of
preferred stock, and no shares were held in the treasury of CrossComm. As of
March 14, 1997, there were no other outstanding shares of capital stock or
voting securities of CrossComm. All outstanding shares of CrossComm Common Stock
are duly authorized, validly issued, fully paid and non-assessable and are free
of any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive rights
(contractual or otherwise) or rights of first refusal created
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by statute, the Certificate of Incorporation, the Bylaws or any agreement to
which CrossComm is a party or by which it is bound.
(b) As of March 14, 1997, there were unexercised options to
purchase 1,796,465 shares of CrossComm Common Stock that had been granted to
employees and directors and were outstanding pursuant to the CrossComm Option
Plans. Since March 14, 1997, CrossComm has not (i) issued or granted additional
options under the CrossComm Option Plans, or (ii) accepted enrollments in the
CrossComm 1995 Employee Stock Purchase Plan (the "CrossComm ESPP"). All shares
of CrossComm Common Stock subject to issuance as set forth above, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. Except for the rights created pursuant to this Agreement, the
CrossComm Option Plans and the CrossComm ESPP, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which
CrossComm is a party or by which it is bound obligating CrossComm to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of CrossComm or obligating
CrossComm to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no contracts, commitments or agreements relating to
voting, purchase or sale of CrossComm's capital stock (i) between or among
CrossComm and any of its stockholders, and (ii) to CrossComm's knowledge,
between or among any of CrossComm's stockholders, except for the stockholder
named in Section 5.8(a) of the CrossComm Disclosure Letter. The current
"Offering" (as defined in the CrossComm ESPP) commenced under the CrossComm ESPP
on January 1, 1997 and will end as provided in Section 5.11(c), and except for
the purchase rights granted on such commencement date to participants in the
current Offering, there are no other purchase rights or options outstanding
under the CrossComm ESPP. True and complete copies of all agreements and
instruments relating to or issued under the CrossComm Option Plans or CrossComm
ESPP have been made available to Olicom, and such agreements and instruments
have not been amended, modified or supplemented, and there are no agreements to
amend, modify or supplement such agreements or instruments in any case from the
form thereof made available to Olicom.
(c) CrossComm is the owner of all outstanding shares of capital
stock of each of its subsidiaries, and all such shares are duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights. All
of the outstanding shares of capital stock of each such subsidiary are owned by
CrossComm free and clear of all liens, charges, claims or encumbrances or rights
of others. There are no outstanding subscriptions, options, warrants, puts,
calls, rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued capital stock or
other securities of any such subsidiary, or otherwise obligating CrossComm or
any such subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities.
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<PAGE> 14
(d) Except as disclosed in the CrossComm SEC Documents (as defined
in Section 2.5), CrossComm does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
2.3 Authority. CrossComm has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of CrossComm, subject only to the
approval of the Merger by CrossComm's stockholders as contemplated by Section
6.1(a)(i). This Agreement has been duly executed and delivered by CrossComm and
constitutes the valid and binding obligation of CrossComm enforceable against
CrossComm in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity. The execution and delivery of this Agreement by CrossComm
do not and, except for any required approval by CrossComm's stockholders as set
forth in Section 2.23, the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, (i) any provision of the Certificate of Incorporation or Bylaws
or equivalent organizational documents of any of CrossComm's subsidiaries, as
amended, or (ii) any mortgage or indenture, or material lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
CrossComm or any of its subsidiaries or any of their properties or assets,
except where such conflict, violation, default, termination, cancellation or
acceleration with respect to the foregoing provisions of clause (ii) is not
reasonably likely to have a Material Adverse Effect on CrossComm or such
subsidiary, as the case may be.
2.4 Governmental Authorization. CrossComm and each of its subsidiaries
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant or other authorization that is required for the
operation of CrossComm's or any of its subsidiaries' businesses (collectively,
the "CrossComm Authorizations"), and all of such CrossComm Authorizations are in
full force and effect, except where the failure to obtain or maintain any of
such CrossComm Authorizations would not have a Material Adverse Effect on
CrossComm and its subsidiaries, taken as a whole. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality (each, a "Governmental Entity") is required by or, to the
knowledge of CrossComm, with respect to, CrossComm or any of its subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger as provided in
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Section 1.2, (ii) the filing with the Securities and Exchange Commission (the
"Commission") and Nasdaq of the Joint Proxy Statement (as defined in Section
2.21) relating to the CrossComm Stockholders' Meeting, (iii) other filings under
the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (v) such filings as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR"), and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would have a Material Adverse
Effect on CrossComm and its subsidiaries, taken as a whole, and would prevent,
or materially alter or delay any of the transactions contemplated by this
Agreement.
2.5 SEC Documents. CrossComm has made available to Olicom a true and
complete copy of each notice, information statement, report, schedule,
registration statement and definitive proxy statement (including exhibits
thereto) filed with the Commission by CrossComm since December 31, 1995; and
prior to the Effective Time, CrossComm will have furnished Olicom with true and
complete copies of any additional documents filed with the Commission by
CrossComm after such date and prior to the Effective Time (collectively, the
"CrossComm SEC Documents"). All documents required to be filed as exhibits to
the CrossComm SEC Documents have been so filed. As of their respective filing
dates, the CrossComm SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
none of the CrossComm SEC Documents contained any untrue statement of a material
fact or omitted 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 CrossComm SEC Document.
2.6 Financial Statements. CrossComm has furnished to Olicom true, complete
and accurate copies of CrossComm's unaudited consolidated financial statements
at and for the fiscal year ended December 31, 1996, which financial statements
include, among other things, the consolidated balance sheet of CrossComm at
December 31, 1996, and the related consolidated statements of income (loss) and
cash flows for the period then ended (such financial statements are collectively
referred to herein as the "CrossComm 1996 Financial Statement"). The
consolidated financial statements of CrossComm, together with, in each case, the
notes thereto, included in the CrossComm SEC Documents and the CrossComm 1996
Financial Statement (collectively, the "CrossComm Financial Statements")
complied or will comply as to form in all material respects with applicable
accounting requirements, to the extent filed with the Commission, with the
published rules and regulations of the Commission with respect thereto as of
their respective dates, and have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other ("GAAP") (except as may be
indicated in the notes thereto or,
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in the case of unaudited statements included in Quarterly Reports on Form 10-Q,
as permitted by Form 10-Q promulgated by the Commission). The CrossComm
Financial Statements fairly present or will present the consolidated financial
condition and operating results of CrossComm and its subsidiaries at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments which were not and are not
expected to be material in amount) in all material respects. All reserves
established by CrossComm with respect to its assets are adequate.
2.7 Absence of Certain Changes. Since December 31, 1996 (the "CrossComm
Balance Sheet Date"), CrossComm has conducted its business in the ordinary
course consistent with past practice, and there has not occurred: (i) to the
date hereof, any change, event or condition (whether or not covered by
insurance) that would result in a Material Adverse Effect to CrossComm or any of
its subsidiaries, taken as a whole; (ii) an event described in Sections 4.1 (as
to CrossComm) or 4.2(c), (e), (f) (as to subclause (i)), (g), (i), (l)-(n) or
(p); or (iii) any negotiation or agreement by CrossComm or any of its
subsidiaries to do any of the things described in the preceding clauses (i) or
(ii) (other than negotiations with Olicom and its representatives regarding the
transactions contemplated by this Agreement).
2.8 Absence of Undisclosed Liabilities. CrossComm has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet included in the CrossComm 1996 Financial Statement (the "CrossComm
Balance Sheet"), (ii) those not required to be set forth in the CrossComm
Balance Sheet under GAAP, (iii) those incurred in the ordinary course of
business since the CrossComm Balance Sheet Date and consistent with past
practice, and (iv) those incurred in connection with the execution and delivery
of this Agreement.
2.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of CrossComm or any of
its subsidiaries, threatened against CrossComm or any of its subsidiaries or any
of their respective properties that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect (i) on CrossComm and its
subsidiaries, taken as a whole, (ii) on CrossComm-Poland or (iii) on CrossComm
(UK).
2.10 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon CrossComm or any of its subsidiaries
which has the effect or is reasonably likely to have the effect of prohibiting
or materially impairing the conduct of business by CrossComm or any of its
subsidiaries as currently conducted by any of them. Section 2.10 of the
CrossComm Disclosure Letter contains a true and complete list or brief
description of any agreements or arrangements restricting CrossComm's ability to
compete in the marketplace, and any joint venture
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<PAGE> 17
contract or arrangement or any other agreement which involves or is expected to
involve a sharing of profits with other persons.
2.11 Title to Property. Neither CrossComm nor any of its subsidiaries own
any real property. CrossComm and its subsidiaries have good and valid title to
all of their respective personal property acquired after the CrossComm Balance
Sheet Date (except personal property sold or otherwise disposed of since the
CrossComm Balance Sheet Date in the ordinary course of business), or in the case
of leased personal properties and assets, valid leasehold interests therein,
free and clear of all mortgages, liens, pledges, charges or encumbrances of any
kind or character, except (i) the lien of current taxes not yet due and payable,
(ii) such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties, (iii) liens securing debt which is reflected on the
CrossComm Balance Sheet, or (iv) those which would not have a Material Adverse
Effect on CrossComm and its subsidiaries, taken as a whole. The plants, property
and equipment of CrossComm and its subsidiaries that are used in the operations
of their businesses are in good operating condition and repair, reasonable wear
and tear excepted. All properties used in the operations of CrossComm and its
subsidiaries are reflected in the CrossComm Balance Sheet to the extent GAAP
requires the same to be reflected. Section 2.11 of the CrossComm Disclosure
Letter identifies each parcel of real property owned or leased by CrossComm or
any of its subsidiaries.
2.12 Intellectual Property.
(a) To its knowledge, CrossComm and its subsidiaries own, or are
licensed or otherwise possess legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material (collectively, "Intellectual
Property") that are used in or necessary to conduct the business of CrossComm
and its subsidiaries as currently conducted.
(b) Section 2.12 of the CrossComm Disclosure Letter lists (i) all
patents and patent applications and all registered and unregistered trademarks,
trade names and service marks (registered and unregistered), copyright
registrations and maskwork registrations, which CrossComm considers to be
material to its business or that of any subsidiary and included in the
Intellectual Property of CrossComm, including the jurisdictions in which each
such Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses, distribution and original equipment manufacturer
agreements, and other agreements as to which CrossComm is a party and pursuant
to which any person is authorized to use any Intellectual Property of CrossComm
or has the right to
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<PAGE> 18
manufacture, reproduce, market or exploit any CrossComm product or any
adaptation, translation or derivative work based on a CrossComm product or any
portion thereof, (iii) all material licenses, sublicenses and other agreements
as to which CrossComm or its subsidiaries is a party and pursuant to which
CrossComm is authorized to use any third party patents, trademarks or
copyrights, including software (collectively, "Third Party Intellectual Property
Rights"), which are used in the manufacture of, incorporated in, or form a part
of any product that is material to the business of CrossComm and any of its
subsidiaries, taken as a whole, and (iv) all material joint development
agreements to which CrossComm or any of its subsidiaries is a party.
(c) To CrossComm's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of CrossComm or any of its subsidiaries, any trade secret material to CrossComm
or any of its subsidiaries, or any Third Party Intellectual Property Right to
the extent licensed by or through CrossComm or any of its subsidiaries, by any
third party, including any employee or former employee of CrossComm or any of
its subsidiaries. Neither CrossComm nor any of its subsidiaries has entered into
any agreement to indemnify any other person against any charge of infringement
of any Intellectual Property, other than indemnification provisions contained in
purchase orders or customer agreements arising in the ordinary course of
business, copies of which have been made available to Olicom.
(d) CrossComm is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations pursuant
hereto, in breach of any license, sublicense or other agreement relating to any
Intellectual Property or Third Party Intellectual Property Rights, the breach of
which would have or would be reasonably likely to have a Material Adverse Effect
on CrossComm and its subsidiaries, taken as a whole.
(e) To CrossComm's knowledge, all patents, registered trademarks,
registered service marks and copyright registrations held by CrossComm are valid
and subsisting. Neither CrossComm nor any of its subsidiaries (i) is a party to
any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party, or (ii) has brought any action,
suit or proceeding for infringement of Intellectual Property or breach of any
license or agreement involving Intellectual Property against any third party. To
CrossComm's knowledge, the manufacture, marketing, licensing or sale of
CrossComm's products do not infringe any patent, trademark, service mark,
copyright, trade secret or other proprietary right of any third party.
(f) CrossComm has a policy to secure valid written assignments from
all consultants and employees who contribute or have contributed to the creation
or development of Intellectual Property of the rights to such contributions that
CrossComm does not already own by operation of law. All use, disclosure or
appropriation of
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<PAGE> 19
proprietary and confidential information ("Confidential Information") owned by
CrossComm by or to a third party has been pursuant to the terms of a written
agreement between CrossComm (or a subsidiary of CrossComm) and such third party.
All use, disclosure or appropriation of Confidential Information not owned by
CrossComm has been pursuant to the terms of a written agreement between
CrossComm (or a subsidiary of CrossComm) and the owner of such Confidential
Information, or is otherwise lawful.
2.13 Environmental Matters. CrossComm and each of its subsidiaries (i)
have obtained all applicable applications, exemptions, permits, licenses,
registrations, identification numbers, notices of intent, and other
authorizations ("Environmental Permits") that are required for the ownership,
use, or operation of their facilities (and equipment and structures thereon) to
comply with applicable laws relating to health, pollution, protection of the
environment or a community's right to know, including laws, rules, regulations,
orders, consent agreements of any foreign, federal, state or local executive,
legislative judicial, regulatory or administrative agency ("Environmental Laws")
relating to emissions, discharges, releases (or threatened releases) of
pollutants, contaminants, solid wastes, or hazardous or toxic substances,
materials or wastes ("Materials of Environmental Concern") into the environment,
including ambient air, surface water, ground water or land or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern by CrossComm or its
subsidiaries (or their respective agents), and (ii) are in compliance with all
terms and conditions of such Environmental Permits, and also are in compliance
with all terms and conditions of such Environmental Permits, and also are in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such Environmental Laws or contained in any judicial or administrative judgment
or decision arising thereunder, except where such failure to comply is not
reasonably likely to have a Material Adverse Effect on CrossComm and its
subsidiaries, taken as a whole.
2.14 Taxes. CrossComm and each of its subsidiaries have timely filed all
Tax Returns (as defined in this Section 2.14) required to be filed by any of
them, have paid all Taxes (as defined in this Section 2.14) shown thereon to be
due and have provided adequate accruals in accordance with GAAP in its financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any Tax Returns. Except as disclosed in the CrossComm Disclosure Letter,
(i) no material claim for Taxes has become a lien against the property of
CrossComm or any of its subsidiaries or is being asserted against CrossComm or
any of its subsidiaries, other than liens for Taxes not yet due and payable,
(ii) no audit of any Tax Return of CrossComm or any of its subsidiaries is being
conducted by a Tax Authority (as defined in this Section 2.14), (iii) no
extension of the statute of limitations on the assessment of any Taxes has been
granted to CrossComm or any of its subsidiaries and is currently in effect, and
(iv) there is no agreement, contract or arrangement to which CrossComm or any of
its subsidiaries
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is a party that may result in the payment of any amount that would not be
deductible by reason of Sections 280G or 404 of the Internal Revenue Code of
1986, as amended (the "Code"). CrossComm has not been and will not be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Sections 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed by CrossComm or any of its subsidiaries prior to the
Merger. Neither CrossComm nor any of its subsidiaries is a party to any tax
sharing or tax allocation agreement, nor does CrossComm or any of its
subsidiaries owe any amount under any such agreement(s). For purposes of this
Agreement, the following terms have the following meanings: "Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (x) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax Authority") responsible for the imposition of any
such tax (domestic or foreign), (y) any liability for the payment of any amounts
of the type described in clause (x) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period, and
(z) any liability for the payment of any amounts of the type described in
clauses (x) or (y) as a result of any express or implied obligation to indemnify
any other person. As used herein, "Tax Return" means any return, statement,
report or form (including estimated Tax returns and reports, withholding Tax
returns and reports and information reports and returns required to be filed
with respect to Taxes). CrossComm and each of its subsidiaries are in full
compliance with all terms and conditions of any Tax exemptions or other
Tax-sharing agreement or order of a foreign government, and the consummation of
the Merger shall not have any adverse effect on the continued validity and
effectiveness of any such Tax exemptions or other Tax-sharing agreement or
order.
2.15 Employee Benefit Plans.
(a) Section 2.15 of the CrossComm Disclosure Letter lists, with
respect to CrossComm, any United States subsidiary of CrossComm and any trade or
business (whether or not incorporated) which is treated as a single employer
with CrossComm (an "ERISA Affiliate") within the meaning of Sections 414(b),
(c), (m) or (o) of the Code, (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), subject to ERISA, (ii) each loan to a non-officer employee, loans to
officers and directors and any stock option, stock purchase, phantom stock or
stock appreciation right, (iii) all supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance, bonus, pension, profit sharing, savings,
deferred compensation or incentive plans, programs or arrangements which are not
employee benefit plans as
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otherwise covered under clause (i) above, (iv) other fringe or employee benefit
plans, programs or arrangements that apply to senior management of CrossComm and
that do not generally apply to all employees, and (v) any current or former
employment, executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of CrossComm of greater than
$25,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of CrossComm, but excluding any plan or
arrangement maintained or sponsored by any non-domestic entity (collectively,
the "CrossComm Employee Plans").
(b) CrossComm has furnished or made available to Olicom a copy of
each of the CrossComm Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto) and has, with
respect to each CrossComm Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports filed for the last three
plan years. Any CrossComm Employee Plan intended to be qualified under Section
401(a) of the Code has either obtained from the Internal Revenue Service a
favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has applied to the Internal Revenue Service for such
a determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination. CrossComm has also furnished or
made available to Olicom the most recent Internal Revenue Service determination
letter issued with respect to each such CrossComm Employee Plan, and nothing has
occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any CrossComm Employee
Plan subject to Code Section 401(a).
(c) Except as disclosed in Section 2.15(c) of the CrossComm
Disclosure Letter, (i) other than continued health care coverage required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
or applicable law, (x) none of the CrossComm Employee Plans promises or provides
retiree medical or other retiree or post termination welfare benefits to any
person, (y) each CrossComm Employee Plan may be amended or terminated at any
time without any liability to CrossComm or any ERISA Affiliate other than for
benefits accrued through the date of such termination, and each such plan
provides the administrator with the discretion to interpret and construe the
terms of the plan; (ii) there has been no "prohibited transaction," as such term
is defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any CrossComm Employee Plan which is reasonably likely to have a Material
Adverse Effect on CrossComm; (iii) each CrossComm Employee Plan is in material
compliance with the requirements prescribed by all statutes, rules and
regulations (including ERISA and the Code) and has been administered in all
material
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respects in accordance with its terms and in material compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), and CrossComm and each subsidiary or ERISA
Affiliate have performed all obligations required to be performed by them under,
are not in any respect in material default under or material violation of, and
have no knowledge of any material default or material violation by any other
party to, any of the CrossComm Employee Plans; (iv) neither CrossComm nor any
subsidiary or ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
of the CrossComm Employee Plans which is reasonably likely to have a Material
Adverse Effect on CrossComm; (v) all contributions required to be made by
CrossComm or any subsidiary or ERISA Affiliate to any CrossComm Employee Plan
have been made on or before their due dates, and a reasonable amount has been
accrued for contributions to each CrossComm Employee Plan for the current plan
year; (vi) with respect to each CrossComm Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the 30 day notice requirement has been waived under the regulations to Section
4043 of ERISA) nor any event described in Sections 4062, 4063 or 4041 of ERISA
has occurred; and (vii) no CrossComm Employee Plan is covered by, and neither
CrossComm nor any subsidiary or ERISA Affiliate has incurred or expects to incur
any liability under, Title IV of ERISA or Section 412 of the Code. With respect
to each CrossComm Employee Plan subject to ERISA as either an employee pension
plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA, CrossComm has prepared in good
faith and timely filed all required governmental reports (which were true and
correct as of the date filed), and CrossComm has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such CrossComm Employee Plan. No
suit, administrative proceeding, action or other litigation has been brought, or
to the knowledge of CrossComm, is threatened, against or with respect to any
such CrossComm Employee Plan, including any audit or inquiry by the Internal
Revenue Service or Department of Labor, and no event (other than routine claims
for benefits) has occurred and no set of circumstances have occurred in
connection with any CrossComm Employee Plan for which CrossComm or any of its
affiliates or subsidiaries could be subject to any material liability. Neither
CrossComm nor any of its subsidiaries or other ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan," as defined in Section 3(37) of ERISA. No CrossComm
Employee Plan is funded through a "welfare benefit fund" (as such term is
defined in Code Section 419(e) of the Code). Except as disclosed in Section
2.15(c) of the CrossComm Disclosure Letter, no CrossComm Employee Plan is a
"multiple employer welfare arrangement" (as defined by Section 3(40) of ERISA).
