<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997
REGISTRATION NO. 333-24655
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
OLICOM A/S
(Exact name of registrant as specified in its charter)
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<C> <C> <C>
KINGDOM OF DENMARK 3669 NONE
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
NYBROVEJ 114
DK-2800 LYNGBY
DENMARK
+45 45 27 00 00
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
J. MICHAEL CAMP
OLICOM, INC.
900 EAST PARK BLVD., SUITE 250
PLANO, TEXAS 75074
(972) 423-7560
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
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<C> <C>
LAWRENCE D. GINSBURG PHILIP P. ROSSETTI
LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P. HALE AND DORR LLP
2200 ROSS AVENUE, SUITE 900 60 STATE STREET
DALLAS, TEXAS 75201 BOSTON, MASSACHUSETTS 02109
TELECOPIER: (214) 220-4899 TELECOPIER: (617) 526-5000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective and the
occurrence of all other conditions to the merger (the "Merger") of PW
Acquisition Corporation, a wholly-owned subsidiary of the Registrant, with and
into CrossComm Corporation (as described in the Agreement and Plan of
Reorganization attached to the Joint Proxy Statement/Prospectus forming a part
of this Registration Statement) have been satisfied or waived.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
OLICOM A/S
CROSS-REFERENCE SHEET
FURNISHED PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
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<CAPTION>
LOCATION OR CAPTION IN
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
---------------------------------------------- --------------------------------
<S> <C> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page and Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover and Outside Back Cover
Pages
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors; Enforceability of
Civil Liabilities
4. Terms of the Transaction................. Summary; The Merger and Related
Transactions; Description of Olicom
Common Stock; Tax Considerations;
Comparison of Stockholder Rights under
the Laws of Denmark and Delaware;
Appendix A; Appendix B; Appendix C
5. Pro Forma Financial Information.......... Unaudited Pro Forma Condensed Combined
Financial Information; Notes to Unaudited
Pro Forma Condensed Financial Statements
6. Material Contacts With the Company Being
Acquired................................. Summary; The Merger and Related
Transactions
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to F-3
Companies................................ *
11. Incorporation of Certain Information by
Reference................................ *
12. Information with Respect to F-2 or F-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Foreign
Registrants Other Than F-2 or F-3
Registrants.............................. Summary; Market Price and Dividend
Information; Risk Factors; Olicom A/S;
Unaudited Pro Forma Condensed Combined
Financial Information; Description of
Olicom Common Stock
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
---------------------------------------------- --------------------------------
<S> <C> <C> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to F-3
Companies................................ *
16. Information with Respect to F-2 or F-3
Companies................................ *
17. Information with Respect to Foreign
Companies Other than F-2 or F-3
Companies................................ Summary; Market Price and Dividend
Information; Risk Factors; CrossComm
Corporation; Unaudited Pro Forma
Condensed Combined Financial Information
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Summary; The Olicom
Meeting; The CrossComm Meeting; The
Merger and Related Transactions
19. Information if Proxies, Consents or
Authorizations are not to be Solicited in
an Exchange Offer........................ *
</TABLE>
- ---------------
* Item is omitted because not applicable.
<PAGE> 4
[Olicom Logo]
May , 1997
Dear Stockholder:
I am pleased to forward the enclosed Joint Proxy Statement/Prospectus for
the Annual General Meeting of Stockholders of Olicom A/S ("Olicom") to be held
on Thursday, May 29, 1997, at 4:00 p.m. local time, at Olicom's International
Headquarters located in Greater Copenhagen at Nybrovej 114, DK-2800 Lyngby, and
any adjournment thereof (the "Olicom Meeting"). A Notice of the Annual General
Meeting of Stockholders, a proxy card, and a Joint Proxy Statement/Prospectus
containing information about the matters to be acted upon are enclosed. All
holders of outstanding common shares in Olicom, nominal value DKK 0.25 per share
("Olicom Common Stock"), as of the close of business on May 2, 1997 (the "Record
Date"), are entitled to notice of and to vote at the Olicom Meeting.
At the Olicom Meeting, including any adjournment thereof, Olicom's
stockholders will be asked, among other things, to consider and vote on a
proposal to approve an Agreement and Plan of Reorganization (the "Merger
Agreement") dated as of March 20, 1997, among Olicom, PW Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Olicom
("MergerSub"), and CrossComm Corporation, a Delaware corporation ("CrossComm"),
pursuant to which MergerSub will be merged with and into CrossComm, which will
continue in existence as a wholly-owned subsidiary of Olicom.
Pursuant to the Merger Agreement, each share of common stock in CrossComm
("Cross Comm Common Stock") will be exchanged for $5.00 in cash, 0.2667 shares
of Olicom Common Stock, subject to change under certain circumstances (the
"Exchange Ratio"), and three-year warrants (each, a "Warrant") to purchase
0.1075 shares of Olicom Common Stock (the "Warrant Exchange Ratio") at an
exercise price of $19.74 per whole share (collectively, the "Merger
Consideration") (the "Merger"). The Merger is subject to the terms and
conditions of the Merger Agreement. The shares of Olicom Common Stock held by
Olicom stockholders prior to the Merger will remain unchanged by the Merger.
Based on the capitalization of Olicom and CrossComm as of the date of the Merger
Agreement and assuming an Exchange Ratio of 0.2667, it is expected that, as a
result of the Merger, Olicom will issue approximately 2,700,000 shares of Olicom
Common Stock by virtue of the Merger (assuming the exercise of all vested
CrossComm options and the purchase of CrossComm Common Stock under the CrossComm
Employee Stock Purchase Plan consistent with current levels of contributions
thereto), which would represent approximately 15.3% of Olicom's outstanding
capital stock. In addition, based on the capitalization of CrossComm as of the
date of the Merger Agreement and assuming a Warrant Exchange Ratio of 0.1075,
Olicom will issue pursuant to the Merger warrants to purchase an aggregate of
approximately 1,100,000 additional shares upon exercise thereof (after giving
pro forma effect to the exercise of all vested CrossComm options).
The accompanying Joint Proxy Statement/Prospectus provides a detailed
description of the Merger Agreement, certain business and financial information
of Olicom and CrossComm, and other important information, which you are urged to
read carefully. Copies of the Merger Agreement and the form of Certificate of
Merger are attached to the Joint Proxy Statement/Prospectus as Appendix A.
THE BOARD OF DIRECTORS OF OLICOM HAS CAREFULLY REVIEWED AND CONSIDERED THE
TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND THE PROPOSED MERGER. THE BOARD
HAS UNANIMOUSLY APPROVED THE TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND
THE MERGER, HAVING REACHED THIS DECISION AFTER CAREFUL CONSIDERATION OF A NUMBER
OF FACTORS, INCLUDING THE OPINION OF ALEX. BROWN & SONS INCORPORATED ("ALEX.
BROWN"), OLICOM'S FINANCIAL ADVISOR, TO THE EFFECT THAT THE MERGER CONSIDERATION
IS FAIR TO OLICOM FROM A FINANCIAL POINT OF VIEW. THE FULL OPINION OF ALEX.
BROWN IS INCLUDED AS APPENDIX B TO THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS, AND STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS
<PAGE> 5
ENTIRETY. THE BOARD RECOMMENDS THAT THE STOCKHOLDERS OF OLICOM VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
At the Olicom Meeting, Olicom stockholders will also be asked to consider
and vote on proposals (i) to (a) receive the report of the Board of Directors
regarding Olicom's activities during fiscal year 1996, (b) receive Olicom's
profit and loss account for the fiscal year ended December 31, 1996, and its
balance sheet at such date, and vote on the adoption of same, (c) approve the
discharge of management and the Board of Directors from their duties for fiscal
year 1996, and (d) authorize the carry forward of Olicom's profits to the fiscal
year ending December 31, 1997; (ii) to elect seven directors to hold office for
a term ending in 1998 and until their successors are elected and qualified;
(iii) to appoint Ernst & Young A/S and KPMG C. Jespersen as Olicom's auditors,
and Ernst & Young LLP as the auditors for Olicom, Inc.; (iv) to authorize the
purchase by Olicom from time to time for a period of 18 months following the
Olicom Meeting of up to 10% of the issued and outstanding common stock of
Olicom; (v) to approve the fees of Olicom's directors for fiscal year 1997; (vi)
to approve amendments to Olicom's Articles of Association; (vii) to approve
Olicom's 1997 Share Incentive Plan; and (viii) to approve the postponement or
adjournment of the Olicom Meeting to consider the approval of the Merger
Agreement and, if necessary, for the solicitation of additional votes. THE BOARD
RECOMMENDS THAT THE STOCKHOLDERS OF OLICOM VOTE "FOR" APPROVAL OF THESE
PROPOSALS.
The Olicom Meeting initially will consider the proposals set forth in the
immediately preceding paragraph on May 29, 1997. Thereafter, the Olicom Meeting
will be adjourned to 4:00 p.m. local time on , June , 1997 (the same
day as CrossComm's Annual Meeting of Stockholders), at which time a reconvened
Olicom Meeting will consider the proposal to approve the Merger Agreement,
together with such other business as may properly come before such adjourned
meeting.
We urge you to review carefully the enclosed material and to return your
proxy promptly. The Merger Agreement and the consummation of the Merger must be
approved by the affirmative vote of a majority of the votes cast at the Olicom
Meeting. Except for the proposal to approve amendments to Olicom's Articles of
Association, the affirmative vote of a majority of the shares of Olicom Common
Stock present and voting at the Olicom Meeting is required for approval of all
other proposals being submitted to the stockholders for their consideration. The
proposal to approve amendments to Olicom's Articles of Association requires
approval by two-thirds of the votes cast at the Olicom Meeting and two-thirds in
nominal value of the voting capital represented at such meeting.
Whether or not you plan to attend the Olicom Meeting, please mark, sign,
date and promptly return your proxy card in the enclosed postage-paid envelope
or vote via telecopier at +45 45 270129 or (972) 422-4351. If you attend the
meeting, you may vote in person if you wish, even though you have previously
returned your proxy. Should you have any questions or if you would like
information on any adjustments to the Exchange Ratio and/or the Warrant Exchange
Ratio, please contact MacKenzie Partners, Inc., toll free at (800) 322-2885 or
collect at (212) 929-5500.
Sincerely,
LARS STIG NIELSEN
Managing Director and Chief
Executive Officer
JAN BECH
Chairman of the Board
<PAGE> 6
NOTICE OF ANNUAL GENERAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
To the Stockholders of Olicom A/S:
The Annual General Meeting of Stockholders of Olicom A/S ("Olicom") will be
held at Olicom's International Headquarters located at Nybrovej 114, DK-2800
Lyngby, Denmark, on Thursday, May 29, 1997, at 4:00 p.m., local time, for the
following purposes:
1. To approve that certain Agreement and Plan of Reorganization (the
"Merger Agreement") dated as of March 20, 1997, among Olicom, PW
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary
of Olicom ("MergerSub"), and CrossComm Corporation, a Delaware corporation
("CrossComm"), pursuant to which each share of common stock in CrossComm,
par value $0.01 per share ("CrossComm Common Stock") will be exchanged for
$5.00 in cash, 0.2667 shares of common stock in Olicom, nominal value DKK
0.25 per share ("Olicom Common Stock"), and three-year warrants (each a
"Warrant") to purchase 0.1075 shares of Olicom Common Stock at an exercise
price of $19.74 per whole share (the "Merger"). The Merger and related
matters are more fully described in, and the Merger Agreement is attached
to, the accompanying Joint Proxy Statement/Prospectus. In addition, the
Board of Directors will be authorized to make such amendments to the
resolutions adopted by the Annual General Meeting as may be required by the
Commercial and Companies Agency of The Kingdom of Denmark as a condition to
the registration of the shares of Olicom Common Stock to be issued pursuant
to the Merger or upon exercise of Warrants issued or options assumed
pursuant to the Merger.
2. To (i) receive the report of the Board of Directors of Olicom (the
"Olicom Board") regarding Olicom's activities during fiscal year 1996, (ii)
receive Olicom's profit and loss account for the fiscal year ended December
31, 1996, and its balance sheet at such date, and vote on the adoption of
same, (iii) approve the discharge of Olicom's management and the Olicom
Board from their duties for fiscal year 1996, and (iv) authorize the carry
forward of Olicom's profits to the fiscal year ending December 31, 1997;
3. To elect seven directors to hold office for a term ending in 1998
and until their successors are elected and qualified;
4. To appoint Ernst & Young A/S and KPMG C. Jespersen as Olicom's
auditors, and Ernst & Young LLP as the auditors for Olicom, Inc.;
5. To authorize the purchase by Olicom from time to time for a period
of 18 months following the meeting of up to 10% of the issued and
outstanding shares of Olicom Common Stock;
6. To approve the fees of Olicom's directors for fiscal year 1997;
7. To approve amendments to Olicom's Articles of Association;
8. To approve Olicom's 1997 Share Incentive Plan;
9. To approve the postponement or adjournment of the meeting to
consider the approval of the Merger Agreement, and if necessary, for the
solicitation of additional votes; and
10. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
At the Annual General Meeting of Stockholders, the Olicom Board will
deliver its report on Olicom's activities for fiscal year 1996, and there will
be a presentation of Olicom's Annual Accounts, together with the Auditor's
Report, Olicom's Annual Report and its consolidated accounts. The meeting
initially will consider Proposals 2-9 on May 29, 1997. Thereafter, the meeting
will be adjourned to 4:00 p.m. local time on , June , 1997 (the
same day as CrossComm's Annual Meeting of Stockholders), at which time
<PAGE> 7
a reconvened meeting will consider the proposal to approve the Merger Agreement,
together with such other business as may properly come before such adjourned
meeting.
The Olicom Board has fixed the close of business on May 2, 1997, as the
record date. Only holders of record of Olicom Common Stock at the close of
business on May 2, 1997, will receive notice of the meeting. Holders of record
of Olicom Common Stock on May 2, 1997, are entitled to vote at the meeting and
any adjournments or postponements thereof. The transfer books of Olicom will not
be closed.
Except for the proposal to approve amendments to Olicom's Articles of
Association, the affirmative vote of a majority of the shares of Olicom Common
Stock present and voting at the meeting is required for approval of all
proposals being submitted to the stockholders for their consideration. The
proposal to approve amendments to Olicom's Articles of Association requires
approval by two-thirds of the votes cast at the meeting and two-thirds in
nominal value of the voting capital represented at such meeting. The Companies
Act of the Kingdom of Denmark and Olicom's Articles of Association generally do
not require the presence, in person or by proxy, of a minimum number of shares
of Olicom Common Stock constituting a quorum in order for the meeting to take
action with respect to the matters described above.
The accompanying Joint Proxy Statement/Prospectus solicits proxies with
respect to the matters identified above for approval at the Annual General
Meeting of Stockholders. A proxy may be revoked by a stockholder prior to its
use, as specified in the enclosed Joint Proxy Statement/Prospectus.
Holders of Olicom Common Stock are encouraged to attend the Annual General
Meeting and vote on all matters. If you plan to attend the meeting and are a
stockholder of record, please check your proxy card in the space provided for
that purpose. An admission ticket will be mailed to you approximately seven days
prior to the meeting date. However, if your shares are not registered in your
own name, please advise the stockholder of record (your bank, broker, etc.) that
you wish to attend. That firm should request an admission ticket from Olicom on
your behalf, or alternatively, provide you with a proxy, which will enable you
to gain admission to the meeting.
By Order of the Board of Directors
JAN BECH
Chairman of the Board
Lyngby, Denmark
May , 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL GENERAL MEETING OF STOCKHOLDERS,
PLEASE SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE
ACCOMPANYING POSTPAID ENVELOPE. YOUR DOING SO MAY SAVE OLICOM THE EXPENSE OF A
SECOND MAILING.
<PAGE> 8
CROSSCOM LOGO
CROSSCOMM CORPORATION
450 DONALD LYNCH BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
May , 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
CrossComm Corporation ("CrossComm") to be held on , June ,
1997, at 10:00 a.m., local time, at the Radisson Marlborough Hotel, 75 Felton
Street, Marlborough, Massachusetts 01752, and any adjournment thereof (the
"CrossComm Meeting").
At the CrossComm Meeting, you will be asked to consider and vote upon,
among other things, a proposal to approve an Agreement and Plan of
Reorganization (the "Merger Agreement") dated as of March 20, 1997, by and among
CrossComm, Olicom A/S, a corporation organized under the laws of the Kingdom of
Denmark ("Olicom"), and PW Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Olicom ("MergerSub"), pursuant to which CrossComm
will be merged with MergerSub ("the Merger") and become a wholly-owned
subsidiary of Olicom. Pursuant to the Merger Agreement, each share of common
stock of CrossComm ("CrossComm Common Stock") will be exchanged for $5.00 in
cash, 0.2667 shares of Olicom Common Stock (the "Exchange Ratio"), and
three-year warrants to purchase 0.1075 shares of Olicom Common Stock at an
exercise price of $19.74 per whole share (the "Warrant Exchange Ratio").
The accompanying Joint Proxy Statement/Prospectus provides a detailed
description of the Merger Agreement, certain business and financial information
of CrossComm and Olicom, and other important information, which you are urged to
read carefully.
The Board of Directors of CrossComm has carefully reviewed and considered
the terms and conditions of the Merger. The CrossComm Board of Directors
believes that the Merger represents an important strategic move for our company
because it significantly increases CrossComm's ability to capitalize on the
growth of the networking market and, in particular, on the growth opportunities
in the IBM/Token Ring market segment. Both Olicom and CrossComm have been
focused on this market segment and have established a successful track record of
delivering solutions to IBM/Token Ring customers. Over the years the two
companies have developed complementary products, technologies and organizations
so that the proposed merger will create a company better able to address the
needs of the Fortune 1000 customers than CrossComm could do alone. In addition,
the Board of Directors of CrossComm has received a written opinion from its
financial advisor, Montgomery Securities, to the effect that the Merger
Consideration is fair to CrossComm stockholders from a financial point of view.
CROSSCOMM'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
<PAGE> 9
At the CrossComm Meeting, CrossComm stockholders will also be asked to
consider and vote on proposals (i) to grant to the Board of Directors of
CrossComm discretionary authority to adjourn the CrossComm Meeting in order to
solicit additional votes for approval of the Merger, if necessary, (ii) to elect
four directors to hold office for a term ending in 1998 and until their
successors are elected and qualified; however, if the Merger is approved, at the
effective time of the Merger (which is expected to occur shortly after the
CrossComm Meeting) the CrossComm Board will be replaced by the Board of
Directors of MergerSub, and (iii) to ratify the selection by CrossComm's Board
of Directors of Ernst & Young LLP as CrossComm's independent auditors for the
current fiscal year. THE CROSSCOMM BOARD OF DIRECTORS ALSO RECOMMENDS THAT YOU
VOTE TO GRANT THE DISCRETIONARY AUTHORITY TO THE BOARD OF DIRECTORS TO ADJOURN
THE CROSSCOMM MEETING, FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED HEREIN
AND FOR RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP.
We urge you to review and consider carefully the accompanying Notice of
Annual Meeting of Stockholders and Joint Proxy Statement/Prospectus. Approval of
the Merger Agreement requires the affirmative vote of a majority of the
outstanding shares of CrossComm Common Stock. The affirmative vote of a
plurality of the shares of CrossComm Common Stock present or represented at the
CrossComm Meeting is required for election of directors. In effect, those
persons who receive the most votes for the number of board seats that are open
shall be elected directors. The affirmative vote of a majority of the shares of
CrossComm Common Stock present or represented at the CrossComm Meeting is
required for the grant to the Board of Directors of discretionary authority to
adjourn the CrossComm Meeting and for the ratification of the selection by the
Board of Directors of Ernst & Young LLP as the Company's independent auditors
for the current fiscal year.
If the Merger Agreement is approved and the Merger is consummated, you will
be sent a letter of transmittal with instructions for surrendering your
certificates representing shares of CrossComm Common Stock. Please do not send
your share certificates until you receive these materials.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE CROSSCOMM MEETING, YOU
ARE URGED PROMPTLY TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE CROSSCOMM MEETING.
If you attend the CrossComm Meeting and desire to revoke your Proxy in writing
and vote in person, you may do so; in any event, a Proxy may be revoked in
writing at any time before it is exercised. Your prompt cooperation will be
appreciated. Should you have any questions or if you would like information on
any adjustments to the Exchange Ratio and/or the Warrant Exchange Ratio, please
contact Mackenzie Partners, Inc., toll free at 1-800-322-2885 or collect at
1-212-929-5500.
As the founder and the largest shareholder of CrossComm, I am an
enthusiastic supporter of the Merger and a believer that the combined company
has an opportunity to become a leader in delivering high speed networking
solutions to large IBM/Token Ring customers world-wide.
I would like to take this opportunity to thank all the stockholders for
their support over the years and ask you to join me in voting for the approval
of the Merger. Regardless of the number of shares you own, your vote is
important.
Sincerely,
/s/ Tadeusz Witkowicz
TADEUSZ WITKOWICZ
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 10
CROSSCOMM CORPORATION
450 DONALD LYNCH BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE , 1997
To the Stockholders of CrossComm Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CrossComm
Corporation, a Delaware corporation ("CrossComm"), has been called by the Board
of Directors of CrossComm and will be held at the Radisson Marlborough Hotel, 75
Felton Street, Marlborough, Massachusetts, on , June , 1997, at
10:00 a.m., local time (the "CrossComm Meeting"), to consider and vote upon the
following matters described in the accompanying Joint Proxy
Statement/Prospectus:
1. To approve that certain Agreement and Plan of Reorganization (the
"Merger Agreement") dated as of March 20, 1997, among Olicom A/S, a
corporation organized under the laws of the Kingdom of Denmark ("Olicom"),
PW Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Olicom ("MergerSub"), and CrossComm, pursuant to which each
share of common stock of CrossComm, par value $0.01 per share ("CrossComm
Common Stock") will be exchanged for $5.00 in cash, 0.2667 shares of Olicom
Common Stock, nominal value DKK 0.25 per share ("Olicom Common Stock"), and
three-year warrants (each, a "Warrant") to purchase 0.1075 shares of Olicom
Common Stock at an exercise price of $19.74 per whole share (the "Merger").
The Merger and related matters are more fully described in, and the Merger
Agreement is attached to, the accompanying Joint Proxy
Statement/Prospectus;
2. To grant the Board of Directors of CrossComm discretionary
authority to adjourn the CrossComm Meeting in order to solicit additional
votes for approval of the Merger;
3. To elect four directors for the ensuing year and until their
successors are elected and qualified or until the Merger is declared
effective;
4. To ratify the selection by the Board of Directors of Ernst & Young
LLP as CrossComm's independent auditors for the current fiscal year; and
5. To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
CrossComm has fixed the close of business on May 2, 1997, as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the CrossComm Meeting, and only stockholders of record at such time will be
entitled to notice of, and to vote at, the CrossComm Meeting.
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW, WHICH GOVERNS RIGHTS
OF DISSENTING STOCKHOLDERS IS SUMMARIZED IN THE JOINT PROXY STATEMENT/PROSPECTUS
UNDER "THE MERGER -- APPRAISAL RIGHTS" AND
IS REPRODUCED AT APPENDIX D TO THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.
Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of CrossComm Common Stock. The
affirmative vote of the holders of a plurality of the shares of CrossComm Common
Stock present or represented at the CrossComm Meeting is required for the
election of directors. In effect, those persons who receive the most votes for
the number of board seats that are open shall be elected directors. The
affirmative vote of the holders of a majority of the shares of CrossComm Common
Stock present or represented at the CrossComm Meeting is required for the grant
to the Board of Directors of discretionary authority to adjourn the CrossComm
Meeting and for the ratification of the
<PAGE> 11
selection by the CrossComm Board of Directors of Ernst & Young LLP as
CrossComm's independent auditors for the current fiscal year.
A form of Proxy and a Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the
CrossComm Meeting (including the Merger Agreement attached as Appendix A
thereto) accompany and form a part of this notice.
If you attend the CrossComm Meeting and desire to revoke your Proxy in
writing and vote in person, you may do so; in any event, a Proxy may be revoked
in writing at any time before it is exercised.
THE BOARD OF DIRECTORS OF CROSSCOMM UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL OF THE TRANSACTIONS CONTEMPLATED
THEREBY.
By Order of the Board of Directors
/s/ Phillip P. Rossetti
PHILIP P. ROSSETTI
Secretary
Marlborough, Massachusetts
May , 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS, PLEASE
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT AS SOON AS
POSSIBLE IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR
SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 12
OLICOM A/S
AND
CROSSCOMM CORPORATION
JOINT PROXY STATEMENT
---------------------
OLICOM A/S
PROSPECTUS
---------------------
This Joint Proxy Statement/Prospectus relates to the proposed exchange
described more fully below (the "Merger") contemplated by an Agreement and Plan
of Reorganization (the "Merger Agreement") dated as of March 20, 1997, among
Olicom A/S, a corporation organized under the laws of the Kingdom of Denmark
("Olicom"), PW Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Olicom ("MergerSub"), and CrossComm Corporation, a Delaware
corporation ("CrossComm"). See "The Merger" and "The Agreement and Plan of
Reorganization." A copy of the Merger Agreement is attached hereto as Appendix A
and is incorporated herein by reference.
Olicom is soliciting proxies for its Annual General Meeting of Stockholders
(the "Olicom Meeting"), and CrossComm is soliciting proxies for its Annual
Meeting of Stockholders (the "CrossComm Meeting" and together with the Olicom
Meeting, the "Meetings"). The Olicom Meeting is scheduled to be held on May 29,
1997 (with consideration of the proposal to approve the Merger Agreement
scheduled to occur at an adjournment thereof, to be convened on June , 1997).
The CrossComm Meeting is scheduled to be held on June , 1997.
At the Olicom Meeting (including any adjournment thereof), the stockholders
of Olicom will be asked to consider and vote upon proposals: (i) to approve the
Merger Agreement; (ii) to (a) receive the report of the Board of Directors of
Olicom (the "Olicom Board") regarding Olicom's activities during fiscal year
1996, (b) receive Olicom's profit and loss account for the fiscal year ended
December 31, 1996, and its balance sheet at such date, and vote on the adoption
of same, (c) approve the discharge of Olicom's management and the Olicom Board
from their duties for fiscal year 1996, and (d) authorize the carry forward of
Olicom's profits to the fiscal year ending December 31, 1997; (iii) to elect
seven directors to hold office for a term ending in 1998 and until their
successors are elected and qualified; (iv) to appoint Ernst & Young A/S and KPMG
C. Jespersen as Olicom's auditors, and Ernst & Young LLP as the auditors for
Olicom, Inc. ("Olicom Americas"); (v) to authorize the purchase by Olicom from
time to time for a period of 18 months following the Olicom Meeting of up to 10%
of the issued and outstanding shares of common stock in Olicom, nominal value
DKK 0.25 per share ("Olicom Common Stock"); (vi) to approve the fees of Olicom's
directors for fiscal year 1997; (vii) to approve amendments to Olicom's Articles
of Association; (viii) to approve Olicom's 1997 Share Incentive Plan (the "1997
Share Incentive Plan"); and (ix) to approve the postponement or adjournment of
the Olicom Meeting for the solicitation of additional votes. See "The Olicom
Meeting."
At the CrossComm Meeting, the stockholders of CrossComm will be asked to
consider and vote upon proposals: (i) to approve the Merger Agreement; (ii) to
grant the Board of Directors of CrossComm (the "CrossComm Board") discretionary
authority to adjourn the CrossComm Meeting in order to solicit additional votes
for approval of the Merger; (iii) to elect four directors to serve for the
ensuing year and until their successors are elected and qualified or until the
Effective Time (as defined in the Merger Agreement); and (iv) to ratify the
selection by the CrossComm Board of Ernst & Young LLP as CrossComm's independent
auditors for the current fiscal year. See "The CrossComm Meeting."