(d) With respect to each CrossComm Employee Plan, CrossComm and
each of its United States subsidiaries have complied in all material respects
with (i) the applicable health care continuation and notice provisions of COBRA
and the proposed
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regulations thereunder, (ii) the applicable requirements of the Family Leave Act
of 1993 and the regulations thereunder and (iii) Section 609 of ERISA.
(e) Except as described in Section 2.15(e) of the CrossComm
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of CrossComm, any CrossComm subsidiary or any other ERISA Affiliate to
severance benefits or any other payment, (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or service
provider, or (iii) require payments (whether in cash or property or the vesting
of property) to any employee, officer or director of CrossComm or any ERISA
Affiliate who is a "disqualified individual" (as such term is defined in
Proposed Treasury Regulation Section 1.280G-1) that could be characterized as a
"excess parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code).
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by CrossComm, any CrossComm subsidiary or
other ERISA Affiliate relating to, or change in participation or coverage under,
any CrossComm Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal year included in CrossComm's financial
statements.
(g) All voluntary employee benefit associations related to the
CrossComm Employee Plans have been submitted to and approved as exempt from
federal income tax under Section 501(c)(9) of the Code by the Internal Revenue
Service and have not been amended or operated in a manner which would adversely
affect such exempt status. All voluntary employee benefit associations related
to the CrossComm Employee Plans have been submitted to and approved as exempt
from federal income tax under Section 501(c)(9) of the Code by the Internal
Revenue Service and have not been amended or operated in a manner which would
adversely affect such exempt status.
(h) Except as disclosed in Section 2.15(h) of the CrossComm
Disclosure Letter, there are no guaranteed investment contracts, annuity
contracts or other funding contracts with any insurance company that are held by
any CrossComm Employee Plan. Except as set forth on Section 2.15 of the
CrossComm Disclosure Letter, no CrossComm Employee Plan covers persons employed
outside the United States, and no such Plan is subject to the laws of a foreign
jurisdiction.
2.16 Employee Matters. CrossComm and each of its subsidiaries are in
compliance in all respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice, except where the
failure to be in compliance or the
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engagement in such unfair labor practices would not have a Material Adverse
Effect on CrossComm and its subsidiaries, taken as a whole. Neither CrossComm
nor any of its subsidiaries has any obligations under COBRA with respect to any
former employees or qualifying beneficiaries thereunder, except for obligations
that would not have a Material Adverse Effect on CrossComm and its subsidiaries,
taken as a whole. Neither CrossComm nor any of its subsidiaries is a party to
any collective bargaining agreement or other labor union contract, nor does
CrossComm nor any of its subsidiaries know of any activities or proceedings of
any labor union to organize any such employees.
2.17 Certain Agreements. Section 2.17 of the CrossComm Disclosure Letter
lists all material contracts to which CrossComm or any of its subsidiaries is a
party (each, a "CrossComm Material Contract"). CrossComm has made available to
Olicom all CrossComm Material Contracts.
2.18 Compliance With Laws. Each of CrossComm and its subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any applicable statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for such violations or failures to comply as would not have a
Material Adverse Effect on CrossComm and its subsidiaries, taken as a whole.
2.19 Customers and Suppliers. Section 2.19 of the CrossComm Disclosure
Letter sets forth a list of CrossComm's customers with whom CrossComm, as of the
date hereof, is contractually obligated to supply CrossComm products or services
aggregating more than $250,000 (collectively, "Continuing Customers"). No
Continuing Customer has indicated to CrossComm or any of its subsidiaries that
it will stop, or materially decrease the rate of, buying services or products of
CrossComm or such subsidiary, nor has at any time on or after January 1, 1997,
decreased materially its purchases of the services or products of CrossComm or
such subsidiary. No supplier of sole source or limited source products,
components or assemblies to CrossComm or any of its subsidiaries has indicated
that it will stop, or materially decrease the rate of, supplying, such products,
components or assemblies to CrossComm or any of its subsidiaries. CrossComm has
not knowingly breached, so as to provide a benefit to CrossComm or such
subsidiary that was not intended by the parties, any agreement with any customer
or supplier of CrossComm or any of its subsidiaries.
2.20 Brokers' and Finders' Fees. Except for payment obligations to
Montgomery Securities disclosed to Olicom, CrossComm has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees in connection with this
Agreement or any transaction contemplated hereby.
2.21 Registration Statement; Joint Proxy Statement/Prospectus. The
information supplied by CrossComm for inclusion in the registration statement on
Form F-4 (or such
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<PAGE> 25
other or successor form as shall be appropriate) pursuant to which the shares of
Olicom Common Stock, the Rights and the Warrants to be issued in the Merger,
together with the Warrant Shares (as defined in Section 3.2(b)), will be
registered with the Commission (the "Registration Statement") shall not at the
time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the Commission contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by CrossComm for inclusion in the proxy statement/prospectus to be sent
to the stockholders of CrossComm in connection with the meeting of CrossComm's
stockholders to consider the Merger (the "CrossComm Stockholders' Meeting")
(such proxy statement/prospectus, as amended or supplemented, is referred to
herein as the "Joint Proxy Statement") shall not, on the date the Joint Proxy
Statement is first mailed to CrossComm's stockholders, at the time of the
CrossComm Stockholders' Meeting or the Olicom Stockholders' Meeting, and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the CrossComm
Stockholders' Meeting or the Olicom Stockholders' Meeting which has become false
or misleading. If at any time prior to the Effective Time any event or
information should be discovered by CrossComm which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, CrossComm shall promptly inform Olicom and MergerSub. Notwithstanding
the foregoing, CrossComm makes no representation, warranty or covenant with
respect to any information supplied by Olicom or MergerSub which is contained in
any of the foregoing documents.
2.22 Opinion of Financial Advisor. CrossComm has been advised in writing
by its financial advisor, Montgomery Securities, that in such advisor's opinion,
as of the date hereof, the consideration to be received by the stockholders of
CrossComm is fair, from a financial point of view, to the stockholders of
CrossComm.
2.23 Vote Required. The affirmative vote of the holders of a majority of
the shares of CrossComm Common Stock outstanding on the record date set for the
CrossComm Stockholders' Meeting is the only vote of the holders of any of
CrossComm's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
2.24 Board Approval. The Board of Directors of CrossComm (the "CrossComm
Board") has, prior to the execution and delivery hereof, unanimously (i)
approved this Agreement and the Merger, (ii) determined that the Merger is in
the best interests of the stockholders of CrossComm and is on terms that are
fair to such stockholders, and
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<PAGE> 26
(iii) determined to recommend that the stockholders of CrossComm approve this
Agreement and the consummation of the Merger.
2.25 Section 203 of Delaware Law Not Applicable. The CrossComm Board has
taken all actions so that the restrictions contained in Section 203 of Delaware
Law applicable to a "business combination" (as defined in Section 203 of the
Delaware Law) will not apply to the execution, delivery or performance of this
Agreement, the consummation of the Merger or the other transactions contemplated
by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF OLICOM AND MERGERSUB
Except as disclosed in a document of even date herewith and delivered by
Olicom to CrossComm prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Olicom
Disclosure Letter"), Olicom and MergerSub represent and warrant to CrossComm as
follows:
3.1 Organization, Standing and Power. Each of Olicom and its subsidiaries,
including MergerSub, is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of Olicom
and its subsidiaries has the corporate power to own its properties and to carry
on its business as now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the failure to be so qualified
and in good standing would have a Material Adverse Effect on Olicom and its
subsidiaries, taken as a whole. Olicom has delivered to CrossComm a true and
correct copy of its articles of association, as amended (the "Articles of
Association"), and rules of procedure, as amended (the "Rules of Procedure").
Neither Olicom nor any of its subsidiaries is in violation of any of the
provisions of its Articles of Association or Rules of Procedure or equivalent
organizational documents.
3.2 Capital Structure.
(a) The authorized capital stock of Olicom, as of March 14, 1997,
consisted of 15,938,000 shares of Olicom Common Stock, of which there were
issued and outstanding 14,734,000 shares, and 1,204,000 shares were held in the
treasury of Olicom. As of March 14, 1997, there are no other outstanding shares
of capital stock or voting securities of Olicom. The authorized capital stock of
MergerSub as of March 14, 1997, consisted of 1,000 shares of MergerSub Common
Stock, all of which were issued and outstanding and held by Olicom. All
outstanding shares of Olicom and MergerSub have been duly authorized, validly
issued, fully paid and are nonassessable and free of any liens or encumbrances,
other than any liens or encumbrances created by or imposed upon the holders
thereof.
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<PAGE> 27
(b) As of March 14, 1997, there were unexercised options and
warrants to purchase 663,200 shares of Olicom Common Stock that had been granted
to employees and directors and were outstanding pursuant to the Olicom Share
Incentive Plans (as defined in Section 8.1). Except for (i) the rights created
pursuant to this Agreement, and (ii) options that may be granted pursuant to an
Olicom Share Incentive Plan by Olicom subsequent to the date hereof, there are
no other options, warrants, calls, rights, commitments or agreements of any
character to which Olicom or MergerSub is a party or by which either of them is
bound obligating Olicom or MergerSub to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of Olicom or MergerSub or obligating Olicom or
MergerSub to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. The shares of Olicom Common Stock to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid, and
non-assessable and free of preemptive rights. The Warrants to be issued pursuant
to the Merger will be duly authorized, validly issued and fully paid, and the
shares of Olicom Common Stock issuable on exercise of the Warrants to which they
relate (the "Warrant Shares"), will be duly authorized, validly issued, fully
paid, and nonassessable and free of preemptive rights.
(c) Olicom is the owner of all outstanding shares of capital stock
of each of its subsidiaries, and all such shares are duly authorized, validly
issued, fully paid and nonassessable. All of the outstanding shares of capital
stock of each such subsidiary are owned by Olicom free and clear of all liens,
charges, claims or encumbrances or rights of others. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of any such
subsidiary, or otherwise obligating Olicom or any such subsidiary to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
(d) Except as disclosed in the Olicom SEC Documents (as defined in
Section 3.5), Olicom does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
3.3 Authority. Olicom and MergerSub have all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Olicom and
MergerSub, subject to the approval of the Merger by Olicom's stockholders as
contemplated by Section 6.1(a)(ii). This Agreement has been duly executed and
delivered by Olicom and MergerSub and constitutes the valid and binding
obligations of Olicom and MergerSub enforceable against Olicom and MergerSub, as
the case may be, in accordance with its terms, subject
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to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and general principles of equity. The execution and delivery of this Agreement
do not and, except for any required approval by Olicom's stockholders as set
forth in Section 3.22 and the authorization of the Board of Directors of Olicom
to increase the share capital of Olicom for the purposes of providing Olicom
Common Stock for exchange as the Merger Consideration, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, (i) any provision of the Articles of
Association or Rules of Procedure or equivalent organizational documents of any
of Olicom's subsidiaries, as amended, or (ii) any mortgage or indenture, or
material lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Olicom or any of its subsidiaries or their properties
or assets, except where such conflict, violation, default, termination,
cancellation or acceleration with respect to the foregoing provisions of clause
(ii) is not reasonably likely to have a Material Adverse Effect on Olicom.
3.4 Governmental Authorization. Olicom and each of its subsidiaries have
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization that is required for the
operation of Olicom's or any of its subsidiaries' businesses (collectively, the
"Olicom Authorizations"), and all of such Olicom Authorizations are in full
force and effect, except where the failure to obtain or maintain any of such
Olicom Authorizations would not have a Material Adverse Effect on Olicom and its
subsidiaries, taken as a whole. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, is
required by or, to the knowledge of Olicom, with respect to Olicom or any of its
subsidiaries in connection with the execution and delivery of this Agreement by
Olicom and MergerSub or the consummation by Olicom and MergerSub of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger as provided in Section 1.2, (ii) the filing with the Commission and
NARD of the Registration Statement, (iii) other filings under the Securities Act
or the Exchange Act, (iv) any filings as may be required under applicable state
securities laws and the securities laws of any foreign country, (v) such filings
as may be required under HSR, (vi) the filing with the Nasdaq National Market of
a Notification Form for Listing of Additional Shares with respect to the
Warrants, the Warrant Shares, the shares of Olicom Common Stock issuable upon
the exchange of the CrossComm Common Stock in the Merger and upon exercise of
the options under the CrossComm Option Plans assumed by Olicom, and (vii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would have a Material Adverse Effect on Olicom and its
subsidiaries, taken as a whole, and would prevent or materially alter or delay
any of the transactions contemplated by this Agreement.
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<PAGE> 29
3.5 SEC Documents. Olicom has made available to CrossComm a true and
complete copy of each notice, information statement, report, schedule,
registration statement and definitive proxy statement filed with the Commission
by Olicom since December 31, 1995; and prior to the Effective Time, Olicom will
have furnished CrossComm with true and complete copies of any additional
documents filed with the Commission by Olicom after such date and prior to the
Effective Time (collectively, the "Olicom SEC Documents"). All documents
required to be filed as exhibits to the Olicom SEC Documents have been so filed.
As of their respective filing dates, the Olicom SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and none of the Olicom SEC Documents contained any
untrue statement of a material fact or omitted 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 Olicom SEC Document.
3.6 Financial Statements. Olicom has furnished to CrossComm true, complete
and accurate copies of Olicom's consolidated unaudited financial statements at
and for the fiscal year ended December 31, 1996, which financial statements
include, among other things, the consolidated balance sheet of Olicom at
December 31, 1996, and the related consolidated statements of income and cash
flows for the period then ended (such financial statements are collectively
referred to herein as the "Olicom 1996 Financial Statement"). The consolidated
financial statements of Olicom, together with, in each case, the notes thereto,
included in the Olicom SEC Documents and the Olicom 1996 Financial Statement
(collectively, the "Olicom Financial Statements") complied or will comply as to
form in all material respects with applicable accounting requirements and, to
the extent filed with the Commission, with the published rules and regulations
of the Commission with respect thereto as of their respective dates, and have
been prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements included in its Reports on Form
6-K, subject to normal, recurring year-end adjustments). The Olicom Financial
Statements fairly present or will present the consolidated financial condition
and operating results of Olicom and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments which were not and are not expected to be
material in amount) in all material respects. All reserves established by Olicom
with respect to its assets are adequate.
3.7 Absence of Certain Changes. Since December 31, 1996 (the "Olicom
Balance Sheet Date"), Olicom has conducted its business in the ordinary course
consistent with past practice, and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that would result in a
Material Adverse Effect to Olicom; (ii) an event described in Section 4.1 (as to
Olicom); or (iii) any negotiation or agreement by Olicom or any of its
subsidiaries to do any of the things described in the preceding clauses (i) or
(ii) (other than negotiations with CrossComm and its representatives regarding
the transactions contemplated by this Agreement).
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3.8 Absence of Undisclosed Liabilities. Olicom has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the balance sheet
included in the Olicom 1996 Financial Statement (the "Olicom Balance Sheet"),
(ii) those not required to be set forth in the Olicom Balance Sheet under GAAP,
(iii) those incurred in the ordinary course of business since the Olicom Balance
Sheet Date and consistent with past practice, and (iv) those incurred in
connection with the execution and delivery of this Agreement.
3.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Olicom or any of its
subsidiaries, threatened against Olicom or any of its subsidiaries or any of
their respective properties that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Olicom and its subsidiaries,
taken as a whole.
3.10 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon Olicom or any of its
subsidiaries which has the effect or is reasonably likely to have the effect of
prohibiting or materially impairing the conduct of business by Olicom or any of
its subsidiaries as currently conducted. Section 3.10 of the Olicom Disclosure
Letter contains a true and complete list or brief description of any agreements
or arrangements restricting Olicom's ability to compete in the marketplace, and
any joint venture contract or arrangement or any other agreement which involves
or is expected to involve a sharing of profits with other persons.
3.11 Title to Property. Olicom and its subsidiaries have good and valid
title to all of their respective properties, interests in properties and assets,
real and personal, acquired after the Olicom Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Olicom Balance Sheet Date in the ordinary course of business), or in
the case of leased properties and assets, valid leasehold interests therein,
free and clear of all mortgages, liens, pledges, charges or encumbrances of any
kind or character, except (i) the lien of current taxes not yet due and payable,
(ii) such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties, (iii) liens securing debt which is reflected on the
Olicom Balance Sheet, or (iv) those which would not have a Material Adverse
Effect on Olicom and its subsidiaries, taken as a whole. The plants, property
and equipment of Olicom and its subsidiaries that are used in the operations of
their businesses are in good operating condition and repair, reasonable wear and
tear excepted. All properties used in the operations of Olicom and its
subsidiaries are reflected in the Olicom Balance Sheet to the extent GAAP
requires the same to be reflected.
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3.12 Intellectual Property.
(a) To its knowledge, Olicom and its subsidiaries own, or are
licensed or otherwise possess legally enforceable rights to use, all
Intellectual Property that is used in or necessary to conduct the business of
Olicom and its subsidiaries as currently conducted by Olicom and its
subsidiaries.
(b) To Olicom's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Olicom or any of its subsidiaries, any trade secret material to Olicom or any
of its subsidiaries, or any Third Party Intellectual Property Right to the
extent licensed by or through Olicom or any of its subsidiaries, by any third
party, including any employee or former employee of Olicom or any of its
subsidiaries.
(c) Olicom is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations pursuant
hereto, in breach of any license, sublicense or other agreement relating to any
Intellectual Property or Third Party Intellectual Property Rights, the breach of
which would have or would be reasonably likely to have a Material Adverse Effect
on Olicom and its subsidiaries, taken as a whole.
(d) To Olicom's knowledge, all patents, registered trademarks,
registered service marks and copyright registrations held by Olicom are valid
and subsisting. Neither Olicom nor any of its subsidiaries (i) is a party to any
suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party, or (ii) has brought any action,
suit or proceeding for infringement of Intellectual Property or breach of any
license or agreement involving Intellectual Property against any third party. To
Olicom's knowledge, the manufacture, marketing, licensing or sale of Olicom's
products do not infringe any patent, trademark, service mark, copyright, trade
secret or other proprietary right of any third party.