Upon the effectiveness of the Merger, each share of common stock in
CrossComm, par value $0.01 per share ("CrossComm Common Stock"), will be
exchanged for $5.00 in cash, 0.2667 shares of Olicom Common Stock (the "Exchange
Ratio"), and three-year warrants (each, a "Warrant") to purchase 0.1075 shares
of Olicom Common Stock (the "Warrant Exchange Ratio") at an exercise price of
$19.74 per whole share (collectively, the "Merger Consideration"); provided that
(i) in the event that the average of the high and low sales prices for Olicom
Common Stock for the ten trading days immediately preceding (but excluding) the
fifth trading day before the CrossComm Meeting, as reported on the Nasdaq
National Market (the "Final Closing Price"), is less than $12.50, Olicom will
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 does not so
increase the Exchange Ratio, CrossComm will have the right to terminate the
Merger Agreement); and (ii) in the event that the Final Closing Price is more
than $20.83, Olicom will 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 will have the right to
terminate the Merger Agreement). In addition, each outstanding option to
purchase a share of CrossComm Common Stock (each, a "CrossComm Option") will be
assumed by Olicom and converted into an option to purchase Olicom Common Stock,
pursuant to the mechanism described in this Joint Proxy Statement/Prospectus.
See "The Agreement and Plan of Reorganization -- Assumption of Options." As a
result of the Merger, CrossComm will become a wholly-owned subsidiary of Olicom.
See "The Merger -- Operations Following the Merger."
On May 7, 1997, the closing sales prices on the Nasdaq National Market of
Olicom Common Stock and of CrossComm Common Stock were $14.875 and $8.00,
respectively. In the event that the Final Closing Price of Olicom Common Stock
is $20.83, the maximum value of the Merger Consideration will be $11.37
(consisting of $5.00 cash, Olicom Common Stock having a value of $5.56, and
Warrants with a value of $0.81 (based on a Warrant Unit Consideration calculated
in the manner described in "The Agreement and Plan of Reorganization -- Exchange
of Shares")). In the event that the Final Closing Price of Olicom Common Stock
is $12.50, the minimum value of the Merger Consideration will be $8.57
(consisting of $5.00 cash, Olicom Common Stock having a value of $3.33, and
Warrants with a value of $0.24 (based on a Warrant Unit Consideration calculated
as aforesaid)). See "Summary -- The Merger: Terms of the Merger -- Exchange
Ratio; Warrant Exchange Ratio" for a comparison of the value of the Merger
Consideration with various possible Final Closing Prices. Although the Final
Closing Price will be known at the time at which approval of the Merger is voted
upon at the Olicom Meeting and the CrossComm Meeting, it may not be known at the
time that a stockholder executes a proxy with respect to same. OLICOM
STOCKHOLDERS AND CROSSCOMM STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR OLICOM COMMON STOCK AND CROSSCOMM COMMON STOCK, AND MAY CALL
(800) 322-2885 TOLL FREE (OR (212) 929-5500 COLLECT) PRIOR TO THE DATE OF THE
MEETINGS FOR CURRENT INFORMATION REGARDING THE FINAL CLOSING PRICE.
This Joint Proxy Statement/Prospectus constitutes the Prospectus of Olicom
for use in connection with the offer and issuance of up to 3,805,647 shares of
Olicom Common Stock that may be issued (i) pursuant to the Merger in exchange
for shares of CrossComm Common Stock (including in exchange for shares of
CrossComm Common Stock that may be issued upon exercise of options that are
vested under CrossComm's stock option plans and pursuant to CrossComm's employee
stock purchase plan), and (ii) upon exercise of Warrants issued in connection
with the Merger. In the event that Olicom determines to issue more than the
foregoing number of shares of Olicom Common Stock in connection with the Merger,
Olicom will resolicit the approval of the Merger by Olicom's stockholders. This
Joint Proxy Statement/Prospectus and the accompanying forms of proxy are first
being mailed to stockholders of Olicom and CrossComm on or about May , 1997.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. THE
STOCKHOLDERS OF OLICOM AND CROSSCOMM ARE STRONGLY URGED TO READ AND CONSIDER
CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY.
SEE "RISK FACTORS," BEGINNING ON PAGE 16 FOR A DESCRIPTION OF CERTAIN RISKS
RELATED TO (I) OLICOM AND ITS OPERATIONS, (II) CROSSCOMM AND ITS OPERATIONS AND
(III) THE PROPOSED COMBINED OPERATIONS OF OLICOM AND CROSSCOMM FOLLOWING
CONSUMMATION OF THE MERGER AND THE ISSUANCE OF OLICOM COMMON STOCK PURSUANT TO
THE MERGER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Joint Proxy Statement/Prospectus is May , 1997.
<PAGE> 13
AVAILABLE INFORMATION
Olicom is subject to the informational requirements applicable to "foreign
private issuers" under, and CrossComm is subject to the informational
requirements of, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements (as to
CrossComm) and other information with the Securities and Exchange Commission
(the "Commission"). These materials can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth Street
N.W., Washington, D.C. 20549 and at the Commission's regional offices at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, New York, New York 10048. Copies of these
materials can also be obtained from the Commission at prescribed rates by
writing to the Public Reference Section of the Commission, 450 Fifth Street
N.W., Washington, D.C. 20549. Olicom Common Stock and CrossComm Common Stock are
traded on the Nasdaq National Market. Reports and other information concerning
Olicom and CrossComm can also be inspected at the offices of the National
Association of Securities Dealers, Inc., Market Listing Section, 1735 K Street,
N.W., Washington, D.C. 20006. The Commission also maintains a web site that
contains reports, proxy and information statements and other information
regarding Olicom, CrossComm and other registrants that have been filed
electronically with the Commission. The address of such site is
http://www.sec.gov. Upon the consummation of the Merger, the listing of
CrossComm Common Stock on the Nasdaq National Market will be terminated.
Under the rules and regulations of the Commission, the solicitation of
proxies from stockholders of CrossComm to approve the Merger Agreement and the
consummation of the Merger constitutes an offering of the Olicom Common Stock
and the Warrants to be issued in connection with the Merger, and may constitute
an offering of the shares of Olicom Common Stock to be issued upon exercise of
the Warrants. Accordingly, Olicom has filed with the Commission a Registration
Statement on Form F-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to such offering. This
Joint Proxy Statement/Prospectus constitutes the prospectus of Olicom that is
filed as part of the Registration Statement, but does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C., as well as through the Commission's web site at
http://www.sec.gov. Statements contained in this Joint Proxy
Statement/Prospectus or in any document incorporated by reference in this Joint
Proxy Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or other such document, each such
statement being qualified in all respects by such reference. After the
consummation of the Merger, registration of CrossComm Common Stock under the
Exchange Act will be terminated.
REPORTS TO OLICOM STOCKHOLDERS
Olicom is currently exempt from the rules under the Exchange Act
prescribing the furnishing and content of proxy statements, and its securities
are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act. Olicom is not required under the
Exchange Act to publish financial statements as frequently or as promptly as are
United States companies subject thereto. However, Olicom furnishes and, after
the effective time of the Merger, will continue to furnish, its stockholders
with annual reports containing audited financial statements and periodic interim
reports containing unaudited results of operations as well as other reports. The
management of Olicom has in the past solicited proxies from its stockholders,
and Olicom management intends to continue this practice.
Olicom prepares its consolidated financial statements in United States
dollars in accordance with accounting principles generally accepted in both the
Kingdom of Denmark and the United States. All references to "dollars" or "$" in
this Joint Proxy Statement/Prospectus are to United States dollars, and all
references to "kroner" or "DKK" are to Danish kroner.
i
<PAGE> 14
ENFORCEMENT OF CIVIL LIABILITIES
Olicom is a corporation organized under the laws of the Kingdom of Denmark.
All of its directors, substantially all members of corporate management, and all
of its experts named herein are nonresidents of the United States, and all or a
substantial portion of the assets of such persons are located outside the United
States. A substantial portion of Olicom's assets are located in the Kingdom of
Denmark. See "Risk Factors -- Risks Relating to Olicom and CrossComm:
Consequences of Danish Incorporation" and "-- Risks Relating to Olicom and
CrossComm: Service and Enforcement of Legal Process." As a result, it may not be
possible for investors to effect service of process within the United States
upon such persons or to enforce against such persons or Olicom judgments of
United States courts predicated upon the civil liability provisions of the
federal securities laws of the United States. Olicom has been advised by
Advokatfirmaet O. Bondo Svane, its Danish legal counsel, that liabilities
predicated solely upon the federal securities laws of the United States are not
enforceable in original actions instituted in the Kingdom of Denmark, or in
actions instituted in the Kingdom of Denmark for enforcement of judgments of
United States courts.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All Annual Reports on Form 20-F, and any Form 6-K so designated,
subsequently filed by Olicom pursuant to Sections 13(a), 13(c) or 15(d) of the
Exchange Act subsequent to the date of this Joint Proxy Statement/Prospectus and
prior to the termination of the offering under this Joint Proxy
Statement/Prospectus shall be deemed to be incorporated by reference into this
Joint Proxy Statement/Prospectus from the date of filing of each such document.
All reports and definitive proxy or information statements filed by CrossComm
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Joint Proxy Statement/Prospectus and prior to the date of the
CrossComm Meeting shall be deemed to be incorporated by reference into this
Joint Proxy Statement/Prospectus from the date of filing of each such document.
Also incorporated by reference herein is the Merger Agreement, which is attached
to this Joint Proxy Statement/Prospectus as Appendix A. Any statement contained
in a document incorporated or deemed to be incorporated herein shall be deemed
to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently-filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. OLICOM AND CROSSCOMM HEREBY
UNDERTAKE TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM A JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON ORAL OR
WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS INCORPORATED
BY REFERENCE HEREIN (EXCLUDING EXHIBITS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN). WITH RESPECT TO OLICOM'S DOCUMENTS, REQUESTS
SHOULD BE DIRECTED TO OLICOM A/S, AT ITS INVESTOR RELATIONS OFFICES AT NYBROVEJ
114, DK-2800 LYNGBY, DENMARK (TELEPHONE +45 45 270000), OR 900 EAST PARK
BOULEVARD, SUITE 250, PLANO, TEXAS 75074 (TELEPHONE (972) 423-7560). WITH
RESPECT TO CROSSCOMM'S DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO CROSSCOMM
CORPORATION, INVESTOR RELATIONS, 450 DONALD LYNCH BOULEVARD, MARLBOROUGH,
MASSACHUSETTS 01752 (TELEPHONE (508) 481-4060). IN ORDER TO ASSURE TIMELY
DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE MEETINGS TO WHICH THIS JOINT PROXY
STATEMENT/PROSPECTUS RELATES, ANY SUCH REQUEST SHOULD BE MADE OF OLICOM BY MAY
, 1997, AND OF CROSSCOMM BY JUNE , 1997.
NO PERSON HAS BEEN AUTHORIZED BY OLICOM OR CROSSCOMM TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROX-
ii
<PAGE> 15
IES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY OLICOM OR CROSSCOMM. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
OFFERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS OR A SOLICITATION OF A PROXY IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS JOINT
PROXY STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN
SINCE THE DATE HEREOF. ALL INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS RELATING TO OLICOM AND MERGERSUB HAS BEEN SUPPLIED BY
OLICOM, AND ALL INFORMATION RELATING TO CROSSCOMM HAS BEEN SUPPLIED BY
CROSSCOMM.
TRADEMARKS
The "Olicom" mark is a registered trademark of Ing. C. Olivetti & C.,
S.p.A., that has been licensed to Olicom. "GoCard" and the Olicom clasped hands
logo are registered trademarks of Olicom, and "RapidFire," "CrossFire" and
"CellDriver" are trademarks of Olicom. "CrossComm," "ClearPath," "Riserswitch"
and "ExpertWatch" are trademarks of CrossComm. This Joint Proxy
Statement/Prospectus also contains trademarks of companies other than Olicom,
CrossComm and their respective subsidiaries and affiliates.
iii
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... i
REPORTS TO OLICOM STOCKHOLDERS.............................. i
ENFORCEMENT OF CIVIL LIABILITIES............................ ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii
TRADEMARKS.................................................. iii
SUMMARY..................................................... 1
RISK FACTORS................................................ 16
Risks Relating to the Merger.............................. 16
Risks Relating to Olicom and CrossComm.................... 17
THE OLICOM MEETING.......................................... 23
Date, Time and Place of the Olicom Meeting................ 23
Matters to be Considered at the Olicom Meeting............ 23
Record Date and Shares Entitled to Vote................... 31
Voting of Proxies......................................... 31
Vote Required............................................. 32
Quorum; Abstentions and Broker Non-Votes.................. 32
Solicitation of Proxies and Expenses...................... 32
THE CROSSCOMM MEETING....................................... 32
Date, Time and Place of the CrossComm Meeting............. 33
Matters to be Considered at the CrossComm Meeting......... 33
Record Date and Shares Entitled to Vote................... 34
Voting of Proxies......................................... 34
Vote Required............................................. 35
Quorum; Abstentions and Broker Non-Votes.................. 35
Solicitation of Proxies and Expenses...................... 36
THE MERGER.................................................. 36
Background of the Merger.................................. 36
Reasons for the Merger.................................... 40
Opinion of Olicom's Financial Advisor..................... 42
Opinion of CrossComm's Financial Advisor.................. 46
Operations Following the Merger........................... 50
Regulatory Matters........................................ 51
Anticipated Accounting Treatment.......................... 51
Resales of Olicom Common Stock; Affiliate Agreements...... 51
Appraisal Rights.......................................... 51
THE AGREEMENT AND PLAN OF REORGANIZATION.................... 54
The Merger................................................ 54
Exchange of Shares........................................ 54
Assumption of Options..................................... 55
CrossComm Employee Stock Purchase Plan.................... 56
Exchange of Certificates.................................. 56
Notification Regarding Options............................ 57
Representations, Warranties and Covenants................. 57
No Solicitation of Transactions........................... 57
Conditions to the Merger.................................. 59
Closing................................................... 60
Termination, Amendments and Waivers....................... 61
Fees and Expenses; Termination Fee........................ 62
Indemnification and Insurance............................. 64
</TABLE>
iv
<PAGE> 17
<TABLE>
<S> <C>
Interests of Certain Persons in the Merger............................................................... 64
Related Agreements....................................................................................... 65
OLICOM A/S................................................................................................. 66
Business................................................................................................. 66
Selected Financial Data.................................................................................. 79
Management's Discussion and Analysis of Financial Condition and Results of Operation..................... 80
Management of Olicom..................................................................................... 86
Certain Transactions..................................................................................... 88
Security Ownership of Certain Beneficial Owners and Management........................................... 89
CROSSCOMM CORPORATION...................................................................................... 90
Business................................................................................................. 90
Selected Financial Data.................................................................................. 95
Management's Discussion and Analysis of Financial Condition and Results of Operation..................... 96
Management of CrossComm.................................................................................. 102
Compensation Committee Report............................................................................ 107
Stock Performance Graph.................................................................................. 109
Security Ownership of Certain Beneficial Owners and Management........................................... 111
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................................................ 113
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS....................................... 116
TAX CONSIDERATIONS......................................................................................... 117
Certain United States Federal Income Tax Consequences of the Merger...................................... 117
United States Tax Consequences of Ownership of Olicom Common Stock....................................... 118
United States Tax Consequences of Ownership of Warrants.................................................. 119
Danish Tax Consequences of the Merger.................................................................... 119
Danish Tax Consequences of Ownership of Olicom Common Stock.............................................. 119
Danish Tax Consequences of Ownership of Warrants......................................................... 120
DESCRIPTION OF OLICOM COMMON STOCK......................................................................... 120
COMPARISON OF STOCKHOLDER RIGHTS UNDER THE LAWS OF DENMARK AND DELAWARE.................................... 121
STOCKHOLDER PROPOSALS...................................................................................... 128
LEGAL MATTERS.............................................................................................. 128
EXPERTS.................................................................................................... 128
FINANCIAL STATEMENTS AVAILABLE............................................................................. 129
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
Olicom A/S............................................................................................... F-3
CrossComm Corporation.................................................................................... F-20
APPENDICES
A -- Agreement and Plan of Reorganization and Certificate of
Merger
B -- Opinion of Alex. Brown & Sons Incorporated
C -- Opinion of Montgomery Securities
D -- Section 262 of the Delaware General Corporation Law
E -- Olicom 1997 Share Incentive Plan
</TABLE>
v
<PAGE> 18
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus, the Appendices hereto, the Exhibits to
the Registration Statement (the "Exhibits") and documents incorporated by
reference herein. The summary does not contain a complete statement of material
information relating to the Merger Agreement, the Merger or the other matters
discussed herein and is subject to, and qualified in its entirety by, the more
detailed information and financial statements contained or incorporated by
reference in this Joint Proxy Statement/Prospectus, the Appendices hereto and
the Exhibits. Unless otherwise defined herein, capitalized terms used in this
summary have the same meanings ascribed to them elsewhere in this Joint Proxy
Statement/Prospectus. Olicom stockholders and CrossComm stockholders are urged
to read this Joint Proxy Statement/Prospectus, the Appendices and the Exhibits
in their entirety.
This Joint Proxy Statement/Prospectus contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
concerning future results which are subject to risks and uncertainties. Olicom's
and CrossComm's actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the section
captioned "Risk Factors."
THE COMPANIES
OLICOM
Olicom develops and markets local area network ("LAN") software and
hardware products that enable computer users to communicate, exchange data and
share computing resources in workgroup and enterprise LANs or in wide area
networks ("WANs"). Olicom believes that its products offer superior performance,
are price competitive and are fully compatible with industry standards and
networking and internetworking products manufactured by International Business
Machines Corporation ("IBM") and other vendors. Olicom's products are marketed
worldwide primarily through distributors, value-added resellers (including
dealers, systems integrators and other resellers) ("VARs") and original
equipment manufacturer customers ("OEMs"). See "Olicom A/S -- Business."
MergerSub refers to PW Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Olicom formed solely for the purpose of the Merger.
MergerSub's principal offices are located at 900 East Park Blvd., Suite 250,
Plano, Texas 75074. MergerSub's telephone number is (972) 423-7560.
Unless otherwise indicated, "Olicom" refers to Olicom A/S, a corporation
organized under the laws of the Kingdom of Denmark, and its wholly-owned and
majority-owned subsidiaries. Olicom was incorporated in the Kingdom of Denmark
in 1985. Olicom's principal executive offices are located at Nybrovej 114,
DK-2800 Lyngby, Denmark. Its telephone number is +45 45 270000.
CROSSCOMM
CrossComm develops, manufactures, markets and supports advanced networking
products. These products concurrently support bridging, multi-protocol routing
and high speed LAN switching functions and asynchronous transfer mode ("ATM")
switching. CrossComm 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 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. CrossComm
markets its products in the United States and Canada through a direct sales
organization, complemented by VARs and system
<PAGE> 19
integrators. CrossComm also sells its products internationally through a network
of international distributors and through a direct sales organization in the
United Kingdom. See "CrossComm Corporation -- Business."
Unless otherwise indicated, "CrossComm" refers to CrossComm Corporation, a
Delaware corporation, and its wholly-owned subsidiaries. CrossComm was
incorporated in Delaware in April 1987. CrossComm's executive offices are
located at 450 Donald Lynch Boulevard, Marlborough, Massachusetts 01752. Its
telephone number is (508) 481-4060.
THE MEETINGS
OLICOM
Time, Date and Place. The Olicom Meeting will be held on Thursday, May 29,
at 4:00 p.m., local time, at Olicom's International Headquarters located at
Nybrovej 114, DK-2800 Lyngby, Denmark.
Purpose. At the Olicom Meeting, stockholders of record of Olicom Common
Stock will be asked to consider and vote on a proposal to approve the Merger
Agreement and the consummation of the Merger. Stockholders of Olicom also will
be asked to consider and vote on proposals: (a) to (i) receive the report of the
Olicom Board regarding Olicom's activities during fiscal year 1996, (ii) receive
Olicom's profit and loss account for the fiscal year ended December 31, 1996,
and its balance sheet at such date, and vote on the adoption of same, (iii)
approve the discharge of Olicom's management and the Olicom Board from their
duties for fiscal year 1996, and (iv) authorize the carry forward of Olicom's
profits to the fiscal year ending December 31, 1997; (b) to elect seven
directors to hold office for a term ending in 1998 and until their successors
are elected and qualified; (c) to appoint Ernst & Young A/S and KPMG C.
Jespersen as Olicom's auditors, and Ernst & Young LLP as the auditors for Olicom
Americas; (d) to authorize the purchase by Olicom from time to time for a period
of 18 months following the Olicom Meeting of up to 10% of the issued and
outstanding shares of Olicom Common Stock; (e) to approve the fees of Olicom's
directors for fiscal year 1997; (f) to approve amendments to Olicom's Articles
of Association (the "Olicom Articles"); (g) to approve Olicom's 1997 Share
Incentive Plan; and (h) if necessary, to approve the postponement or adjournment
of the Olicom Meeting for the solicitation of additional votes. Stockholders of
Olicom will also consider and vote on any other matter that may properly come
before the Olicom Meeting and any adjournment or postponement thereof. The
Olicom Meeting will consider the proposal to approve the Merger Agreement at an
adjournment of such meeting to be held at 4:00 p.m. local time on June , 1997
(the same day as the CrossComm Meeting); all other proposals will be considered
at the Olicom Meeting to be held on May 29, 1997. Representatives of Ernst &
Young A/S are expected to be present at the Olicom Meeting, will have the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions. See "The Olicom
Meeting -- Matters to be Considered at the Olicom Meeting."
Stockholders Entitled to Vote. Only holders of record of Olicom Common
Stock on May 2, 1997 (the "Record Date"), are entitled to notice of and to vote
at the Olicom Meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote 14,749,095 shares of Olicom Common Stock, each
of which will be entitled to one vote on each matter to be acted upon. See "The
Olicom Meeting -- Record Date and Shares Entitled to Vote."
Required Vote. Except for the proposal to approve amendments to the Olicom
Articles, the affirmative vote of a majority of the shares of Olicom Common
Stock present and voting at the Olicom Meeting is required for approval of all
proposals being submitted to Olicom's stockholders for their consideration. The
proposal to approve amendments to the Olicom Articles requires approval by
two-thirds of the votes cast at the Olicom Meeting and two-thirds in nominal
value of the voting capital represented at such meeting. The Companies Act of
the Kingdom of Denmark (the "Companies Act") and the Olicom Articles generally
do not require the presence, in person or by proxy, of a minimum number of
shares of Olicom Common Stock constituting a quorum at the Olicom Meeting in
order for the Olicom stockholders to take action with respect to the foregoing
matters. See "The Olicom Meeting -- Vote Required."
2
<PAGE> 20
CROSSCOMM
Time, Date and Place. The CrossComm Meeting will be held on ,
June , 1997 at 10:00 a.m., local time, at the Radisson Marlborough Hotel, 75
Felton Street, Marlborough, Massachusetts, United States.
Purpose. At the CrossComm Meeting, stockholders of record of CrossComm will
be asked to consider and vote on a proposal to approve the Merger Agreement.
Stockholders of CrossComm also will be asked to consider and vote on proposals
to (i) elect four directors to serve for the ensuing year and until their
successors are elected and qualified or until the Merger is declared effective;
(ii) to grant the CrossComm Board discretionary authority to adjourn the
CrossComm Meeting in order to solicit additional votes for approval of the
Merger, if necessary; and (iii) to ratify the selection by the CrossComm Board
of Ernst & Young LLP as CrossComm's independent auditors for the current fiscal
year. Stockholders of CrossComm will also consider and vote on any other matter
that may properly come before the CrossComm Meeting and any adjournment or
postponement thereof. Representatives of Ernst & Young LLP are expected to be
present at the CrossComm Meeting. They will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions from stockholders.
Stockholders Entitled to Vote. Only holders of record of CrossComm Stock on
the Record Date, are entitled to notice of, and to vote at, the CrossComm
Meeting. At the close of business on the Record Date, there were outstanding and
entitled to vote 9,341,096 shares of CrossComm Common Stock, each of which will
be entitled to one vote on each matter to be acted upon. See "The CrossComm
Meeting -- Record Date and Shares Entitled to Vote."
Required Vote. Approval of the Merger Agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of CrossComm Common
Stock. The affirmative vote of the holders of a plurality of the shares of
CrossComm Common Stock present or represented at the CrossComm Meeting is
required for the election of directors. In effect, the persons who receive the
most votes for the number of board seats that are open shall be elected as
directors. The affirmative vote of the holders of a majority of the shares of
CrossComm Common Stock present or represented at the CrossComm Meeting is
required for the grant to the CrossComm Board of discretionary authority to
adjourn the CrossComm Meeting and for the ratification of the selection by the
CrossComm Board of Ernst & Young LLP as CrossComm's independent auditors for the
current fiscal year. See "The CrossComm Meeting -- Vote Required."
THE MERGER
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Olicom Board has unanimously approved the Merger Agreement and
determined that the Merger is fair and in the best interests of Olicom. THE
OLICOM BOARD RECOMMENDS THAT OLICOM STOCKHOLDERS VOTE FOR THE MERGER AGREEMENT
AND THE MERGER, AS WELL AS VOTE FOR THE OTHER PROPOSALS TO BE CONSIDERED AT THE
OLICOM MEETING. For a discussion of factors considered by the Olicom Board in
reaching its decision to approve the Merger Agreement and the Merger, see "The
Merger -- Reasons for the Merger: Joint Reasons for the Merger" and "-- Reasons
for the Merger: Olicom's Reasons for the Merger." Olicom has agreed to use its
best efforts to obtain the approval of the Merger Agreement and the Merger by
Olicom's stockholders.
The CrossComm Board has unanimously approved the Merger Agreement and
determined that the Merger is fair and in the best interests of CrossComm and
its stockholders. THE CROSSCOMM BOARD RECOMMENDS THAT CROSSCOMM STOCKHOLDERS
VOTE FOR THE MERGER AGREEMENT AND THE MERGER, AS WELL AS VOTE FOR THE OTHER
PROPOSALS TO BE CONSIDERED AT THE CROSSCOMM MEETING. For a discussion of factors
considered by the CrossComm Board in reaching its decision to approve the Merger
Agreement and the Merger, see "The Merger -- Reasons for the Merger: Joint
Reasons for the Merger" and "-- Reasons for the Merger: CrossComm's Reasons for
the Merger." CrossComm has agreed to use its best efforts to obtain the approval
of the Merger Agreement and the Merger by CrossComm's stockholders.
3
<PAGE> 21
OPINIONS OF FINANCIAL ADVISORS
The Olicom Board has received from Alex. Brown & Sons Incorporated ("Alex.
Brown") its written opinion, dated as of March 20, 1997 (the "Alex. Brown
Opinion"), that, as of such date, and based upon and subject to the factors and
assumptions set forth in such written opinion, the consideration to be paid by
Olicom pursuant to the Merger was fair to Olicom, from a financial point of
view. The full text of the Alex. Brown Opinion is attached as Appendix B to this
Joint Proxy Statement/Prospectus. Olicom stockholders should read the Alex.
Brown Opinion in its entirety. See "The Merger -- Opinion of Olicom's Financial
Advisor."
The CrossComm Board has received from Montgomery Securities ("Montgomery")
its written opinion, dated as of March 20, 1997 (the "Montgomery Opinion"),
that, as of such date, and based upon and subject to the factors and assumptions
set forth in such written opinion, the consideration to be received by the
stockholders of CrossComm pursuant to the Merger was fair to CrossComm's
stockholders, from a financial point of view. The full text of the Montgomery
Opinion is attached as Appendix C to this Joint Proxy Statement/Prospectus.