(e) Olicom has a policy to secure valid written assignments from
all consultants and employees who contribute or have contributed to the creation
or development of Intellectual Property of the rights to such contributions that
Olicom does not already own by operation of law. All use, disclosure or
appropriation of Confidential Information owned by Olicom by or to a third party
has been pursuant to the terms of a written agreement between Olicom (or a
subsidiary of Olicom) and such third party. All use, disclosure or appropriation
of Confidential Information not owned by Olicom has been pursuant to the terms
of a written agreement between Olicom (or a subsidiary of Olicom) and the owner
of such Confidential Information, or is otherwise lawful.
3.13 Environmental Matters. Olicom and each of its subsidiaries (i) have
obtained all applicable Environmental Permits that are required for the
ownership, use,
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or operation of their facilities (and equipment and structures thereon) to
comply with applicable laws relating to health, pollution, protection of the
environment or a community's right to know, including Environmental Laws, and
(ii) are in compliance with all terms and conditions of such Environmental
Permits, and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in such Environmental Laws or contained in any judicial or
administrative judgment or decision arising thereunder, except where such
failure to comply is not reasonably likely to have a Material Adverse Effect on
Olicom and its subsidiaries, taken as a whole.
3.14 Taxes. Olicom and each of its subsidiaries have timely filed all Tax
Returns required to be filed by any of them, have paid all Taxes shown thereon
to be due and have provided adequate accruals in accordance with GAAP in its
financial statements for any Taxes that have not been paid, whether or not shown
as being due on any Tax Returns. Except as disclosed in the Olicom Disclosure
Letter, (i) no material claim for Taxes has become a lien against the property
of Olicom or any of its subsidiaries or is being asserted against Olicom or any
of its subsidiaries, other than liens for Taxes not yet due and payable, (ii) no
audit of any Tax Return of Olicom or any of its subsidiaries is being conducted
by a Tax Authority, (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted to Olicom or any of its subsidiaries
and is currently in effect, and (iv) there is no agreement, contract or
arrangement to which any United States subsidiary of Olicom is a party that may
result in the payment of any amount that would not be deductible by reason of
Sections 280G or 404 of the Code. Olicom has not been and will not be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Sections 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed by Olicom or any of its subsidiaries prior to the
Merger. Neither Olicom nor any of its subsidiaries is a party to any tax sharing
or tax allocation agreement, nor does Olicom or any of its subsidiaries owe any
amount under any such agreement(s). Olicom and each of its subsidiaries are in
full compliance with all terms and conditions of any Tax exemptions or other
Tax-sharing agreement or order of a foreign government, and the consummation of
the Merger shall not have any adverse effect on the continued validity and
effectiveness of any such Tax exemptions or other Tax-sharing agreement or
order.
3.15 Employee Benefit Plans.
(a) As used in this Section 3.15, "Olicom Employee Plans" means,
with respect to Olicom, Inc., a Delaware corporation ("Olicom USA"), (i) all
employee benefit plans subject to ERISA, (ii) any stock option, stock purchase,
phantom stock or stock appreciation right, (iii) all supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance, bonus, pension, profit sharing,
savings, deferred compensation or incentive plans, programs or
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arrangements which are not employee benefit plans as otherwise covered under
clause (i) above, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Olicom USA and that do not
generally apply to all employees, and (v) any current or former employment,
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Olicom of greater than $25,000 remain for the
benefit of, or relating to, any present or former employee, consultant or
director of CrossComm, but excluding any plan or arrangement maintained or
sponsored by any non-domestic entity.
(b) (i) Other than continued health care coverage required under
COBRA or applicable law, none of the Olicom Employee Plans promises or provides
retiree medical or other retiree or post termination welfare benefits to any
person; (ii) there has been no "prohibited transaction" with respect to any
Olicom Employee Plan which is reasonably likely to have a Material Adverse
Effect on Olicom USA; (iii) each Olicom Employee Plan is in material compliance
with the requirements prescribed by all statutes, rules and regulations
(including ERISA and the Code) and has been administered in all material
respects in accordance with its terms and in material compliance with the
requirements prescribed by all statutes, rules and regulations (including ERISA
and the Code), and Olicom USA and each ERISA Affiliate have performed all
obligations required to be performed by them under, are not in any respect in
material default under or violation of, and have no knowledge of any material
default or material violation by any other party to, any of the Olicom Employee
Plans; (iv) neither Olicom USA nor any ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to any of the Olicom Employee Plans which is reasonably
likely to have a Material Adverse Effect on Olicom USA; (v) all contributions
required to be made by Olicom USA or any ERISA Affiliate to any Olicom Employee
Plan have been made on or before their due dates, and a reasonable amount has
been accrued for contributions to each Olicom Employee Plan for the current plan
years; (vi) with respect to each Olicom Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the 30 day notice requirement has been waived under the regulations to Section
4043 of ERISA) nor any event described in Sections 4062, 4063 or 4041 or ERISA
has occurred; and (vii) no Olicom Employee Plan is covered by, and neither
Olicom USA nor any ERISA Affiliate has incurred or expects to incur any
liability under Title IV of ERISA or Section 412 of the Code. With respect to
each Olicom Employee Plan subject to ERISA as either an employee pension plan
within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, Olicom USA has prepared in good
faith and timely filed all required governmental reports (which were true and
correct as of the date filed), and Olicom USA has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such Olicom Employee Plan. No suit,
administrative proceeding, action or other litigation has been brought, or to
the knowledge of Olicom, is threatened, against or with respect to any such
Olicom Employee Plan, including, without limitation, any audit or inquiry by
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the Internal Revenue Service or Department of Labor, and no event (other than
routine claims for benefits) has occurred and no set of circumstances have
occurred in connection with any Olicom Employee Plan for which Olicom or any of
its affiliates or subsidiaries could be subject to any material liability.
Neither Olicom USA nor any ERISA Affiliate is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan," as defined in Section 3(37) of ERISA.
(c) With respect to each Olicom Employee Plan, Olicom USA has
complied in all material respects with (i) the applicable health care
continuation and notice provisions of COBRA and the proposed regulations
thereunder, (ii) the applicable requirements of the Family Leave Act of 1993 and
the regulations thereunder, and (iii) Section 609 of ERISA.
3.16 Employee Matters. Olicom and each of its subsidiaries are in
compliance in all respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice, except where the
failure to be in compliance or the engagement in such unfair labor practices
would not have a Material Adverse Effect on Olicom and its subsidiaries, taken
as a whole. Neither Olicom nor any of its subsidiaries has any obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder, except for obligations that would not have a Material Adverse Effect
on Olicom. Neither Olicom nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract, nor does Olicom
nor any of its subsidiaries know of any activities or proceedings of any labor
union to organize any such employees.
3.17 Certain Agreements. Olicom has not breached or received in writing
any claim or threat that it has breached any of the terms of conditions of any
material agreement, contract or commitment (each, a "Olicom Material Contract")
in such a manner as would permit any other party to cancel or terminate the same
or would permit any other party to collect material damages from Olicom under
any Olicom Material Contract.
3.18 Compliance With Laws. Each of Olicom and its subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any applicable statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for such violations or failures to comply as would not have a
Material Adverse Effect on Olicom and its subsidiaries, taken as a whole.
3.19 Brokers' and Finders' Fees. Except for payment obligations to Alex.
Brown & Sons Incorporated, Olicom has not incurred, nor will it incur, directly
or indirectly,
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any liability for brokerage or finders' fees or agents' commissions or
investment bankers' fees in connection with this Agreement or any transaction
contemplated hereby.
3.20 Registration Statement; Joint Proxy Statement/Prospectus. The
information supplied by Olicom and MergerSub for inclusion in the Registration
Statement shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the Commission,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by Olicom for inclusion in the Joint Proxy Statement shall not, on the
date the Joint Proxy Statement is first mailed to Olicom's stockholders in
connection with the meeting of Olicom's stockholders to consider the Merger (the
"Olicom Stockholders' Meeting"), at the time of the CrossComm Stockholders'
Meeting or the Olicom Stockholders' Meeting, and at the Effective Time, contain
any statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the CrossComm Stockholders' Meeting or the Olicom Stockholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Time any event or information should be discovered by Olicom or
MergerSub which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement, Olicom or MergerSub will
promptly inform CrossComm. Notwithstanding the foregoing, Olicom and MergerSub
make no representation, warranty or covenant with respect to any information
supplied by CrossComm which is contained in any of the foregoing documents.
3.21 Opinion of Financial Advisor. Olicom has been advised in writing by
its financial advisor, Alex. Brown & Sons Incorporated, that in such advisor's
opinion as of the date hereof, the consideration to be paid by Olicom is fair to
Olicom from a financial point of view.
3.22 Vote Required. The affirmative vote of a majority of the votes cast
at the Olicom Stockholders' Meeting is the only vote of the holders of any of
Olicom's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
3.23 Board Approval. The Boards of Directors of Olicom and MergerSub have
prior to the date hereof unanimously (i) approved the Merger, (ii) determined
that the Merger is in the best interests of their respective stockholders and is
on terms that are fair to such stockholders, (iii) delegated to the Chairman of
the Board and the Managing Director the authority to approve the Agreement and
(iv) determined to recommend that the stockholders of Olicom approve this
Agreement (upon its execution and delivery on behalf of Olicom pursuant to the
foregoing authorization) and the consummation of the Merger.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of CrossComm and Olicom. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, each of CrossComm and Olicom agrees
(except to the extent expressly contemplated by this Agreement or as consented
to in writing by the other), to carry on its and its subsidiaries' business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay and to cause its subsidiaries to pay debts and
Taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform other obligations when due, and to use all reasonable efforts (under
the circumstances) to preserve intact its and its subsidiaries' present business
organizations, use its reasonable efforts to keep available the services of its
and its subsidiaries' present officers and key employees and use its reasonable
efforts consistent with past practice to preserve its and its subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees and
others having business dealings with it or its subsidiaries, to the end that its
and its subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Each of CrossComm and Olicom agrees to promptly notify the other
of any event or occurrence which would have a Material Adverse Effect. Without
limiting the foregoing, except as expressly contemplated by this Agreement,
neither CrossComm nor Olicom shall do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of the other:
(a) Cause or permit any amendments to the Certificate of
Incorporation or Bylaws (in the case of CrossComm), the Articles of Association
or Rules of Procedure, except as may be required to increase the share capital
of Olicom (in the case of Olicom), or equivalent charter or organizational
documents of any subsidiary;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or its
subsidiaries;
(c) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) and (b) above, or any action which would
make any of its representations or warranties contained in this Agreement untrue
or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
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4.2 Conduct of Business of CrossComm. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement, CrossComm shall not do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Olicom:
(a) Enter into any customer or vendor contract or commitment (or
violate, amend or otherwise modify or waive any of the terms of any of its
contracts) except for (i) contracts or commitments with respect to customers and
vendors with commitments that do not extend beyond June 30, 1997, that were
entered into (and violations, amendments, modifications and waivers of such
contracts) in the ordinary course of business consistent with past practice in
an amount less than $500,000 in any one case; (ii) contracts or commitments with
respect to customers and vendors with commitments that extend beyond June 30,
1997, that were entered into (and violations, amendments, modifications and
waivers of such contracts) in the ordinary course of business consistent with
past practice in an amount less than $200,000; and (iii) contracts or
commitments with respect to customers and vendors that were entered into (and
violations, amendments, modifications and waivers of such contracts) not in the
ordinary course of business consistent with past practice in an amount less than
$100,000 in any one case (Olicom agrees (1) to use its best efforts to respond
to requests from CrossComm with respect to waivers of the foregoing within
twelve (12) business hours, and (2) not to unreasonably withhold consent).
(b) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities, other
than the issuance of shares of CrossComm Common Stock pursuant to the exercise
of stock options, warrants or other rights therefor outstanding as of March 14,
1997;
(c) Transfer or license to any person or entity any rights to its
Intellectual Property which are material, individually or in the aggregate, to
its and its subsidiaries' businesses, taken as a whole, other than in the
ordinary course of business consistent with past practice, or enter into any
license to use Third Party Intellectual Property Rights;
(d) Enter into or amend any agreements pursuant to which any other
party is granted distribution rights with respect to any of its products or
technology;
(e) Sell, lease or otherwise dispose of or encumber any of its
properties or assets which are material, individually or in the aggregate, to
its and its subsidiaries' businesses, taken as a whole;
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(f) (i) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except in the ordinary course of business consistent with
past practice; or (ii) except to the extent of reserves therefor reflected on
the CrossComm Balance Sheet, pay, discharge or satisfy in an amount in excess of
$25,000 in any one case, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) arising other than in the
ordinary course of business, other than the payment, discharge or satisfaction
of current liabilities reflected or reserved against in the CrossComm Financial
Statements;
(g) Enter into any operating lease, except in the ordinary course
of business consistent with past practice;
(h) Make any material capital expenditures, capital additions or
capital improvements in an amount greater than $50,000 in any one instance;
(i) Materially increase or reduce the amount of any material
insurance coverage provided by existing insurance policies;
(j) Except, in each instance, to the extent set forth in the
CrossComm Disclosure Letter, adopt or amend any employee benefit or stock
purchase or option plan; accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under, or take any
similar action regarding any CrossComm Option Plan that is reasonably likely to
have a Material Adverse Effect on CrossComm and its subsidiaries, taken as a
whole, or authorize cash payments in exchange for any options or other rights
granted under any of such plans; employ any new officer level employee or any
director level employee; promote any employee to an officer or director level
position; pay any special bonus or special remuneration to any employee or
director; or increase the salaries or wage rates of officer or director level
employees;
(k) Grant any severance or termination pay to any director, officer
or employee except payments made pursuant to written agreements outstanding on
March 14, 1997;
(l) Commence a lawsuit other than (i) for the routine collection of
bills, (ii) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect of
its business, provided that it consults with Olicom prior to the filing of such
a suit, or (iii) for a breach of this Agreement;
(m) Acquire or agree to acquire (or permit any of its subsidiaries
to acquire or agree to acquire) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof,
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or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its subsidiaries' business, taken
as a whole, or acquire or agree to acquire any equity securities of any
corporation, partnership, association or business organization;
(n) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(o) Fail to give such notices and other information required to be
given to the employees of CrossComm, any collective bargaining unit representing
any group of employees of CrossComm, and any applicable government authority
under the WARN Act, the National Labor Relations Act, as amended, the Code,
COBRA, and other applicable law in connection with the transactions provided for
in this Agreement;
(p) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business; or
(q) Take or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through (p) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.3 No Solicitation.
(a) CrossComm and its subsidiaries, together with the officers,
directors, employees or other agents of CrossComm and its subsidiaries, (i)
shall not, directly or indirectly, take any action to solicit, initiate or
encourage any inquiries or proposals that constitute, or which could reasonably
be expected to lead to, an Acquisition Proposal (as defined in Section 4.3(d)),
(ii) shall not, directly or indirectly, subject to the terms of the immediately
following sentence, engage in negotiations or discussions with, or disclose any
nonpublic information relating to CrossComm or any of it subsidiaries to, or
afford access to the properties, books or records of CrossComm or any of its
subsidiaries to, any person with regard to an Acquisition Proposal, and (iii)
shall immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person, firm or entity conducted heretofore
with respect to any of the foregoing and shall inform any such person, firm or
entity of the obligations undertaken by CrossComm in this Section 4.3; provided,
however, that nothing herein shall prohibit the CrossComm Board from taking and
disclosing to CrossComm's stockholders a position with respect to a tender offer
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Notwithstanding the immediately preceding sentence, if (1) an unsolicited bona
fide written Acquisition
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Proposal, or an unsolicited bona fide expression of interest that CrossComm
reasonably expects could lead to a Acquisition Proposal, shall be received by
the CrossComm Board, (2) the CrossComm Board believes in good faith that such
Acquisition Proposal would, if consummated, result in a transaction more
favorable to CrossComm's stockholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to herein as a "Superior Proposal"), (3) the CrossComm
Board determines in good faith that it is necessary for the CrossComm Board to
comply with its fiduciary duties to CrossComm's stockholders under applicable
law by considering the Superior Proposal and taking actions consistent herewith
with respect thereto, and (4) that the party making such Superior Proposal has
the financial means, or the ability to obtain the necessary financing, to
consummate such transaction (it being understood that nothing herein shall
prohibit CrossComm from engaging in discussions with such party for the limited
purpose of determining that such party has the financial means, or ability to
obtain the necessary financing, to consummate such transaction), then CrossComm
and its subsidiaries, together with their respective officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
other representatives, may (consistent with the provisions hereof) furnish in
connection therewith information, enter into discussions and negotiations,
recommend such Superior Proposal to CrossComm's stockholders and take such other
actions as are consistent with the fiduciary obligations of the CrossComm Board,
and such actions shall not be considered a breach of this Section 4.3 or any
other provisions of this Agreement, provided that, in each such event, CrossComm
notifies Olicom of such determination by the CrossComm Board and provides Olicom
with a written summary in reasonable detail of the Superior Proposal (including
the identity of the offeror and the terms thereof) received from such third
party, together with a copy of all documents containing or referring to
non-public information of CrossComm that are supplied to such third party and
that were not previously supplied to Olicom; and provided, further, that in
order for the foregoing actions to not be considered a breach of this Section
4.3 or any other provision of this Agreement, (x) CrossComm shall not provide
any material non-public information to any such third party if it has not prior
to the date thereof provided such information to Olicom or Olicom's
representatives, and (y) CrossComm provides such non-public information pursuant
to a binding non-disclosure agreement with terms no less favorable as to
confidential information as the Confidentiality Agreement (as defined in Section
5.4).
(b) Notwithstanding anything to the contrary in this Agreement,
CrossComm shall not permit the CrossComm Board to adopt any Acquisition Proposal
unless CrossComm shall have terminated this Agreement pursuant to Section 7.1(g)
and paid Olicom all amounts payable to Olicom pursuant to Section 7.3(b) and
(d).
(c) CrossComm shall notify Olicom promptly (and, in any event, no
later than 24 hours), orally and in writing, after receipt by CrossComm (or its
advisors) of any Acquisition Proposal or obtaining actual knowledge that any
person is submitting an Acquisition Proposal or any request for non-public
information relating to
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CrossComm or any of its subsidiaries or for access to the properties, books or
records of CrossComm or any of its subsidiaries by any person that has advised
CrossComm that it may be considering making, or that has made, an Acquisition
Proposal and will keep Olicom fully informed of the status and details of any
such Acquisition Proposal, notice, request or any correspondence or
communications related thereto and shall provide Olicom with a written summary
in reasonable detail of such Acquisition Proposal, notice or request or
correspondence or communications related thereto (including the identity of the
offeror and the complete terms and conditions of such Acquisition Proposal).
(d) For purposes of this Agreement, "Acquisition Proposal" means
any written offer or proposal for, or any written indication of interest in, a
merger or other business combination involving CrossComm or the acquisition of
25% or more of the outstanding shares of capital stock of CrossComm, or the sale
or transfer of all or substantially all of the assets (excluding the sale or
disposition of assets in the ordinary course of business) of CrossComm, other
than the transactions contemplated by this Agreement.
(e) Nothing in this Section 4.3 shall (x) permit CrossComm to
terminate this Agreement (except as specifically provided in Section 4.3(b) or
Article VII), (y) permit CrossComm to enter into any agreement with respect to
an Acquisition Proposal during the term of this Agreement (it being agreed that
during the term of this Agreement, no party shall enter into any agreement with
any person that provides for, or in any way facilitates, an Acquisition Proposal
(other than (i) a confidentiality agreement in the form described herein and
information provided in accordance with Section 4.3(a), and (ii) as set forth in
Section 4.3(b)), or (z) affect any other obligation of CrossComm under this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Joint Proxy Statement/Prospectus; Registration Statement. As promptly
as practicable after the execution and delivery of this Agreement, CrossComm and
Olicom shall prepare and file with the Commission the Joint Proxy Statement, and
Olicom shall file with the Commission a Registration Statement on Form F-4 (or
such other or successor form as shall be appropriate), which complies in form
with applicable Commission requirements. Olicom and CrossComm shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable. Each of Olicom and CrossComm will notify the
other promptly of the receipt of any comments from the Commission or its staff
and of any request by the Commission or its staff or any other government
officials for amendments or supplements to the Registration Statement or any
other filing or for additional information and will supply the other with copies
of all correspondence between such company or any of its
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representatives, on the one hand, and the Commission, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement or other filing. The Registration Statement and the other filings
shall comply in all material respects with all applicable requirements of law.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Registration Statement or any other filing, Olicom or
CrossComm, as the case may be, shall promptly inform the other of such
occurrence and cooperate in filing with the Commission or its staff or any other
government officials, and/or mailing to stockholders of Olicom and CrossComm,
such amendment or supplement. The Joint Proxy Statement shall include the
recommendation of the CrossComm Board and the Board of Directors of Olicom in
favor of the Merger; provided, however, that the recommendation of the CrossComm
Board may be withdrawn if the CrossComm Board believes in good faith that a
Superior Proposal has been made or shall determine in good faith that to not
withdraw such recommendation would constitute a breach of the CrossComm Board's
fiduciary duty to stockholders under applicable law.
5.2 Meetings of Stockholders.
(a) Promptly after the date hereof, CrossComm shall take all action
necessary in accordance with Delaware Law and its Certificate of Incorporation
and Bylaws to convene the CrossComm Stockholders' Meeting as promptly as
practicable after the Registration Statement is declared effective by the
Commission. CrossComm shall consult with Olicom regarding the date of the
CrossComm Stockholders' Meeting and use all reasonable efforts not to postpone
or adjourn (other than for the absence of a quorum) the CrossComm Stockholders'
Meeting without the consent of Olicom, which consent shall not be required where
CrossComm determines in good faith that it is necessary to postpone or adjourn
the CrossComm Stockholders' Meeting in order to comply with its fiduciary duties
to stockholders under applicable law. Subject to Section 5.1, CrossComm shall
use its best efforts to solicit from stockholders of CrossComm proxies in favor
of the Merger and shall take all other action necessary or advisable to secure
the vote or consent of stockholders required to effect the Merger.
(b) Promptly after the date hereof, Olicom shall take all action
necessary in accordance with the Companies Act, its Articles of Association and
Rules of Procedure to convene the Olicom Stockholders' Meeting as promptly as
practicable after the Registration Statement is declared effective by the
Commission. Olicom shall consult with CrossComm regarding the date of the Olicom
Stockholders' Meeting and use all reasonable efforts not to postpone or adjourn
(other than for the absence of a quorum) the Olicom Stockholders' Meeting
without the consent of CrossComm. Subject to Section 5.1, Olicom shall use its
best efforts to solicit from stockholders of Olicom proxies in favor of the
Merger and shall take all other action necessary or advisable to secure the vote
or consent of stockholders required to effect the Merger.
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5.3 Access to Information; Advice of Changes.
(a) Until the earlier of the Effective Time or the termination of
this Agreement, CrossComm shall afford Olicom and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of CrossComm's and its
subsidiaries' properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and personnel of
CrossComm and its subsidiaries as Olicom may reasonably request. CrossComm
agrees to provide to Olicom and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(b) Until such time as the Registration Statement is declared
effective by the Commission or the earlier termination of this Agreement, Olicom
shall afford CrossComm and its accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to such information concerning the business, properties and
personnel of Olicom and its subsidiaries as CrossComm may reasonably request.
Olicom agrees to provide to CrossComm and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(c) Subject to compliance with applicable law, from the date hereof
until the earlier of the Effective Time or the termination of this Agreement,
each of Olicom and CrossComm shall confer on a regular and frequent basis with
one or more representatives of the other party to report operational matters of
materiality and the general status of ongoing operations.
(d) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
(e) Each party hereto shall promptly advise the other parties
hereto in writing of (i) any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of such advising
party contained in this Agreement, if made on or as of the date of such event or
the date of the Closing, untrue or inaccurate in any material respect and (ii)
any material change in such advising party's business.
5.4 Confidentiality. The parties acknowledge that each of Olicom and
CrossComm have previously executed a non-disclosure agreement dated November 27,
1996 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
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5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Olicom and CrossComm shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release with respect to the Merger or the
transactions contemplated hereby or make any public filing with respect thereto
without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law, or in exercise of the
fiduciary duties of a board of directors, or by obligations pursuant to any
listing agreement with any national securities exchange or with Nasdaq.
5.6 Consents; Cooperation. Each of Olicom and CrossComm shall promptly
apply for or otherwise seek, and use its best efforts to obtain, all consents
and approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR, and shall use its reasonable efforts to
obtain all necessary consents, waivers and approvals under any of the CrossComm
Material Contracts or Olicom Material Contracts, as the case may be, in
connection with the Merger for the assignment thereof or otherwise, except where
the failure to obtain such consents under CrossComm Material Contracts or Olicom
Material Contracts, as the case may be, would not have a Material Adverse Effect
on CrossComm or Olicom, as the case may be. The parties hereto shall consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to HSR or any other
federal or state antitrust or fair trade law.
5.7 Affiliate Agreements. Section 5.7 of the CrossComm Disclosure Letter
sets forth those persons who may be deemed "Affiliates" of CrossComm within the
meaning of Rule 145 promulgated under the Securities Act ("Rule 145"). CrossComm
shall provide Olicom such information and documents as Olicom shall reasonably
request for purposes of reviewing such list, and shall notify CrossComm in
writing with respect to any change in the identity of its Affiliates prior to
the Closing Date. CrossComm shall use its best efforts to deliver or cause to be
delivered to Olicom, concurrently with the execution and delivery of this
Agreement (and in each case at least 30 days prior to the Effective Time) from
each of the Affiliates of CrossComm, an executed Affiliate Agreement in the form
attached hereto as Exhibit C. Olicom and MergerSub shall be entitled to place
appropriate legends on the certificates evidencing any Olicom Common Stock to be
received by such Affiliates of CrossComm pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Olicom Common Stock, consistent with the terms of such Affiliate
Agreements.
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5.8 Voting Agreements.
(a) Concurrently with the execution and delivery of this Agreement,
CrossComm shall use its best efforts to cause Tadeusz Witkowicz to execute and
deliver to Olicom a voting agreement substantially in the form of Exhibit D
attached hereto.
(b) Concurrently with the execution and delivery of this Agreement,
Olicom shall use its best efforts to cause Lars Stig Nielsen to execute and
deliver to CrossComm a voting agreement substantially in the form of Exhibit E
attached hereto.
5.9 Legal Requirements. Each of Olicom, MergerSub and CrossComm shall, and
shall cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement, will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement, and shall take all reasonable actions necessary to obtain
(and will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
5.10 Blue Sky Laws. Olicom shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Olicom Common Stock in connection with the
Merger.
5.11 Employee Benefit Plans.
(a) As used herein, the "Option Exchange Ratio" shall equal (1) the
sum of (x) $5.00, (y) the Warrant Exchange Ratio times the Warrant Unit
Consideration (as defined in the immediately succeeding sentence) and (z) the
Exchange Ratio times the Final Closing Price, divided by (2) the Final Closing
Price. The value of a Warrant (the "Warrant Unit Consideration") shall be
calculated using the Black-Scholes Formula using a volatility equal to the
52-week historical weekly volatility of Olicom Common Stock and a risk-free rate
of interest equal to the yield to maturity for a United States Treasury Note
with a three-year maturity, as reported by Bloomberg on its historical yield
curve page, and shall be determined by and agreed upon by each of the financial
advisors to Olicom and CrossComm prior to the Closing, which agreement shall not
be unreasonably withheld.
(b) At the Effective Time, the CrossComm Stock Option Plans and
each outstanding option to purchase shares of CrossComm Common Stock under the
CrossComm Stock Option Plans, whether vested or unvested, shall be assumed by
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Olicom. Section 5.11 of the CrossComm Disclosure Letter sets forth a true and
complete list as of March 14, 1997, of all holders of outstanding options under
the CrossComm Stock Option Plans, including the number of shares of CrossComm
capital stock subject to each such option, the exercise or vesting schedule, the
exercise price per share and the term of each such option. On the Closing Date,
CrossComm shall deliver to Olicom an updated Section 5.11 of the CrossComm
Disclosure Letter current as of such date. Each such option so assumed by Olicom
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the CrossComm Stock Option Plans and the documents
governing the outstanding options under those plans, immediately prior to the
Effective Time, except that (i) such option shall be exercisable for that number
of whole shares of Olicom Common Stock equal to the product of the number of
shares of CrossComm Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Option Exchange Ratio
and rounded down to the nearest whole number of shares of Olicom Common Stock,
and (ii) the per share exercise price for the shares of Olicom Common Stock
issuable upon exercise of such assumed option shall be equal to the quotient
determined by dividing the exercise price per share of CrossComm Common Stock at
which such option was exercisable immediately prior to the Effective Time by the
Option Exchange Ratio, rounded up to the nearest whole cent. Consistent with the
terms of the CrossComm Option Plans and the documents governing the options
outstanding under such plans and except as set forth in the CrossComm Disclosure
Letter, the Merger shall not terminate any of the outstanding options under such
plans or accelerate the exercisability or vesting of such options or the shares
of Olicom Common Stock which will be subject to such options upon Olicom's
assumption of the options in the Merger. It is the intention of the parties that
any assumption of "incentive stock options" (as defined in Section 422 of the
Code) ("ISOs") shall comply with Section 424 of the Code such that ISOs so
assumed by Olicom shall qualify following the Effective Time as ISOs if and to
the extent that such options qualified as ISOs prior to the Effective Time. As
soon as reasonably practical, but in no event more than 25 days after the
Effective Time, Olicom will issue to each person who, immediately prior to the
Effective Time, was a holder of an outstanding option under the CrossComm Option
Plans a document reasonably evidencing the foregoing assumption of such option
by Olicom.
(c) Outstanding purchase rights under the CrossComm ESPP shall be
exercised or assumed, and the CrossComm ESPP shall be terminated, as follows:
(i) If it is determined on or before June 20, 1997, that the
Effective Time shall occur before July 1, 1997, the CrossComm Board shall
give notice to the holders of all outstanding purchase rights under the
CrossComm ESPP in accordance with clause (c) of the second paragraph of
Section 16 of the CrossComm ESPP, and each such outstanding purchase right
shall be deemed to be exercised as described in such clause. The CrossComm
ESPP, and all outstanding purchase rights thereunder, shall terminate with
such exercise date,
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and no purchase rights shall be subsequently granted or exercised under
the CrossComm ESPP.
(ii) If it is determined on or before June 20, 1997, that the
Effective Time shall occur on or after July 1, 1997, CrossComm shall take
such actions as are necessary to cause the Offering (as defined in the
CrossComm ESPP) scheduled to commence on July 1, 1997, to be postponed
until the earlier of such time as is determined by the Surviving
Corporation or the termination of this Agreement.
(iii) Section 5.11(c) of the CrossComm Disclosure Letter hereto
sets forth a true and complete list as of the date hereof of all holders
of outstanding purchase rights under the CrossComm ESPP, including the
payroll deduction amount elected by each holder and the price per share of
CrossComm Stock at the beginning of the current Offering. On the Closing
Date, CrossComm shall deliver to Olicom an updated Section 5.11(c) of the
CrossComm Disclosure Letter current as of such date.
5.12 Letter of Olicom's and CrossComm's Accountants.
(a) Olicom shall use all reasonable efforts to cause to be
delivered to CrossComm a Procedures Letter pursuant to SAS 76 of Olicom's
independent auditors, dated the date on which the Registration Statement shall
become effective and addressed to Olicom and CrossComm, in form reasonably
satisfactory to CrossComm and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
(b) CrossComm shall use all reasonable efforts to cause to be
delivered to Olicom a Procedures Letter pursuant to SAS 76 of CrossComm's
independent auditors, dated the date on which the Registration Statement shall
become effective and addressed to Olicom and CrossComm, in form reasonably
satisfactory to Olicom and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
5.13 Directorship. In connection with the meeting of Olicom's stockholders
called for the purpose of approving this Agreement and the transactions
contemplated hereby, Olicom shall nominate Tadeusz Witkowicz as a director for a
term of one year, and use its best efforts to secure his election as a director
of Olicom.
5.14 Form S-8. Olicom agrees to file, no later than 25 days after the
Closing, a registration statement on Form S-8 covering the shares of Olicom
Common Stock issuable pursuant to outstanding options under the CrossComm Option
Plans assumed
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by Olicom. CrossComm shall cooperate with and assist Olicom in the preparation
of such registration statement.
5.15 Indemnification.
(a) For a period of six years after the Effective Time, Olicom
shall, and shall cause the Surviving Corporation to, indemnify and hold harmless
the present and former officers, directors, employees, fiduciaries and agents of
CrossComm (the "Indemnified Parties") in respect of acts or omissions occurring
on or prior to the Effective Time to the fullest extent permitted by applicable
law and to the fullest extent provided under CrossComm's Certificate of
Incorporation and Bylaws or any indemnification agreement with CrossComm
officers and directors to which CrossComm is a party, in each case in effect on
the date hereof; provided, however, that such indemnification shall be subject
to any limitation imposed from time to time under applicable law. Without
limitation of the foregoing, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter relating to this Agreement or the transactions
contemplated hereby occurring on or prior to the Effective Time, Olicom shall,
or shall cause the Surviving Corporation to, pay as incurred such Indemnified
Party's reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith.
(b) After the Effective Time and until July 14, 1999, Olicom shall
provide officers' and directors' liability insurance in respect of acts or
omissions occurring on or prior to the Effective Time covering each such person
currently covered by CrossComm's officers' and directors' liability insurance
policy on terms substantially similar to those of such policy in effect on the
date hereof; provided, however, that in satisfying its obligation under this
Section , Olicom shall not be obligated to expend in any one year in excess of
$200,000 for such coverage, and if the Surviving Corporation is unable to obtain
the insurance required by this Section 5.15, it shall obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount.
(c) To the extent there is any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) against an
Indemnified Party that arises out of or pertains to any action or omission in
his or her capacity as a director, officer, employee, fiduciary or agent of
CrossComm occurring prior to the Effective Time, or arises out of or pertains to
the transactions contemplated by this Agreement for a period of six years after
the Effective Time (whether arising before or after the Effective Time), such
Indemnified Party shall be entitled to be represented by counsel and following
the Effective Time (i) any counsel retained by the Indemnified Parties shall be
reasonably satisfactory to the Surviving Corporation and Olicom (it being agreed
that Hale and Dorr LLP is reasonably satisfactory), (ii) the Surviving
Corporation and Olicom shall pay the reasonable fees and expenses of such
counsel, promptly after
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statements therefor are received, and (iii) the Surviving Corporation and Olicom
will cooperate in the defense of any such matter; provided, however, that
neither the Surviving Corporation nor Olicom shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld); and provided, further, that, in the event that any claim or claims
for indemnification are asserted or made within such six-year period, all rights
to indemnification in respect of any such claim or claims shall continue until
the final disposition of any and all such claims. The Indemnified Parties as a
group may retain only one law firm to represent them with respect to any single
action unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
(d) The provisions of this Section 5.15 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and his or her
heirs and representatives.
5.16 Listing of Additional Shares, Warrants and Warrant Shares. Prior to
the Effective Time, Olicom shall file with the Nasdaq National Market a
Notification Form for Listing of Additional Shares with respect to the shares
referred to in Section 6.1(f), and with respect to the Warrants, shall file a
Nasdaq National Market Application for Initial Inclusion and shall use its best
efforts to receive an approval letter from Nasdaq with respect thereto.
5.17 Best Efforts and Further Assurances. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) This Agreement and the Merger shall have been approved and
adopted (i) by the requisite vote of the stockholders of CrossComm (as described
in
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Section 2.23) under Delaware Law, and (ii) by the requisite vote of the
stockholders of Olicom (as described in Section 3.22).
(b) The Commission shall have declared the Registration Statement
effective. No stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued, and no proceeding for that
purpose, and no similar proceeding in respect of the Joint Proxy Statement,
shall have been initiated or threatened by the Commission.
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Merger shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; nor shall there be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation of the
Merger illegal or prevents or prohibits the Merger. In the event that an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(d) Olicom shall have received all state securities and "blue sky"
permits and other such authorizations necessary to consummate the transactions
contemplated hereby.
(e) All material authorizations, consents, orders or approvals of,
or declarations or filings with, or expiration of waiting periods imposed by,
any Governmental Entity (collectively, "Authorizations and Approvals") necessary
for the consummation of the transactions contemplated by this Agreement and the
Certificate of Merger shall have been filed, expired or been obtained, other
than those that, individually or in the aggregate, the failure to be filed,
expired or obtained would not (i) as to Authorizations and Approvals required
pursuant hereto of Olicom, in the reasonable opinion of CrossComm after
consultation with Olicom, have a material adverse effect on Olicom, and (ii) as
to Authorizations and Approvals required pursuant hereto of CrossComm, in the
reasonable opinion of Olicom after consultation with CrossComm, have a Material
Adverse Effect on CrossComm.
(f) The filing with the Nasdaq National Market of (i) a
Notification Form for Listing of Additional Shares shall have been made with
respect to the shares of Olicom Common Stock issuable upon conversion of the
CrossComm Common Stock in the Merger, upon the exercise of the Warrants and upon
exercise of the options under the CrossComm Option Plans assumed by Olicom, and
(ii) a National Market Application for Initial Inclusion with respect to the
Warrants. The Warrants shall have been approved for listing on the Nasdaq
National Market upon official notification thereof.
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(g) The Commercial and Companies Agency of the Kingdom of Denmark
shall have registered the issuance of the Olicom Common Stock included in the
Merger Consideration to the extent required by the Companies Act and the
amendment of the Articles of Association that is required to increase the share
capital of Olicom.
6.2 Additional Conditions to Obligations of CrossComm. The obligations of
CrossComm to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by CrossComm:
(a) The representations and warranties of Olicom and MergerSub
contained in this Agreement shall be true and correct as of the date when made
and as of the Effective Time, except to the extent that any such representation
and warranty speaks as of an earlier date, with the same force and effect as if
made on and as of the Effective Time, except for changes expressly contemplated
by this Agreement and such inaccuracies as individually or in the aggregate that
would not have a Material Adverse Effect on Olicom, and CrossComm shall have
received a certificate to such effect signed on behalf of Olicom by the Managing
Director and Chief Financial Officer of Olicom.
(b) Olicom and MergerSub shall have performed or complied in all
material respects with all covenants, obligations, conditions and agreements
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and, CrossComm shall have received a certificate to such
effect signed by the Managing Director and Chief Financial Officer of Olicom.
(c) There shall not have occurred any material adverse change in
the condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of Olicom
and its subsidiaries, taken as a whole, as a consequence of (i) the occurrence
of acts of God, fire, war, strikes and other similar events beyond the
reasonable control of Olicom the result of which (or the reasonably likely
result of which) is (or will be) the substantial impairment of the value of the
business of Olicom and its subsidiaries, taken as a whole, or (ii) a material
change in the political or economic environment in the Kingdom of Denmark the
result of which (or the reasonably likely result of which) is (or will be) the
substantial impairment of the value of the businesses of Olicom and its
subsidiaries, taken as a whole.