CrossComm stockholders should read the Montgomery Opinion in its entirety. See
"The Merger -- Opinion of CrossComm's Financial Advisor."
TERMS OF THE MERGER
Olicom, MergerSub and CrossComm have entered into the Merger Agreement,
whereby MergerSub will be merged with and into CrossComm, resulting in CrossComm
becoming a wholly-owned subsidiary of Olicom. See "The Agreement and Plan of
Reorganization."
Exchange Ratio; Warrant Exchange Ratio. Upon the effectiveness of the
Merger, each share of CrossComm Common Stock will be exchanged for $5.00 in
cash, 0.2667 shares of Olicom Common Stock and three-year Warrants to purchase
0.1075 shares of Olicom Common Stock at an exercise price of $19.74 per whole
share; provided that (i) in the event that the Final Closing Price is less than
$12.50, Olicom will 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
does not so increase the Exchange Ratio, CrossComm will have the right to
terminate the Merger Agreement); and (ii) in the event that the Final Closing
Price is more than $20.83, Olicom will 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 will have the
right to terminate the Merger Agreement). Based on the capitalization of
CrossComm as of the Record Date and assuming an Exchange Ratio of 0.2667, it is
expected that, as a result of the Merger, approximately 2,700,000 shares of
Olicom Common Stock will be issued by virtue of the Merger. In addition, based
on the capitalization of CrossComm as of the Record Date and assuming a Warrant
Exchange Ratio of 0.1075, it is expected that, as a result of the Merger,
approximately 1,100,000 additional shares of Olicom Common Stock may be issuable
by Olicom pursuant to the exercise of Warrants issued by virtue of the Merger.
The foregoing number of shares of Olicom Common Stock and Warrants that may be
issued by virtue of the Merger gives pro forma effect to the exercise of all
options ("CrossComm Options") that are vested under the stock option plans of
CrossComm (the "CrossComm Option Plans") and the purchase of CrossComm Common
Stock under CrossComm's 1995 Employee Stock Purchase Plan (the "CrossComm ESPP")
in amounts consistent with current levels of contributions thereto.
4
<PAGE> 22
The operation of the Exchange Ratio and the Warrant Exchange Ratio
described above is illustrated by the following table, which compares the value
of the Merger Consideration, including the components thereof, at various
possible Final Closing Prices:
<TABLE>
<CAPTION>
FINAL MERGER CONSIDERATION EXPRESSED AS
CLOSING PRICE VALUE PER SHARE OF CROSSCOMM COMMON STOCK
- ------------- --------------------------------------------
OLICOM
CASH COMMON STOCK WARRANTS* TOTAL
----- ------------ --------- ------
<S> <C> <C> <C> <C> <C>
$12.50...................................... $5.00 $3.33 $0.24 $ 8.57
14.50...................................... 5.00 3.87 0.35 9.22
15.54...................................... 5.00 4.14 0.41 9.55
18.50...................................... 5.00 4.93 0.62 10.55
20.83...................................... 5.00 5.56 0.81 11.37
</TABLE>
- ---------------
* The value of the Warrants is calculated in the manner described in "The
Agreement and Plan of Reorganization -- Exchange of Shares" and may vary if
certain underlying assumptions change prior to the calculation of the Final
Closing Price.
The foregoing table is presented for illustration purposes only, and no
inference is intended or should be drawn therefrom concerning the actual Final
Closing Price which may occur or the value of the resulting Merger Consideration
(or any component thereof). Moreover, CrossComm stockholders should be aware
that the actual market value of a share of Olicom Common Stock at the Effective
Time and at the time at which certificates for such shares are delivered
following surrender and exchange of certificates for shares of Olicom Common
Stock may be more or less than the Final Closing Price. THE VALUE OF THE MERGER
CONSIDERATION THAT MAY BE RECEIVED BY HOLDERS OF CROSSCOMM COMMON STOCK IN
CONNECTION WITH THE MERGER COULD BE LESS THAN THE PRICE AT WHICH SHARES OF
CROSSCOMM COMMON STOCK HAVE TRADED AT CERTAIN TIMES DURING RECENT MONTHS.
CROSSCOMM STOCKHOLDERS ARE URGED TO OBTAIN INFORMATION ON THE TRADING PRICE OF
OLICOM COMMON STOCK THAT IS MORE RECENT THAN THAT PROVIDED HEREIN. See
"Comparative Market Price and Dividend Information."
As of the Record Date, there were 9,341,096 shares of CrossComm Common
Stock outstanding and 1,723,088 shares of CrossComm Common Stock reserved for
issuance pursuant to outstanding CrossComm Options, of which options to purchase
698,319 shares of CrossComm Common Stock were vested and exercisable. Based on
the average of the high and low sales prices of Olicom Common Stock for the ten
trading days ending on May 1, 1997 ($15.54), and assuming the exercise of all
vested CrossComm Options at the Effective Time and the purchase of CrossComm
Common Stock under the CrossComm ESPP consistent with current levels of
contributions thereto (estimated to be approximately 45,000 shares), the
aggregate value of the Merger consideration to be issued in the transaction
would be approximately $96.5 million. See "The Agreement and Plan of
Reorganization -- Exchange of Shares." The actual number of shares of Olicom
Common Stock purchasable upon exercise of CrossComm Options assumed by Olicom
will be determined based on the Final Closing Price and the value of Warrants at
the Effective Time. See "The Agreement and Plan of Reorganization -- Assumption
of Options."
The shares of Olicom Common Stock outstanding prior to the Merger will
remain unchanged by the Merger, except for dilution resulting from the Merger.
Based on the capitalization of Olicom and CrossComm as of May 2, 1997, if the
proposed Merger is approved and becomes effective, Olicom stockholders
immediately prior to the Effective Time will own approximately 85.5% of the
outstanding Olicom Common Stock at the Effective Time (approximately 79.8% on a
pro forma basis as described above that, in addition, gives effect to the
exercise of all Warrants), and CrossComm stockholders immediately prior to the
Effective Time will own approximately 14.5% of the outstanding Olicom Common
Stock at the Effective Time (approximately 20.2% on a pro forma basis that gives
effect to the exercise of all Warrants).
5
<PAGE> 23
Fractional Shares; Warrants to Purchase Fractional Shares. No fractional
shares of Olicom Common Stock and no Warrants to purchase fractional shares will
be issued in the Merger. Instead, each CrossComm stockholder who would otherwise
be entitled to receive a fraction of a share of Olicom Common Stock will receive
an amount of cash equal to the Final Closing Price multiplied by the fraction of
a share of Olicom Common Stock to which the stockholder would otherwise be
entitled. Further, each CrossComm stockholder who would otherwise be entitled to
receive a Warrant to purchase a fractional share of Olicom Common Stock will
receive an amount of cash equal to the value of a Warrant (determined in the
manner described herein) multiplied by the fraction of a share to which the
stockholder would otherwise be entitled upon exercise of a Warrant. See "The
Agreement and Plan of Reorganization -- Exchange of Shares."
Effective Time. As promptly as practicable after the satisfaction or waiver
of the conditions set forth in the Merger Agreement, MergerSub and CrossComm
will file a certificate of merger with the Secretary of State of Delaware and
the Recorder of the County in which the registered office of each of CrossComm
and MergerSub is located. The Merger will become effective upon such filings
(the time of such filings is referred to herein as the "Effective Time"). It is
anticipated that, assuming all conditions are met, the Merger will occur and a
closing will be held on or before June 30, 1997 (the "Closing"). See "The
Agreement and Plan of Reorganization -- Closing."
Exchange of Certificates. Following the Effective Time, a letter of
transmittal will be mailed to each holder of record of CrossComm Common Stock.
The letter of transmittal will contain instructions with respect to exchanging
CrossComm Common Stock certificates for Olicom Common Stock certificates,
Warrants and the cash portion of the Merger Consideration. HOLDERS OF CROSSCOMM
COMMON STOCK SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL THEY
HAVE RECEIVED THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
Assumption of CrossComm Options. At the Effective Time, each outstanding
CrossComm Option will be assumed by Olicom and converted into an option to
purchase Olicom Common Stock, pursuant to the adjustment mechanism described in
this Joint Proxy Statement/Prospectus. See "The Agreement and Plan of
Reorganization -- Assumption of Options." Following the Effective Time, Olicom
will issue to each holder of an unexercised CrossComm Option a document
evidencing the assumption of such option by Olicom. See "The Agreement and Plan
of Reorganization -- Exchange of Certificates" and "-- Notification Regarding
Options."
Indemnification and Insurance. Olicom has agreed that, for a period of six
years after the Effective Time, it will indemnify and hold harmless the present
and former officers, directors, employees, fiduciaries and agents of CrossComm
with respect to 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 (the "CrossComm
Certificate") and Bylaws or any indemnification agreement with CrossComm
officers and directors to which CrossComm is a party, in each case as in effect
on the date of the Merger Agreement. The Merger Agreement also provides that
until July 14, 1999, Olicom will provide officers' and directors' liability
insurance with respect to 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 such obligations, Olicom will not be obligated to expend in
any one year in excess of $200,000 for such coverage, and if Olicom is unable to
obtain such insurance, it will obtain as much comparable insurance as possible
for an annual premium equal to such maximum amount. See "The Agreement and Plan
of Reorganization -- Indemnification and Insurance" and "-- Interests of Certain
Persons in the Merger."
Certain Tax Considerations. The Merger constitutes a taxable reverse
subsidiary merger which will be treated for United States federal income tax
purposes as a direct purchase by Olicom of the shares of CrossComm Common Stock
from the CrossComm stockholders in exchange for the Merger Consideration
received by such stockholders. Each CrossComm stockholder will recognize gain or
loss as measured by the difference between the amount realized by such
stockholder (i.e., the amount of cash plus the fair market value of the Olicom
Common Stock and Warrants received by the stockholder) and the stockholder's
basis in its CrossComm Common Stock. For CrossComm stockholders who hold their
CrossComm Common Stock as
6
<PAGE> 24
a capital asset, the gain or loss recognized should be capital gain or loss.
CROSSCOMM STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES. For further discussion of
the United States federal income tax and Danish tax considerations of the Merger
and ownership of Olicom Common Stock and Olicom Warrants, see "Tax
Considerations."
Accounting Treatment. Olicom intends to use purchase accounting with
respect to the Merger for both United States and Denmark financial accounting
purposes. The availability or use of a specific method of accounting is not a
condition to the consummation of the Merger. See "The Merger -- Anticipated
Accounting Treatment."
Government and Regulatory Approvals. Consummation of the Merger is
conditioned on the expiration or termination of the waiting period applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). Olicom and CrossComm have filed notification reports under the HSR
Act with the Federal Trade Commission (the "FTC") and the Antitrust Division of
the Department of Justice (the "Antitrust Division"). In addition, in order to
effect the Merger, the Registration Statement is required to have been declared
effective by the Commission under the Securities Act. See "The Merger --
Regulatory Matters."
No Injunction Preventing the Merger. Consummation of the Merger is subject
to the condition that there not have been issued any temporary restraining order
or injunction or order by any court of competent jurisdiction that prevents the
consummation of the Merger. See "The Agreement and Plan of
Reorganization -- Conditions to the Merger."
Other Conditions to the Merger. In addition to the requirement that the
requisite approvals of Olicom stockholders and CrossComm stockholders be
received, the consummation of the Merger is subject to a number of certain
customary and other conditions that, if not satisfied or waived, may cause the
Merger not to be consummated and the Merger Agreement to be terminated,
including, without limitation, that the shares of Olicom Common Stock and
Warrants to be issued in the Merger have been authorized for listing on the
Nasdaq National Market, subject to notice of issuance. See "The Agreement and
Plan of Reorganization -- Conditions to the Merger."
NO SOLICITATION OF TRANSACTIONS
Restriction. CrossComm has agreed not to, directly or indirectly, solicit,
initiate discussions, encourage or engage in negotiations with, or disclose any
nonpublic information relating to CrossComm or any of its subsidiaries to, any
person relating to a possible acquisition of CrossComm; provided, however, that
if the CrossComm Board receives an unsolicited bona fide written offer or
proposal, or written expression of interest, that the CrossComm Board believes
in good faith will result in a transaction more favorable to CrossComm
stockholders from a financial point of view than the Merger (a "Superior
Proposal"), and the CrossComm Board determines in good faith that such actions
are necessary for the CrossComm Board to comply with its fiduciary duties under
applicable law and that the party making such Superior Proposal has the
financial means, or the ability to obtain the necessary financing, to consummate
such transaction, then the CrossComm Board will not be prevented from taking
such actions as are consistent with the fiduciary obligations of the CrossComm
Board. See "The Agreement and Plan of Reorganization -- No Solicitation of
Transactions."
TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT
Termination. At any time prior to the Effective Time, the Merger Agreement
may be terminated under certain circumstances, including, without limitation:
(i) by mutual consent of Olicom and CrossComm; (ii) by either Olicom or
CrossComm if the other party commits certain material breaches of any
representation, warranty or covenant made by such other party in the Merger
Agreement; (iii) by either party if the Merger is not consummated by August 1,
1997; (iv) by Olicom or, under certain circumstances, by CrossComm, if the
CrossComm Board withdraws or modifies its recommendation of the Merger Agreement
or the Merger in a manner adverse to Olicom; (v) by CrossComm if the CrossComm
Board receives a
7
<PAGE> 25
Superior Proposal and 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, provided that CrossComm has provided Olicom
with at least one business day's written notice of such Superior Proposal, and
contemporaneously with giving notice of termination, CrossComm makes the payment
of the Termination Fee (as defined below); (vi) by CrossComm (a) if the Final
Closing Price is less than $12.50 and Olicom fails to increase the Exchange
Ratio as provided in the Merger Agreement, or (b) if the Final Closing Price is
more than $20.83 and Olicom decreases the Exchange Ratio as provided in the
Merger Agreement; (vii) by Olicom if, for any reason, the CrossComm Board fails
to call and hold a meeting of CrossComm stockholders to approve the Merger
Agreement and the Merger by June 30, 1997, or at such meeting (including any
adjournment or postponement thereof), the requisite vote of the stockholders of
CrossComm in favor of the Merger Agreement and the Merger is not obtained;
(viii) by CrossComm, if for any reason, the Olicom Board fails to call and hold
a meeting of Olicom stockholders to approve the Merger Agreement and the Merger
by June 30, 1997, or at such meeting (including any adjournment or postponement
thereof), the requisite vote of the stockholders of Olicom in favor of the
Merger Agreement and the Merger is not obtained; or (ix) by either Olicom or
CrossComm in the event of a nonappealable final order, decree or ruling or other
action that has 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 the Merger
Agreement to comply with legal requirements imposed on such party with respect
to the consummation of the Merger. See "The Agreement and Plan of
Reorganization -- Termination, Amendments and Waivers" and "-- Fees and
Expenses: Termination Fee."
Amendments and Waivers. The Merger Agreement may be amended by Olicom and
CrossComm at any time before or after approval by the Olicom and CrossComm
stockholders, except that, after such approval, no amendment may be made which
(i) alters or changes the amount or kind of consideration to be received upon
conversion of the CrossComm Common Stock in the Merger, (ii) alters or changes
any term of the certificate of incorporation of the surviving corporation (the
"Surviving Corporation") to be effected by the Merger, or (iii) alters or
changes any of the terms and conditions of the Merger Agreement if such
alteration or change would adversely affect the holders of CrossComm Common
Stock or the holders of common stock in MergerSub.
At any time prior to the Effective Time, either of Olicom or CrossComm may,
to the extent legally allowed, by execution of an instrument duly authorized in
writing signed on behalf of such party (i) extend the time for the performance
of any of the obligations or acts of the other party set forth in the Merger
Agreement, (ii) waive any inaccuracies in the representations and warranties
made to such party in the Merger Agreement or in any document delivered pursuant
to the Merger Agreement, and (iii) waive compliance with any of the agreements
or conditions for the benefit of such party under the Merger Agreement. See "The
Agreement and Plan of Reorganization -- Termination, Amendments and Waivers."
Fees and Expenses; Termination Fee. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the Merger will be paid by the party incurring the expense, and
the payment of fees and expenses in connection with the printing and filing of
the Joint Proxy Statement/Prospectus and the Registration Statement will be
shared equally. Notwithstanding the foregoing, in certain events, if, under
certain circumstances, Olicom or CrossComm terminates the Merger Agreement,
CrossComm will be obligated to pay to Olicom all of the reasonable, documented
expenses incurred by Olicom in connection with the Merger Agreement and the
Merger. In certain events, if Olicom terminates the Merger Agreement, Olicom
will be obligated to pay to CrossComm all reasonable, documented expenses
incurred by CrossComm in connection with the Merger Agreement and the Merger. In
addition, CrossComm also will be obligated to pay Olicom a termination fee of
$2,360,000 (the "Termination Fee") in the event of: (i) the termination of the
Merger Agreement by Olicom as a result of CrossComm's failure to receive the
requisite vote for approval of the Merger Agreement and the Merger by
CrossComm's stockholders if, at the time of such failure, there has been
announced an Alternative Transaction (defined in "The Agreement and Plan of
Reorganization -- Termination, Amendments and Waivers") which has not been
absolutely and unconditionally withdrawn and abandoned and with respect to which
the CrossComm Board has not recommended that the stockholders of CrossComm not
vote to accept; (ii) the termination of the Merger
8
<PAGE> 26
Agreement by Olicom as a result of (a) the withdrawal or modification by the
CrossComm Board of its recommendation of the Merger Agreement or the Merger in a
manner adverse to Olicom, (b) the occurrence of an Alternative Transaction or
the recommendation by the CrossComm Board of an Alternative Transaction, or (c)
the commencement of a tender offer or exchange offer for 25% or more of the
outstanding CrossComm Common Stock and the recommendation of the CrossComm Board
that CrossComm stockholders tender their shares with respect thereto; or (iii)
the termination of the Merger Agreement by CrossComm in connection with the
CrossComm Board's receipt of a Superior Proposal, after determining 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 and
after providing Olicom with at least one business day's written notice of such
Superior Proposal. See "The Agreement and Plan of Reorganization -- No
Solicitation of Transactions" and "-- Fees and Expenses; Termination Fee."
RESALES OF OLICOM COMMON STOCK; AFFILIATES AGREEMENTS
Olicom Common Stock received in the Merger, and Olicom Common Stock
purchased upon exercise of Warrants, will be freely transferable by the holders
thereof, except for those shares held by holders who may be deemed to be
"affiliates" (generally including directors, certain executive officers and 10%
or more stockholders) of CrossComm or Olicom under applicable federal securities
laws. To help assure compliance with the Securities Act, CrossComm has agreed to
use its best efforts to cause to be delivered to Olicom at least 30 days prior
to the Effective Time, executed agreements that prohibit the directors and
officers of CrossComm (including Mr. Witkowicz, a director, officer and 10%
stockholder) from disposing of their Olicom Common Stock received pursuant to
the Merger except pursuant to Rule 145 under the Securities Act (the "Affiliates
Agreements"). See "The Merger -- Resales of Olicom Common Stock Affiliates
Agreements."
VOTING AGREEMENTS
In connection with the execution and delivery of the Merger Agreement, Mr.
Lars Stig Nielsen, the Managing Director and Chief Executive Officer of Olicom,
entered into a voting agreement with CrossComm, pursuant to which Mr. Nielsen
has agreed to vote all shares of Olicom Common Stock directly owned by him in
favor of the approval of the Merger Agreement and consummation of the Merger and
against any competing proposals. Mr. Nielsen is the holder of approximately 1.8%
(as of May 2, 1997, exclusive of any shares issuable upon the exercise of
options held by him) of the shares of Olicom Common Stock entitled to vote at
the Olicom Meeting. See "The Agreement and Plan of Reorganization -- Related
Agreements: LSNielsen Voting Agreement."
In connection with the execution and delivery of the Merger Agreement, Mr.
Tadeusz Witkowicz, the President and Chairman of the Board of Directors of
CrossComm, entered into a voting agreement with Olicom, pursuant to which Mr.
Witkowicz has agreed to vote all shares of CrossComm Common Stock beneficially
owned by him in favor of the approval of the Merger Agreement and consummation
of the Merger and against any competing proposals. Mr. Witkowicz is the holder
of approximately 16.9% (as of May 2, 1997) of the shares of CrossComm Common
Stock entitled to vote at the CrossComm Meeting. See "The Agreement and Plan of
Reorganization -- Related Agreements: Witkowicz Voting Agreement."
CONSULTING AGREEMENT; NONCOMPETITION AGREEMENT; LICENSE AGREEMENT
In connection with the execution and delivery of the Merger Agreement, Mr.
Witkowicz entered into a consulting agreement for a term commencing at the
Effective Time and extending through December 31, 1997. During such term, Mr.
Witkowicz agreed to consult with and assist Olicom in successfully and
expeditiously implementing the integration of the business of CrossComm and its
subsidiaries with those of Olicom and its subsidiaries and in providing advice
and assistance with respect to existing customers of CrossComm and with respect
to key sales and marketing opportunities. In connection with the agreement of
Mr. Witkowicz to render consulting services, Olicom agreed to grant to him at
the Effective Time an option to purchase 100,000 shares of Olicom Common Stock.
The Consulting Agreement is contingent upon the occurrence of the Merger and
will become effective at the Effective Time. See "The Agreement and Plan of
9
<PAGE> 27
Reorganization -- Interests of Certain Persons in the Merger" and "-- Related
Agreements: Witkowicz Consulting Agreement."
In connection with the execution and delivery of the Merger Agreement, Mr.
Witkowicz also entered into a noncompetition and nonsolicitation agreement with
CrossComm (the "Noncompetition Agreement"). Pursuant to the Noncompetition
Agreement, Mr. Witkowicz agreed, for a period of ten months after the Closing:
(i) not to compete in the development and marketing of the following products in
the computer networking industry: Ethernet, Token Ring and ATM switches and
network interface cards; bridges; routers; and HUBs; and (ii) except pursuant to
the License Agreement dated March 20, 1997, between CrossComm and Mr. Witkowicz
(the "License Agreement") without the prior written consent of CrossComm (which
may not be unreasonably withheld or delayed), not to induce any employee of or
independent contractor to CrossComm to terminate his or her relationship with
CrossComm or any subsidiary or affiliate thereof, in order to accept any
position with Mr. Witkowicz or a company affiliated with him. On March 20, 1996,
CrossComm entered into a license agreement with Mr. Witkowicz that granted to
him a non-exclusive license to use CrossComm's partially developed Network Delta
software, which was being developed to, among other things, enable CrossComm to
deliver monitoring services to its customers. See "The Agreement and Plan of
Reorganization -- Interests of Certain Persons in the Merger," "-- Related
Agreements: Witkowicz Noncompetition Agreement" and "-- Related Agreements:
Witkowicz License Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the CrossComm Board with respect to
the Merger Agreement and the Merger, CrossComm stockholders should be aware that
certain directors and officers of CrossComm have interests in the Merger that
present them with potential conflicts of interest. The Merger Agreement provides
that Olicom will assume CrossComm's outstanding stock options, after which such
options will be exercisable for Olicom Common Stock. In light of the premium
reflected in the Exchange Ratio, CrossComm's officers may receive a significant
benefit from the Merger in the form of the higher value of shares issuable upon
exercise of their options, although the officers will not be entitled to "golden
parachute" or other change of control payments as a result of the Merger
becoming effective. The Merger Agreement also provides that for a period of six
years after the Effective Time Olicom will indemnify and hold harmless the
present and former officers, directors, employees, fiduciaries and agents of
CrossComm for acts or omissions occurring prior to the Effective Time. In
addition, the Merger Agreement provides that Olicom will use its best efforts to
secure the election of Mr. Witkowicz to the Olicom Board at the Olicom Meeting.
However, Mr. Witkowicz has advised Olicom that he would prefer to postpone his
nomination, and Olicom has agreed to consider nominating Mr. Witkowicz, upon his
request, for election to the Olicom Board at Olicom's 1998 Annual General
Meeting. Olicom has entered into a consulting agreement with Mr. Witkowicz, to
commence at the Effective Time, and CrossComm has entered into a noncompetition
and nonsolicitation agreement and a license agreement with Mr. Witkowicz. See
" -- Consulting Agreement; Noncompetition Agreement; License Agreement" above,
"The Agreement and Plan of Reorganization -- Interests of Certain Persons in the
Merger" and "-- Related Agreements."
RISK FACTORS
IN CONSIDERING WHETHER TO APPROVE THE MERGER AGREEMENT AND THE CONSUMMATION
OF THE MERGER, OLICOM STOCKHOLDERS AND CROSSCOMM STOCKHOLDERS SHOULD CAREFULLY
REVIEW AND CONSIDER THE INFORMATION CONTAINED BELOW UNDER THE CAPTION "RISK
FACTORS."
APPRAISAL RIGHTS
Holders of CrossComm Common Stock who elect to dissent from the approval
and adoption of the Merger Agreement and who have not voted their shares in
favor of the Merger, have delivered to CrossComm a written demand for appraisal
of such shares and meet certain other statutory requirements, will be entitled
to have the value of their shares appraised in accordance with Section 262 of
the Delaware General Corporation Law, as amended (the "DGCL"). THE PROVISIONS OF
SECTION 262 OF THE DGCL ARE
10
<PAGE> 28
TECHNICAL IN NATURE AND COMPLEX. STOCKHOLDERS OF CROSSCOMM DESIRING TO EXERCISE
APPRAISAL RIGHTS AND OBTAIN APPRAISAL OF THE VALUE OF THEIR CROSSCOMM COMMON
STOCK SHOULD CONSULT COUNSEL, SINCE THE FAILURE TO COMPLY STRICTLY WITH THE
PROVISIONS OF SECTION 262 OF THE DGCL MAY RESULT IN A WAIVER OR FORFEITURE OF
THEIR APPRAISAL RIGHTS. A copy of Section 262 of the DGCL is attached as
Appendix D. See "The Merger -- Appraisal Rights."
REGULATORY MATTERS.
Under the HSR Act, and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division, and
specified waiting period requirements have been satisfied. Each of Olicom and
CrossComm have filed a Notification and Report Form required under the HSR Act
with the FTC and the Antitrust Division, together with a request for early
termination of the applicable 30-day waiting period. See "The Agreement and Plan
of Reorganization -- Regulatory Matters."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.
The Merger constitutes a taxable reverse subsidiary merger which will be
treated for United States federal income tax purposes as a direct purchase by
Olicom of the shares of CrossComm Common Stock from the CrossComm stockholders
in exchange for the Merger Consideration received by such stockholders. Each
CrossComm stockholder will recognize gain or loss as measured by the difference
between the amount realized by such stockholder (i.e., the amount of cash plus
the fair market value of the Olicom Common Stock and Warrants received by the
stockholder) and the stockholder's basis in its CrossComm Common Stock. For
CrossComm stockholders who hold their CrossComm Common Stock as a capital asset,
the gain or loss recognized should be capital gain or loss. CROSSCOMM
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES. For further discussion of the United States
federal income tax and Danish tax considerations of the Merger and ownership of
Olicom Common Stock and Warrants, see "Tax Considerations."
COMPARISON OF STOCKHOLDER RIGHTS
The rights of stockholders of CrossComm currently are determined by
reference to the DGCL, the CrossComm Certificate and CrossComm's Bylaws. At the
Effective Time, stockholders of CrossComm receiving shares of Olicom Common
Stock in the Merger will become stockholders of Olicom. Their rights as
stockholders will then be determined by reference to the Companies Act, the
Olicom Articles and Olicom's Rules of Procedure. There are certain significant
differences between the corporate laws of Delaware that are applicable to
CrossComm and the corporate laws of Denmark that are applicable to Olicom. See
"Comparison of Stockholder Rights under the Laws of Denmark and Delaware."