(d) CrossComm shall have been furnished with evidence satisfactory
to it of the consent or approval of those persons whose consent or approval
shall be required in connection with the Merger under any material contract of
Olicom or any of its subsidiaries or otherwise, except where the failure to
obtain such consent or approval would not have a Material Adverse Effect on
Olicom.
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(e) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint provision limiting or restricting Olicom's
business following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other Governmental Entity,
domestic or foreign, seeking the foregoing be pending except where the existence
of any of the foregoing items would not have a Material Adverse Effect on
Olicom.
6.3 Additional Conditions to the Obligations of Olicom and MergerSub. The
obligations of Olicom and MergerSub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Olicom:
(a) The representations and warranties of CrossComm contained in
this Agreement shall be true and correct as of the date when made and as of the
Effective Time, except to the extent that any such representation and warranty
speaks as of an earlier date, with the same force and effect as if made on and
as of the Effective Time, except for such inaccuracies as individually or in the
aggregate that would not have a Material Adverse Effect on CrossComm, and Olicom
and MergerSub shall have received a certificate to such effect signed on behalf
of CrossComm by the President and Chief Financial Officer of CrossComm.
(b) CrossComm shall have performed or complied in all material
respects with all agreements, covenants, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Olicom and MergerSub shall have received a certificate to
such effect signed by the President and Chief Financial Officer of CrossComm.
(c) Olicom shall have been furnished with evidence satisfactory to
it of the consent or approval of those persons whose consent or approval shall
be required in connection with the Merger under any material contract of
CrossComm or any of its subsidiaries or otherwise, except where the failure to
obtain such consent or approval would not have a Material Adverse Effect on
CrossComm.
(d) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint provision limiting or restricting Olicom's conduct
or operation of the business of CrossComm and its subsidiaries, following the
Merger shall be in effect, nor shall any proceeding brought by an administrative
agency or commission or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending, except where the existence of any of the foregoing
items would not have a Material Adverse Effect on CrossComm.
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(e) There shall not have occurred any material adverse change in
the condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of CrossComm
and its subsidiaries, taken as a whole, as a consequence of (i) the occurrence
of acts of God, fire, war, strikes and other similar events beyond the
reasonable control of CrossComm the result of which (or the reasonably likely
result of which) is (or will be) the substantial impairment of the value of the
businesses of CrossComm and its subsidiaries, taken as a whole, to Olicom, or
(ii) a material change in the political or economic environment in Poland which
(or the reasonably likely result of which) is (or will be) the substantial
impairment of the value of the business of CrossComm and its subsidiaries, taken
as a whole, to Olicom.
(f) Olicom shall have received from each of the Affiliates of
CrossComm an executed Affiliate Agreement in substantially the form attached
hereto as Exhibit C.
(g) CrossComm shall deliver resignations of all officers and
directors of its subsidiaries.
(h) As of the taking of the vote at the CrossComm Stockholders'
Meeting with respect to the Merger, holders of no more than 15% of the issued
and outstanding shares of CrossComm Common Stock shall have duly demanded and
perfected, and not withdrawn or forfeited, demands for appraisal rights under
Delaware Law.
(i) In the event that the Final Closing Price is less than $12.50,
CrossComm shall have received an updated written opinion of Montgomery
Securities (or another nationally recognized investment banking firm selected by
the CrossComm Board) that, in such advisor's opinion, as of a date at least one
day prior to the CrossComm Stockholders' Meeting, the consideration to be
received by the stockholders of CrossComm is fair, from a financial point of
view, to the stockholders of CrossComm.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (with respect to Sections 7.1(b)-(i), by written notice by the
terminating party to the other party), whether before or after approval of the
matters presented in connection with the Merger by the stockholders of CrossComm
or Olicom:
(a) By the mutual written consent of Olicom and CrossComm;
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(b) By either Olicom or CrossComm if the Merger shall not have been
consummated by August 1, 1997 (provided that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
action or failure to act has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(c) By either Olicom or CrossComm if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other
action has not complied with its obligations under Section 5.9;
(d) By Olicom, if (i) for any reason, the CrossComm Board fails to
call and hold the CrossComm Stockholders' Meeting by June 30, 1997, or (ii) at
the CrossComm Stockholders' Meeting (including any adjournment or postponement),
the requisite vote of the stockholders of CrossComm in favor of this Agreement
and the Merger shall not have been obtained;
(e) By CrossComm, if (i) for any reason the Board of Directors of
Olicom fails to call and hold the Olicom Stockholders' Meeting by June 30, 1997,
or (ii) at the Olicom Stockholders' Meeting (including any adjournment or
postponement), the requisite vote of the stockholders of Olicom in favor of this
Agreement and the Merger shall not have been obtained;
(f) By Olicom, if (i) the CrossComm Board shall have withdrawn or
modified its recommendation of this Agreement or the Merger in a manner adverse
to Olicom or shall have publicly announced or disclosed to any third party its
intention to do any of the foregoing, (ii) an Alternative Transaction (as
defined in Section 7.3(f)) shall have taken place or the CrossComm Board shall
have recommended to the stockholders of CrossComm an Alternative Transaction, or
(iii) a tender offer or exchange offer for 25% or more of the outstanding shares
of CrossComm Common Stock is commenced (other than by Olicom or an affiliate of
Olicom) and the CrossComm Board recommends that the stockholders of CrossComm
tender their shares in such tender or exchange offer;
(g) By CrossComm prior to the Effective Time, if (i) the CrossComm
Board receives a Superior Proposal, (ii) the CrossComm Board determines in good
faith that the failure to accept such Superior Proposal would be inconsistent
with its fiduciary duties to CrossComm's stockholders under applicable law,
(iii) CrossComm has provided Olicom with at least one business day's written
notice of such Superior Proposal, including a written summary thereof in
reasonable detail (including the identity of the offeror and the terms of the
Superior Proposal) and of the determination of the CrossComm Board, and (iv)
contemporaneously with giving the notice specified in Section 7.1(g)(iii),
CrossComm makes the payment specified in Section 7.3(d);
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<PAGE> 55
(h) By Olicom or CrossComm, if there has been a material breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions set
forth in Sections 6.1 or 6.2(a) (in the case of termination by CrossComm), or in
Sections 6.1 or 6.3(a) (in the case of termination by Olicom) not to be
satisfied, and (ii) shall not have been cured within five business days
following receipt by the breaching party of written notice of such breach from
the other party; or
(i) By CrossComm, (i) if the Final Closing Price is less than
$12.50 and Olicom fails to increase the Exchange Ratio as provided in Section
1.6(b)(x), or (ii) if the Final Closing Price is more than $20.83 and Olicom
decreases the Exchange Ratio as provided in Section 1.6(b)(y).
7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith terminate, except as
provided in this Section 7.2 and in Section 9.1, and there shall be no liability
or obligation on the part of Olicom, MergerSub or CrossComm or their respective
officers, directors, stockholders or affiliates, except to the extent that such
termination results from the willful breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement; provided,
however, that, the provisions of Section 5.4 (Confidentiality), Section 7.3
(Expenses and Termination Fees), this Section 7.2 and Section 9.1 (Non-Survival
at Effective Time) shall remain in full force and effect and survive any
termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; provided, however, that Olicom and CrossComm shall share
equally all fees and expenses, other than investment banking, attorneys' and
accountants' fees and expenses, incurred in connection with the printing and
filing of the Joint Proxy Statement (including any related preliminary
materials) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements.
(b) CrossComm shall reimburse Olicom for all of its reasonable,
documented expenses actually incurred relating to the transactions contemplated
by this Agreement prior to termination (including reasonable, documented fees
and expenses of Olicom's counsel, accountants and financial advisors, but
excluding any discretionary fees paid to such financial advisors) upon the
earliest to occur of the following events:
(i) The termination of this Agreement by Olicom pursuant to Section
7.1(d) as a result of the failure to receive the requisite vote for
approval of this Agreement and the Merger by the stockholders of CrossComm
at the
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<PAGE> 56
CrossComm Stockholders' Meeting if, at the time of such failure, there
shall have been announced an Alternative Transaction which shall not have
been absolutely and unconditionally withdrawn and abandoned; or
(ii) The termination of this Agreement by Olicom pursuant to
Section 7.1(f);
(iii) The termination of this Agreement by CrossComm pursuant to
Section 7.1(g); or
(iv) The termination of this Agreement by Olicom pursuant to
Section 7.1(h) after a material breach of this Agreement by CrossComm.
(c) Olicom shall reimburse CrossComm for all of its reasonable,
documented expenses actually incurred relating to the transactions contemplated
by this Agreement prior to termination (including reasonable, documented fees
and expenses of CrossComm's counsel, accountants and financial advisors, but
excluding any discretionary fees paid to such financial advisors) upon the
earliest to occur of the following events:
(i) The termination of this Agreement by CrossComm pursuant to
Section 7.1(e); or
(ii) The termination of this Agreement by CrossComm pursuant to
Section 7.1(h) after a material breach of this Agreement by Olicom.
(d) CrossComm shall pay Olicom as liquidated damages and not as a
penalty or forfeiture, a termination fee of $2,360,000 upon the earliest to
occur of the following events:
(i) The termination of this Agreement by Olicom pursuant to Section
7.1(d) as a result of the failure to receive the requisite vote for
approval of this Agreement and the Merger by the stockholders of CrossComm
at the CrossComm Stockholders' Meeting if, at the time of such failure,
there shall have been announced an Alternative Transaction which shall not
have been absolutely and unconditionally withdrawn and abandoned and with
respect to which the CrossComm Board shall not have recommended that the
stockholders of CrossComm not vote to accept.
(ii) The termination of this Agreement by Olicom pursuant to
Section 7.1(f); or
(iii) The termination of this Agreement by CrossComm pursuant to
Section 7.1(g).
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<PAGE> 57
(e) The reasonable, documented expenses and fees, if applicable,
payable pursuant to Sections 7.3(b), 7.3(c), 7.3(d)(i) or 7.3(d)(ii) shall be
paid by wire transfer within three business days after the first to occur of the
events described therein; provided that, in no event shall Olicom or CrossComm,
as the case may be, be required to pay any expenses or termination fees, if
applicable, to the other, if, immediately prior to the termination of this
Agreement, the party to receive the expenses, termination fees and other
payment, if applicable, was in breach of any of its material obligations under
this Agreement in any manner that shall have proximately contributed to such
action or failure to act on the part of the other party which gives rise to the
right of termination. In the event that Olicom is required to file suit to seek
all or any portion of the termination fee described in Section 7.3(d), and it is
the prevailing party therein, Olicom shall be entitled to all expenses,
including reasonable, documented attorneys' fees and expenses, which it incurs
in enforcing its rights hereunder.
(f) As used in this Agreement, "Alternative Transaction" means
either (i) a transaction pursuant to which any person (or group of persons),
other than Olicom or its affiliates (a "Third Party"), acquires more than 25% of
the outstanding shares of CrossComm Common Stock, pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving CrossComm pursuant to which any Third Party acquires more than 25% of
the outstanding equity securities of CrossComm or the entity surviving such
merger or business combination, (iii) any other transaction pursuant to which
any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of subsidiaries of CrossComm, and the entity
surviving any merger or business combination including any of them) of CrossComm
having a fair market value equal to more than 20% of the fair market value of
all the assets of CrossComm immediately prior to such transaction, or (iv) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing.
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by the execution and delivery of an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that an amendment made subsequent to adoption of the Agreement by the
stockholders of CrossComm or MergerSub shall not (i) alter or change the amount
or kind of consideration to be received on conversion of the CrossComm Common
Stock, except as provided herein, (ii) alter or change any term of the
Certificate of Incorporation of the Surviving Corporation to be effected by the
Merger, or (iii) alter or change any of the terms and conditions of the
Agreement if such alteration or change would adversely affect the holders of
CrossComm Common Stock or MergerSub Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any
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<PAGE> 58
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
DEFINITIONS
8.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"DKK" and "kroner" refer to currency of the Kingdom of Denmark.
Any reference to a party's "knowledge" means such party's actual knowledge
after reasonable inquiry of executive officers and directors of such party.
Any reference to any event, change, condition or effect being "material"
with respect to any entity or group of entities means any material event,
change, condition or effect related to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of entities.
Any reference to a "Material Adverse Effect" with respect to any entity
means any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations
or results of operations of such entity.
"Olicom Share Incentive Plans" means Olicom's Share Incentive Plan,
Olicom's 1994 Share Incentive Plan and Olicom's 1996 Share Incentive Plan.
"CrossComm Option Plans" means, collectively, CrossComm's Amended 1988
Incentive Stock Option Plan, CrossComm's Amended 1989 Incentive Stock Option
Plan, CrossComm's 1991 Incentive Stock Option Plan, as amended, CrossComm's 1992
Stock Option Plan, as amended, CrossComm's 1992 Directors Option Plan, as
amended, and CrossComm's 1994 Stock Option Plan, as amended, and CrossComm's
1996 Stock Option Plan, as amended.
"Subsidiary" (and the correlative term "subsidiaries") shall have the
meaning ascribed to it in Rule 1-02 of Regulation S-X, as promulgated by the
Commission.
"USD," "dollars" and "$" refer to currency of the United States of
America.
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<PAGE> 59
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival at Effective Time. The representations, warranties and
agreements set forth in this Agreement shall terminate at the Effective Time,
except that the agreements set forth in Article I, Section 5.4
(Confidentiality), 5.7 (Affiliate Agreements), 5.11 (Employee Benefit Plans),
5.13 (Directorship), 5.14 (Form S-8), 5.15 (Indemnification), 5.17 (Best Efforts
and Further Assurances), 7.3 (Expenses and Termination Fees), 7.4 (Amendment),
and this Article IX shall survive the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by nationally
recognized overnight delivery service, or sent via facsimile (with confirmation
of receipt) to the parties at the following address (or at such other address
for a party as shall be specified by like notice):
If to Olicom or MergerSub, to:
Olicom A/S
Nybrovej 114
DK-2800 Lyngby
Attn: Managing Director
Facsimile No.: +45 45 27 0129
Telephone No.: +45 45 27 0000
with a copy to:
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attn: Lawrence D. Ginsburg, Esq.
Facsimile No.: (214) 220-4899
Telephone No.: (214) 220-4438
If to CrossComm, to:
CrossComm Corporation
450 Donald Lynch Boulevard
Marlborough, Massachusetts 01752
Attn: President
Facsimile No.: (508) 229-5526
Telephone No.: (508) 481-4060
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<PAGE> 60
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: Philip P. Rossetti, Esq.
Richard N. Kimball, Esq.
Facsimile No.: (617) 526-5000
Telephone No.: (617) 526-6000
Notices by personal delivery or via nationally recognized overnight delivery
service shall be effective on receipt. Telecopied notices shall be effective on
the date of receipt if received by 5:00 p.m. local time where received, and on
the next business day if received thereafter.
9.3 Interpretation. When a reference is made in this Agreement to Exhibits
or Disclosure Letters, such reference shall be to an Exhibit or Disclosure
Letter to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the CrossComm Disclosure Letter and the Olicom Disclosure
Letter (a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof (except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms); (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(c), (e), (f) and (h), 1.7-1.9, and 5.11-5.16; and (c) shall not be
assigned by operation of law or otherwise except as otherwise specifically
provided.
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<PAGE> 61
9.6 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement shall continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the greatest extent possible, the
economic, business and other purposes of such void or unenforceable provision.
9.7 Remedies Cumulative. 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 or equity upon
such party, and the exercise by a party of any one remedy shall not preclude the
exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to principles
of conflicts of law); provided, however, that matters affecting the validity of
corporate action taken by Olicom shall be governed by the laws of the Kingdom of
Denmark. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any court located within the State of Delaware in connection
with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware for such persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
[the remainder of this page is intentionally left blank]
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<PAGE> 62
IN WITNESS WHEREOF, CrossComm, Olicom and MergerSub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
CROSSCOMM CORPORATION
By: /s/ T. Witkowicz
---------------------------------------
Its: Chairman
---------------------------------------
OLICOM A/S
By: /s/ Lars Stig Nielsen
---------------------------------------
Its: Managing Director
---------------------------------------
By: /s/ Jan Bech
---------------------------------------
Its: Chairman of the Board
---------------------------------------
PW ACQUISITION CORPORATION
By: /s/ Lars Stig Nielsen
---------------------------------------
Its: Managing Director
---------------------------------------
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<PAGE> 63
EXHIBIT A
CERTIFICATE OF MERGER
MERGING
PW ACQUISITION CORPORATION
WITH AND INTO
CROSSCOMM CORPORATION
-----------------------------------
Pursuant to Section 251 of the General Corporation Law of the State of Delaware
-----------------------------------
PW Acquisition Corporation, a Delaware corporation ("MergerSub") and
CrossComm Corporation, a Delaware corporation ("CrossComm"), DO HEREBY CERTIFY
AS FOLLOWS:
FIRST: That MergerSub was incorporated on February __, 1997, pursuant to
the Delaware General Corporation Law, as amended (the "Delaware Law"), and that
CrossComm was incorporated on April __, 1987, pursuant to the Delaware Law.
SECOND: That an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of March 20, 1997, among Olicom, a corporation organized
under the laws of the Kingdom of Denmark, MergerSub and CrossComm, setting forth
the terms and conditions of the merger of MergerSub with and into CrossComm (the
"Merger"), has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with subsection (c) of
Section 251 of the Delaware Law.
THIRD: That the name of the surviving corporation of the merger (the
"Surviving Corporation") shall be CrossComm Corporation.
FOURTH: That the Certificate of Incorporation of MergerSub, pursuant to
Article I of the Reorganization Agreement, shall be the Certificate of
Incorporation of the Surviving Corporation and be amended to read in its
entirety as follows:
ARTICLE I
The name of the corporation is CrossComm Corporation.
FIFTH: That an executed copy of the Reorganization Agreement is on file at
the principal place of business of the Surviving Corporation at the following
address:
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<PAGE> 64
CrossComm Corporation
450 Donald Lynch Boulevard
Marlborough, Massachusetts 01752
SIXTH: That a copy of the Reorganization Agreement will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
any constituent corporation.
SEVENTH: That the Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, each of MergerSub and CrossComm has caused this
Certificate of Merger to be executed in its corporate name this ___ day of ___,
1997.
PW ACQUISITION CORPORATION
By: ________________________________
_________________ , President
ATTEST:
___________________________
Secretary
CROSSCOMM CORPORATION
By: ________________________________
_________________ , President
ATTEST:
___________________________
________________ , Secretary
A-2
<PAGE> 65
EXHIBIT B
_____________________
No. of Warrant Shares
FORM OF WARRANT CERTIFICATE
NO. W-__
VOID AFTER ___________, 2000
WARRANT CERTIFICATE
FOR PURCHASE OF COMMON SHARES
OLICOM A/S
This certifies that FOR VALUE RECEIVED, _______________ is the registered
holder (the "Registered Holder") of the number of Warrants (the "Warrants")
specified above. This Warrant entitles the Registered Holder, but only subject
to the terms and conditions set forth herein and in the Warrant Agreement (as
hereinafter defined), to purchase the number of fully paid and nonassessable
shares (each a "Warrant Share") of Common Stock, par value DKK 0.25 per share
(the "Common Stock"), of Olicom A/S, a corporation organized under the laws of
the Kingdom of Denmark (the "Company"), indicated above at any time after
issuance through the Expiration Date (as hereinafter defined), upon presentation
and surrender of this Warrant Certificate and the form on the reverse hereof
duly executed at the principal office of American Stock Transfer & Trust
Company, as warrant agent, or its successor (the "Warrant Agent"), accompanied
by payment of $19.74 per share of Common Stock (the "Exercise Price") to be
purchased hereunder in lawful money of the United States of America by money
order or certified or official bank check made payable to the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to, and are subject in all respects to the terms and conditions set
forth in, the Warrant Agreement, dated ______________, 1997 (the "Warrant
Agreement"), by and between the Company and the Warrant Agent.
Prior to the Expiration Date, upon the occurrence of certain events
provided for in the Warrant Agreement, the Exercise Price or the number of
shares of Common Stock subject to purchase upon the exercise of each Warrant
represented hereby are subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock shall be issued. In
the case of the
B-1
<PAGE> 66
exercise of less than all of the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates, which the Warrant
Agent shall countersign, for the balance of such Warrants.
The "Expiration Date" shall mean ______________, 2000, or such earlier
date as all of the Warrants shall be exercised or redeemed. No Warrant may be
exercised after the 5:00 p.m., Central time, on the Expiration Date, and all
rights of the registered holders of the Warrants shall cease after 5:00 p.m.,
Central time, on the Expiration Date.
This Warrant Certificate is exchangeable upon surrender hereof by the
Registered Holder at the principal office of the Warrant Agent in New York, New
York, or the principal office of the Company in greater Copenhagen, Denmark, for
another Warrant Certificate or Warrant Certificates of like tenor and
representing in the aggregate the number of Warrants evidenced by the Warrant
Certificate or Warrant Certificates so surrendered.
Prior to due presentment for registration or transfer of this Warrant
Certificate, the Company and the Warrant Agent shall deem and treat the
Registered Holder hereof as the absolute owner of Warrants (notwithstanding any
notation of ownership or other writing on the Warrant Certificate made by anyone
other than the Company or the Warrant Agent), for the purpose of any exercise
thereof and for all other purposes, and no transfer or exchange will be
effective unless made in accordance with Sections [10 and 11] of the Warrant
Agreement, and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed by its duly authorized officers and has caused its corporate seal to be
affixed hereunto.
Dated: __________________, 1997
OLICOM A/S
By:_______________________________________
Its: _____________________________________
By:________________________________________
Its:_______________________________________
B-2
<PAGE> 67
COUNTERSIGNED:
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as warrant agent
By:_________________________________
Name: _____________________________
Authorized Office
FORM TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO
EXERCISE WARRANTS
The undersigned Registered Holder hereby irrevocably elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the securities
issuable upon the exercise of such Warrants, and requests that certificates for
such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________
and be delivered to
_______________________________________
_______________________________________
_______________________________________
_______________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
and if such number of exercised Warrants shall not be all the Warrants evidenced
by this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to the Registered
Holder at the address stated below.
B-3
<PAGE> 68
The undersigned represents that the exercise of the Warrants evidenced
hereby was solicited by a member of the National Association of Securities
Dealers, Inc., if not solicited by an NASD member, please write "unsolicited" in
the space below.
______________________________________________
(Name of NASD Member)
Dated: ___________________ X ________________________________________
(Signature of Registered Holder)
_______________________________________________
_______________________________________________
_______________________________________________
(Please print or type name and address of
registered holder)
Signature Guarantee Stamp Required Here if
Securities are to be Delivered to a Person Other
Than Registered Holder
B-4
<PAGE> 69
ASSIGNMENT
TO BE EXECUTED BY THE REGISTERED HOLDER
IN ORDER TO ASSIGN WARRANTS
FOR VALUE RECEIVED, ________________________ hereby sells, assigns and transfers
unto ________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
____________________________
(Please print or type name and address)
_______________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
___________________________, Attorney, to transfer the Warrant Certificate on
the books of the Company, with full power of substitution in the premises.
Dated: X_____________________________________
(Signature of Registered Holder)
Signature Guarantee Stamp Required Here
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND ALL REQUIRED
SIGNATURE GUARANTEES MUST BE PROVIDED BY A MEMBER OF THE MEDALLION STAMP
PROGRAM.
B-5
<PAGE> 70
EXHIBIT C
CROSSCOMM AFFILIATE'S AGREEMENT
C-1
<PAGE> 71
EXHIBIT D
VOTING AGREEMENT -- CROSSCOMM AFFILIATES
D-1
<PAGE> 72
EXHIBIT E
VOTING AGREEMENT -- OLICOM AFFILIATES
E-1
<PAGE> 73
E-2
<PAGE> 1
EXHIBIT 10.16
MANUFACTURING AGREEMENT
-----------------------
BETWEEN
-------
CROSSCOMM CORPORATION
---------------------
AND
---
LOCKHEED COMMERCIAL ELECTRONICS COMPANY
---------------------------------------
AMENDMENT NUMBER (2)
--------------------
Section 3.1 is amended as listed herein:
3.1 This agreement as amended herein shall commence as of the effective
date, December 31, 1993 and continue through December 31, 1996.
Section 4.1a is replaced as listed herein:
4.1a Unit pricing is listed in Exhibit A reflects a 17.25% mark-up on
material cost and shall be clearly specific to a corresponding assembly revision
level. The 17.25% mark-up assumes 1994 business volume will be between $12 and
$25 million. Pricing for 1995 and 1996 will use the same format with the actual
mark-up to be negotiated 90 days prior to the new year.
Section 4.1e is replaced as listed herein:
4.1e Component pricing in Exhibit E will be reviewed and negotiated
quarterly beginning with each calendar year. Total material will be reviewed and
revised semi-annually beginning with the calendar year. Product pricing in
Exhibit A will be adjusted accordingly.
Section 6.2 is altered in the order change section by adding the following:
The above Remaining Lead Time schedule is for circuit board assemblies.
For unit builds CrossComm will provide LCEC with weekly mix requirements
for unit shipments for the following weeks shipments. In the event that
CrossComm does not provide the mix requirements by Wednesday for the following
week, LCEC will use the 12 month forecast for that weeks requirements. LCEC will
make a reasonable effort to comply with schedule changes. Unit mix changes will
be limited by burn-in requirements and the availability of the option boards.
Section 7.4 is added as follows:
7.4 For EC's generated by LCEC which result in cost reduction, the parties
agree to share the resultant savings 50/50. The savings from cost reduction EC's
originated by CrossComm will be retained by CrossComm.
In witness whereof, the parties hereto have executed this amendment as of
the date set forth below.
LOCKHEED COMMERCIAL ELECTRONICS COMPANY CROSSCOMM CORPORATION
BY: BY:
/s/ Roger M. Damphousse /s/ Arthur Coviello
- --------------------------------------- -----------------------------------
Roger M. Damphousse Arthur Coviello
President Vice President, Finance
Date: 2/11/94 Date: 2/11/94
------------------ ---------------------
Page 1 of 1 Date: February 11, 1994
-----------------
<PAGE> 1
CROSSCOMM CORPORATION
1996 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for CrossComm
Corporation (the "Company") and its shareholders the benefits arising from
capital stock ownership by employees, officers and directors of, and consultants
or advisors to, the Company and its subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code"). Those provisions of the Plan which make express reference to Section
422 shall apply only to Incentive Stock Options (as that term is defined in the
Plan).
2. Type of Options and Administration.
----------------------------------
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan may be either
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Code or Non-Statutory Options which are not intended to meet
the requirements of Section 422 of the Code ("Non-Statutory Options").
(b) ADMINISTRATION.
(i) The Plan will be administered by the Board of Directors of the
Company, whose construction and interpretation of the terms and provisions of
the Plan shall be final and conclusive. The Board of Directors may in its sole
discretion grant options to purchase shares of the Company's Common Stock
("Common Stock") and issue shares upon exercise of such options as provided in
the Plan. The Board shall have authority, subject to the express provisions of
the Plan, to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, and to make all other determinations which are, in the
judgment of the Board of Directors, necessary or desirable for the
administration of the Plan. The Board of Directors may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such
<PAGE> 2
expediency. No director or person acting pursuant to authority delegated by the
Board of Directors shall be liable for any action or determination under the
Plan made in good faith.
(ii) The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations and Section 3(b) of this Plan,
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
(c) APPLICABILITY OF RULE 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3"), or which are
required in order for certain option transactions to qualify for exemption under
Rule 16b-3, shall apply only to such persons as are required to file reports
under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
-----------
(a) GENERAL. Options may be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company; PROVIDED, that the class of employees to whom Incentive Stock Options
may be granted shall be limited to all employees of the Company. A person who
has been granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board of Directors shall so determine. Subject to
adjustment as provided in Section 15 below, the maximum number of shares with
respect to which options may be granted to any employee under the Plan shall not
exceed 350,000 shares of common stock during any one calendar year during the
ten-year term of the Plan. For the purpose of calculating such maximum number,
(a) an option shall continue to be treated as outstanding notwithstanding its
repricing, cancellation or expiration and (b) the repricing of an outstanding
option or the issuance of a new option in substitution for a cancelled option
shall be deemed to constitute the grant of a new additional option separate from
the original grant of the option that is repriced or cancelled.
(b) GRANT OF OPTIONS TO DIRECTORS AND OFFICERS. From and after the
registration of the Common Stock of the Company under the Exchange Act, the
selection of a director or an officer (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board
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<PAGE> 3
of Directors, of which all members shall be "disinterested persons" (as
hereinafter defined), or (ii) by two or more directors having full authority to
act in the matter, each of whom shall be a "disinterested person." For the
purposes of the Plan, a director shall be deemed to be a "disinterested person"
only if such person qualifies as a "disinterested person" within the meaning of
Rule 16b-3, as such term is interpreted from time to time.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock which may be issued and sold under the Plan is 700,000
shares. If an option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall again be available for subsequent option grants under the
Plan. If shares issued upon exercise of an option under the Plan are tendered to
the Company in payment of the exercise price of an option granted under the
Plan, such tendered shares shall again be available for subsequent option grants
under the Plan; provided, that in no event shall such shares be made available
for issuance to Reporting Persons or pursuant to exercise of Incentive Stock
Options.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. Purchase Price.
--------------
(a) GENERAL. Subject to Section 3(b), the purchase price per share of
stock deliverable upon the exercise of an option shall be determined by the
Board of Directors, PROVIDED, HOWEVER, that in the case of an Incentive Stock
Option, the exercise price shall not be less than 100% of the fair market value
of such stock, as determined by the Board of Directors, at the time of grant of
such option, or less than 110% of such fair market value in the case of options
described in Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
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<PAGE> 4
optionee having a fair market value equal in amount to the exercise price of the
options being exercised or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board). The fair market value of any shares
of the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an option shall be determined by the Board of
Directors.
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as shall be
set forth in the applicable option agreement, except that, in the case of an
Incentive Stock Option, such date shall not be later than ten years after the
date on which the option is granted and, in all cases, options shall be subject
to earlier termination as provided in the Plan.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Options.
-----------------------------
Options shall not be assignable or transferable by the person to whom they
are granted, either voluntarily or by operation of law, except by will or the
laws of descent and distribution, and, during the life of the optionee, shall be
exercisable only by the optionee; provided, however, that Non-Statutory Options
may be transferred pursuant to a qualified domestic relations order (as defined
in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
-4-
<PAGE> 5
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years from the
date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
90 days after the date the optionee ceases to be an employee of the Company
(or within such lesser period as may be specified in the applicable option
agreement), PROVIDED, that the agreement with respect to such option may
-5-
<PAGE> 6
designate a longer exercise period and that the exercise after such three-month
period shall be treated as the exercise of a non-statutory option under the
Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within
the period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
---------------------
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Board of
Directors; PROVIDED THAT such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised.
-6-
<PAGE> 7
13. General Restrictions.
--------------------
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
14. Rights as a Shareholder.
-----------------------
The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions.
--------------------------------------------------------------------
(a) GENERAL. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are
-7-
<PAGE> 8
increased, decreased or exchanged for a different number or kind of shares or
other securities of the Company, or (ii) additional shares or new or different
shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment would cause the Plan to
fail to comply with Section 422 of the Code.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
---------------------------------------------------
(a) GENERAL. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), PROVIDED that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, (iii)
in the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding options
(to the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise
-8-
<PAGE> 9
price of all such outstanding options in exchange for the termination of such
options, and (iv) provide that all or any outstanding options shall become
exercisable in full immediately prior to such event.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
-----------------------
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
---------------------
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, or under Rule
16b-3, the Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may
-9-
<PAGE> 10
amend outstanding option agreements in a manner not inconsistent with the Plan.
The Board of Directors shall have the right to amend or modify (i) the terms and
provisions of the Plan and of any outstanding Incentive Stock Options granted
under the Plan to the extent necessary to qualify any or all such options for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code and (ii) the terms and provisions of the Plan and of any outstanding option
to the extent necessary to ensure the qualification of the Plan under Rule
16b-3.
20. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3 (unless
it is intended that the transaction not qualify for exemption under Rule 16b-3).
21. Cancellation and New Grant of Options, Etc.
------------------------------------------
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms
-10-
<PAGE> 11
of any and all outstanding options under the Plan to provide an option exercise
price per share which is higher or lower than the then-current exercise price
per share of such outstanding options.
22. Change in Control.
-----------------
Notwithstanding any other provision of the Plan and except as otherwise
provided in the relevant option agreement, in the event of a "Change in Control
of the Company" (as defined below), if an optionee's employment with the Company
is terminated by the Company other than for "cause" (as defined below), death or
disability or by the optionee for "Good Reason" (as defined below) within two
years after such Change in Control of the Company, then the exercise dates of
all options then outstanding shall be accelerated in full and any restrictions
on exercising outstanding options issued pursuant to the Plan prior to any given
date shall terminate. For purposes of the Plan, a "Change in Control of the
Company" shall occur or be deemed to have occurred only if (i) any "person", as
such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; (ii) during any period of two
consecutive years ending during the term of the Plan (not including any period
prior to the adoption of the Plan), individuals who at the beginning of such
period constitute the Board of Directors of the Company, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect any transaction described in clause (i), (iii) or
(iv) of this Section 22) whose election by the Board of Directors or nomination
for election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were either directors at
the beginning of the period or whose election or whose nomination for election
was previously so approved (collectively, the "Disinterested Directors"), cease
for any reason to constitute a majority of the Board of Directors; (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation
-11-
<PAGE> 12
or (B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 30% of the combined voting power of the Company's then
outstanding securities or (C) a merger or consolidation which has been approved
by a majority of the Disinterested Directors; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets which, in either case, has not previously been approved by a
majority of the Disinterested Directors. Notwithstanding the foregoing, the
Board of Directors of the Company may, in its sole discretion, by a resolution
adopted by two-thirds of the Disinterested Directors prior to the occurrence of
any of the events otherwise constituting a Change in Control of the Company,
declare that such event will not constitute a Change in Control of the Company
for the purposes of the Plan. If such resolution is adopted, such event shall
not constitute a Change in Control of the Company for any purpose of the Plan.
"GOOD REASON" shall mean, without the optionee's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment:
(A) any significant diminution in the optionee's position or
responsibilities as in effect immediately prior to a Change in Control of the
Company;
(B) any reduction in the optionee's annual base salary as the same
may be in effect from time to time; or
(C) any requirement by the Company or of any person in control of the
Company that the location at which the optionee performs his principal duties
for the Company be changed to a new location outside a radius of 50 miles from
his principal residence at the time of the Change in Control of the Company.
"CAUSE" shall mean willful misconduct in connection with an optionee's
employment or willful failure to perform his or her employment responsibilities
in the best interests of the Company (including, without limitation, breach by
an optionee of any provision of any employment, nondisclosure, non-competition
or other similar agreement between an optionee and the Company), as determined
by the Company, which determination shall be conclusive. An optionee shall be
considered to have been discharged "for cause" if the Company determines, within
30 days after the optionee's resignation, that discharge for cause was
warranted.
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<PAGE> 13
23. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, options previously granted
under the Plan shall not vest and shall terminate and no options shall be
granted thereafter. Amendments to the Plan not requiring shareholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring shareholder approval (as provided in Section 19) shall become
effective when adopted by the Board of Directors, but no option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such option to
a particular person) unless and until such amendment shall have been approved by
the Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall terminate to the extent that such
amendment was required to enable the Company to grant such option to a
particular optionee. Subject to this limitation, options may be granted under
the Plan at any time after the effective date and before the date fixed for
termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate upon the close of business on the day next preceding
the tenth anniversary of the date of its adoption by the Board of Directors.
Options outstanding on such date shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such options.
24. Provision for Foreign Participants.
----------------------------------
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by the Board of Directors on
February 1, 1996.
Adopted by the Stockholders on
April 25, 1996.
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<PAGE> 1
EXHIBIT 10.24
MANUFACTURING AGREEMENT
-----------------------
BETWEEN
-------
CROSSCOMM CORPORATION
---------------------
AND
---
LOCKHEED COMMERCIAL ELECTRONICS COMPANY
---------------------------------------
AMENDMENT NUMBER 3
------------------
Section 3.1 is amended to read:
3.1 This agreement shall commence as of the Effective Date and continue
through June 30, 1997. The term of this Agreement may automatically be
renewed for additional successive terms of 6 months each unless at
least 90 days before the end of the then current term either party
gives notice in writing to the other party of its intent to terminate
this Agreement at the end of the then-current term.
LOCKHEED COMMERCIAL ELECTRONICS COMPANY CROSSCOMM CORPORATION
BY: BY:
/s/ Roger M. Damphousse /s/ David A. Westall, II
- ---------------------------------------- ------------------------------------
Roger M. Damphousse David A. Westall, II
President Director, Manufacturing
Lockheed Commercial Electronics Company CrossComm Corporation
Date: 2/14/97 Date: 2-10-97
---------------- ----------------
<PAGE> 1
Supplement To CrossComm Corporation's
Amended 1988 Incentive Stock Option Plan
On March 9, 1995, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
In the event of a "Change in Control" of the Company (as defined on
EXHIBIT A attached hereto), if an option holder's employment with the Company is
terminated by the Company other than for "Cause" (as defined on EXHIBIT A),
death or disability or by the option holder for "Good Reason" (as defined on
EXHIBIT A) within two years after such a Change in Control, then in such event
all options to purchase shares of capital stock of the Company, issued and
outstanding as of the date of such termination and then held by such terminated
option holder pursuant to the Amended 1988 Incentive Stock Option Plan shall
immediately vest and become fully exercisable in accordance with their terms.
<PAGE> 2
EXHIBIT A
---------
A "CHANGE IN CONTROL" shall occur or be deemed to have occurred only if
any of the following events occur: (i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Termination by the Company of employment for "CAUSE" shall mean
termination (A) upon the willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting
from incapacity due to physical or mental
<PAGE> 3
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination (as defined below) by the option holder for Good Reason (as
defined below), provided that a written demand for substantial performance has
been delivered to the option holder by the Company specifically identifying the
manner in which the Company believes that the option holder has not
substantially performed his duties and he has not cured such failure within 30
days after such demand, (B) if the option holder shall have violated any
provision of any confidentiality, invention and non-disclosure, non-competition
or similar agreement entered into by him in connection with his employment by
the Company or (C) if the option holder shall have been found guilty of any act
or acts of dishonesty constituting a felony. For purposes of this subsection, no
act or failure to act on the option holder's part shall be deemed "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
"GOOD REASON" shall mean, without the option holder's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment specified in the Notice
of Termination (as defined below) given in respect thereof:
(A) any significant diminution in the option holder's position
or responsibilities as in effect immediately prior to a Change in Control;
(B) any reduction in the option holder's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
(excluding any salary reductions implemented prior to the date of the adoption
of these resolutions by the Board of Directors); or
(C) any requirement by the Company or of any person in control
of the Company that the location at which the option holder performs his
principal duties for the Company be changed to a new location outside a radius
of 50 miles from his principal residence at the time of the Change in Control.