11
<PAGE> 29
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
The shares of Olicom Common Stock and CrossComm Common Stock are listed on
the Nasdaq National Market under the symbols "OLCMF" and "XCOM" respectively.
The following table sets forth the high ask and low bid prices per share of
Olicom Common Stock and CrossComm Common Stock for the calendar quarters
indicated, as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
OLICOM CROSSCOMM
COMMON STOCK COMMON STOCK
--------------- ---------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Calendar 1997
First Quarter..................................... 19 5/8 14 1/2 9 5/8 5
Second Quarter (through May 2, 1997).............. 16 13 1/2 8 1/8 6 3/8
Calendar 1996
First Quarter..................................... 15 1/2 11 1/8 11 7/8 8 3/4
Second Quarter.................................... 14 1/4 10 12 3/4 9 7/8
Third Quarter..................................... 15 1/8 10 7/16 10 7/8 7
Fourth Quarter.................................... 19 1/8 14 5/8 7 3/8 4 3/4
Calendar 1995
First Quarter..................................... 11 5/8 8 5/8 14 1/2 9 3/4
Second Quarter.................................... 14 1/8 8 7/8 12 7/8 9
Third Quarter..................................... 16 1/8 12 3/8 14 1/2 9
Fourth Quarter.................................... 15 1/2 11 3/4 14 1/4 9 1/2
</TABLE>
DIVIDEND INFORMATION
Neither Olicom nor CrossComm has ever paid any cash dividends on its stock,
and both anticipate that they will continue to retain any earnings for the
foreseeable future for use in the operation of their respective businesses.
RECENT CLOSING PRICES
The following table sets forth the closing prices per share of Olicom
Common Stock and CrossComm Common Stock on the Nasdaq National Market on March
20, 1997, the last trading day before announcement of the proposed Merger, and
on May , 1997, the latest practicable trading day before the printing of this
Joint Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
OLICOM CROSSCOMM
COMMON STOCK COMMON STOCK
------------ ------------
<S> <C> <C>
March 20, 1997........................................ 14 3/4 8 5/8
May , 1997.......................................... . .
</TABLE>
Because the market price of Olicom Common Stock is subject to fluctuation,
the market value of the shares of Olicom Common Stock that holders of CrossComm
Common Stock will receive in the Merger may increase or decrease prior to and
following the Merger. OLICOM STOCKHOLDERS AND CROSSCOMM STOCKHOLDERS ARE URGED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR OLICOM COMMON STOCK AND CROSSCOMM COMMON
STOCK. No assurance can be given as to the future prices or markets for Olicom
Common Stock or CrossComm Common Stock. See "Risk Factors -- Risks Relating to
Olicom and CrossComm: Volatility of Stock Price." Following the Merger, Olicom
Common Stock will continue to be traded on the Nasdaq National Market under the
symbol "OLCMF."
12
<PAGE> 30
NUMBER OF STOCKHOLDERS
As of May 2, 1997, there were approximately 90 stockholders of record who
held shares of Olicom Common Stock, as shown on the records of Olicom's transfer
agent for such shares. As of May 2, 1997, there were approximately 65 United
States record holders of shares of Olicom Common Stock, who held approximately
82.5% of the outstanding shares of Olicom Common Stock as of such date.
As of May 2, 1997, there were approximately 181 stockholders of record who
held shares of CrossComm Common Stock, as shown on the records of CrossComm's
transfer agent for such shares.
13
<PAGE> 31
SUMMARY FINANCIAL INFORMATION
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma financial information gives pro
forma effect to the acquisition by Olicom of CrossComm using the purchase method
of accounting.
The unaudited pro forma consolidated balance sheet as of December 31, 1996,
and the unaudited pro forma consolidated statement of operations for the year
ended December 31, 1996, combine the consolidated historical balance sheet of
Olicom and the consolidated historical balance sheet of CrossComm as if the
acquisition of CrossComm had been completed on December 31, 1996, and combine
the consolidated historical statement of income of Olicom and the consolidated
historical statement of operations of CrossComm as if the acquisition had been
completed on January 1, 1996.
This pro forma information should be read in conjunction with the unaudited
pro forma financial information and notes thereto included elsewhere in this
Joint Proxy Statement/Prospectus. The unaudited pro forma statement of income
data are not necessarily indicative of the operating results that would have
occurred had the Merger occurred on January 1, 1996, nor are they necessarily
indicative of future operating results of the combined company.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
--------------
(IN THOUSANDS,
STATEMENT OF OPERATIONS DATA: EXCEPT PER
- ----------------------------- SHARE AMOUNTS)
<S> <C>
Net sales................................................... $213,102
Income (loss) from operations............................... (2,630)
Income interest and gain on investments..................... 6,483
Net loss.................................................... (545)
Net loss per share.......................................... (0.03)
Weighted average shares outstanding......................... 17,394
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1996
BALANCE SHEET DATA: --------------
- ------------------- (IN THOUSANDS)
<S> <C>
Total assets................................................ $155,384
Long term debt.............................................. --
Total stockholders' equity.................................. 107,472
</TABLE>
14
<PAGE> 32
COMPARATIVE PER SHARE DATA OF OLICOM AND CROSSCOMM
Set forth below are the income (loss) from continuing operations, cash
dividends and book value per common share data of Olicom and CrossComm on an
historical basis, a pro forma basis for Olicom and an equivalent pro forma basis
for CrossComm.
The Olicom pro forma data were derived by combining historical consolidated
financial information of Olicom and CrossComm, giving effect to the Merger under
the purchase method of accounting for business combinations.
The information set forth below should be read in conjunction with the
respective audited and unaudited consolidated financial statements and related
notes, together with the other financial information, of Olicom and CrossComm
included elsewhere in this Joint Proxy Statement/Prospectus and the unaudited
pro forma financial information and notes thereto included elsewhere in this
Joint Proxy Statement/Prospectus.
OLICOM
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Historical Per Share Data:
Income from continuing operations......................... $ 0.50
Dividends................................................. --
Book Value................................................ 6.59
Pro Forma Per Share Data:
Loss from continuing operations........................... $(0.03)
Dividends................................................. --
Book Value................................................ 6.18
</TABLE>
CROSSCOMM
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Historical Per Share Data:
Loss from continuing operations........................... $(0.58)
Dividends................................................. --
Book Value................................................ 5.92
Equivalent Pro Forma Per Share Data:
Loss from continuing operations........................... $(0.01)
Dividends................................................. --
Book Value................................................ 1.65
</TABLE>
15
<PAGE> 33
RISK FACTORS
The following risk factors should be considered by holders of Olicom Common
Stock and CrossComm Common Stock in evaluating whether to approve the Merger
Agreement. These factors should be considered in conjunction with the other
information included and incorporated by reference in this Joint Proxy
Statement/ Prospectus.
Certain statements included in this Joint Proxy Statement/Prospectus are
forward-looking, such as statements regarding anticipated synergies in
connection with the Merger, expected transaction charges and expenses relating
to the integration of the two companies, new product introductions and
enhancements to existing products, rapidly changing technology, improvement of
manufacturing efficiencies and availability of licenses with respect to
intellectual property. Such forward-looking statements, in addition to
information included in this Joint Proxy Statement/Prospectus, are based on
current expectations and are subject to a number of risks and uncertainties that
could cause actual results in the future to differ significantly from results
expressed or implied in any forward-looking statements by, or on behalf of,
Olicom or CrossComm. These and other risks are detailed below.
RISKS RELATING TO THE MERGER
Integration of Certain Operations. The managements of Olicom and CrossComm
have entered into the Merger Agreement with the expectation that the Merger will
result in beneficial synergies for Olicom and CrossComm. See "The
Merger -- Joint Reasons for the Merger." Achieving the anticipated benefits of
the Merger will depend in part upon whether the integration of the two
companies' businesses is accomplished in an efficient manner, and there can be
no assurance that this will occur. The combination of the two companies will
require, among other things, integration of the companies' respective product
offerings, and coordination of their sales and marketing, research and
development, administrative and financial reporting efforts. There can be no
assurance that such integration will be accomplished smoothly or successfully.
If significant difficulties are encountered in the integration of existing
product lines, resources could be diverted from new product development,
resulting in delays in new product introductions. The integration of the product
lines could also cause confusion or dissatisfaction among existing customers of
Olicom or CrossComm. The difficulties of such integration may be increased by
the necessity of coordinating geographically separated organizations with
distinct cultures. Further, as commonly occurs with high technology companies
during pre-merger and integration phases, aggressive competitors may undertake
formal initiatives to attract customers and recruit key employees through
various incentives. The integration of certain operations following the Merger
will require the dedication of management and other personnel resources which
may temporarily distract attention from the day-to-day business of the combined
company. The failure to successfully accomplish the integration of the two
companies' operations could have a material adverse effect on the business,
financial condition or results of operations of the combined company.
Distributors, Resellers and Customers. There can be no assurance that
distributors, resellers and present and potential customers of Olicom and/or
CrossComm will continue their current buying patterns without regard to the
announced Merger, and any significant delay or reduction in orders could have a
material adverse effect on Olicom's and/or CrossComm's near-term business,
financial condition or results of operations. In particular, Olicom and
CrossComm believe that their respective customers could defer purchasing
decisions as they evaluate the future product strategy of the combined company,
and any such deferrals could have a material adverse effect on the business,
financial condition or results of operations of Olicom, CrossComm or the
combined company. In addition, Olicom anticipates that it will utilize its
distribution model in connection with the sale of CrossComm products after the
Merger, and therefore, will place greater emphasis on sales of CrossComm
products through indirect channels. There can be no assurance that utilizing
Olicom's distribution model for CrossComm's products will be successful. See
"Risks Relating to Olicom and CrossComm -- Fluctuations in Operating Results,"
"-- Reliance on Indirect Channels of Distribution," and "Olicom A/S -- Business:
Sales and Marketing."
Fixed Exchange Ratio within Collar. Under the terms of the Merger
Agreement, each share of CrossComm Common Stock issued and outstanding at the
Effective Time will be exchanged for $5.00 in cash,
16
<PAGE> 34
0.2667 share of Olicom Common Stock and Warrants to purchase 0.1075 shares of
Olicom Common Stock. In the event that the Final Closing Price is less than
$12.50, CrossComm may terminate the Merger Agreement unless Olicom increases the
Exchange Ratio, and if the Final Closing Price is more than $20.83, Olicom can
decrease the Exchange Ratio, subject to CrossComm's right to terminate the
Merger Agreement in such event (the "Collar"). See "The Agreement and Plan of
Reorganization -- Termination, Amendment and Waiver." The Merger Agreement does
not contain any provisions for adjustment of the Exchange Ratio or the Warrant
Exchange Ratio in the event that the Final Closing Price is between $12.50 and
$20.83. Accordingly, the value of the consideration to be received by the
stockholders of CrossComm upon the Merger will depend in part on the market
price of Olicom Common Stock at the Effective Time. On March 20, 1997, the date
on which the Merger Agreement was executed, the closing sale price of Olicom
Common Stock was $14.75, and there can be no assurance that the market price of
Olicom Common Stock on and after the Effective Time will not be lower than such
price. In addition, in the event that the Final Closing Price exceeds $20.83,
the operation of the Collar may reduce the ability of CrossComm stockholders to
realize such appreciation in the value of Olicom Common Stock. See "-- Risks
Relating to Olicom and CrossComm: Volatility of Stock Price" and "The Agreement
and Plan of Reorganization -- Exchange of Shares."
Transaction Charges. Olicom expects to incur charges to operations
currently estimated to be between $37 million and $47 million in the quarter
ending June 30, 1997, the quarter in which the Merger is expected to be
consummated, to reflect costs associated with combining the operations of the
two companies, and with respect to the write-off of expenses associated with
in-process research and development. This range is a preliminary estimate only
and therefore subject to change. Additional unanticipated expenses may be
incurred relating to the integration of the businesses of Olicom and CrossComm,
including the integration of product lines and distribution and administrative
functions. Although Olicom expects that the elimination of duplicative expenses
as well as other efficiencies related to the integration of the businesses of
Olicom and CrossComm may offset additional expenses over time, there can be no
assurance that such net benefit will be achieved in the near term, or at all.
There can be no assurance that Olicom will be successful in its efforts to
integrate the operations of the two companies. See "-- Integration of Certain
Operations" and "Summary -- Selected Unaudited Historical Pro Forma Financial
Information" and "-- Comparative Per Share Data of Olicom and CrossComm."
Completion of Acquired In-Process Technologies. Upon the closing of the
Merger, approximately $36,250,000 of acquired in-process research and
development projects, which will be expensed at that time, will have been
acquired by Olicom. Management of Olicom has estimated that approximately
$15,000,000 of additional costs will be required over two to three years to
complete these projects. However, there can be no assurance that any or all of
the projects will be completed successfully, and that if they are completed,
that they will be completed at a cost that is not substantially in excess of the
amounts estimated by management. Moreover, there can be no assurance that Olicom
will be able to exploit the new technologies as they are developed. If the
products developed from the acquired technology fail to gain widespread
commercial acceptance, there could be a material adverse effect on the business,
financial condition or results of operations of the combined company. Olicom's
businesses may be adversely affected.
Termination Fee if Merger Fails to Occur. No assurance can be given that
the Merger will be consummated. The Merger Agreement provides for the payment by
CrossComm of a termination fee of $2,360,000 if the Merger is terminated under
certain circumstances, and reimbursement of expenses by either Olicom or
CrossComm under certain circumstances. The obligation to make such payment may
adversely affect the ability of CrossComm to engage in another transaction in
the event that the Merger is not consummated. See "The Agreement and Plan of
Reorganization -- Fees and Expenses: Termination Fee."
RISKS RELATING TO OLICOM AND CROSSCOMM
Rapid Technological Change; New Products and Evolving Markets. The market
for the products of the combined company is characterized by frequent new
product introductions, rapidly changing technology, changes in customer
requirements, short product life cycles and continued emergence of new industry
standards, any one of which could render the existing products of Olicom,
CrossComm or the combined company obsolete. The success of the combined company
will depend to a substantial degree upon its ability
17
<PAGE> 35
to develop and introduce, on a cost-effective and timely basis, new products and
enhancements to existing products that meet changing customer requirements and
emerging industry standards, and take advantage of technological advances. The
development of new, technologically advanced products is a complex and uncertain
process requiring high levels of innovation, as well as the accurate
anticipation of technological and market trends. Both Olicom and CrossComm have
on occasion experienced delays in the introduction of new products and product
enhancements. There can be no assurance that the combined company will be able
to identify, develop, manufacture or market new or enhanced products
successfully or on a timely basis, that new products will gain market
acceptance, or that the combined company will be able to respond effectively to
product announcements by competitors, technological changes, emerging industry
standards or changing customer requirements. From time to time, the combined
company may announce new products or product enhancements, capabilities or
technologies that have the potential to replace or shorten the life cycle of
existing product offerings and that may cause customers to defer purchases of
existing products or cause resellers to return products. Any failure to
introduce new products or product enhancements on a timely basis, customer
delays in purchasing products in anticipation of new product introductions, or
any inability of the combined company to respond effectively to product
announcements by competitors, technological changes, changing customer
requirements or emerging industry standards could have a material adverse effect
on the business, financial condition or results of operations of the combined
company.
The markets for Olicom's and CrossComm's products are characterized by
evolving methods of building and operating networks. The combined company's
operating results will depend to a significant extent on its ability to reduce
costs of existing products. The success of many new products is dependent on
several factors, including proper new product definition, product cost, timely
completion and introduction of new products, differentiation of new products
from those of competitors, market acceptance of these products, and the
activities of parties with whom Olicom has joint development projects. Any
failure of the combined company's new product development efforts could have a
material adverse effect on its business, financial condition or results of
operations.
Olicom and CrossComm believe that the ability to compete successfully in
the market for LAN products is dependent upon the continued compatibility and
interoperability of its products with products and architectures offered by
various vendors, including workstation and personal computer architectures and
computer and network operating systems. There can be no assurance that the
combined company will be able to effectively address the compatibility and
interoperability issues raised by technological changes or evolving industry
standards. Any failure to so address compatibility and interoperability issues
could have a material adverse effect on the business, financial condition or
results of operation of Olicom, CrossComm or the combined company.
Industry standards for ATM technology are still evolving. One of the bodies
setting industry standards is the ATM Forum, a group of industry participants
including equipment manufacturers, telecommunications service providers and end
users. As these standards evolve, Olicom, CrossComm and the combined company may
be required to modify their respective products or develop and support new
versions of products. Any failure of such products to comply promptly and
cost-effectively, or delays in achieving such compliance, with the various
existing and evolving industry standards could delay introduction of the
combined company's products, which could have a material adverse effect on the
business, financial condition or operating results of the combined company. See
"Olicom A/S -- Business: Strategic Relationships," and "-- Business Research and
Development."
Competition. Both Olicom and CrossComm experience significant competition
and expect substantial additional competition from established and emerging
computer, communications and networking companies. The primary competitors for
Olicom's products include IBM, Madge Networks N.V. ("Madge") and 3Com
Corporation ("3Com"), while the primary competitors for CrossComm's products
include Cisco Systems, Inc. ("Cisco"), Bay Networks, Inc. ("Bay Networks"), FORE
Systems, Inc. ("FORE"), Xylan Corporation, IBM and 3Com. There can be no
assurance that Olicom, CrossComm or the combined company will be able to compete
successfully in the future with existing or new competitors. The networking
industry has become increasingly competitive, and the results of operations of
Olicom, CrossComm and the combined company may be adversely affected by the
actions of existing or future competitors. Such actions may include the
18
<PAGE> 36
development or acquisition of new technologies, the introduction of new
products, marketing and sales activities directed at Olicom and CrossComm
customers while their product lines and sales forces are being integrated, the
assertion by third parties of patent or similar intellectual property rights,
and the reduction of prices by competitors to gain or retain market share.
Industry consolidation or alliances may also affect the competitive environment.
In particular, competitive pressures from existing or new competitors that offer
lower prices or introduce new products could result in delayed or deferred
purchasing decisions by potential customers and price reductions, both of which
could adversely affect the sales and operating margins of Olicom, CrossComm or
the combined company. The industry in which Olicom and CrossComm compete is
characterized by declining average selling prices. This trend could adversely
impact the sales and operating margins of Olicom, CrossComm or the combined
company. Many of the combined company's current and potential competitors have
longer operating histories and substantially greater financial, technical,
sales, marketing and other resources, as well as greater name recognition and a
larger installed customer base, than the combined company. As a result, these
competitors may be able to devote greater resources to the development,
promotion, marketing and support of their products than the combined company. In
addition, competitors with a larger installed customer base may have a
competitive advantage over the combined company when selling similar products or
alternative networking solutions to such customers. Increased competition could
result in significant price competition, reduced profit margins or loss of
market share, any of which could have a material adverse effect on the business,
financial condition or results of operations of Olicom, CrossComm or the
combined company. See "Rapid Technological Change; New Products and Evolving
Markets" and "Olicom A/S -- Business: Competition."
Fluctuations in Operating Results. The revenue and operating results of
Olicom and CrossComm have fluctuated, and the revenue and operating results of
the combined company may, in the future, fluctuate from quarter to quarter and
from year to year due to a combination of factors, including, without
limitation, (i) the integration of personnel, operations and products from
acquired businesses, (ii) increased competition, (iii) capital spending of
end-users, (iv) the timing and amount of significant orders from distributors,
VARs and OEMs, including decisions by such customers as to the quantity of
products to be maintained in inventories, (v) the mix of distribution channels
and products, (vi) the combined company's success in developing, introducing and
shipping product enhancements and new products, (vii) the ability to attain and
maintain production volumes and quality levels for products, (viii)
manufacturing lead times, and changes in material costs, (ix) the ability to
obtain manufacturing economies when planned, (x) new product introductions by
competitors, (xi) pricing actions by the combined company or its competitors,
(xii) overall demand for communications and networking products, and (xiii)
general economic conditions, together with economic and other considerations
specific to the computer and networking industries. The results of operations
for the first quarter of fiscal 1997 are not necessarily indicative of results
to be expected in future periods.
A significant portion of the expenses of Olicom and CrossComm are
relatively fixed in advance, based in large part on forecasts of future sales.
If sales are below expectations in any given period, the adverse effect of a
shortfall in sales on the combined company's operating results may be magnified
by the inability to adjust spending to compensate for such shortfall. The
backlog of each company at the beginning of each quarter typically is not
sufficient to achieve expected revenue for that quarter. To achieve its revenue
objectives, the combined company will be dependent upon obtaining orders in a
quarter for shipment during that quarter. Furthermore, Olicom's and CrossComm's
agreements with its customers typically provide that they may change delivery
schedules, cancel orders within specified time frames without significant
penalty, and within certain limits return unsold products in connection with
rotation of inventory. Distributors, VARs and OEMs have no long-term obligations
to purchase products, which in turn creates the risk of unanticipated declines
in sales to customers for competitive reasons or because of the internalization
of the manufacture of products previously purchased on an OEM basis. The
combined company's industry is characterized by short product life cycles and
declining prices of existing products, which requires continual improvement of
manufacturing efficiencies and introduction of new products and enhancements to
existing products to maintain gross margins. Moreover, in response to
competitive pressures or to pursue new product or market opportunities, the
combined company may take certain pricing or marketing actions that could have a
material adverse effect on the business, financial condition or results of
operation of the combined company. As a result of all of the
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foregoing, it is possible that in some future quarter the combined company's
operating results may be below the expectations of securities analysts and
investors. In such event, the price of Olicom's Common Stock would likely be
materially and adversely affected. See "Olicom A/S -- Business: Sales and
Marketing," and "-- Business: Manufacturing and Distribution."
Volatility of Stock Price. The trading price of Olicom Common Stock has
been, and after the Merger may continue to be, subject to wide fluctuations in
response to quarterly variations in the combined company's financial
performance, shortfalls in revenue or earnings from levels forecast by
securities analysts, changes in estimates by such analysts, market conditions in
the computer software or hardware industries, product introductions by Olicom or
its competitors, announcements of extraordinary events such as acquisitions or
litigation, or general economic conditions. In addition, in recent years the
stock market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices for many high
technology companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could adversely affect the market
price for Olicom Common Stock before and after the Merger. Because the market
price of Olicom Common Stock is subject to fluctuation, the market value of the
shares of Olicom Common Stock that CrossComm stockholders will receive in the
Merger may increase or decrease prior to the Merger. CROSSCOMM STOCKHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR OLICOM COMMON STOCK. See
"Fluctuations in Operating Results," "-- Risks Relating to the Merger: Fixed
Exchange Ratio Within Collar" and "Summary -- Comparative Market Price and
Dividend Information."
Reliance on Indirect Channels of Distribution. The revenues of Olicom, and
to a lesser extent, CrossComm have been, and the revenues of the combined
company is anticipated to be, highly dependent upon the sales efforts and
success of distributors, VARs and, in the case of Olicom, OEMs, which have not
been and will not be within the control of the combined company. These resellers
also represent other lines of products that are complementary to, or compete
with, those of Olicom and CrossComm. While Olicom and CrossComm encourage their
resellers to focus on Olicom and CrossComm products, respectively, through
marketing and support programs, there can be no assurance that these resellers
will not give higher priority to products of other suppliers, thereby reducing
the efforts devoted to selling products of the combined company. See
"Fluctuations in Operating Results" and "Olicom A/S -- Business: Sales and
Marketing."
Risks Associated with Failure to Manage Growth. Olicom has undergone a
period of rapid growth and expansion. Olicom has also experienced significant
growth in its employee base. Olicom's ability to compete effectively and execute
its strategies will depend in part upon its ability to manage the integration of
CrossComm following the Merger, to continue to improve its operational,
management and financial systems and controls, and to integrate new employees.
See "-- Risks Relating to the Merger: Integration of Certain Operations." The
failure of Olicom's management team to effectively manage further growth,
including any growth related to the Merger, could have a material adverse effect
on the combined company's business, financial condition or results of
operations. See "Olicom A/S -- Business: Employees."
Dependence on Sole and Limited Source Suppliers and Availability of
Components. Several key components used in the manufacture of Olicom's and
CrossComm's products are currently purchased only from single or limited
sources. In general, neither Olicom nor CrossComm has long-term agreements with
any of these single or limited sources of supply. Any interruption in the supply
of any sole or limited source components, or the inability of the combined
company to procure these components from alternate sources at acceptable prices
and within a reasonable time, could have a material adverse effect upon the
business, financial condition or results of operations of the combined company.
Qualifying additional suppliers is time consuming, and the likelihood of errors
is greater with new suppliers. Lead times for materials and components ordered
by Olicom and CrossComm vary significantly, and depend on factors such as the
specific supplier, contract terms and demand for a component at a given time. If
orders do not match forecasts, the combined company may have excess or
inadequate inventory of certain materials and components. From time to time
Olicom has experienced shortages and allocations of certain materials and
components, and has experienced delays in filling orders while waiting to obtain
the necessary components. Given current worldwide demand for certain components
used by both Olicom and CrossComm and the complexity and yield problems in
manufacturing such components, such shortages and allocations are likely to
occur in the future and could
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have a material adverse effect on the business, financial condition or results
of operations of the combined company. See "Olicom A/S -- Business:
Manufacturing and Distribution" and "CrossComm Corporation -- Business:
Manufacturing."
Dependence on Contract Manufacturing. Both Olicom and CrossComm currently
subcontract product assembly and aspects of component procurement. Further, two
of Olicom's subcontractors conduct manufacturing of Olicom products in Thailand,
while another maintains operations in Ireland. The importation of products from
Thailand and Ireland exposes Olicom (and will expose the combined company) to
the possibility of product supply disruption and increased costs in the event of
political unrest, unstable economic conditions or developments that are adverse
to trade. The inability of Olicom's or CrossComm's contract manufacturers to
provide the combined company with adequate supplies of high-quality products, or
the loss of any of Olicom's or CrossComm's contract manufacturers, could cause a
delay in the combined company's ability to fill orders while production is
shifted to alternative manufacturers or replacement manufacturers are
identified, and could have a material adverse effect upon the combined company's
business, financial condition or results of operations. See "Olicom
A/S -- Business: Manufacturing and Distribution" and "CrossComm
Corporation -- Business: Manufacturing."
Product Concentration. During 1996, sales of network interface cards
accounted for approximately 74.4% of Olicom's net revenues. Declines in the
demand for Olicom's network interface cards, whether as a result of competition,
technological change or otherwise, could have a material adverse effect on the
combined company's business, financial condition or results of operations.
Moreover, the future performance of the combined company in the network
switching market will depend in part on Olicom's success in integrating the
CrossComm product line and on the successful development, introduction and
market acceptance of new and enhanced products. Any failure of the combined
company's products to achieve market acceptance could have a material adverse
effect on the business, financial condition or results of operation of the
combined company. See "Olicom A/S -- Business: Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Patents, Intellectual Property and Licensing. The success of Olicom and
CrossComm have been, and the success of the combined company will be, dependent
on their proprietary technology. Olicom and CrossComm have generally relied, and
the combined company will rely, upon copyright, trademark and trade secret laws
to establish and maintain its proprietary rights in their respective
technologies and products. There can be no assurance that the steps taken by
Olicom, CrossComm or the combined company to protect proprietary rights will be
adequate to prevent misappropriation of their technologies or that competitors
will not independently develop technologies that are substantially equivalent or
superior to their technologies. In the event that protective measures are not
successful, the combined company's business, financial condition or results of
operations could be materially and adversely affected. In addition, the laws of
some foreign countries may not permit the protection of proprietary rights to
the same extent as do the laws of the United States. Although Olicom and
CrossComm believe the protection afforded by their copyrights and trademarks
have value, the rapidly changing technology in the networking industry makes the
combined company's future success dependent primarily on the innovative skills,
technological expertise and management abilities of its employees rather than on
patent, copyright and trademark protection.