<PAGE> 4
Amendment to CrossComm Corporation's
Amended 1988 Incentive Stock Option Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
1. "That, Section 2 of the 1988 Plan be, and hereby is, amended and restated
in its entirety to read as follows:
'The Plan was adopted by resolutions of the Board of Directors and the
stockholders of the Company on December 12, 1988 and amended by resolution of
the Board of Directors, effective as of March 1, 1991. The Plan shall be
administered by the Compensation Committee appointed by the Board of Directors
(the "Committee"). The Committee shall be composed solely of at least two
individuals who are Non-Employee Directors, as such term is defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended and Outside
Directors, as such term is defined in Section 162(m) of the Internal Revenue
Code of 1986, as amended. The Committee shall have the sole authority to select
the persons to receive options under the Plan, interpret the Plan and adopt
rules governing its execution. A majority of the members of the Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members. Any determination reduced to writing and signed by a
majority of the members shall be fully as effective as if it has been made by a
majority vote at a meeting duly called and held and any action taken by the
Committee with respect to the implementation, interpretation or administration
of the Plan shall be final, conclusive and binding. No member of the Committee
or of the Board of Directors shall have any liability with respect to the Plan
or its administration.'
2. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Supplement To CrossComm Corporation's
Amended 1989 Incentive Stock Option Plan
On March 9, 1995, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
In the event of a "Change in Control" of the Company (as defined on
EXHIBIT A attached hereto), if an option holder's employment with the Company is
terminated by the Company other than for "Cause" (as defined on EXHIBIT A),
death or disability or by the option holder for "Good Reason" (as defined on
EXHIBIT A) within two years after such a Change in Control, then in such event
all options to purchase shares of capital stock of the Company, issued and
outstanding as of the date of such termination and then held by such terminated
option holder pursuant to the Amended 1989 Incentive Stock Option Plan shall
immediately vest and become fully exercisable in accordance with their terms.
<PAGE> 2
Exhibit A
---------
A "CHANGE IN CONTROL" shall occur or be deemed to have occurred only if
any of the following events occur: (i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Termination by the Company of employment for "CAUSE" shall mean
termination (A) upon the willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting
from incapacity due to physical or mental
<PAGE> 3
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination (as defined below) by the option holder for Good Reason (as
defined below), provided that a written demand for substantial performance has
been delivered to the option holder by the Company specifically identifying the
manner in which the Company believes that the option holder has not
substantially performed his duties and he has not cured such failure within 30
days after such demand, (B) if the option holder shall have violated any
provision of any confidentiality, invention and non-disclosure, non-competition
or similar agreement entered into by him in connection with his employment by
the Company or (C) if the option holder shall have been found guilty of any act
or acts of dishonesty constituting a felony. For purposes of this subsection, no
act or failure to act on the option holder's part shall be deemed "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
"GOOD REASON" shall mean, without the option holder's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment specified in the Notice
of Termination (as defined below) given in respect thereof:
(A) any significant diminution in the option holder's position
or responsibilities as in effect immediately prior to a Change in Control;
(B) any reduction in the option holder's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
(excluding any salary reductions implemented prior to the date of the adoption
of these resolutions by the Board of Directors); or
(C) any requirement by the Company or of any person in control
of the Company that the location at which the option holder performs his
principal duties for the Company be changed to a new location outside a radius
of 50 miles from his principal residence at the time of the Change in Control.
<PAGE> 4
Amendment to CrossComm Corporation's
Amended 1989 Incentive Stock Option Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
1. "That, Section 2 of the 1989 Plan be, and hereby is, amended and restated
in its entirety to read as follows:
'The Plan was adopted by resolutions of the Board of Directors and the
stockholders of the Company on July 20, 1989. The Plan shall be administered by
the Compensation Committee appointed by the Board of Directors (the
"Committee"). The Committee shall be composed solely of at least two individuals
who are Non-Employee Directors, as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended and Outside Directors, as such term
is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Committee shall have the sole authority to select the persons to receive
options under the Plan, interpret the Plan and adopt rules governing its
execution. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination reduced to writing and signed by a majority of the
members shall be fully as effective as if it has been made by a majority vote at
a meeting duly called and held and any action taken by the Committee with
respect to the implementation, interpretation or administration of the Plan
shall be final, conclusive and binding. No member of the Committee or of the
Board of Directors shall have any liability with respect to the Plan or its
administration.'
2. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Supplement To CrossComm Corporation's
1991 Incentive Stock Option Plan
On March 9, 1995, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
In the event of a "Change in Control" of the Company (as defined on
EXHIBIT A attached hereto), if an option holder's employment with the Company is
terminated by the Company other than for "Cause" (as defined on EXHIBIT A),
death or disability or by the option holder for "Good Reason" (as defined on
EXHIBIT A) within two years after such a Change in Control, then in such event
all options to purchase shares of capital stock of the Company, issued and
outstanding as of the date of such termination and then held by such terminated
option holder pursuant to the 1991 Incentive Stock Option Plan shall immediately
vest and become fully exercisable in accordance with their terms.
<PAGE> 2
Exhibit A
---------
A "CHANGE IN CONTROL" shall occur or be deemed to have occurred only if
any of the following events occur: (i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Termination by the Company of employment for "CAUSE" shall mean
termination (A) upon the willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting
from incapacity due to physical or mental
<PAGE> 3
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination (as defined below) by the option holder for Good Reason (as
defined below), provided that a written demand for substantial performance has
been delivered to the option holder by the Company specifically identifying the
manner in which the Company believes that the option holder has not
substantially performed his duties and he has not cured such failure within 30
days after such demand, (B) if the option holder shall have violated any
provision of any confidentiality, invention and non-disclosure, non-competition
or similar agreement entered into by him in connection with his employment by
the Company or (C) if the option holder shall have been found guilty of any act
or acts of dishonesty constituting a felony. For purposes of this subsection, no
act or failure to act on the option holder's part shall be deemed "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
"GOOD REASON" shall mean, without the option holder's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment specified in the Notice
of Termination (as defined below) given in respect thereof:
(A) any significant diminution in the option holder's position
or responsibilities as in effect immediately prior to a Change in Control;
(B) any reduction in the option holder's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
(excluding any salary reductions implemented prior to the date of the adoption
of these resolutions by the Board of Directors); or
(C) any requirement by the Company or of any person in control
of the Company that the location at which the option holder performs his
principal duties for the Company be changed to a new location outside a radius
of 50 miles from his principal residence at the time of the Change in Control.
<PAGE> 4
Amendment to CrossComm Corporation's
1991 Incentive Stock Option Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
1. "That, Section 2 of the 1991 Plan be, and hereby is, amended and restated
in its entirety to read as follows:
'The Plan was adopted by action of the Board of Directors on August 29, 1991 and
will be effective that date subject to ratification by the stockholders of the
Company prior to August 29, 1992. The Plan shall be administered by the
Compensation Committee appointed by the Board of Directors (the "Committee").
The Committee shall be composed solely of at least two individuals who are
Non-Employee Directors, as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and Outside Directors, as such term
is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Committee shall have the sole authority to select the persons to receive
options under the Plan, interpret the Plan and adopt rules governing its
execution. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination reduced to writing and signed by a majority of the
members shall be fully as effective as if it has been made by a majority vote at
a meeting duly called and held and any action taken by the Committee with
respect to the implementation, interpretation or administration of the Plan
shall be final, conclusive and binding. No member of the Committee or of the
Board of Directors shall have any liability with respect to the Plan or its
administration.'
2. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Supplement To CrossComm Corporation's
1992 Stock Option Plan
On March 9, 1995, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
In the event of a "Change in Control" of the Company (as defined on
EXHIBIT A attached hereto), if an option holder's employment with the Company is
terminated by the Company other than for "Cause" (as defined on EXHIBIT A),
death or disability or by the option holder for "Good Reason" (as defined on
EXHIBIT A) within two years after such a Change in Control, then in such event
all options to purchase shares of capital stock of the Company, issued and
outstanding as of the date of such termination and then held by such terminated
option holder pursuant to the 1992 Stock Option Plan shall immediately vest and
become fully exercisable in accordance with their terms.
<PAGE> 2
Exhibit A
---------
A "CHANGE IN CONTROL" shall occur or be deemed to have occurred only if
any of the following events occur: (i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Termination by the Company of employment for "CAUSE" shall mean
termination (A) upon the willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting
from incapacity due to physical or mental
<PAGE> 3
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination (as defined below) by the option holder for Good Reason (as
defined below), provided that a written demand for substantial performance has
been delivered to the option holder by the Company specifically identifying the
manner in which the Company believes that the option holder has not
substantially performed his duties and he has not cured such failure within 30
days after such demand, (B) if the option holder shall have violated any
provision of any confidentiality, invention and non-disclosure, non-competition
or similar agreement entered into by him in connection with his employment by
the Company or (C) if the option holder shall have been found guilty of any act
or acts of dishonesty constituting a felony. For purposes of this subsection, no
act or failure to act on the option holder's part shall be deemed "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
"GOOD REASON" shall mean, without the option holder's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment specified in the Notice
of Termination (as defined below) given in respect thereof:
(A) any significant diminution in the option holder's position
or responsibilities as in effect immediately prior to a Change in Control;
(B) any reduction in the option holder's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
(excluding any salary reductions implemented prior to the date of the adoption
of these resolutions by the Board of Directors); or
(C) any requirement by the Company or of any person in control
of the Company that the location at which the option holder performs his
principal duties for the Company be changed to a new location outside a radius
of 50 miles from his principal residence at the time of the Change in Control.
<PAGE> 4
Amendment to CrossComm Corporation's
1992 Stock Option Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
1. "That, Section 2(b) of the 1992 Plan be, and hereby is, amended by
inserting the following two sentences at the end of the paragraph:
'The Committee shall be composed solely of at least two individuals who are
Non-Employee Directors, as such term is defined in Rule 16b-3, and Outside
Directors, as such term is defined in Section 162(m) of the Internal Revenue
Code of 1986, as amended. A majority of the members of the Committee shall
constitute a quorum, and all determinations of the Committee shall be made by a
majority of its members.'
2. That Section 6(b)(i) of the 1992 Plan be, and hereby is, amended and
restated in its entirety as follows:
'by delivery to the Company of shares of Common Stock of the Company already
owned by the optionee for at least six months having a fair market value equal
in amount to the exercise price of the options being exercised.'
3. That, Section 9 of the 1992 Plan be, and hereby be, amended and restated in
its entirety to read as follows:
'Except as otherwise provided in the option agreement evidencing such option
grant, no option may be transferred other than by will or by the laws of descent
and distribution, and during the life of the optionee, shall be exercisable only
by the optionee; provided, however, that Non-Statutory Options may be
transferred pursuant to a qualified domestic relations order (as defined in Rule
16b-3).'
4. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Supplement To CrossComm Corporation's
1992 Directors' Option Plan
On March 9, 1995, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
In the event of a "Change in Control" of the Company (as defined on
EXHIBIT A attached hereto), if an option holder's employment with the Company is
terminated by the Company other than for "Cause" (as defined on EXHIBIT A),
death or disability or by the option holder for "Good Reason" (as defined on
EXHIBIT A) within two years after such a Change in Control, then in such event
all options to purchase shares of capital stock of the Company, issued and
outstanding as of the date of such termination and then held by such terminated
option holder pursuant to the 1992 Directors' Option Plan shall immediately vest
and become fully exercisable in accordance with their terms.
<PAGE> 2
Exhibit A
---------
A "CHANGE IN CONTROL" shall occur or be deemed to have occurred only if
any of the following events occur: (i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Termination by the Company of employment for "CAUSE" shall mean
termination (A) upon the willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting
from incapacity due to physical or mental
<PAGE> 3
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination (as defined below) by the option holder for Good Reason (as
defined below), provided that a written demand for substantial performance has
been delivered to the option holder by the Company specifically identifying the
manner in which the Company believes that the option holder has not
substantially performed his duties and he has not cured such failure within 30
days after such demand, (B) if the option holder shall have violated any
provision of any confidentiality, invention and non-disclosure, non-competition
or similar agreement entered into by him in connection with his employment by
the Company or (C) if the option holder shall have been found guilty of any act
or acts of dishonesty constituting a felony. For purposes of this subsection, no
act or failure to act on the option holder's part shall be deemed "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
"GOOD REASON" shall mean, without the option holder's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment specified in the Notice
of Termination (as defined below) given in respect thereof:
(A) any significant diminution in the option holder's position
or responsibilities as in effect immediately prior to a Change in Control;
(B) any reduction in the option holder's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
(excluding any salary reductions implemented prior to the date of the adoption
of these resolutions by the Board of Directors); or
(C) any requirement by the Company or of any person in control
of the Company that the location at which the option holder performs his
principal duties for the Company be changed to a new location outside a radius
of 50 miles from his principal residence at the time of the Change in Control.
<PAGE> 4
Amendment to CrossComm Corporation's
1992 Directors' Option Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
1. "That, Section 5(c) of the 1992 Directors' Plan be, and hereby is, amended
and restated in its entirety to read as follows:
'Except as otherwise provided in the option agreement evidencing such option
grant, each option granted under the Plan by its terms shall not be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution, or pursuant to a qualified domestic relations order (as defined in
Section 414(p) of the Code) and shall be exercised during the lifetime of the
optionee.'
2. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Supplement To CrossComm Corporation's
1994 Stock Option Plan
On March 9, 1995, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
In the event of a "Change in Control" of the Company (as defined on
EXHIBIT A attached hereto), if an option holder's employment with the Company is
terminated by the Company other than for "Cause" (as defined on EXHIBIT A),
death or disability or by the option holder for "Good Reason" (as defined on
EXHIBIT A) within two years after such a Change in Control, then in such event
all options to purchase shares of capital stock of the Company, issued and
outstanding as of the date of such termination and then held by such terminated
option holder pursuant to the 1994 Stock Option Plan shall immediately vest and
become fully exercisable in accordance with their terms.
<PAGE> 2
Exhibit A
---------
A "CHANGE IN CONTROL" shall occur or be deemed to have occurred only if
any of the following events occur: (i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of stock of the Company) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of the date hereof, constitute the Board (as of the date
hereof, the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Termination by the Company of employment for "CAUSE" shall mean
termination (A) upon the willful and continued failure to substantially perform
his duties with the Company (other than any such failure resulting
from incapacity due to physical or mental
<PAGE> 3
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination (as defined below) by the option holder for Good Reason (as
defined below), provided that a written demand for substantial performance has
been delivered to the option holder by the Company specifically identifying the
manner in which the Company believes that the option holder has not
substantially performed his duties and he has not cured such failure within 30
days after such demand, (B) if the option holder shall have violated any
provision of any confidentiality, invention and non-disclosure, non-competition
or similar agreement entered into by him in connection with his employment by
the Company or (C) if the option holder shall have been found guilty of any act
or acts of dishonesty constituting a felony. For purposes of this subsection, no
act or failure to act on the option holder's part shall be deemed "willful"
unless done or omitted to be done by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the
Company.
"GOOD REASON" shall mean, without the option holder's written consent, the
occurrence after a Change in Control of the Company of any of the following
circumstances unless, in the case of paragraph (A), such circumstances are fully
corrected prior to the date of termination of employment specified in the Notice
of Termination (as defined below) given in respect thereof:
(A) any significant diminution in the option holder's position
or responsibilities as in effect immediately prior to a Change in Control;
(B) any reduction in the option holder's annual base salary as
in effect on the date hereof or as the same may be increased from time to time
(excluding any salary reductions implemented prior to the date of the adoption
of these resolutions by the Board of Directors); or
(C) any requirement by the Company or of any person in control
of the Company that the location at which the option holder performs his
principal duties for the Company be changed to a new location outside a radius
of 50 miles from his principal residence at the time of the Change in Control.
<PAGE> 4
Amendment to CrossComm Corporation's
1994 Stock Option Plan, as amended
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
"That, Section 2(b) of the 1994 Plan be, and hereby is, amended and restated in
its entirety to read as follows:
1. 'ADMINISTRATION. The Plan will be administered by the Board of Directors of
the Company, whose construction and interpretation of the terms and provisions
of the Plan shall be final and conclusive. The Board of Directors may in its
sole discretion grant options to purchase shares of the Company's Common Stock
("Common Stock") and issue shares upon exercise of such options as provided in
the Plan. The Board shall have authority, subject to the express provisions of
the Plan, to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, and to make all other determinations which are in the
judgment of the Board of Directors, necessary or desirable for the
administration of the Plan. The Board of Directors may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination under the Plan made in
good faith. The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations (including, without limitation,
applicable state law, Section 162(m) of the Code or any regulations thereunder,
or any successor section of the Code or regulations thereunder ("Section
162(m)"), and Rule 16b-3 promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), or any successor rule ("Rule 16b-3")), delegate any or all
of its powers under the Plan to a committee (the "Committee") appointed by the
Board of Directors, and if the Committee is so appointed all references to the
Board of Directors in the Plan shall mean and relate to such Committee. The
Committee shall be composed solely of at least two individuals who are
Non-Employee Directors, as such term is defined in Rule 16b-3 under the Exchange
Act, and Outside Directors, as such term is defined in Section 162(m) of the
Code. A majority of
<PAGE> 5
the members of the Committee shall constitute a quorum, and all determinations
of the Committee shall be made by a majority of its members.'
2. That, Section 3(b) of the 1994 Plan be, and hereby is, deleted in its
entirety.
3. That Section 6(b)(i) of the 1994 Plan be, and hereby is, amended and
restated in its entirety as follows:
'by delivery to the Company of shares of Common Stock of the Company already
owned by the optionee for at least six months having a fair market value equal
in amount to the exercise price of the options being exercised.'
4. That, Section 9 of the 1994 Plan be, and hereby is, amended and restated in
its entirety to read as follows:
"Except as otherwise provided in the option agreement evidencing such option
grant, no option may be transferred other than by will or by the laws of descent
and distribution, and during the life of the optionee, shall be exercisable only
by the optionee; provided, however, that Non-Statutory Options may be
transferred pursuant to a qualified domestic relations order (as defined in Rule
16b-3).'
5. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Amendment to CrossComm Corporation's
1995 Employee Stock Purchase Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted a resolution providing for the following:
"That, Section 8 of the 1995 Plan be, and hereby is, amended and restated in its
entirety to read as follows:
'An employee may at any time prior to the close of business on the last business
day in a Plan Period and for any reason permanently draw out the balance
accumulated in the employee's account and thereby withdraw from participation in
an Offering. Partial withdrawals are not permitted. The employee may not begin
participation again during the remainder of the Plan Period. The employee may
participate in any subsequent Offering in accordance with terms and conditions
established by the Board or the Committee.'
<PAGE> 1
Amendment to CrossComm Corporation's
1996 Stock Option Plan
On December 10, 1996, the Board of Directors of CrossComm Corporation (the
"Company") adopted resolutions providing for the following:
1. "That, Paragraph (ii) of Section 2(b) of the 1996 Plan be, and hereby is,
amended and restated to read as follows:
'The Board of Directors may, to the full extent permitted by or consistent with
applicable laws or regulations, delegate any or all of its powers under the Plan
to a committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the Plan
shall mean and relate so such Committee. The Committee shall be composed solely
of at least two individuals who are Non-Employee Directors, as such term is
defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and
Outside Directors, as such term is defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended. A majority of the members of the Committee
shall constitute a quorum, and all determinations of the Committee shall be made
by a majority of its members.'