Many of Olicom's and CrossComm's products are designed to include software
or other intellectual property licensed from third parties, and the loss of such
software or other rights might require significant changes in, or otherwise
disrupt or delay the distribution of, such products. While it may be necessary
in the future to seek or renew licenses relating to various aspects of their
products, Olicom and CrossComm believe that, based upon past experience and
standard industry practice, such licenses generally could be obtained on
commercially reasonable terms. From time to time Olicom and CrossComm receive
communications from third parties asserting that their use of trademarks, or
that their products, infringe or may infringe the rights of third parties. In
this connection, CrossComm is a defendant in an action filed by Datapoint
Corporation ("Datapoint") alleging infringement by CrossComm of a Datapoint
patent. See "CrossComm Corporation -- Business: Legal Proceedings." There can be
no assurance that any such claims will not result in protracted and costly
litigation; however, based upon general practice in the industry Olicom and
CrossComm believe that such matters can ordinarily be resolved without any
material adverse impact on their business, financial
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condition or results of operations. Nevertheless, there can be no assurance that
the necessary licenses would be available on acceptable terms, if at all, or
that Olicom, CrossComm or the combined company would prevail in any such
challenge. The inability to obtain certain licenses or other rights or to obtain
such licenses or rights on favorable terms, or litigation arising out of such
other parties' assertion, could have a material adverse effect on the business,
financial condition or results of operations of the combined company.
License of Olicom Trademark. Olicom is the licensee of the trademark
"Olicom" pursuant to a license from Ing. C. Olivetti & C., S.p.A. ("Olivetti
S.p.A.") that prohibits Olivetti from using, or granting to a third party any
rights to use, the trademark on products of the type manufactured or marketed by
Olicom. Olicom has no ownership rights in the trademark. In the event that the
license of the trademark were terminated, Olicom would be required to change its
name and cease using the trademark on its products. A change in Olicom's name
and the creation of a new trademark could involve substantial expense and the
possibility of customer confusion, which, in turn, could have a material adverse
effect on the business, financial condition or results of operations of the
combined company. See "Olicom A/S -- Business: Trademark Agreement."
Risks Associated with International Operations; Currency Exchange Rate
Fluctuations. Conducting business outside of the United States is subject to
certain risks, including, without limitation, longer payment cycles, unexpected
changes in regulatory requirements and tariffs, export licenses, political
instability, difficulties in staffing and managing foreign operations, greater
difficulty in accounts receivable collection, and potentially adverse tax
consequences. International sales are also affected by seasonal fluctuations
resulting from lower sales that typically occur during the summer months in
Europe and other parts of the world.
Olicom's business may also be affected by changes in demand resulting from
fluctuations in currency exchange rates. Olicom generates sales primarily in
U.S. dollars (Olicom's functional currency) and incurs expenses in a number of
currencies, principally in U.S. dollars and Danish kroner. Fluctuations in the
value of foreign currencies cause U.S. dollar-translated amounts to change in
comparison with previous periods. Due to the number of currencies involved, the
constantly changing currency exposures and the fact that all foreign currencies
do not react in the same manner against the U.S. dollar, Olicom cannot quantify,
in any meaningful way, the effect of exchange rate fluctuations upon future
income. Although Olicom seeks to manage its foreign currency exposures by
matching non-dollar revenues and expenses and by entering into hedging
transactions, there can be no assurance that exchange rate fluctuations will not
have a material adverse effect on the business, financial condition or results
of operations of the combined company. See "Olicom A/S -- Business: Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Dependence on Foreign Subsidiary. A substantial portion of CrossComm's
research and development activities are conducted in Gdansk, Poland, at its
wholly-owned subsidiary, CrossComm-Poland, Ltd. In the event the current
political and economic environment in Poland becomes less favorable to the
combined company or restrictions are imposed on travel or technology transfers
between Poland and the United States, there could be an adverse effect on the
research and development activities, as well as the business, financial
condition or results of operations, of the combined company.
Effect of Certain Charter Provisions. The Olicom Articles prohibit any
person from holding more than 33% of the outstanding shares of Olicom Common
Stock without obtaining the approval of the Olicom Board, which may condition
its approval in such manner as it determines to be appropriate. A holder of more
than 33% of the outstanding shares of Olicom Common Stock who fails to obtain
the approval of the Olicom Board is prohibited by the Olicom Articles from
having any right to vote, or receive dividends or distributions on, any shares
in excess of the 33% threshold. In addition, a stockholder who acquires shares
of Olicom Common Stock by means of a transfer (including shares received
pursuant to the Merger) cannot vote such shares until three months after such
stockholder has been registered in Olicom's list of stockholders. These
provisions may have the effect of limiting the price that certain investors
might be willing to pay in the future for shares of Olicom Common Stock,
delaying, deferring or otherwise discouraging an acquisition or change in
control of Olicom deemed undesirable by the Olicom Board, or adversely affecting
the voting power of stockholders who own shares of Olicom Common Stock in excess
of the 33% threshold. See "Comparison of Stockholder Rights under the Laws of
Denmark and Delaware -- Limitations on Share Ownership."
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Consequences of Danish Incorporation. Olicom is a Danish corporation and
its corporate affairs are governed by the Olicom Articles and the Companies Act.
Although certain provisions of the Companies Act resemble some of the provisions
of the corporation laws of a number of states in the United States, principles
of law relating to such matters as the validity of corporate procedures, the
fiduciary duties of management and the rights of Olicom's stockholders may
differ from those that would apply if Olicom were incorporated in a jurisdiction
within the United States. See "Description of Olicom Common Stock", "Comparison
of Stockholder Rights under the Laws of Denmark and Delaware" and "Enforcement
of Civil Liabilities."
Service and Enforcement of Legal Process. All of Olicom's directors,
substantially all of Olicom's executive officers, and all of Olicom's experts
named herein are non-residents of the United States, and all or a substantial
portion of the assets of such persons are located outside the United States. A
substantial portion of Olicom's assets are located in Denmark. As a result, it
may not be possible for United States stockholders to effect service of process
within the United States upon such persons or to enforce against such persons or
Olicom judgments of United States courts predicated upon the civil liability
provisions of the federal securities laws of the United States. Olicom has been
advised by its Danish counsel, Advokatfirmaet O. Bondo Svane, that civil
liabilities under the Securities Act or the Exchange Act, are not enforceable in
original actions instituted in the Kingdom of Denmark, or in actions instituted
in the Kingdom of Denmark to enforce judgments of United States courts. See
"Enforcement of Civil Liabilities."
THE OLICOM MEETING
DATE, TIME AND PLACE OF THE OLICOM MEETING
The Olicom meeting will be held at Olicom's International Headquarters
located at Nybrovej 114, DK-2800, Lyngby, Denmark, on Thursday, May 29, 1997 at
4:00 p.m., local time. The Olicom Meeting initially will consider Proposals 2-9
on May 29, 1997, and thereafter the Olicom Meeting will be adjourned to 4:00
p.m. local time on , June , 1997 (the same day as CrossComm's Annual
Meeting of Stockholders), at which time a reconvened Olicom Meeting will
consider the proposal to approve the Merger Agreement, together with such other
business as may properly come before such adjourned meeting.
MATTERS TO BE CONSIDERED AT THE OLICOM MEETING
The Olicom Articles require that the matters identified in Proposals 1-8 in
the Notice of Annual General Meeting of Stockholders be included in the agenda
of such meeting. Set forth below is a brief description of these matters.
PROPOSAL 1
APPROVAL OF THE MERGER AGREEMENT AND THE MERGER
The proposal to approve the Merger Agreement and the Merger is being
submitted to Olicom stockholders for approval in accordance with the
requirements of The Nasdaq Stock Market applicable to the designation of Olicom
Common Stock as a Nasdaq National Market security. Such requirements generally
require the prior approval of Olicom's stockholders in respect of the issuance
of Olicom Common Stock in connection with the acquisition of the stock of
another company where the number of shares of common stock that may be issued is
or will be equal to or greater than 20% of the number of shares of common stock
outstanding before the issuance of such stock. Because the number of shares of
Olicom Common Stock that may be issued pursuant to the Merger Agreement may
exceed 20% of the number of shares of Olicom Common Stock outstanding, the
proposal is being submitted to the Olicom stockholders for approval in
accordance with the requirements of The Nasdaq Stock Market. Based on the
capitalization of CrossComm as of the Record Date and assuming an Exchange Ratio
of 0.2667, it is expected that, as a result of the Merger, approximately
2,700,000 shares of Olicom Common Stock will be issued by virtue of the Merger;
in addition, based on the capitalization of CrossComm as of the Record Date and
assuming a Warrant Exchange Ratio of 0.1075, it is expected that, as a result of
the Merger, approximately 1,100,000 additional shares of Olicom
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Common Stock may be issuable by Olicom pursuant to the exercise of Warrants
issued by virtue of the Merger (the foregoing number of shares of Olicom Common
Stock and Warrants to be issued by virtue of the Merger gives pro forma effect
to the exercise of a vested CrossComm Options and the purchase of CrossComm
Common Stock under the CrossComm ESPP consistent with current levels of
contributions thereto). See "Summary -- Terms of the Merger."
Approval of Proposal 1 will include authorization of the Olicom Board to
make such amendments to the resolutions adopted by the Olicom Meeting as may be
required by the Commercial and Companies Agency of the Kingdom of Denmark as a
condition to the registration of the shares of Olicom Common Stock to be issued
pursuant to the Merger or upon exercise of Warrants issued or CrossComm Options
assumed pursuant to the Merger. See "The Merger" and "Agreement and Plan of
Reorganization."
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 1.
PROPOSAL 2
APPROVAL OF ANNUAL ACCOUNTS, DISCHARGE OF MANAGEMENT
AND THE BOARD OF DIRECTORS, AND CARRY FORWARD OF OLICOM'S PROFITS
Section 69 of the Companies Act provides that the Annual Accounts of Olicom
shall be presented to, and either be adopted or rejected by, Olicom's
stockholders. Copies of Olicom's Annual Accounts prepared in accordance with
generally accepted accounting principles of the Kingdom of Denmark will be
available at the Olicom Meeting. In addition, any Olicom stockholder desiring a
copy of the Annual Accounts may request same from Olicom at the addresses set
forth in this Joint Proxy Statement/Prospectus. In connection with the adoption
of the Annual Accounts, there will be consideration of the discharge of Olicom's
management and the Olicom Board from their duties for fiscal year 1996. Under
Danish law it is also appropriate to carry forward prior years' profits in the
event that dividends are not paid.
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 2.
PROPOSAL 3
ELECTION OF DIRECTORS
Seven directors of Olicom will be elected at the Olicom Meeting. The
nominees for director are Jan Bech, Bo F. Vilstrup, Lars Stig Nielsen, Kurt
Anker Nielsen, Frank G. Petersen, Michael J. Peytz and Anders Knutsen. It is the
intention of the persons named in the accompanying proxy to vote FOR the
election of the foregoing nominees. Except for Mr. Knutsen, all such persons are
currently serving as directors of Olicom. Should any nominee for director be
unable or fail to accept nomination or election (which is not contemplated), it
is the intention of the persons named in the proxy, unless otherwise
specifically instructed in the proxy, to vote FOR the election in his stead of
such other person as the Olicom Board may recommend. Information with respect to
the director nominees is set forth in the section of this Joint Proxy
Statement/Prospectus entitled "Olicom A/S -- Management of Olicom."
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
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PROPOSAL 4
APPOINTMENT OF AUDITORS
The Olicom Board proposes that Olicom's stockholders appoint Ernst & Young
A/S and KPMG C. Jespersen as independent auditors to audit the financial
statements of Olicom for the year ending December 31, 1997. The Olicom Board
also proposes that Olicom's stockholders appoint Ernst & Young LLP as
independent auditors to audit the financial statements of Olicom Americas for
the year ending December 31, 1997. Ernst & Young A/S (and Revisor Centret, the
predecessor thereto) has acted as Olicom's auditors since 1985, and Ernst &
Young LLP has acted as the auditors for Olicom Americas since 1991.
Representatives of Ernst & Young A/S will be present at the Olicom Meeting, will
have an opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 4.
PROPOSAL 5
AUTHORIZATION TO PURCHASE OLICOM COMMON STOCK
Proposal 5 would grant to the Olicom Board the right to authorize the
purchase, from time to time for a period of 18 months following the Olicom
Meeting, of up to 10% of Olicom's issued and outstanding common stock.
Section 48 of the Companies Act permits a company incorporated under Danish
law to acquire up to 10% of its issued and outstanding capital stock, provided
that such acquisitions are undertaken pursuant to stockholder authorization
granted to a company's board of directors (such authorization may not be granted
for a period exceeding 18 months). At the Annual General Meeting held on May 8,
1996, the Olicom Board was authorized to purchase up to 10% of Olicom's share
capital at the market price of Olicom Common Stock on the date of purchase, with
a deviation of up to 10% from the market price. Such authorization will expire
prior to the 1998 Annual General Meeting of Stockholders unless extended.
The purpose of Proposal 5 is to continue to provide the Olicom Board with a
measure of flexibility in dealing with Olicom's outstanding common stock. Olicom
believes that a number of circumstances could arise whereby Olicom would be
benefited by its ability to purchase its own securities. For example, to the
extent that the Olicom Board feels that Olicom Common Stock may be undervalued
at the market levels at which it is trading, repurchases of Olicom Common Stock
may represent an attractive investment for Olicom. There may be other situations
when repurchases of Olicom Common Stock are appropriate or necessary to
facilitate a corporate transaction wherein part of the consideration to be paid
by Olicom consists of Olicom Common Stock. The reduction in the number of
outstanding shares of Olicom Common Stock resulting from any such purchases will
increase the proportionate interest of the remaining stockholders in Olicom's
net worth and whatever further profits Olicom may earn (but could, under some
circumstances, result in a decrease in the book or market value per share of the
remaining shares).
Olicom purchased 62,000 shares of Olicom Common Stock during fiscal 1993,
997,255 shares during fiscal 1994, 257,490 shares during fiscal 1995 and 2,500
shares during 1996 pursuant to authorizations of the Olicom Board to purchase up
to an aggregate of 1,500,000 shares of Olicom Common Stock from time to time in
open market transactions. Accordingly, up to 180,755 additional shares of Olicom
Common Stock may be purchased by Olicom pursuant to such authorizations. Other
than the foregoing, Olicom has no present intentions, understandings or
agreements for the repurchase of any of its outstanding shares of common stock,
nor is it holding any discussions with any stockholder with respect to any such
purchase. It is the intention of the Olicom Board that any purchases of Olicom
Common Stock will be made in accordance with United States federal securities
laws, as well as any applicable rules and regulations of the National
Association of Securities Dealers, Inc. Further, Olicom Common Stock will be
purchased only if, in the judgment of the
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Olicom Board, it would be in the best interest of Olicom to purchase such shares
at the time and at the prices at which any such purchases are proposed to be
made.
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 5.
PROPOSAL 6
DIRECTORS' FEES
For fiscal year 1997, it is proposed that (i) nonmanagement directors
receive a director's fee of DKK 120,000 (approximately $18,800), (ii) the
Chairman of the Board receive a director's fee of DKK 240,000 (approximately
$37,600), and (iii) the Deputy Chairman of the Board receive a director's fee of
DKK 180,000 (approximately $28,200).
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 6.
PROPOSAL 7
AMENDMENTS TO OLICOM'S ARTICLES OF ASSOCIATION
The Olicom Board has proposed amendments to the Olicom Articles that may be
generally categorized as (i) an amendment to increase the authorized share
capital of Olicom and the breadth of the Olicom Board's authority in connection
therewith, and (ii) an amendment to require the appointment of two auditors with
respect to Olicom's financial statements and annual accounts.
Increase in Authorized Share Capital. The proposed amendment to Article 8,
Section 1 of the Olicom Articles is being undertaken to increase the authorized
share capital of Olicom to reflect the shares of Olicom Common Stock that may be
issued pursuant to the Merger, and upon exercise of the Warrants to be issued,
and CrossComm Options to be assumed, pursuant to the Merger. While Olicom's
presently-authorized share capital is adequate to meet Merger-related needs, the
Olicom Board believes that, upon consummation of the Merger, the authorized
share capital will not be sufficient to meet other needs. Increasing the
authorized share capital will facilitate the acquisition of other companies and
properties and make shares available for other corporate purposes, including,
without limitation, any future issuances of Olicom Common Stock in public or
private financings, and upon conversion or exercise of any convertible
securities, options, warrants or rights that may be hereafter issued in one or
more of such acquisitions. The proposed increase in Olicom's share capital will
also provide Olicom with sufficient reserves and flexibility for employee
compensation and incentive programs. In this connection, it should be noted
that, as presently in effect, Article 8, Section 1 of the Olicom Articles limits
capital increases to issuances of shares in connection with private placements
or acquisitions of assets or companies. Such limitation has been deleted in the
proposed amendment, and accordingly, shares of Olicom Common Stock could be
issued for any corporate purpose consistent with the Olicom Articles.
At the date of this Joint Proxy Statement/Prospectus, except as otherwise
described herein, there are no agreements, arrangements or understandings with
respect to the issuance of additional shares of Olicom Common Stock involving
acquisitions of companies or properties. Except as discussed in this Joint Proxy
Statement/Prospectus, there is no present intention to issue shares in public or
private offerings, or except for shares of Olicom Common Stock that may be
issued pursuant to Olicom's Share Incentive Plans as in effect from time to time
(including, without limitation, the CrossComm Options that would be assumed in
connection with the Merger), any present plan or intention to issue other
convertible securities, options, warrants, rights or other issuances involving
Olicom Common Stock. Having additional authorized shares of Olicom Common Stock
available for issuance in the future will give Olicom greater flexibility and
may result in future acquisitions or issuances of Olicom Common Stock being
effected without stockholder approval by means of a general meeting of Olicom's
stockholders. Any issuance of such shares could dilute existing Olicom
stockholders. Under certain circumstances, the shares available for additional
issuance could be used
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to create voting impediments and make it more difficult for persons seeking to
effect a combination or otherwise gain control of Olicom. Such action could have
an adverse impact on the market price and liquidity of Olicom Common Stock.
Also, any of such additional shares of Olicom Common stock could, provided that
there is compliance with the Companies Act, be privately placed with a purchaser
or purchasers who might side with management of Olicom in opposing a tender
offer by a third party. Such amendment to the Olicom Articles is not being
sought in order to delay any attempt to acquire control of Olicom, and Olicom is
not aware of any such attempt.
Accordingly, the Olicom Board believes that it is advisable and in the best
interests of Olicom and its stockholders to increase the authorized share
capital of Olicom.
The English translation of Article 8, Section 1 of the Olicom Articles is
proposed to be amended to read in its entirety as follows:
"The Company's Board has been authorized by the General Meeting to
increase the Company's share capital -- at such times and on such terms as
the Board thinks fit -- by one or several stages by not more than DKK
2,687,500 (i.e., 10,750,000 shares of DKK 0.25 each). The said authority
shall be valid for a period of five (5) years until May , 2002 and may be
extended by the General Meeting by one or more five year periods at a time.
Any increase in pursuance of the Board's authorization may be effected by
the payment of assets other than cash and without any preferential right to
subscribe on the part of the Company's present shareholders,
notwithstanding the provisions in Art. 7 above."
Appointment of Auditors. The Olicom Board has proposed the amendment of
Article 31 of the Olicom Articles to permit Olicom greater flexibility in
connection with the listing of its securities on various exchanges. As Olicom
has grown, its management has considered the benefits of listing its securities
on exchanges in addition to the Nasdaq National Market. Toward this end, the
requirement that Olicom's financial statements and annual accounts be audited by
two firms of auditors could facilitate any such additional listings of Olicom
securities.
The English translation of Article 31 of the Olicom Articles is proposed to
be amended to read in its entirety as follows:
"The auditing shall be undertaken by two chartered accountants
appointed by the Company in General Meeting. The appointment shall be for
one (1) year at a time until the end of the next year's Annual General
Meeting, where the auditor(s) may be re-elected. A company or firm of
accountants may be appointed auditor."
Pursuant to the Companies Act, the Danish version of the proposed
amendments to the Olicom Articles will, upon approval thereof, be filed with the
Commercial and Companies Agency of the Kingdom of Denmark and will be the
operative instrument. Any Olicom stockholder who desires to receive a copy of
the Danish text of the proposed amendments to the Olicom Articles, or a copy of
the Olicom Articles as presently in effect and as filed with the Commercial and
Companies Agency, may obtain same by contacting Olicom's Investor Relations
Department at the address set forth in this Joint Proxy Statement/Prospectus.
In order to be adopted, Proposal 7 requires approval by two-thirds of the
votes cast at the Annual General Meeting and two-thirds in nominal value of the
voting capital represented at such meeting.
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 7.
PROPOSAL 8
APPROVAL OF 1997 SHARE INCENTIVE PLAN
The Olicom Board proposes that the 1997 Share Incentive Plan (the "Plan")
be approved by Olicom's stockholders.
Olicom first adopted a share incentive plan in 1992, which provided for the
issuance of warrants to purchase up to 565,000 shares of Olicom Common Stock. As
of the date hereof, warrants to purchase 565,000
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<PAGE> 45
shares of Olicom Common Stock have been issued under such plan. In May 1994,
Olicom's stockholders approved the 1994 Share Incentive Plan, which, as amended,
provided for the issuance of options to purchase up to 425,000 shares of Olicom
Common Stock. As of the date hereof, options to purchase 356,500 shares of
Olicom Common Stock have been granted under such plan. In May 1996, Olicom's
stockholders approved the 1996 Share Incentive Plan, which provided for the
issuance of options to purchase up to 1,000,000 shares of Olicom Common Stock.
As of the date hereof, options to purchase 479,700 shares of Olicom Common Stock
have been granted under such plan. The Olicom Board adopted the Plan because an
insufficient number of shares of Olicom Common Stock are available under
existing Olicom share incentive plans for the assumption of options under the
CrossComm Option Plans (as of March 31, 1997, only 520,300 shares of Olicom
Common Stock were available from the original pool of 1,000,000 shares of Olicom
Common Stock under the 1996 Share Incentive Plan). In addition, pursuant to the
Merger, Olicom will assume CrossComm Options, which upon assumption will entitle
the holders thereof to purchase approximately 1,060,000 additional shares of
Olicom Common Stock.
Olicom intends to register the offer and sale of the 2,000,000 shares of
Olicom Common Stock issuable under the Plan under the Securities Act. Olicom
Common Stock purchased pursuant to the Plan after the effective date of such
registration statement could immediately be sold in the open market subject, in
the case of affiliates (as defined in Rule 144 under the Securities Act), to
compliance with the provisions of Rule 144, other than the holding period
requirement.
The following is a brief summary of certain provisions contained in the
Plan, the full text of which appears in Appendix E to this Joint Proxy
Statement/Prospectus. The following description does not purport to be a
complete statement of the provisions of the Plan and is qualified in its
entirety by reference to such appendix.
DESCRIPTION OF THE PLAN
The Plan, which authorizes the grant of various options and warrants, is an
integral part of Olicom's director, officer, manager and key employee
compensation program, which is based upon a pay-for-performance philosophy. The
Plan provides long term incentives in the form of grants of stock options and
issuances of warrants. The objective of these incentives is to advance the
longer term interests of Olicom and its stockholders and to complement
incentives tied to annual performance. Options and warrants provide rewards to
directors, officers, managers and other key employees upon the creation of
incremental stockholder value and the attainment of long term earnings goals.
The Plan also encourages directors, officers, managers and other key employees
to acquire a larger personal financial interest in Olicom through stock
ownership. It is also anticipated that the Plan will further enable Olicom to
attract and retain highly qualified executives.
In developing the terms of the Plan, consideration was given to the tax
laws of the countries that have jurisdiction over eligible employees of Olicom
and its affiliates. In this connection, Olicom anticipates that incentive stock
options ("ISOs"), as defined in Section 422 of the United States Internal
Revenue Code of 1986, as amended (the "Code"), will be granted to key employees
of Olicom Americas (and of CrossComm, if the Merger is consummated),
nonqualified stock options ("NQOs") will be granted to employees, managers and
directors of Olicom and of Olicom Americas (and of CrossComm, if the Merger is
consummated), and options and warrants will be issued to employees, managers and
directors of Olicom.
The Plan became effective on April 14, 1997, conditioned on and subject to
approval of the Plan by an Annual General Meeting of Olicom's stockholders.
Unless terminated earlier, the Plan terminates on April 13, 2002, after which no
additional options or warrants may be granted or issued under the Plan. Under
the Plan, the number of shares that may be issuable on exercise of options and
warrants may not exceed 2,000,000 shares of Olicom Common Stock. Olicom Common
Stock issued under the Plan may be either authorized and unissued shares or
issued shares acquired by Olicom in the open market or otherwise.
The Plan is administered by the Olicom Board, which has the authority to
determine the provisions of options granted and warrants issued, subject to any
limitations contained in the Olicom Articles. The Olicom Board has the authority
under the Plan, subject to its provisions, to delegate to the compensation
committee of the Olicom Board the authority to select the individuals who
receive grants of options and to whom warrants
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<PAGE> 46
may be issued. Any shares subject to unexercised portions of options or warrants
granted or issued pursuant to the Plan which have terminated, been canceled or
expired may again be subject to options and warrants granted or issued pursuant
to the Plan. It is not possible at this time to determine who may be selected in
the future to receive options or warrants, or the number of shares of Olicom
Common Stock that may be issuable on exercise of options and warrants.
Options may be granted only during the five years following the effective
date of the Plan and will have a maximum term of ten years. Warrants may be
granted only during the five years following the effective date of the Plan and
will have a maximum term of five years. Options and warrants issued to directors
will be exercisable for no more than ten and five years, respectively, except
that in the event of the death or termination of service of a member of the
Olicom Board as a director of Olicom or a member of the board of directors of a
subsidiary as a director thereof, such options and warrants may not be exercised
after the expiration of one year following such death or termination (or if
shorter, the remaining term of the option or warrant). However, unless otherwise
provided in the grant or issuance thereof, options and warrants must be
exercised no later than one year after an optionee's or warrant holder's death
(but in no case, later than the expiration date of the option or warrant, and
then only to the extent vested). The Olicom Board has the power under the Plan
to determine on the date of grant or issuance what effect, if any, termination
of employment will have on the right to exercise an option or warrant.
The option exercise price must be at least equal to the fair market value
(or in the discretion of the Olicom Board, the average of the high and low sales
prices) of Olicom Common Stock on the date of grant, and the sum of the warrant
purchase price and the exercise price thereof must be at least equal to the fair
market value of Olicom Common Stock on the date of issuance. The consideration
to be received by Olicom in consideration for the issuance of a warrant is to be
determined by the Olicom Board on the date the warrant is issued. The Plan
provides that the Olicom Board may establish the exercise price for options
assumed in connection with acquisitions of business enterprises by reference to
the exercise price of such assumed options immediately prior to the closing of
such acquisition, adjusted to reflect the consideration received by the equity
holders of such acquired business enterprise. The amount of such adjustment is
to be determined by the Olicom Board. See "The Agreement and Plan of
Reorganization -- Assumption of Options." On May , 1997, the fair market value
of a share of Olicom Common Stock, based on the closing sales price as quoted by
the Nasdaq National Market, was $ . The Olicom Board will have the
authority to determine such other terms and conditions of each option and
warrant as are not inconsistent with the provisions of the Plan.