2. That, Section 3(b) of the 1996 Plan be, and hereby is, deleted in its
entirety.
3. That Section 6(b)(i) of the 1996 Plan be, and hereby is, amended and
restated in its entirety as follows:
'by delivery to the Company of shares of Common Stock of the Company already
owned by the optionee for at least six months having a fair market value equal
in amount to the exercise price of the options being exercised.'
4. That Section 9 of the 1996 Plan be, and hereby is, amended and restated in
its entirety to read as follows:
'Except as otherwise provided in the option agreement evidencing such option
grant, no option may be transferred other than by will or by the laws of descent
and distribution, and during the life of the optionee, shall be exercisable only
by the optionee; provided, however, that
<PAGE> 2
Non-Statutory Options may be transferred pursuant to a qualified domestic
relations order (as defined in Rule 16b-3).'
5. That the transactions arising out of the surrender by any optionee under
any outstanding option of shares of the Company to exercise an option or to
satisfy withholding obligations pursuant to the terms of any outstanding option
agreement be and hereby are approved."
<PAGE> 1
Montgomery
PERSONAL AND CONFIDENTIAL
November 18, 1996
CrossComm Corporation
450 Donald Lynch Boulevard
Marlboro, MA 01752
Attention: Mr. Tadeusz Witkowicz
Chairman
Dear Tad:
We are pleased to have been selected to assist you in the sale you are
contemplating. This letter will set forth the understanding and agreement
between Montgomery Securities ("us" or "Montgomery") and CrossComm Corporation
("you" or the "Company").
You are engaging us as your exclusive representative and financial adviser
for the purpose of identifying opportunities for maximizing shareholder value,
which may include a sale of the Company or one of its four Divisions,
Enterprise Products, Carrier Products, Services and Ethernet Switches (each, a
"Division"); advising you concerning such opportunities; and if requested by
you, participating on your behalf in negotiations resulting from these
opportunities. For purposes of this agreement, the sale of the Company or a
Division shall mean any transaction or related series or combination of
transactions whereby, directly or indirectly, control of all or substantially
all of the business or assets of the Company or a Division is acquired by a
third party in a sale or exchange of stock, merger or consolidation, sale of
assets or other similar transaction. The sale of a Division shall include the
distribution or other transfer of the business or assets of the Division to the
shareholders of the Company, by a dividend (i.e. spin-off) or otherwise.
We will render to you whatever services are mutually agreeable in order to
assist you in connection with these opportunities. In particular, we will assist
you in the preparation of a descriptive memorandum concerning the Company or any
Division with the understanding that you will be solely responsible for the
contents of the memorandum and the memorandum shall not be made available to
or used in discussions with prospective purchasers of the Company or a Division
or their representatives by us until both the memorandum and its use for that
purpose have
<PAGE> 2
been approved by you. We will develop, update from time to time, and review
with you on an on-going basis a list of parties which might be interested in
acquiring the Company or a Division and contact only parties which are approved
by you. We will consult with and advise you concerning opportunities for the
sale of the Company or a Division and, if requested by you, participate on your
behalf in negotiations concerning the sale. We will also consult with you
regarding the financial structure of any transaction. Further, we will develop
and administer a "bidding" process if we both agree to such a process, will
consult with you with respect to both competing bids, if any, and the financial,
strategic and tactical aspects of the transaction as described in the agreements
effecting the transaction and will assist you in the administration of the
closing of any transaction.
Finally, we will, if requested by you, render to the Company's board of
directors our opinion with respect to the fairness from a financial point of
view to the shareholders of the Company of the consideration to be received by
such shareholders in a sale of the Company (or to the Company of the
consideration to be received by the Company in a sale of a Division or
Divisions) as of the date of the opinion (any such opinions being referred to
herein as the "Opinion"). We will render the Opinion as of the date of the
meeting of your board of directors to finally approve the sale of the Company
(or Division, if applicable) and, if we mutually agree, as of the date of the
mailing of the proxy statement and/or prospectus soliciting the approval of your
shareholders and the date of the consummation of the sale of the Company. If
this agreement expires or is terminated and a sale of the Company or all of the
Divisions has not been consummated, we will provide the Company with a written
report covering a summary of processes undertaken by us, potential buyers
contacted, and the results of those efforts.
In order for us to advise you effectively, it is necessary that you make
available to us all information which we reasonably request in connection with
the performance of our services, including information concerning the business,
assets, operations or financial condition of the Company and the Divisions. You
agree that we may rely upon the accuracy and completeness of such information
without independent verification and are authorized to make appropriate use of
such information.
In addition, you agree to furnish to us the names of all parties with which
you have had discussions or contacts concerning an acquisition of the Company or
a Division within one year before or during the term of this engagement.
Further, you agree to conduct any transaction in a manner which will comply
in all respects with the applicable provisions of the Securities Act of 1933,
the Securities Exchange Act of 1934 and all other applicable federal and state
statutes, rules and regulations and also agree to be responsible for the
completeness, accuracy and format of all information furnished to any
prospective purchaser and furnish to a prospective
<PAGE> 3
purchaser any appropriate information which may be required by it in order to
make a purchase decision.
The term of our engagement will extend for one year from the date hereof;
provided, however, that subject to the provisions regarding fees, either party
may terminate our engagement at any time on 10 days prior written notice.
As compensation for our services hereunder, you will pay us a retainer fee
of $50,000 upon execution of this letter agreement. This retainer fee will be
credited against the fee due to us upon consummation of the sale of the Company
or a Division.
Upon the delivery of any Opinion, you will pay us a fee in the amount of
$100,000. Such fee will be credited against any fee due to us upon consummation
of the sale of the Company or any Division, as provided in the paragraph below.
If the sale of the Company or a Division or a minority interest in the
Company or a Division is consummated, or if you reach a definitive agreement for
a sale of the Company or a Division or a minority interest in the Company or a
Division, during this engagement or at any time prior to one year following the
termination date of this engagement, you will pay us a fee equal to the
following amounts or percentages of the consideration involved in the sale, as
the case may be:
<TABLE>
<CAPTION>
Consideration Fee
- ------------- ---
<S> <C> <C>
(i)Sale of the Company:
a)For the amount of consideration from the sale up $400,000
to the Company's cash and cash equivalents; plus
b)For the Amount of Consideration (if any) Greater 3.5% of the Consideration
than the Company's cash and cash equivalents. above the amount of
Consideration equal to the
Company's cash and cash
equivalents.
(ii) For the sale of the Divisions of the Company,
per Division:
Sale of Enterprise Products Division $400,000
Sale of Carrier Products Division $400,000
Sale of Services Division $300,000
Sale of Ethernet Switches Division $300,000
</TABLE>
<PAGE> 4
For example, if the Company as a whole is sold for $100,000,000 and the
cash and cash equivalents are $50,000,000 at the closing of the sale, then the
fee would be $400,000 plus 3.5% of $50,000,000 (i.e. $1,750,000), in which case
the total fee would be $2,150,000 (i.e., $400,000 plus $1,750,000).
Alternatively, if the Enterprise Products and Services Divisions were sold, the
fee would be $400,000 plus $300,000, for an aggregate fee of $700,000. If the
Enterprise Products Division were sold in one transaction and the rest of the
Company were sold (including the cash and cash equivalents) in a separate
transaction, then the fee would be $400,000 plus 3.5% of the consideration from
the two sales in excess of the cash and cash equivalents. If the four Divisions
were sold and the cash from these transactions as well as the cash and cash
equivalents were then distributed to shareholders, the total fee would be
$1,400,000 (the sum of $400,000, $400,000, $300,000 and $300,000). In cash case,
our fee shall be payable in cash at the time a sale is consummated and shall be
based upon consideration and cash and cash equivalents determined at that time.
Our compensation is to be free and clear of any obligation that you may have to
any other broker or finder.
Consideration shall mean the sum of (i) the cash, market value of
marketable equity securities, interests, options or warrants, fair value of
unmarketable equity securities, interests, options or warrants, face amount of
straight and convertible debt instruments or obligations issued or issuable
(including any amounts paid into escrow) to you, your shareholders and
optionholders, or a Division or any entity affiliated with you, your
shareholders and optionholders, or a Division in connection with the sale, (ii)
the amount of long-term indebtedness of the Company or a Division assumed
directly or indirectly by an acquiring party or any entity affiliated with an
acquiring party in connection with the sale, and (iii) the fair value of future
payment obligations, absolute and contingent (e.g., earn-outs), arising in
connection with the sale. Consideration shall be determined at the time the sale
is consummated. For purposes of computing any fees payable to us hereunder,
non-cash consideration shall be valued as follows: (a) publicly traded
securities shall be valued at the average of their closing prices (as reported
in the Wall Street Journal) for the five trading days prior to the closing of
any transaction, and (b) any other non-cash consideration shall be valued at the
fair market value thereof as mutually agreed upon by you and us.
In addition to the foregoing fees, you agree to reimburse us for all
reasonable out-of-pocket costs and expenses (including reasonable counsel fees)
incurred by us in connection with the services to be rendered by us hereunder,
whether or not a transaction is consummated or our services are terminated or
completed. These expenses shall be billed by us and payable by you quarterly. In
addition, in the event we are requested to appear at a judicial or
administrative hearing in connection with this engagement, you will pay us a per
diem fee of $2,000 per person per day and reimburse our reasonable out-of-pocket
expenses in connection with such appearance.
<PAGE> 5
As we are acting on your behalf, it is our practice to obtain an
indemnification and contribution agreement from you. That agreement is attached
and incorporated by reference. The obligations contained in that agreement will
remain operative regardless of any termination or completion of our services
hereunder.
We understand that you may request any Opinion be disclosed in a
registration statement under the Securities Act of 1933 and/or a proxy statement
in compliance with the Securities Exchange Act of 1934 prepared in connection
with the transaction to which such Opinion relates. You are hereby authorized to
disclose any such Opinion in full and refer to it in such documents provided
that we expressly approve all statements in such documents with respect to us or
relating to such Opinion. You agree to include in any such disclosure a
statement that we do not admit that we are experts with respect to the
registration statement or proxy statement/prospectus within the meaning of the
term "experts" as used in the Securities Act of 1933. The Opinion will not be
used or referred to by you, quoted or disclosed to any person (other than the
Company's directors, executive officers and attorneys) in any manner for any
other purpose without our express prior written consent.
All notices or communications hereunder, except as otherwise provided by
written notice, will be in writing and mailed or delivered as follows:
If to Montgomery Securities:
Montgomery Securities ATTN: Jack G. Levin, Esq.
600 Montgomery Street
San Francisco, CA 94111
If to the Company:
CrossComm Corporation ATTN: Tadeusz Witkowicz
450 Donald Lynch Blvd. Chairman
Marlboro, MA 01752
Copy to:
Hale and Dorr ATTN: Philip P. Rossetti
60 State Street Partner
Boston, MA 02109
This engagement agreement, together with the attached agreement on
indemnification and contribution, contains our entire agreement concerning the
proposed transaction and supersedes any prior understandings and agreements.
This engagement agreement is made and shall be construed under and in accordance
with
<PAGE> 6
the laws of the State of California (without reference to any principle of the
conflict of laws). Any waiver of any right or obligation hereunder must be in
writing signed by the party against whom such waiver is sought to be enforced.
If the foregoing correctly sets forth out understanding and agreement,
please sign in the space below and return it to us. We thank you for the
opportunity to share in your business endeavors and are looking forward to a
successful and mutually beneficial relationship.
Very truly yours,
MONTGOMERY SECURITIES
By: /s/ M. Benjamin Howe
-----------------------------------
M. Benjamin Howe, Managing Director
Accepted and Agreed to on this 18th day of November, __1996:
CROSSCOMM CORPORATION
By: /s/ T. Witkowicz
---------------------------
Tadeusz Witkowicz, Chairman
<PAGE> 1
Exhibit 10.34
LICENSE AGREEMENT
AGREEMENT made this 20th Day of March 1997 by and between CrossComm
Corporation ("CCC") and Tadeusz Witkowicz ("Witkowicz").
CCC and Witkowicz hereby act and agree as follows:
1. CCC hereby grants to Witkowicz a perpetual, non-exclusive world-wide
license to use, produce, copy, sublicense and distribute the software program
known as Network Delta (formerly called IMS Delta) in object and source code
form and all documentation therefor (such software program and documentation
being referred to herein collectively as the "Software"). Witkowicz may enhance,
alter, modify and adapt the Software and create derivative works therefrom, and
CCC shall have no right, title or interest in any such modification or
derivative work. Witkowicz may merge the Software or any part thereof with other
software.
2. With 30 days after the date hereof, CCC shall deliver to Witkowicz the
electronic media and printed materials listed on Exhibit A attached hereto.
3. CCC hereby assigns to Witkowicz all of CCC's right, title and interest,
if any, in and to the name "Network Delta", but CCC makes no representation or
warranty that it has any right, title or interest in or to such name, nor any
representation or warranty as to any right, title or interest that it may have
in or to
<PAGE> 2
such name. Witkowicz is not granted any right hereunder to make use of the name
"CrossComm" or any other trademark, service mark or trade name of CCC.
4. Witkowicz agrees to pay license fees to CCC as follows:
a) $30,000 on the date hereof.
b) For each copy of the Software or of any merged version thereof or
derivative work therefrom sublicensed to end-users thereof by
Witkowicz or his assignees, successors in interest or
sublicensees, a license fee of $25 for each copy so sublicensed
prior to January 1, 1999 and a license fee of $5 for each copy so
sublicensed thereafter. Such fees shall become due and payable on
each anniversary date hereof. Each payment will be accompanied by
a report, signed by Witkowicz or an appropriate accounting
officer of his assignee or successor in interest, setting out the
number of copies of the Software sublicensed during the license
year then ended. CCC will have the right to audit, no more than
once per year and at CCC's sole cost and expense, such books and
records of Witkowicz or his assignee or successor in interest as
shall be reasonably necessary to confirm the amount of license
fee due and payable for any year.
-2-
<PAGE> 3
5. CCC warrants that there are no pending, and to CCC's knowledge there are
no threatened, claims by any person that the Software, in its current form,
infringes any copyright or patent rights of such person. Except for the
foregoing warranty, the Software is being provided to Witkowicz AS IS, without
warranty of any kind or nature whatsoever. Without limitation of the foregoing,
CCC is making no warranty or representation concerning the quality, performance
or other characteristics of the Software. CCC has no obligation to maintain or
support the Software.
6. Witkowicz has delivered to CCC a letter specifying those employees of
CCC to whom Witkowicz currently intends to offer employment (the "Designated
Employees"). CCC agrees that, during the four-month period commencing on the
date hereof, it will not take any action to prevent or otherwise discourage any
Designated Employee from accepting an offer of employment from Witkowicz. For
purposes of the foregoing sentence, "otherwise discourage" shall mean (i)
disparagement of Witkowicz or his business or (ii) improvement of the terms or
conditions of employment of any Designated Employee. CCC hereby assigns to
Witkowicz all of its rights and benefits under the provisions of agreements it
has with the Designated Employees relating to non-disclosure of confidential
information, assignment of inventions and the like solely with respect to the
Software and Witkowicz's conduct of his business utilizing the license granted
hereby.
-3-
<PAGE> 4
7. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
8. No delay, omission, or failure to exercise any right or remedy provided
herein shall be deemed to be a waiver thereof or an acquiescence in the event
giving rise to such right or remedy, but every such right or remedy may be
executed from time to time as may be deemed expedient by the party exercising
such remedy or right.
9. Witkowicz shall be solely responsible for any sales, use, service or
other tax levied or incurred on account of this Agreement or his activities
hereunder, except for any tax based upon the net income of CCC.
10. Except as stated below, any controversy or claim arising out of or
relating to the Agreement or the breach hereof shall be settled by arbitration
in the Commonwealth of Massachusetts in accordance with the rules and procedures
of the American Arbitration Association, and the judgment upon any award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof.
11. If any provision herein is too broad in any respect to permit the full
enforcement thereof, then such provision shall be limited only so far as it is
necessary to allow conformance to the law, and as so limited shall be deemed a
part hereof. If
-4-
<PAGE> 5
any invalid provision may not be so limited, such provision shall be deleted
from the Agreement, but the remaining provisions shall remain in full force and
effect.
12. In no event will CCC or Witkowicz be liable to the other for any
indirect, incidental or consequential damages, whether foreseeable or not,
including without limitation, damages for loss of business profits or business
interruption, resulting from or arising out of the use of or inability to use
the Software even if CCC or Witkowicz has been advised of the possibility of
such.
13. Witkowicz understands that the Software may be a regulated commodity
under the Export Control Act of 1979, as amended from time to time, and the
regulations thereunder, and may require a license to export such. Witkowicz is
solely responsible for any required export license.
14. Nothing herein shall be deemed to create any agency, joint venture or
partnership relationship between the parties. Neither party shall have the right
to bind the other to any obligation, nor have the right to incur any liability
on behalf of the other. Nothing contained in this Agreement shall in any way
prevent, restrict or otherwise affect the right of CCC to grant non-exclusive
licenses to the Software to third parties.
-5-
<PAGE> 6
15. This Agreement is the complete and exclusive agreement between the
parties with regard to the subject matter hereof.
16. No action may be brought by either party against the other more than
one year after the cause of action has accrued.
17. Attached hereto and incorporated herein by this reference is the
following exhibit:
Exhibit A: Itemization of Licensed Software and Documentation
18. The parties agree to execute any document reasonably requested by the
other to perfect or effectuate the rights granted herein.
19. This Agreement may be executed in multiple original counterparts, each
of which will be an original, but all of which taken together shall constitute
one and the same document. This Agreement will become effective when and if
there exist copies of this Agreement which, when taken together, bear the
authorized signatures of CCC and Witkowicz.
CROSSCOMM CORPORATION
By: /s/ Douglas G. Bryant
------------------------------------
Its Chief Financial Officer
/s/Tadeusz Witkowicz
---------------------------
Tadeusz Witkowicz
-6-
<PAGE> 7
EXHIBIT A
The Network Delta software technology covered under the License includes all
source and object code for the following software modules:
i) IMS/Delta shell
* user interface
* trap dispatcher
ii) Query Editor
* MIB Compiler
* schedule designer
* device database description
* Summit Basic compiler
iii) Query Executor
* scheduler
* SNMP engine
* Summit Basic runtime engine
* Crystal Reports reporting engine
Specific deliverables include:
DeltaShell.exe
Qexec.exe
SerSNMP.dll
cccsnmp.dll
kernl.dll
nmpdu.dll
oem.dll
EvMan.dll
Qeditor.exe
dev32st.dll
mibdb.dll
IDNotify.dll
IDQuery. dll
IDSreNtf. dll
IDTrpMgr.dll
IDUtils.dll
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-52130, 33-52132, 33-52134, 33-52136, 33-52138, 33-69592,
33-82476, 33-93832, 33-93834, and 333-05337) of CrossComm Corporation of our
report dated January 28, 1997, except for Note 12, as to which the date is March
20, 1997, with respect to the consolidated financial statements and schedule of
CrossComm Corporation included in the Annual Report (Form 10-K) for the year
ended December 31, 1996.
ERNST & YOUNG LLP
Boston, Massachusetts
March 25, 1997
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<PERIOD-START> JAN-01-1996
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<SECURITIES> 37279
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<COMMON> 92
<OTHER-SE> 54270
<TOTAL-LIABILITY-AND-EQUITY> 66859
<SALES> 34083
<TOTAL-REVENUES> 44874
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<OTHER-EXPENSES> 30009
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
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