The Plan provides that an option or warrant may allow the optionee or
warrant holder to elect to pay withholding taxes due with respect to the
exercise of an option or warrant by delivering Olicom Common Stock to Olicom or
authorizing Olicom to withhold shares otherwise issuable on exercise. Such
shares delivered or withheld will be valued at fair market value.
Upon the exercise of any option granted or warrant issued under the Plan,
Olicom may, in its sole discretion, make financing available, from time to time
on such terms and to such optionees and warrant holders as the Olicom Board may
determine in its sole discretion, for the purchase of the Olicom Common Stock
that may be purchased or subscribed for pursuant to the exercise of such option
or warrant.
The Olicom Board may amend the Plan from time to time in such respects as
it may deem advisable in its sole discretion or in order that the options and
warrants granted or issued thereunder will conform to any change in applicable
laws, regulations or rulings of administrative agencies. Further, the Plan
includes provisions that emphasize that (i) pursuant to provisions of the Olicom
Articles, the Olicom Board has been, and may in the future be, granted the
authority to issue warrants, grant options and issue other instruments that
entitle the holders thereof to subscribe for Olicom Common Stock, and (ii)
notwithstanding anything contained in the Plan, the action of the Olicom Board
and of Annual General Meetings in authorizing the Plan or any amendment(s)
thereto shall not derogate from or otherwise affect the power of the Olicom
Board to issue warrants, grant options or issue other instruments pursuant to
the authority granted to the Olicom Board in the Olicom Articles.
The Plan provides that Olicom may grant options under the Plan in
substitution for, or in connection with the assumption of, options held by
employees or directors of another business enterprise who become
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<PAGE> 47
employees or directors of Olicom or its subsidiaries, as the result of a merger
or consolidation of Olicom or one of its subsidiaries, or as a result of the
acquisition by Olicom of property or stock of such other business enterprise. In
this connection, Olicom may direct that substitute options be granted, or that
the options or option plans of such other business enterprise be assumed, on
such terms and conditions as the Olicom Board considers appropriate in the
circumstances.
TAX CONSEQUENCES
The following is a summary of the tax consequences of the Plan applicable
to the grant and exercise of options and the issuance and exercise of warrants.
United States Internal Revenue Code. Olicom is of the opinion that an
optionee will not realize any compensation income under the Code on the grant of
an option. However, an optionee will realize compensation income at the time of
exercise (except for options that are ISOs) in the amount of the difference
between the option exercise price and the fair market value of Olicom Common
Stock on the date of exercise. Olicom is also of the opinion that the United
States subsidiaries of Olicom will be entitled to a deduction under the Code at
the time, and equal to the amount, of compensation income that is realized by an
optionee who is an employee or director of Olicom Americas. If the shares of
Olicom Common Stock acquired pursuant to a timely exercise of an ISO by an
employee or director of a United States subsidiary of Olicom are held for at
least one year after they are acquired by exercise of the ISO and two years
after the date on which the ISO was granted to the optionee (the "Required
Period"), then any gain on disposition of such shares will generally be taxable
to the optionee as long-term capital gain, and no corresponding deduction will
be allowed to such subsidiary. Generally, the excess of the fair market value on
the date of exercise over the option price paid by an optionee will be included
in the optionee's alternative minimum taxable income under the Code.
If the shares of Olicom Common Stock acquired pursuant to a timely exercise
of an ISO are disposed of by an employee or director of a United States
subsidiary of Olicom before the expiration of the Required Period, then the
difference between the optionee's adjusted tax basis and the fair market value
of the shares at the date of exercise will generally be taxable as ordinary
income to such optionee, and a contemporaneous deduction in the amount of such
income will be allowed to such subsidiary of Olicom. Any additional gain (or
loss) realized on a subsequent disposition of such shares generally will be
taxable to the optionee as long- or short-term capital gain (or loss), depending
on the period for which the shares were deemed to have been held. The Plan is
not qualified under Section 401(a) of the Code. Olicom does not anticipate
issuing warrants to directors, officers managers or key employees of Olicom's
United States subsidiaries who are subject to taxation under the Code, and
accordingly, discussion of the tax consequences under the Code relating to the
issuance and exercise of warrants by optionees who are directors, officers,
managers or key employees of United States subsidiaries of Olicom has been
omitted.
Danish Tax Laws. Olicom is of the opinion that an optionee will not realize
any compensation income under Danish tax laws on the grant of an option.
However, an optionee will realize compensation income at the time of the vesting
of an option, in the amount of the difference between the option exercise price
and the fair market value of Olicom Common Stock on the date of vesting. If the
exercise of an option is postponed during a permitted period, and the fair
market value of Olicom Common Stock increases during such period, it is the
opinion of Olicom that this increase in fair market value will be taxable to the
optionee. If, during the same period, a decrease occurs in the fair market value
of Olicom Common Stock, the optionee may, under certain circumstances, be
entitled to a deduction in the amount of such decrease. Olicom will not be
entitled to a deduction under applicable Danish tax law in connection with the
exercise of an option.
Olicom is of the opinion that a warrant holder will not realize any
compensation income under Danish tax laws on the issuance of a warrant. However,
a warrant holder will realize compensation income at the time of the vesting of
a warrant, in the amount of the difference between the issue price for such
warrant and an assessment of the value of the warrant, if any. Olicom will not
be entitled to a deduction under applicable Danish tax law in connection with
the exercise of a warrant.
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<PAGE> 48
The foregoing is only a summary of the effects of United States federal
income taxation and Danish income taxation, respectively, on Olicom and
optionees/warrant holders with respect to the grant and exercise of options and
the issuance and exercise of warrants under the Plan, does not purport to be
complete, and does not discuss (i) the tax consequences of the delivery of
Olicom Common Stock in payment of the exercise price for an option or warrant,
(ii) the tax consequences on an optionee's or warrant holder's death, or (iii)
income tax treatment under foreign, state or local law.
Because the tax treatment of options and warrants depends on many factors
too numerous to be included in this summary, no assurance can be given that the
foregoing tax consequences will be realized by Olicom, Olicom Americas or any
optionee.
THE OLICOM BOARD URGES OLICOM STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 8.
PROPOSAL 9
ADJOURNMENT
The Companies Act permits the holders of a majority of the shares of Olicom
Common Stock represented at the Olicom Meeting to adjourn the Olicom Meeting or
any adjournment thereof. In this connection, Olicom anticipates that the Olicom
Meeting initially will consider Proposals 2 through 9 on May 29, 1997.
Thereafter, the Olicom Meeting will be adjourned to 4:00 p.m. local time on June
, 1997 (the same day as the CrossComm Meeting, at which a reconvened Olicom
Meeting will consider the proposal to approve the Merger Agreement, together
with such other business as may properly come before such adjourned meeting.
If necessary for purposes of securing approval of Proposal 7 by two-thirds
of the votes cast at the Olicom Meeting and two-thirds in nominal value of the
voting capital represented at such meeting, unless authority to do so is
withheld, the proxy holders also may vote in favor of proposals: (i) adjourn the
Olicom Meeting to June , 1997, and (ii) to adjourn the Olicom Meeting to
permit further solicitation of proxies in order to obtain sufficient votes to
approve Proposal 7. Olicom stockholders who wish to withhold from the persons
named as proxies in the enclosed Olicom proxy authority to vote such
stockholder's shares to so adjourn the Olicom Meeting should so indicate by
appropriately marking Proposal 9 on the proxy.
THE OLICOM BOARD URGES STOCKHOLDERS TO VOTE
"FOR" THE APPROVAL OF PROPOSAL 9.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of Olicom Common Stock at the close of
business on May 2, 1997, will receive notice of the Olicom Meeting. At the close
of business on May 2, 1997, there were issued and outstanding 14,749,095 shares
of Olicom Common Stock. Holders of record of shares of Olicom Common Stock on
May 2, 1997, are entitled to vote at the Olicom Meeting and are entitled to one
vote for each share of Olicom Common Stock held.
VOTING OF PROXIES
The Olicom proxy accompanying this Joint Proxy Statement/Prospectus is
solicited on behalf of the Olicom Board for use at the Olicom Meeting.
Stockholders in Olicom are requested to complete, date and sign the accompanying
proxy and promptly return it in the accompanying envelope or otherwise mail or
telecopy it to Olicom. Stockholders may vote by telecopying the executed proxy
to +45 45 270129 or (972) 422-4351. Any holder of shares of Olicom Common Stock
giving an Olicom proxy in the form accompanying this Joint Proxy
Statement/Prospectus has the power to revoke the proxy prior to its use. A proxy
can be revoked (i) by an instrument of revocation delivered prior to the Olicom
Meeting to Olicom's Vice-President, Legal, (ii) by an instrument of revocation
delivered at the Olicom Meeting to the chairman of the meeting, (iii) by a
duly-executed proxy bearing a later date or time than the date or time of the
proxy
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being revoked, or (iv) at the Olicom Meeting, if the stockholder is present and
elects to vote in person. Mere attendance at the Olicom Meeting will not serve
to revoke a proxy. A proxy will not be revoked by the death or incapacity of the
stockholder executing it unless, before the shares are voted, notice of such
death or supervening incapacity is filed with Olicom's Vice-President, Legal.
All shares of Olicom Common Stock represented by a properly-executed proxy,
unless such proxy previous has been revoked, will be voted in accordance with
the directions on such proxy. IF NO DIRECTIONS ARE GIVEN TO THE CONTRARY ON SUCH
PROXY, THE SHARES OF OLICOM COMMON STOCK REPRESENTED BY SUCH PROXY WILL BE VOTED
FOR APPROVAL OF ALL PROPOSALS ADDRESSED AT THE OLICOM MEETING. It is not
anticipated that any matters will be presented at the Olicom Meeting other than
as set forth in the Notice of Annual General Meeting of Stockholders. If,
however, other matters are properly presented at the Olicom Meeting, the proxy
will be voted in accordance with the judgment and discretion of the proxy
holders.
Olicom stockholders who have questions or who would like information on any
adjustments to the Exchange Ratio and/or Warrant Exchange Ratio should contact
MacKenzie Partners, Inc., toll free at (800) 322-2885 or collect at (212)
929-5500.
VOTE REQUIRED
Except for the proposal to approve amendments to the Olicom Articles, the
affirmative vote of a majority of the shares of Olicom Common Stock present and
voting at the Olicom Meeting is required for approval of all proposals being
submitted to Olicom's stockholders for their consideration. The proposal to
approve amendments to the Olicom Articles requires approval by two-thirds of the
votes cast at the Olicom Meeting and two-thirds in nominal value of the voting
capital represented at such meeting. Mr. Lars Stig Nielsen, the Managing
Director and Chief Executive Officer of Olicom, has entered into a voting
agreement obligating him to vote in favor of the Merger Agreement and the
consummation of the Merger. As of the Record Date, Mr. Nielsen owned directly
267,080 shares (exclusive of any shares issuable upon the exercise of options)
of Olicom Common Stock (constituting approximately 1.8% of the shares of Olicom
Common Stock then outstanding). See "The Agreement and Plan of
Reorganization -- Related Agreements: LSNielsen Voting Agreement." As of the
Record Date, Olicom's directors and executive officers (including affiliates),
as a group, beneficially owned 2,130,080 shares (exclusive of any shares
issuable on the exercise of options unexercised as of such date), or
approximately 14.4% of the shares of Olicom Common Stock that were issued and
outstanding at such date. As of the Record Date and the date of this Joint Proxy
Statement/Prospectus, CrossComm owned no shares of Olicom Common Stock.
THE ACTIONS PROPOSED IN THIS JOINT PROXY STATEMENT/PROSPECTUS GENERALLY ARE
NOT MATTERS THAT CAN BE VOTED ON BY BROKERS HOLDING SHARES FOR BENEFICIAL OWNERS
WITHOUT THE OWNERS' SPECIFIC INSTRUCTIONS. ACCORDINGLY, ALL BENEFICIAL OWNERS OF
OLICOM COMMON STOCK ARE URGED TO RETURN THE ENCLOSED PROXY CARD MARKED TO
INDICATE THEIR VOTES.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The Companies Act and the Olicom Articles generally do not require the
presence, in person or by proxy, of a minimum number of shares of Olicom Common
Stock constituting a quorum in order for the Olicom Meeting to take action with
respect to the matters set forth in the attached Notice of Annual General
Meeting of Stockholders. Broker non-votes will have no effect as to whether any
proposal is adopted.
SOLICITATION OF PROXIES AND EXPENSES
Olicom will bear the cost of solicitation of proxies from its stockholders.
In addition to solicitation by mail, the directors, officers and employees of
Olicom, none of whom will be specifically compensated for such services, may
solicit proxies from stockholders by telephone, facsimile or in person; such
persons will not be specifically compensated for such solicitation activities.
Olicom will also request brokers, custodians, nominees and other record holders
to forward copies of the proxy and other soliciting materials to persons for
whom they
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hold shares of Olicom Common Stock and to request authority for the exercise of
proxies. In such cases, Olicom, upon the request of the record holders, will
reimburse such holders for their reasonable expenses. Olicom has engaged
MacKenzie Partners, Inc. to represent it in connection with the solicitation of
proxies at a cost of $6,000 plus expenses.
THE CROSSCOMM MEETING
DATE, TIME AND PLACE OF THE CROSSCOMM MEETING
The CrossComm Meeting will be held at the Radisson Marlborough Hotel, 75
Felton Street, Marlborough, Massachusetts, United States, on , June
, 1997 at 10:00 a.m., local time.
MATTERS TO BE CONSIDERED AT THE CROSSCOMM MEETING
At the CrossComm Meeting, stockholders of record of CrossComm as of the
close of business on the Record Date will be asked to consider and vote upon the
following four proposals: (1) to approve and adopt the Merger and the Merger
Agreement; (2) to grant the CrossComm Board discretionary authority to adjourn
the CrossComm Meeting in order to solicit additional votes for approval of the
Merger; (3) to elect four directors; and (4) to ratify the selection of Ernst &
Young LLP as CrossComm's independent auditors for the current fiscal year.
PROPOSAL 1
APPROVAL OF THE MERGER AGREEMENT AND THE MERGER
Upon the effectiveness of the Merger, each share of CrossComm Common Stock
will be exchanged for $5.00 in cash, 0.2667 shares of Olicom Common Stock (the
"Exchange Ratio") and three-year warrants to purchase 0.1075 shares of Olicom
Common Stock at an exercise price of $19.74 per whole share. However, (i) in the
event that the average of the high and low sales prices for Olicom Common Stock
for the ten trading days immediately preceding (but excluding) the fifth trading
day before the CrossComm Meeting, as reported on the Nasdaq National Market (the
"Final Closing Price"), is less than $12.50, Olicom will 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 does not so increase the Exchange
Ratio, CrossComm will have the right to terminate the Merger Agreement); and
(ii) in the event that the Final Closing Price is more than $20.83, Olicom will
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 will have the right to terminate the Merger
Agreement). See "The Merger" and "The Agreement and Plan of Reorganization." The
CrossComm Board believes it is in the best interest of the stockholders to
approve the Merger Agreement.
THE CROSSCOMM BOARD URGES CROSSCOMM STOCKHOLDERS
TO VOTE "FOR" THE APPROVAL OF PROPOSAL 1.
PROPOSAL 2
AUTHORITY TO ADJOURN THE CROSSCOMM MEETING
The CrossComm Board believes that it is in the best interests of the
CrossComm stockholders that it be granted the authority to adjourn the CrossComm
Meeting in the event that at the time set for the CrossComm Meeting insufficient
votes have been tendered, via proxy or otherwise, for approval of the Merger,
and therefore, the CrossComm Board is requesting that the CrossComm stockholders
authorize the CrossComm Board to adjourn the CrossComm Meeting in order to
solicit additional votes for approval of the Merger.
THE CROSSCOMM BOARD URGES CROSSCOMM STOCKHOLDERS
TO VOTE "FOR" THE APPROVAL OF PROPOSAL 2.
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PROPOSAL 3
ELECTION OF DIRECTORS
Four directors of CrossComm will be elected at the CrossComm Meeting. The
nominees are Nancy Casey, Alexander M. Levine, Michael C. Ruettgers and Tadeusz
Witkowicz. It is the intention of the persons named in the accompanying proxy to
vote FOR the election of the foregoing nominees. All such persons are currently
serving as directors of CrossComm. Should any nominee for director be unable or
fail to accept nomination or election (which is not contemplated), it is the
intention of the persons named in the proxy, unless otherwise specifically
instructed in the proxy, to vote FOR the election in his or her stead of such
other person as the CrossComm Board may recommend. If the Merger is approved, at
the Effective Time the CrossComm Board will be replaced by the Board of
Directors of MergerSub. Information with respect to the nominees is set forth in
the section of this Joint Proxy Statement/Prospectus entitled "CrossComm
Corporation -- Management of CrossComm."
THE CROSSCOMM BOARD URGES CROSSCOMM STOCKHOLDERS
TO VOTE "FOR" THE APPROVAL OF PROPOSAL 3.
PROPOSAL 4
RATIFICATION OF AUDITORS
The CrossComm Board, at the recommendation of the Audit Committee of the
CrossComm Board, has selected the firm of Ernst & Young LLP as CrossComm's
independent auditors for the current fiscal year. Ernst & Young LLP has served
as CrossComm's independent auditors since 1988. Although stockholder
ratification of the CrossComm Board's selection of Ernst & Young LLP is not
required by law, the CrossComm Board believes that it is advisable to give
CrossComm stockholders the opportunity to ratify this selection. If this
proposal is not approved at the CrossComm Meeting, the CrossComm Board will
reconsider its selection of Ernst & Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the
CrossComm Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
THE CROSSCOMM BOARD URGES CROSSCOMM STOCKHOLDERS
TO VOTE "FOR" THE APPROVAL OF PROPOSAL 4.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of CrossComm Common Stock at the close of
business on May 2, 1997, will receive notice of the CrossComm Meeting. At the
close of business on May 2, 1997, there were issued and outstanding 9,341,096
shares of CrossComm Common Stock. Holders of record of shares of CrossComm
Common Stock on May 2, 1997, are entitled to vote at the CrossComm Meeting and
are entitled to one vote for each share of CrossComm Common Stock held.
VOTING OF PROXIES
The CrossComm proxy accompanying this Joint Proxy Statement/Prospectus is
solicited on behalf of the CrossComm Board for use at the CrossComm Meeting.
Stockholders of CrossComm are requested to complete, date and sign the
accompanying proxy and promptly return it in the accompanying envelope or
otherwise mail it to CrossComm. Any holder of shares of CrossComm Common Stock
giving a CrossComm proxy in the form accompanying this Joint Proxy
Statement/Prospectus has the power to revoke the proxy prior to its use. A proxy
can be revoked (i) by an instrument of revocation delivered prior to the
CrossComm Meeting to CrossComm, (ii) by an instrument of revocation delivered at
the CrossComm Meeting to the chairman of the meeting, (iii) by a duly-executed
proxy bearing a later date or time than the date or time of the proxy being
revoked, or (iv) at the CrossComm Meeting, if the stockholder is present and
elects to vote in person. Mere attendance at the CrossComm Meeting will not
serve to revoke a proxy. All shares of
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CrossComm Common Stock represented by a properly-executed proxy, unless such
proxy previously has been revoked, will be voted in accordance with the
directions on such proxy. IF NO DIRECTIONS ARE GIVEN TO THE CONTRARY ON SUCH
PROXY, THE SHARES OF CROSSCOMM COMMON STOCK REPRESENTED BY SUCH PROXY WILL BE
VOTED FOR APPROVAL OF ALL PROPOSALS SET FORTH IN THE NOTICE OF MEETING. It is
not anticipated that any matters will be presented at the CrossComm Meeting
other than as set forth in the Notice of Annual Meeting of Stockholders. If,
however, other matters are properly presented at the CrossComm Meeting, the
proxy will be voted in accordance with the judgment and discretion of the proxy
holders.
VOTE REQUIRED
Approval of the Merger Agreement and the transactions contemplated thereby
requires the affirmative vote of the holders of a majority of the outstanding
shares of CrossComm Common Stock. The affirmative vote of the holders of a
plurality of the shares of CrossComm Common Stock present or represented at the
CrossComm Meeting is required for the election of directors. In effect, those
persons who receive the most votes for the number of board seats that are open
shall be elected as directors. The affirmative vote of the holders of a majority
of the shares of CrossComm Common Stock present or represented at the CrossComm
Meeting is required for the grant to the CrossComm Board of discretionary
authority to adjourn the CrossComm Meeting and the ratification of the selection
by the CrossComm Board of Ernst & Young LLP as CrossComm's independent auditors
for the current fiscal year. Mr. Tadeusz Witkowicz, the President and Chief
Executive Officer of CrossComm, has entered into a voting agreement obligating
him to vote in favor of the Merger Agreement and the consummation of the Merger.
As of the Record Date, Mr. Witkowicz beneficially owned approximately 16.9% of
the shares of CrossComm Common Stock. See "The Agreement and Plan of
Reorganization -- Related Agreements: Witkowicz Voting Agreement." As of the
Record Date, CrossComm's directors and executive officers (including
affiliates), as a group, beneficially owned 1,635,710 shares (exclusive of any
shares issuable on the exercise of options unexercised as of such date), or
approximately 17.5% of the shares of CrossComm Common Stock that were issued and
outstanding at such date. As of the Record Date and the date of this Joint Proxy
Statement/Prospectus, Olicom owned no shares of CrossComm Common Stock.
THE ACTIONS PROPOSED IN THIS JOINT PROXY STATEMENT/PROSPECTUS GENERALLY ARE
NOT MATTERS THAT CAN BE VOTED ON BY BROKERS HOLDING SHARES FOR BENEFICIAL OWNERS
WITHOUT THE OWNERS' SPECIFIC INSTRUCTIONS. ACCORDINGLY, ALL BENEFICIAL OWNERS OF
CROSSCOMM COMMON STOCK ARE URGED TO RETURN THE ENCLOSED PROXY CARD MARKED TO
INDICATE THEIR VOTES.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
Shares of CrossComm Common Stock represented in person or by proxy
(including shares which abstain or do not vote for any reason with respect to
one or more of the matters presented for stockholder approval) will be counted
for purposes of determining whether a quorum is present at the CrossComm
Meeting.
Abstentions will be treated as shares that are present and entitled to vote
for purposes of determining the number of shares present and entitled to vote
with respect to any particular matter, but will not be counted as a vote in
favor of such matter. Accordingly, an abstention from voting on a matter has the
same legal effect as a vote against the matter.
If a broker or nominee holding stock in "street name" indicates on the
proxy that it does not have discretionary authority to vote as to a particular
matter ("broker non-votes"), those shares will not be considered as present and
entitled to vote with respect to the election of directors, the grant to the
CrossComm Board of discretionary authority to adjourn the CrossComm Meeting, or
the ratification of Ernst & Young LLP as CrossComm's independent auditors for
the current fiscal year. Accordingly, a broker non-vote has no effect on the
voting on such matters. However, a broker non-vote does have the effect of a
vote against the approval of the Merger Agreement since the required vote on
such matter is based upon the number of outstanding shares of CrossComm Common
Stock.
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SOLICITATION OF PROXIES AND EXPENSES
CrossComm will bear the cost of solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of CrossComm, none of whom will be specifically compensated for such
services, may solicit proxies from stockholders by telephone, facsimile or in
person. Following the original mailing of the proxies and other soliciting
materials, CrossComm will request brokers, custodians, nominees and other record
holders to forward copies of the proxy and other soliciting materials to persons
for whom they hold shares of CrossComm Stock and to request authority for the
exercise of proxies. In such cases, CrossComm, upon the request of the record
holders, will reimburse such holders for their reasonable expenses. CrossComm
has engaged MacKenzie Partners, Inc. to represent it in connection with the
solicitation of proxies at a cost of $4,000 plus expenses.
THE MERGER
BACKGROUND OF THE MERGER
During the past year, Olicom has from time to time had discussions with
various participants in the networking industry in an effort to explore the
future of the industry and the role of Olicom and its products.
Commencing in June 1996, the CrossComm Board began to discuss certain
corporate restructuring and strategic alliance alternatives. Among other
alternatives considered by the CrossComm Board was the feasibility of spinning
off one or more of its four principal business segments, its (i) router
business, (ii) service business, (iii) ATM business, and (iv) Ethernet business.
After reviewing and discarding a number of alternative plans, in November 1996,
the CrossComm Board engaged Montgomery to assist it in its strategic
alternatives evaluation. One of the alternatives to be considered by Montgomery
was the sale of CrossComm. After CrossComm engaged Montgomery, it entered into
confidentiality agreements with 13 parties, and Montgomery provided certain
information to such parties in connection with evaluations to be conducted by
such parties regarding the possibility of a strategic transaction with
CrossComm.
On November 21, 1996, CrossComm issued a press release announcing that it
had retained Montgomery to "assist in evaluating strategic alternatives."
Shortly thereafter, a representative of Montgomery's Technology Group approached
Boje Rinhart, Olicom's Chief Financial Officer, to inquire as to the interest of
Olicom in discussing a combination involving Olicom and CrossComm.
On or about November 27, 1996, Olicom and CrossComm executed and delivered
a Confidentiality Agreement pursuant to which the parties agreed to maintain the
confidentiality of materials provided by, as well as their discussions with,
each other. Thereafter, the senior management teams of each company began to
explore the feasibility of a business combination, and representatives of Olicom
commenced technical and financial due diligence with respect to CrossComm and
its products. Subsequent to November 27, 1996, a variety of telephonic meetings
occurred involving senior management of Olicom and CrossComm in furtherance of
such due diligence and to discuss potentially advantageous synergies arising
from a business combination.
On December 12 through December 13, 1996, Messrs. Michael Camp, President
of Olicom Americas, Jorgen Hog, Olicom's Vice-President, Strategic Planning,
Niels Jorgensen, Olicom's Vice-President, Engineering, and Tyge Trier, Olicom's
Vice-President, Legal and Director of Business Development, undertook further
discussions with CrossComm at its headquarters relative to technical and
financial due diligence.
On December 17, 1996, at a regularly scheduled meeting, the Olicom Board
discussed the preliminary results of technical and financial due diligence. In
the course of such discussions, Olicom management received questions and
comments from members of the Olicom Board with respect to a possible
combination, and obtained the authorization of the Olicom Board to explore the
possibility of a combination and to engage Alex. Brown as Olicom's financial
advisor with respect thereto. Subsequent thereto, Mr. Jorgensen undertook
further discussions with CrossComm in Gdansk, Poland, relative to technical due
diligence and research and development at CrossComm-Poland, Ltd.
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On December 20, 1996, Olicom retained Alex. Brown to act as Olicom's
financial advisor with respect to a possible combination involving CrossComm.
On December 23, 1996, Mr. Camp and other representatives of Olicom and
Alex. Brown met with Messrs. Tadeusz Witkowicz, the Chairman of the Board,
President and Chief Executive Officer of CrossComm, and Nigel Machin, the
President of CrossComm's Enterprise Products Division, at Montgomery's Boston
office to discuss further due diligence issues.
On January 7-8, 1997, representatives of Olicom met with representatives of
CrossComm for further financial, legal and operational due diligence.
On January 12, 1997, Messrs. Witkowicz and Michael Ruettgers, a member of
the CrossComm Board, met with representatives of Montgomery at CrossComm's
headquarters in Marlborough, Massachusetts to discuss recent developments
regarding Montgomery's efforts on behalf of CrossComm.
On January 14-15, 1997, Messrs. Witkowicz and Machin and a representative
of Montgomery met with Messrs. Camp and Hog and David Burkey, the Chief
Financial Officer of Olicom Americas, at the headquarters of Olicom Americas to
further explore potential synergies arising from a business combination.
On January 19, 1997, at a meeting of the CrossComm Board, Mr. Witkowicz
described Montgomery's efforts to date and advised the CrossComm Board that he
and Mr. Machin had visited the headquarters of Olicom Americas and that it was
his impression that Olicom had a genuine interest in discussing a possible
strategic transaction with CrossComm.
On January 24, 1997, Olicom management discussed with its outside legal
counsel the progress of technical and financial due diligence and requested that
such counsel commence legal due diligence with respect to CrossComm.
On January 27, 1997, at a regularly scheduled meeting, the Olicom Board
discussed the results of the further technical and financial due diligence with
respect to CrossComm. In the course of such discussions, Olicom management
received questions and comments from members of the Olicom Board with respect to
a possible combination, and obtained the authorization of the Olicom Board to
continue discussions with CrossComm.
On February 3, 1997, at a meeting of the CrossComm Board, a representative
from Montgomery updated the CrossComm Board on discussions with Olicom and Alex.
Brown, after which the CrossComm Board directed Mr. Witkowicz to contact the
Managing Director of Olicom.
On February 12, 1997, at a regularly scheduled meeting of the CrossComm
Board, Mr. Camp made a presentation to the CrossComm Board regarding Olicom and
explained why Olicom believed a business combination would be in the best
interests of both companies as a result of the synergies that could be derived
because of, among other things, the complementary product offerings of the two
companies. A representative of Montgomery was also present and updated the
CrossComm Board regarding ongoing discussions with Olicom. After a detailed
discussion regarding a possible transaction with Olicom, the CrossComm Board
authorized management to begin a detailed business and legal due diligence
review of Olicom.
On February 15, 1997, at a special meeting, the Olicom Board received a
presentation by Alex. Brown regarding a possible business combination with
CrossComm, and discussed with representatives of Alex. Brown the range of
parameters that might be indicated for such a transaction. Management was
directed to continue discussions with CrossComm, and later that day Mr. Lars
Stig Nielsen, Managing Director of Olicom, together with Mr. Camp, made a
presentation to the CrossComm Board.
On February 18th and 19th, 1997, Mr. Witkowicz and a representative of
Montgomery visited Olicom's headquarters in Denmark to conduct financial and
operational due diligence, and CrossComm's outside legal counsel initiated its
legal due diligence review of Olicom.
On February 20, 1997, Mr. Witkowicz met with the Olicom Board and senior
management of Olicom at Olicom's headquarters to discuss the advantages of
combining the two companies.
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On February 23 through February 26, 1997, management of Olicom met with
CrossComm management to continue Olicom's technical and financial due diligence
review of CrossComm. Olicom's outside legal counsel continued its due diligence
review. During this period, Ernst & Young LLP, New York, commenced its financial
due diligence with respect to CrossComm.
On March 7, 1997, at a special meeting, the Olicom Board reviewed the
progress made by Olicom management with respect to financial, technical and
legal due diligence, and authorized Olicom management to continue discussions
with CrossComm.
On March 10, 1997, at a meeting of the CrossComm Board, the CrossComm Board
reviewed a draft proposal received from Alex. Brown concerning a possible
transaction with Olicom. A representative from Montgomery discussed various
issues, including proposed pricing and the related collar on Olicom's stock
price. The significant terms of the draft proposal received from Alex. Brown
called for CrossComm to declare a special pre-closing dividend of $4.50 per
share to each of its stockholders. Thereafter, each CrossComm stockholder would
receive, as merger consideration, 0.2519 shares of Olicom Common Stock and
three-year warrants to purchase 0.1613 shares of Olicom Common Stock with an
exercise price equal to an 18.5% premium to a ten day average trading price of
Olicom Common Stock for each share of CrossComm Common Stock. If the price of
Olicom Common Stock at closing was 25% higher or lower than such average trading
price, Olicom would have the option to, respectively, decrease or increase the
exchange ratio, and CrossComm would have the right to terminate the agreement if
Olicom decreased the exchange ratio or failed to increase the exchange ratio, as
the case may be. The Montgomery representative also advised the CrossComm Board
that there was one other party that had expressed some interest in a possible
transaction, but that Montgomery, after consultation with Mr. Witkowicz and
conducting financial due diligence, considered the ability of the other
candidate to effect a transaction as low to moderate and that the other
candidate was not as viable a candidate as Olicom.
On March 11, 1997, at a meeting of the CrossComm Board, the CrossComm Board
reviewed the status of discussions with Olicom. A representative from Montgomery
summarized recent discussions with Alex. Brown. CrossComm's outside legal
counsel indicated that they had some concerns as to the structure proposed by
Olicom. The primary concern with respect to the structure was with the
requirement that CrossComm declare a special dividend prior to the closing. The
matter raised issues under Delaware law as to the ability of CrossComm to
legally declare such a dividend. There were also procedural concerns regarding
the declaration of such a dividend and concerns that the declaration and payment
of such a dividend could have subjected CrossComm to substantial risks in the
event that the Merger was not consummated. It was the consensus of the CrossComm
Board that Montgomery should continue to attempt to obtain better terms from
Olicom.
On March 14, 1997, Olicom provided to CrossComm a preliminary draft
Agreement and Plan of Reorganization whereby a newly-formed subsidiary of Olicom
would merge with and into CrossComm, thereby causing CrossComm to become a
subsidiary of Olicom, and discussions ensued between outside legal counsel to
Olicom and outside legal counsel to CrossComm regarding the proposed structure
and other principal terms of the draft agreement. The material changes in the
terms of the preliminary draft agreement from the earlier proposal included an
increase in the exchange ratio from 0.2519 to 0.2667, the payment by Olicom of
$5.00 per share (instead of requiring CrossComm to declare a special pre-closing
dividend of $4.50 per share), a decrease in the warrant exchange ratio from
0.1613 to 0.1075, a transaction structured as a subsidiary merger, and an
increase from two years to six years in the term of the obligation of Olicom to
indemnify CrossComm's officers and directors after the closing of the
transaction. Subsequent thereto, a variety of telephonic meetings took place
involving various members of Olicom management and CrossComm management, as well
as financial and legal advisors of both companies. In addition, various members
of management and representatives of both companies, as well as outside legal
counsel, continued their due diligence efforts.
On March 15, 1997, Olicom's management met with Olicom's outside counsel
and its financial advisors via telephone conference to discuss the negotiations
with respect to the draft agreement.
On March 16, 1997, at a special meeting, the Olicom Board reviewed the
preliminary draft Agreement and Plan of Reorganization and draft fairness
opinion prepared by Alex. Brown. Representatives of Alex.
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Brown were present by telephone and made a presentation with respect to a
proposed combination involving CrossComm, and rendered an oral opinion to the
Olicom Board that the proposed terms for the transaction would be fair from a
financial point of view to Olicom. Representatives of Alex. Brown responded to
questions from the Olicom Board regarding the fairness opinion and Alex. Brown's
analysis in connection therewith. Olicom's outside legal counsel was also
present by telephone and answered questions from the Olicom Board regarding the
proposed structure and status of, and issues arising from, legal due diligence.
Olicom's Danish legal counsel and independent auditors were also present at the
meeting and answered questions from the Olicom Board. Following extensive review
and discussion, the Olicom Board authorized management to negotiate and enter
into an Agreement and Plan of Reorganization with CrossComm substantially within
the terms set forth in the draft Agreement and Plan of Reorganization and in the
draft fairness opinion of Alex. Brown.
On March 17, 1997, Olicom senior management, together with outside legal
counsel and financial advisors to Olicom and CrossComm, met at the offices of
CrossComm's outside legal counsel to continue the negotiation of a proposed
agreement. Such negotiations continued through March 20, 1997.
On March 19, 1997, at a meeting of the CrossComm Board, held via
teleconference, the CrossComm Board discussed a draft of the Agreement and Plan
of Reorganization and draft fairness opinion prepared by Montgomery.
Representatives of Montgomery made a presentation with respect to the proposed
combination involving Olicom and rendered an oral opinion to the CrossComm Board
that the proposed terms for the transaction would be fair from a financial point
of view to the stockholders of CrossComm. The representatives of Montgomery
discussed, among other things, the sale process to date, reviewing various
alternatives, the number of companies contacted, the number of companies with
continuing interest and the number of companies declining interest. Of all the
companies contacted, only Olicom and one other company had any continuing
interest. The Montgomery representative told the CrossComm Board that the
probability of closing a sale with Olicom at an estimated near term valuation of
$10.00 per share was quite high, but that there was a low probability of
negotiating a transaction with the other party and that any such transaction
with the other party would likely be less than $10.00 per share in the near
term. The other party was a smaller company than Olicom, had less financial
resources and was technically not as good a fit as Olicom. The CrossComm Board
also discussed the alternative of discontinuing the negotiations with Olicom and
remaining independent. The Montgomery representative then reviewed in detail the
various components of the Olicom proposal and answered numerous questions from
the CrossComm Board concerning stock price and valuation. After an extensive
discussion, the CrossComm Board authorized CrossComm, subject to the
satisfactory resolution of certain issues remaining to be negotiated, to enter
into the Agreement and Plan of Reorganization between CrossComm and Olicom
substantially in the form reviewed and discussed at the meeting.
On March 20, 1997, at a meeting of the CrossComm Board, held via
teleconference, representatives of Montgomery and CrossComm's outside legal
counsel reviewed with the CrossComm Board the status of the remaining issues
which had been negotiated, and a Montgomery representative confirmed that firm's
view that the terms of the transaction would be fair from a financial point of
view to the stockholders of CrossComm. After a discussion of these matters, the
CrossComm Board authorized CrossComm to enter into the Agreement and Plan of
Reorganization, as revised. Shortly thereafter, management of Olicom and
CrossComm executed and delivered the Agreement and Plan of Reorganization,
publicly announced the proposed transaction and agreed to proceed with making a
formal recommendation to their respective stockholders that they vote in favor
of the Merger. Alex Brown confirmed in writing its opinion in writing that, as
of such date, the Merger Consideration payable by Olicom was fair to Olicom from
a financial point of view. The Merger Agreement varied from the preliminary
draft thereof in the following material respects: various monetary thresholds
were agreed to with respect to the conduct by CrossComm of its business between
the execution of the Merger Agreement and the Closing; provisions with respect
to the consideration of the CrossComm Board of other transactions were refined
to address various fiduciary duty issues; the exercise of appraisal rights by no
more than 15% of the outstanding shares of CrossComm Common Stock was added as a
condition to Olicom's obligation to close; and the receipt by CrossComm of an
updated opinion of Montgomery in the event that the Final Closing Price was less
than $12.50 was added as a condition to Olicom's obligation to close.
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REASONS FOR THE MERGER
Joint Reasons for the Merger. The Boards of Directors of Olicom and
CrossComm, in voting to approve the proposed Merger, identified a number of
potential benefits that they believe will contribute to the success of the
combined company. There can be no assurance that any of these potential benefits
will be realized. The potential benefits include:
- Improved ability to provide leading-edge network solutions particularly
for organizations employing mainframe based Systems Network Architecture
("SNA") and Token Ring environments, and improved competitive position
against various competitors, many of which have greater financial,
technical and marketing resources than Olicom, CrossComm or the combined
company.
- Opportunity to leverage research and development capabilities by sharing
technology and eliminating redundant product development efforts.
- Potential to achieve operating synergies by combining operations in
administrative, sales, marketing, product development and support.
Olicom's Reasons for the Merger. The Olicom Board identified the following
additional benefits from the proposed Merger:
- Acceleration of Olicom's entry into the market for end-to-end enterprise
network solutions, particularly to the Olicom and CrossComm customer base.
- Improved solutions for Token Ring/SNA customers seeking to migrate to
Asynchronous Transfer Mode (ATM)-based networks.
- Complementary nature of CrossComm's technologies to those of Olicom.
- Minimal overlap with CrossComm's customer base, and the ability to
cross-sell Olicom's networking products into CrossComm's installed
customer base.
- Cost benefits potentially attainable from CrossComm's research and
development activities in Poland.
In reaching its decision to approve the Merger Agreement and the
consummation of the Merger and to recommend that Olicom's stockholders vote to
approve the same, the Olicom Board also considered, in addition to other
matters, the following factors: (i) historical information concerning Olicom's
and CrossComm's respective businesses, operations, properties, assets, financial
condition and operating results, including public reports concerning results of
operations during the most recent fiscal year and fiscal quarter of each
company; (ii) discussions with CrossComm management regarding the compatibility
of the respective business philosophies of Olicom and CrossComm (and in
particular, the similar commitment of both companies to quality of product and
customer service and leading technology in the networking industry, and the
similarity of organizational structures which do not involve numerous layers of
management); (iii) internal projections regarding possible results of operations
as to Olicom and publicly available forecasts of securities analysts as to
possible future results of operations for CrossComm; (iv) detailed financial
analyses and pro forma and other information with respect to Olicom and
CrossComm presented by Alex. Brown in its presentation to the Olicom Board on
March 16, 1997, as well as the oral opinion of Alex. Brown that, as of such
date, and based upon and subject to certain factors and assumptions, the
consideration to be payable by Olicom pursuant to the Merger Agreement was fair
to Olicom from a financial point of view (such analyses are described under
"Opinion of Olicom's Financial Advisor"); (v) an evaluation of the Merger in
light of the evolution of trends in the networking industry, the potential for
product line synergies, the possibility of operational synergies, and the
potential stockholder return of a combined entity; (vi) the perceived
compatibility of the business cultures of the two companies; (vii) a review of
the prices of Olicom Common Stock and CrossComm Common Stock prior to the
announcement of the proposed Merger, as well as historical trading prices of
Olicom and CrossComm, the implied premium reflected in the proposed exchange
ratio and premiums in similar transactions in the networking and technology
industries; and (viii) the terms and conditions of the Merger Agreement,
including, without limitation, the termination fees, non-solicitation
provisions, conditions to closing and termination provisions. As part of the
foregoing analysis, the Olicom
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Board consulted with its financial advisor regarding the financial aspects of
the proposed Merger and the fairness to Olicom of the consideration to be paid
by it in the Merger, with its legal counsel regarding the legal terms of the
transaction and the Olicom Board's obligations in its consideration of the
proposed transaction, and with management of Olicom.
The Olicom Board also considered the following specific negative factors
concerning the Merger and the risks inherent in the transaction: (i) the
requirement of stockholder approval of the Merger Agreement and the process
involved in obtaining such approval (and the possibility of substantial delays
in completing the proposed Merger due to regulatory requirements and the concern
that such a delay could have a significant adverse effect on employee and
customer relationships if not managed properly); (ii) the possibility that
following announcement of the transaction, some customers may defer orders or
purchasing decisions pending the completion of the Merger or seek to terminate
their relationship with the combined company or reduce their long-term
dependence on the combined company following the transaction; (iii) the
potential effect of the Merger on Olicom and CrossComm customers and suppliers
both in the near term and over an extended period of time, and in particular the
possible effect on sales and marketing efforts of CrossComm during the period
following announcement and prior to consummation of the Merger; (iv) the risks
of combining the distinct cultures of the two organizations; (v) the risks in
mergers of technology companies generally and, in particular, the fact that many
technology merger transactions frequently result in high employee attrition
rates, loss of management focus and temporary or long-term employee morale
problems; (vi) the risk that the combination with CrossComm could make
attractive partnerships with other companies in the communications industries
more complicated and difficult to complete; and (vii) the other risks described
under "Risk Factors -- Risks Relating to the Merger."
The foregoing discussion of the information and factors considered and
given weight by the Olicom Board is not intended to be exhaustive. In view of
the wide variety of factors, both positive and negative, considered by the
Olicom Board in connection with its evaluation of the Merger, the Olicom Board
did not find it practicable to, and did not quantify or otherwise assign
relative weight to, the specific factors considered. In addition, individual
members of the Olicom Board may have given different weights to different
factors.
The Olicom Board believed that the benefits and advantages of the Merger
far outweighed the negative factors and risks, and believes that the terms of
the Merger Agreement and the Merger are fair from a financial point of view to
Olicom, and are in the best interests of Olicom and its stockholders.
ACCORDINGLY, THE OLICOM BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS APPROVAL OF THE MERGER AGREEMENT BY THE STOCKHOLDERS OF OLICOM.
In the event that the Merger is not consummated for any reason, Olicom will
return to executing its strategic objectives of further developing its
leadership position as a developer and vendor of network access and switching
products for Token Ring, ATM, Ethernet and mobility environments to large,
geographically dispersed enterprises which require superior service and support.
CrossComm's Reasons for the Merger. In reaching its decision to approve the
Merger Agreement, the CrossComm Board consulted with its legal advisors
regarding the legal terms of the transaction and the CrossComm Board's
obligations in its consideration of the proposed transaction, and with its
financial advisers regarding the financial aspects of the proposed transaction
and the fairness of the consideration to the CrossComm's stockholders, as well
as with management of CrossComm. Without assigning any relative or specific
weights, the CrossComm Board considered a number of factors, both from a short
term and long term perspective, including, without limitation, the following:
(i) information concerning the financial performance, condition, business
operations and prospects of each of Olicom and CrossComm, including, without
limitation, the long term growth potential of Olicom and the business risks
associated therewith; (ii) the financial strength, global market presence and
greater resources of the combined company and its consequent enhanced ability to
realize the potential of the business contributed by CrossComm; (iii) the
current and prospective environment in which CrossComm operates, including,
without limitation, international and local economic conditions, the competitive
environment for networking companies generally, and the trend toward
consolidation in the networking industry and the adverse effect that such
consolidation could have on the ability of
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CrossComm to compete on a stand alone basis; (iv) difficulties that CrossComm
has had as a small stand alone company selling strategic networking solutions to
large corporations; (v) the difficulties that CrossComm has had retaining key
employees as a stand alone company competing for their services against much
larger companies in the networking industry; (vi) the ability of the combined
company to deliver end-to-end network solutions, in the Token Ring/SNA
environment; (vii) that the core product lines of the two companies are
primarily complementary; (viii) the ability of the combined company to better
exploit the CrossComm's ATM switching technology; (ix) the extensive efforts of
Montgomery to procure alternative strategic alliance opportunities; (x) the
written opinion of Montgomery, given its familiarity with CrossComm, Olicom, the
networking industry and the Merger Agreement, that the consideration offered in
the Merger to the CrossComm shareholders was fair to such holders from a
financial point of view; and (xi) the financial and other significant terms of
the proposed Merger, including, without limitation, the terms and conditions of
the Merger Agreement and the related agreements.
The CrossComm Board also considered negative factors relating to the
Merger, including (i) the risks that the benefits sought in the Merger would not
be fully achieved; (ii) the risk that the Merger would not be consummated; (iii)
the effect of the announcement of the Merger would have on CrossComm's ability
to attract and retain key management, marketing and technical personnel; (iv)
the possible loss of revenue from customers; and (v) the risks associated with
the business of Olicom and the combined company after the Merger. See "Risk
Factors."
After considering the opinion of Montgomery, to the effect that, from a
financial point of view, the consideration to be payable as a result of the
Merger to the CrossComm stockholders, was fair to the CrossComm stockholders,
and the foregoing matters, the CrossComm Board unanimously approved the Merger
and the related transactions as being fair and in the best interests of
CrossComm and its stockholders.
The foregoing discussion of the information and factors considered by the
CrossComm Board is not intended to be exhaustive, but is believed to include the
material factors the CrossComm Board considered. In addition, in reaching its
determination to approve and recommend the Merger, given the wide variety of
factors considered in connection with its evaluation of the proposed Merger, the
CrossComm Board did not find it practical to, and did not, quantify or otherwise
attempt to assign any relative or specific weights to the foregoing factors, and
individual directors may not concur on which factors should have been given
greater weight.
THE CROSSCOMM BOARD UNANIMOUSLY BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF CROSSCOMM AND ITS STOCKHOLDERS. ACCORDINGLY, THE CROSSCOMM
BOARD HAS UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT AND THE MERGER,
AND UNANIMOUSLY RECOMMENDS THAT CROSSCOMM'S STOCKHOLDERS VOTE TO APPROVE THE
MERGER AGREEMENT.
OPINION OF OLICOM'S FINANCIAL ADVISOR
Olicom retained Alex. Brown on December 20, 1996, to act as Olicom's
financial advisor in connection with the Merger, including rendering its opinion
to the Olicom Board as to the fairness, from a financial point of view, of the
Merger Consideration payable by Olicom. Alex. Brown was not requested to, and
did not make any recommendation to the Olicom Board that any specific
consideration constituted the appropriate consideration to be paid in connection
with the Merger. The amount of such consideration was determined through
negotiations between Olicom and CrossComm.
At the March 16, 1997, meeting of the Olicom Board, representatives of
Alex. Brown made a presentation with respect to the Merger and rendered to the
Olicom Board an oral opinion, subsequently confirmed in writing as of March 20,
1997, that, as of such date, and subject to the assumptions made, matters
considered and limitations set forth in such opinion and summarized below, the
Merger Consideration payable by Olicom was fair to Olicom, from a financial
point of view. No limitations were imposed by the Olicom Board upon Alex. Brown
with respect to the investigations made or procedures followed by it in
rendering its opinion.
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THE FULL TEXT OF ALEX. BROWN'S WRITTEN OPINION DATED MARCH 20, 1997, WHICH
SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX B AND IS
INCORPORATED HEREIN BY REFERENCE. OLICOM STOCKHOLDERS ARE URGED TO READ THE
ALEX. BROWN OPINION IN ITS ENTIRETY. THE ALEX. BROWN OPINION IS DIRECTED TO THE
OLICOM BOARD, ADDRESSES ONLY THE FAIRNESS OF THE MERGER CONSIDERATION PAYABLE BY
OLICOM FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY OLICOM STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE OLICOM
MEETING. THE ALEX. BROWN OPINION WAS RENDERED TO THE OLICOM BOARD FOR ITS
CONSIDERATION IN DETERMINING WHETHER TO APPROVE THE MERGER AGREEMENT. THE
DISCUSSION OF THE ALEX. BROWN OPINION IN THIS JOINT PROXY STATEMENT/PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE ALEX. BROWN
OPINION.
In connection with the Alex. Brown Opinion, Alex. Brown reviewed certain
publicly available financial information and other information concerning Olicom
and CrossComm and certain internal analyses and other information furnished to
it by Olicom and CrossComm. Alex. Brown also held discussions with the members
of the senior managements of Olicom and CrossComm regarding the businesses and
prospects of their respective companies and the joint prospects of a combined
company. In addition, Alex. Brown (i) reviewed the reported prices and trading
activity for the common stock of both Olicom and CrossComm, (ii) compared
certain financial and stock market information for Olicom and CrossComm with
similar information for certain other companies whose securities are publicly
traded, (iii) reviewed the financial terms of certain recent business
combinations, (iv) reviewed the terms of the Merger Agreement, and (v) performed
such other studies and analyses and considered such other factors as it deemed
appropriate.
In conducting its review and arriving at its opinion, Alex. Brown assumed
and relied upon, without independent verification, the accuracy, completeness
and fairness of the information furnished to or otherwise reviewed by or
discussed with it for purposes of rendering its opinion. With respect to the
financial projections of Olicom and CrossComm and other information relating to
the prospects of Olicom and CrossComm provided to Alex. Brown by each company,
Alex. Brown assumed that such projections and other information were reasonably
prepared and reflected the best currently available judgments and estimates of
the respective managements of Olicom and CrossComm as to the likely future
financial performances of their respective companies and of the combined entity.
The financial projections of Olicom and CrossComm that were provided to Alex.
Brown were utilized and relied upon by Alex. Brown in the Discounted Cash Flow
Analysis and the Pro Forma Earnings Analysis summarized below. Alex. Brown did
not make, and it was not provided with, an independent evaluation or appraisal
of the assets of Olicom and CrossComm, nor has Alex. Brown been furnished with
any such evaluations or appraisals. The Alex. Brown Opinion is based on market,
economic and other conditions as they existed and could be evaluated as of the
date of the opinion letter.
The following is a summary of the analyses performed and factors considered
by Alex. Brown in connection with the rendering of the Alex. Brown Opinion.
Historical Financial Position. In rendering its opinion, Alex. Brown
reviewed and analyzed the historical and current financial condition of
CrossComm which included (i) an assessment of CrossComm's recent financial
statements, (ii) an analysis of CrossComm's revenue, growth and operating
performance trends and (iii) an assessment of CrossComm's margin trends.
Historical Stock Price Performance. Alex. Brown reviewed and analyzed the
daily closing per share market prices and trading volume for CrossComm Common
Stock from March 20, 1996, to March 20, 1997. Alex. Brown also reviewed the
daily closing per share market prices of CrossComm Common Stock and compared the
movement of such daily closing prices with the movement of the Nasdaq Composite
Index over the periods from March 20, 1996, through March 20, 1997. Alex. Brown
noted that, on a relative basis, CrossComm underperformed the Nasdaq Composite
Index. Alex. Brown also reviewed the daily closing per share market prices of
CrossComm Common Stock and compared the movement of such closing prices with
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the movement of two networking composite averages (consisting of Asante
Technologies, Inc., Interphase Corporation, Lan Optics Ltd., Network Peripherals
Inc., Optical Data Systems, Inc., Plaintree Systems Inc., Proteon, Inc. and
Retix Corporation (the "Small-cap Networking Group") and 3Com, Bay Networks,
Cisco and FORE (the "Large-cap Networking Group")) over the period from March
20, 1996, through March 20, 1997. On a relative basis, the CrossComm Common
Stock price outperformed both of the networking composite averages. This
information was presented to give the Olicom Board background information
regarding the respective stock prices of CrossComm over the periods indicated.
Analysis of Certain Other Publicly Traded Companies. This analysis examines
a company's valuation in the public market as compared to the valuation in the
public market of other selected publicly traded companies. Alex. Brown compared
certain financial information (based on the commonly used valuation measurements
described below) relating to CrossComm to certain corresponding information from
two groups of publicly traded networking companies: the Small-cap Networking
Group and the Large-cap Networking Group (together, the "Selected Companies").
These companies were selected because they were publicly-traded companies in the
communications networking equipment industry sector, and they had general
business characteristics similar to those of CrossComm. Such financial
information included, among other things, (i) common equity market valuation,
(ii) capitalization ratios, (iii) operating performance, (iv) ratios of common
equity market value as adjusted for debt and cash ("Adjusted Value") to revenues
and operating earnings, each for the latest reported twelve month ("LTM") period
as derived from publicly available information, and (v) ratios of common equity
market prices per share ("Equity Value") to earnings per share ("EPS"). The
financial information used in connection with the multiples provided below with
respect to CrossComm and the Selected Companies was based on the LTM period as
derived from publicly available information and on estimated EPS for calendar
years 1997 and 1998 based on Alex. Brown research and as reported by the
Institutional Brokers Estimating System ("IBES"). Alex. Brown noted that, on an
LTM basis, the multiple of Adjusted Value to revenues was 0.9x for CrossComm,
compared to a range of 0.2x to 2.4x (with a mean of 1.3x) for the Small-cap
Networking Group and a range of 1.4x to 6.1x (with a mean of 3.5x) for the
Large-cap Networking Group. Alex. Brown further noted that the multiple of
Equity Value to calendar year 1998 EPS was 43.1x for CrossComm, compared to a
range of 10.8x to 26.9x (with a mean of 17.5x) for the Small-cap Networking
Group and a range of 11.4x to 17.7x (with a mean of 14.3x) for the Large-cap
Networking Group. Alex. Brown noted that multiples of Adjusted Value to LTM
operating earnings and of Equity Value to calendar year 1997 EPS were not
meaningful for CrossComm. As a result of the foregoing procedures, Alex. Brown
noted that the multiple of Adjusted Value to LTM revenues for CrossComm was
within the range of the multiples for the Small-cap Networking Group and was
lower than the range of the multiples for the Large-cap Networking Group. Alex.
Brown noted that the multiple of Equity Value to calendar year 1998 EPS for
CrossComm was not applicable for comparison purposes due to CrossComm's
historical lack of profitability and its projected transition to profitability
during 1998. The IBES EPS estimate, as of March 20, 1997, for CrossComm for
calendar year 1997 was ($0.03) and for calendar year 1998 was $0.20.
Analysis of Selected Mergers and Acquisitions. Alex. Brown reviewed the
financial terms, to the extent publicly available, of 24 proposed, pending or
completed mergers and acquisitions since May 10, 1995, in the communications
networking equipment industry sector, including the following acquisitions (the
acquiring party being listed first): 3Com Corporation/U.S. Robotics Corporation;
ParGain Technologies/Avidia Systems Inc.; FORE Systems, Inc./Cadia Networks,
Inc.; 3Com Corporation/OnStream Networks Inc.; Cisco Systems, Inc./Nashua
Networks; Cisco Systems, Inc./Telebit Communications; U.S. Robotics
Corporation/Scorpio Communications Ltd.; Cisco Systems, Inc./Stratacom
Corporation; Whittaker Corp./Syplex Inc.; Ascend Communications, Inc./White
Tree, Inc.; FORE Systems, Inc./Alantec Corp.; Cisco Systems, Inc./Grand Junction
Networks, Inc.; Bay Networks, Inc./Xylogics, Inc.; 3Com Corporation/Chipcom
Corporation; Madge N.V./Lannet Data Communications Ltd.; Wellfleet
Communications, Inc./SynOptics Communications, Inc.; 3Com Corporation/Star-Tek,
Inc.; 3Com Corporation/Synernetics Inc.; Cisco Systems, Inc./LightStream Corp.;
Cisco Systems, Inc./Kalpana Inc.; Chipcom Corporation/Artel Communications,
Inc.; 3Com Corporation/NiceCom Ltd.; Raytheon Corporation/Xyplex Inc.; and Bay
Networks, Inc./ Centillion Networks Inc. Alex. Brown selected these transactions
because they involved companies in the communications networking equipment
industry (collectively, the "Selected Transactions"). Alex. Brown
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calculated various financial multiples and the premiums over market value based
on certain publicly available information for each of the Selected Transactions
and compared them to corresponding financial multiples and the premiums over
market for the Merger, based on the Merger Consideration. Alex. Brown noted that
the multiple of adjusted purchase price (value of consideration paid for common
equity adjusted for debt, preferred stock and cash) to trailing LTM revenues was
1.1x for the Merger versus a range of 1.1x to 55.7x (with a mean of 10.1x) for
the Selected Transactions. Alex. Brown also noted that the Selected Transactions
were effected at a range of the premium to the target's per share market price
four weeks prior to announcement and to the target's per share market price one
day prior to announcement of 0.4% to 77.8% with a mean of 42.5%, and -7.9% to
53.4% with a mean of 26.2%, respectively, versus transaction premiums of 7.1%
and 7.9%, respectively, for the Merger (based on the per share market price four
weeks prior to and one day prior to the March 21, 1997, announcement of the
proposed transaction). All multiples for the Selected Transactions were based on
public information available at the time of announcement of such transaction,
without taking into account differing market and other conditions during the
21-month period during which the Selected Transactions occurred.
Discounted Cash Flow Analysis. Alex. Brown performed discounted cash flow
analyses for CrossComm on a stand alone basis and after giving effect to certain
synergies which management of Olicom anticipated might result from the Merger.
The discounted cash flow approach values a business based on the current value
of the future cash flows that the business will generate. To establish a current
value under this approach, future cash flow must be estimated and an appropriate
discount rate determined. Alex. Brown used estimates of projected financial
performance for CrossComm for the years 1997 through 2001 prepared by the
respective managements of Olicom and CrossComm. Alex. Brown aggregated the
present value of the cash flows through 2001 with the present value of a range
of terminal values. Alex. Brown discounted these cash flows at discount rates
ranging from 15% to 25%. The terminal value was computed based on projected
revenue in calendar year 2001 and a range of terminal multiples of 1.0x to 2.0x.
Alex. Brown arrived at such discount rates based on its judgment of the weighted
average cost of capital of publicly traded networking companies, and arrived at
such terminal values based on its review of the trading characteristics of the
common stock of the Selected Companies. This analysis indicated a range of
values of $8.24 to $14.87 per share for the stand alone case and $11.08 to
$19.40 per share if potential synergies were achieved.
Pro Forma Combined Earnings Analysis. Alex. Brown analyzed certain pro
forma effects of the Merger. Based on such analysis, Alex. Brown computed the
resulting accretion/dilution to the combined company's EPS estimate for the
fiscal years ending 1997 and 1998, pursuant to the Merger before and after
taking into account any potential cost savings and other synergies that Olicom
and CrossComm could achieve if the Merger were consummated and before
nonrecurring costs relating to the Merger. Alex. Brown noted that before taking
into account any potential cost savings and other synergies and before certain
nonrecurring costs relating to the Merger, the Merger would be approximately
9.3% dilutive and 13.2% dilutive to the combined company's EPS for the fiscal
years ending 1997 and 1998, respectively. Alex. Brown also noted that after
taking into account potential cost savings and other synergies for the fiscal
years ending 1997 and 1998, respectively, and before nonrecurring costs relating
to the Merger, the Merger would be approximately 5.8% accretive to the combined
company's estimated EPS for the fiscal year ending 1997, and that the Merger
would be approximately 11.4% accretive to the combined company's estimated EPS
for the fiscal year ending 1998. There can be no assurance that the combined
company will be able to realize savings and synergies in the amounts identified,
or at all, following the Merger.
Relevant Market and Economic Factors. In rendering its opinion, Alex. Brown
considered, among other factors, the condition of the United States stock
markets, particularly in the networking sector, and the current level of
economic activity.
No company used in the analysis of other publicly traded companies nor any
transaction used in the analysis of selected mergers and acquisitions summarized
above is identical to Olicom, CrossComm or the Merger. Accordingly, such
analyses must take into account differences in the financial and operating
characteristics of the Selected Companies and the companies in the Selected
Transactions, together with other factors that would affect the public trading
value and acquisition value of the Selected Companies and the Selected
Transactions, respectively.
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While the foregoing summary describes all analyses and factors that Alex.
Brown deemed material in its presentation to the Olicom Board, it is not a
comprehensive description of all analyses and factors considered by Alex. Brown.
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the applications of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Alex. Brown believes that its analyses must be considered as a
whole and that selecting portions of its analyses or of the factors considered
by it, without considering all analyses and factors, would create an incomplete
view of the evaluation process underlying the Alex. Brown Opinion. In performing
its analyses, Alex. Brown considered general economic, market and financial
conditions and other matters, many of which are beyond the control of Olicom and
CrossComm. The analyses performed by Alex. Brown are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by such analyses. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Additionally,
analyses relating to the value of a business do not purport to be appraisals or
to reflect the prices at which the business actually may be sold. Furthermore,
no opinion is being expressed as to the prices at which shares of Olicom Common
Stock may trade at any future time.
Pursuant to a letter agreement dated December 20, 1996, between Olicom and
Alex. Brown, the fees to date payable to Alex. Brown for rendering the Alex.
Brown Opinion have been $350,000, which amount will be credited against the
final fee of $1,000,000, payable upon consummation of the Merger. In addition,
Olicom has agreed to reimburse Alex. Brown for its reasonable out-of-pocket
expenses incurred in connection with rendering financial advisory services,
including fees and disbursements of its legal counsel. Olicom has agreed to
indemnify Alex. Brown and its directors, officers, agents, employees and
controlling persons, for certain costs, expenses, losses, claims, damages and
liabilities related to or arising out of its rendering of services under its
engagement as financial advisor.
The Olicom Board retained Alex. Brown to act as its advisor based upon
Alex. Brown having served as the lead-managing underwriter in the October 22,
1992, initial public offering of Olicom Common Stock and based upon Alex.
Brown's qualifications, reputation, experience and expertise. Alex. Brown is an
internationally recognized investment banking firm and, as a customary part of
its investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. Alex. Brown may actively trade the equity securities of Olicom and
CrossComm for its own account and for the account of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Alex. Brown maintains a market in Olicom Common Stock and regularly publishes
research reports regarding the technology industry and the businesses and
securities of Olicom and other publicly traded companies in the technology
industry. Olicom did not consider or interview other firms to act as its
financial advisor in connection with the Merger.
OPINION OF CROSSCOMM'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated November 18, 1996 (the "Engagement
Letter"), CrossComm engaged Montgomery to act as its exclusive financial advisor
for the purpose of identifying opportunities for maximizing stockholder value,
including in connection with a sale of CrossComm. Montgomery is a nationally
recognized firm and, as part of its investment banking activities, is regularly
engaged in the valuation of businesses and their securities in connection with
merger transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. CrossComm selected Montgomery
as its financial adviser on the basis of its experience and expertise in
transactions similar to the Merger and its reputation in the technology and data
communications industries and the investment community.
At the March 19, 1997 meeting of the CrossComm Board, Montgomery delivered
its oral opinion, subsequently confirmed in writing as of March 20, 1997, that
the consideration to be received by CrossComm's stockholders in the Merger, when
taken as a whole, is fair to CrossComm's stockholders from a financial point of
view as of such date so long as the Final Closing Price is not less than $12.50
nor greater than $20.83 (subject to certain adjustments). The amount of such
consideration was determined pursuant to
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negotiations between CrossComm and Olicom and not pursuant to recommendations of
Montgomery. No limitations were imposed by CrossComm on Montgomery with respect
to the investigations made or procedures followed in rendering its opinion. The
full text of Montgomery's written opinion to the CrossComm Board, which sets
forth the assumptions made, matters considered and limitations of review by
Montgomery, is attached hereto as Appendix C and is incorporated herein by
reference and should be read carefully and in its entirety in connection with
this Joint Proxy Statement/Prospectus.
THE FOLLOWING SUMMARY OF MONTGOMERY'S OPINION IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE OPINION. MONTGOMERY'S OPINION IS ADDRESSED
TO THE CROSSCOMM BOARD ONLY AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
CROSSCOMM STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE CROSSCOMM
MEETING. IN FURNISHING ITS OPINION, MONTGOMERY DID NOT ADMIT THAT IT IS AN
EXPERT WITHIN THE MEANING OF THE TERM "EXPERT" AS USED IN THE SECURITIES ACT AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER, OR THAT ITS OPINION IS A
REPORT OR VALUATION WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT, AND
STATEMENTS TO SUCH EFFECT ARE INCLUDED IN MONTGOMERY'S OPINION. MONTGOMERY HAS
NOT ASSUMED RESPONSIBILITY FOR PERFORMING THE LEVEL OF DILIGENCE OR INDEPENDENT
VERIFICATION THAT WOULD BE REQUIRED FOR IT TO RENDER A REPORT OR VALUATION FOR
PURPOSES OF THE SECURITIES ACT. ACCORDINGLY, MONTGOMERY BELIEVES THAT ITS
OPINION SHOULD NOT BE ACCORDED THE DEGREE OF RELIANCE PLACED ON SUCH REPORTS AND
VALUATIONS.
Montgomery has informed CrossComm that in arriving at its opinion,
Montgomery, among other things: (i) reviewed certain publicly available
financial and other data with respect to CrossComm and Olicom, including the
consolidated financial statements for recent years ending December 31, 1996 and
1995, and certain other relevant financial and operating data relating to
CrossComm and Olicom made available to Montgomery from published sources and
from the internal records of CrossComm; (ii) reviewed the financial terms and
conditions of the draft Merger Agreement; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for,
CrossComm Common Stock and Olicom Common Stock; (iv) compared CrossComm and
Olicom from a financial point of view with certain other companies in the data
communications industry that Montgomery deemed to be relevant; (v) considered
the financial terms, to the extent publicly available, of selected recent
business combinations of companies in the data communications industry that
Montgomery deemed to be comparable, in whole or in part, to the Merger; (vi)
reviewed and discussed with representatives of the management of CrossComm and
Olicom certain information of a business and financial nature regarding
CrossComm and Olicom, including financial forecasts and related assumptions of
CrossComm provided to Montgomery by the management of CrossComm and of Olicom
obtained by Montgomery from third-party research analysts; and (vii) performed
such other analyses and examinations as Montgomery deemed appropriate.
In preparing its opinion, Montgomery assumed and relied upon the accuracy
and completeness of all financial and other information reviewed by it for
purposes of its opinion and did not assume responsibility for independent
verification of any of such information. With respect to the financial forecasts
for CrossComm provided to Montgomery by CrossComm's management, Montgomery
assumed for purposes of its opinion that the forecasts were reasonably prepared
on bases reflecting the best available estimates and judgment of CrossComm's
management at the time of preparation as to the future financial performance of
CrossComm and that the forecasts provided a reasonable basis upon which
Montgomery could form its opinion. With respect to the financial forecasts for
Olicom obtained by Montgomery from third-party research analysts, upon the
advice of Olicom's management and with CrossComm's consent, Montgomery assumed
that they provide a reasonable basis upon which Montgomery could form its
opinion. Montgomery also assumed that there were no material changes in
CrossComm's or Olicom's assets, financial condition, results of operations,
business or prospects since the date of the last financial statements made
available to Montgomery. Montgomery relied on advice of counsel and independent
accountants to CrossComm as to all legal and financial reporting matters with
respect to CrossComm, the Merger and the Merger Agreement, including the legal
status and financial
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reporting of litigation involving CrossComm. Montgomery has assumed that the
Merger will be consummated in a manner that complies in all respects with the
applicable provisions of the Securities Act, the Exchange Act and all other
applicable federal and state statutes, rules and regulations. In addition,
Montgomery did not make an independent evaluation, appraisal or physical
inspection of the assets or liabilities (contingent or otherwise) of CrossComm
or Olicom, nor has Montgomery been furnished with any such appraisals.
Management of CrossComm informed Montgomery, and Montgomery has assumed, that
the Merger will be recorded as a purchase under generally accepted accounting
principles. Further, Montgomery's opinion was based on economic, monetary and
market conditions existing as of March 19, 1997, and on the assumption that the
Merger Agreement will be consummated in accordance with the terms thereof,
without any amendments thereto, and without waiver by CrossComm or Olicom of any
of the conditions to their respective obligations thereunder. Accordingly,
although subsequent developments may affect Montgomery's opinion, Montgomery has
not assumed any obligation to update, revise or reaffirm its opinion.
Set forth below is a brief summary of selected analyses presented by
Montgomery to the CrossComm Board on March 19, 1997, in connection with its
opinion.
Summary of Proposal. Montgomery reviewed the terms of the proposed
transaction, including the Exchange Ratio, the cash consideration, the right to
receive Warrants, and the aggregate transaction value. Montgomery reviewed the
implied value of the consideration offered based upon the average of the high
and low share prices of Olicom's common stock for the ten trading days prior to
March 19, 1997. This analysis showed that the implied value of the Olicom merger
proposal as of March 19, 1997, was approximately $10.00 per share of CrossComm
Common Stock, for a total of approximately $99.0 million. Montgomery also
reviewed with the CrossComm Board indications of interest expressed by companies
other than Olicom regarding possible business combinations with CrossComm.
Selected Comparable Merger Analysis. Montgomery reviewed with the CrossComm
Board certain publicly available financial information for selected mergers and
acquisitions of data communications companies.
Montgomery reviewed the acquisition prices paid in other acquisition
transactions involving data communications companies based upon a multiple of
equity value (determined by multiplying the number of shares outstanding by the
market value per share on the respective closing dates for each transaction) to
LTM revenue (reported aggregate revenue during prior four quarters) and a
multiple of equity value to LTM net income (reported aggregate net income during
prior four quarters) for the following transactions involving data
communications companies (to the extent information was available): Newbridge
Networks/UB Networks, Northern Telecom/MICOM Communications, Whittaker/Xyplex,
Raytheon/Xyplex, Storage Tek/ Network Systems, Network Systems Corp./Bytex Corp.
and DCA Holdings Inc./Digital Communications Associates. This analysis yielded a
relevant range of multiples for equity value to LTM revenues of 1.0 to 1.2. The
comparable multiples for the acquisition of CrossComm by Olicom, based on
CrossComm's LTM revenues, imply aggregate values ranging from approximately
$89.0 million to $98.0 million. Montgomery determined that comparable multiples
for CrossComm's LTM net income were not meaningful as CrossComm's LTM net income
was negative for such time period.
Montgomery also examined the acquisition premiums paid in over 50
acquisitions of publicly traded technology companies. The transactions reviewed
for this analysis included 14 acquisitions in the data communications industry
completed since September 1993. Montgomery compared, among other things, the
premiums represented by the consideration paid in these 14 transactions as a
percentage of the market price for the target company's stock at one, seven and
thirty days prior to announcement of the transaction. In the time period 30 days
prior to the date of the CrossComm Board meeting at which the Merger was
approved, this analysis yielded premiums of -1.3% to 76.4%, with an average of
30.0%. The comparable premium for the acquisition of CrossComm by Olicom is 23%
based upon the average stock price 30 days prior to announcement. Montgomery
also calculated the average stock price of CrossComm Common Stock for the period
beginning November 26, 1996, through January 13, 1997, at $5.50. Using this
median stabilized stock price, Montgomery informed the CrossComm Board that the
calculation would yield an 82% premium. In comparable transactions accounted for
as pooling transactions, the average premium was 29% over the 30 day
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time period and, in comparable transactions accounted for as purchases, the
average premium was 34% over the 30 day time period.
No company or transaction used in the above analyses as a comparison is
identical to CrossComm, Olicom or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical. Rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and transactions, and other factors that could
affect the public trading value of the companies and transactions with which
CrossComm, Olicom and the Merger are being compared.
Comparable Public Company Analysis. Using public and other available
information, Montgomery reviewed various historical and projected financial,
operating and stock market data of CrossComm in comparison to certain publicly
traded technology companies that it considered relevant for purposes of this
analysis. Included among these comparable companies are the following data
communications companies: Gandalf Technologies Inc., Osicom Technologies, Inc.,
Madge, Olicom, Proteon, Inc., and Whittaker Corporation.
Montgomery compared, among other things, the valuation of the consideration
to be paid in the Merger for CrossComm to the median valuation of the comparable
companies using an adjusted market value analysis calculated as follows:
adjusted market value was determined by subtracting cash and cash equivalents
from the comparable company's equity value. Montgomery determined that the
public companies valued under this method had a relevant range of multiples over
LTM revenue ranging from 0.8 to 1.1. Based on the analysis of publicly traded
comparable companies, Montgomery determined that CrossComm's implied market
value ranged from approximately $84.0 million to approximately $98.0 million, or
$8.00 to $10.00 per share of CrossComm Common Stock.
Discounted Cash Flow Analysis. In performing its analyses of CrossComm,
Montgomery also relied upon a discounted cash flow analysis. In such an
analysis, Montgomery estimated a range of equity valuations for CrossComm based
upon an analysis of financial forecasts through CrossComm's fiscal year ending
December 31, 2001, that Montgomery developed after discussions with management
of CrossComm.
To arrive at an equity valuation of CrossComm, Montgomery discounted the
after-tax cash flows that resulted from the aforementioned financial forecasts.
The after-tax cash flows were discounted using discount rates ranging from 25%
to 35%, based upon a variety of factors including, among other things, the size
of the business, history of profitability, market growth, market dynamics, and
the cost of equity for other comparable data communications companies. The range
of discount rates also reflects the risk assumptions applied by Montgomery to
the financial forecasts. Montgomery added to the present value of the cash flows
the terminal value of CrossComm as of December 31, 2001, discounted back at the
same discount rates. The terminal value was computed by multiplying CrossComm's
projected revenue in the year 2001 by a revenue multiple of 1.1 (the average of
comparable transactions in public comparable company analysis). Based on such
assumptions, Montgomery's discounted cash flow analyses indicated a range of
aggregate values for CrossComm from $71 million to $83 million.
Contribution Analysis. CrossComm stockholders will receive approximately
20% of the total shares outstanding of the combined companies after the Merger
is completed. To compare this ownership percentage to the relative contribution
made to the combined companies, Montgomery analyzed the contribution of each of
CrossComm and Olicom to certain statement of operations items for the combined
companies on a pro forma basis. Montgomery analyzed the statement of operations
contribution of each of CrossComm and Olicom to the combined companies on a pro
forma basis for the year ending December 31, 1996, using financial forecasts of
CrossComm and Olicom provided by management of CrossComm with respect to
CrossComm and third party research analysts with respect to Olicom. This
analysis showed, among other things, that assuming no revenue enhancement or
cost savings arising from the combination of the two companies, CrossComm would
contribute 19% of the combined companies' 1997 forecasted total revenues and 8%
of the combined companies' 1997 forecasted operating income. Based on such
analysis, Montgomery concluded that, notwithstanding the premium to be received
by CrossComm's stockholders, the Merger would be non-dilutive to the combined
companies' 1997 forecasted operating income, which representatives of Olicom had
indicated would be an important factor in determining whether to proceed with
the transaction.
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<PAGE> 67
The summary set forth above does not purport to be a complete description
of all analyses and examinations actually performed by Montgomery or a complete
description of the presentation made by Montgomery to the CrossComm Board. The
preparation of a fairness opinion necessarily is not susceptible to partial
analysis or summary description. Montgomery believes that such analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and of the factors considered, without considering all
such analyses and factors, would create an incomplete view of the analyses set
forth in its presentation to the CrossComm Board. In addition, Montgomery may
have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumptions, so
that valuations resulting from any particular analysis should not be taken to be
Montgomery's view of the actual value of CrossComm or the combined companies.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of CrossComm or Olicom. The
analyses performed by Montgomery are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Montgomery's analysis of the fairness of the Merger to CrossComm and were
provided to the CrossComm Board in connection with the delivery of Montgomery's
opinion. The analyses do not purport to be appraisals or to reflect the prices
at which a company might actually be sold or the prices at which any securities
may trade at the present time or at any time in the future. Montgomery used in
its analyses various projections of future performance prepared by the
management of CrossComm and third party research analysts. The projections are
based on numerous variables and assumptions which are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
As described above, Montgomery's opinion and presentation to the CrossComm
Board were among the many factors taken into consideration by the CrossComm
Board in making its determination to approve, and to recommend that CrossComm's
stockholders approve, the Merger.
Pursuant to the Engagement Letter, CrossComm is obligated to pay Montgomery
(i) a retainer fee of $50,000, and (ii) an additional fee of $100,000 following
the delivery of its opinion, both of which will be credited against any fee
payable to Montgomery upon consummation of the Merger. Upon consummation of the
Merger, CrossComm will become obligated to pay Montgomery a fee of $400,000 plus
an amount equal to 3.5% of the excess of the total merger consideration over the
value of CrossComm's cash and cash equivalents at the time of the Merger.
CrossComm's cash and cash equivalents were $43,097,000 at March 31, 1997.
CrossComm has also agreed to reimburse Montgomery for its reasonable
out-of-pocket expenses. Pursuant to a separate letter agreement, CrossComm has
agreed to indemnify Montgomery, its affiliates and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under the federal securities
laws.
In the ordinary course of its business, Montgomery trades securities of
CrossComm and Olicom for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities. Certain partners of
Montgomery may also own shares of CrossComm Common Stock and Olicom Common
Stock.
OPERATIONS FOLLOWING THE MERGER
Following the Merger, CrossComm will continue its operations as a
wholly-owned subsidiary of Olicom. Upon consummation of the Merger, the members
of CrossComm's Board of Directors will be Jan Bech, Lars Stig Nielsen, Michael
Camp and Boje Rinhart. The membership of the Olicom Board will remain unchanged
as a result of the Merger. The stockholders of CrossComm will become
stockholders of Olicom, and their rights as stockholders will be governed by the
Olicom Articles and the Companies Act. See "Comparison of Stockholder Rights
Under the Laws of Denmark and Delaware."
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REGULATORY MATTERS
Under the HSR Act, and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division and
specified waiting period requirements have been satisfied. Each of Olicom and
CrossComm have filed a Notification and Report Form required under the HSR Act
with the FTC and the Antitrust Division, together with a request for early
termination of the applicable 30-day waiting period. At any time before or after
consummation of the Merger, the FTC, the Antitrust Division, the state attorneys
general or others could take action under the antitrust laws with respect to the
Merger, including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Olicom or CrossComm.
Based on information available to them, Olicom and CrossComm believe that
the Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, Olicom and CrossComm would prevail or would not be required to accept
certain conditions, possibly including certain divestitures or hold-separate
arrangements, in order to consummate the Merger.
ANTICIPATED ACCOUNTING TREATMENT
Olicom intends to use purchase accounting with respect to the Merger for
both Denmark and United States financial accounting purposes. Accordingly, the
aggregate fair value of the consideration paid by Olicom in connection with the
Merger will be allocated to CrossComm's assets based on their fair values as of
the Effective Time, and the results of operations of CrossComm will be included
in Olicom's consolidated results of operations only for periods subsequent to
the Effective Time. Consummation of the Merger Agreement is not subject to the
availability or use of a specific method of accounting.
RESALES OF OLICOM COMMON STOCK; AFFILIATES AGREEMENTS
The Olicom Common Stock issued pursuant to the Merger or purchased on
exercise of Warrants will not be subject to any restrictions on transfer arising
under the Securities Act, except for shares issued to any CrossComm stockholder
who may be deemed to be an "affiliate" of CrossComm or Olicom for purposes of
Rule 145 under the Securities Act. It is expected that the directors and
officers of CrossComm (including Mr. Witkowicz, a director, officer and 10%
stockholder of CrossComm) will enter into an agreement with Olicom providing
that such affiliate will not transfer any Olicom Common Stock received in the
Merger except in compliance with the Securities Act. This Joint Proxy
Statement/Prospectus does not cover resales of Olicom Common Stock received by
any person who may be deemed to be such an affiliate of CrossComm.
APPRAISAL RIGHTS
Holders of CrossComm Common Stock are entitled to appraisal rights under
Section 262 of the DGCL ("Section 262"), the text of which is attached as
Appendix D hereto. The description of appraisal rights contained in this Joint
Proxy Statement/Prospectus is qualified in its entirety by reference to Section
262.
If the Merger is completed, holders of CrossComm Common Stock who object to
the Merger and who have fully complied with the provisions of Section 262 may
have the right to require the Surviving Corporation to pay them the appraised
value of their CrossComm Common Stock. Shares of CrossComm Common Stock which
are outstanding immediately prior to the Effective Time and which are held by
CrossComm stockholders who (a) have not voted such CrossComm Common Stock in
favor of the Merger, and (b) have delivered to CrossComm a written demand for
appraisal of such CrossComm Common Stock prior to the CrossComm Meeting for
consideration of the Merger, in the manner provided in Section 262 (the
"Dissenting Shares"), and (c) have continuously held such CrossComm Common Stock
from the date of the written demand for appraisal through the Effective Time,
will not be exchanged into or represent the right to receive the Merger
Consideration, but instead the holders thereof will be entitled to payment of
the appraised value of such Dissenting Shares in accordance with Section 262.
However, (i) if any holder of Dissenting Shares subsequently delivers a written
withdrawal of such holder's demand for appraisal of such Dissenting Shares
within 60 days after the Effective Time (or thereafter, with the written
approval of the Surviving
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Corporation), (ii) if any holder fails to establish such holders' entitlement to
appraisal rights as provided in such Section 262, or (iii) if neither any holder
of Dissenting Shares nor the Surviving Corporation files a petition with the
Delaware Court of Chancery demanding a determination of the value of all
Dissenting Shares within the time provided in Section 262, such holder or
holders will forfeit the right to appraisal of such Dissenting Shares, and such
Dissenting Shares may thereupon be deemed to have been converted as of the
Effective Time into the right to receive, and to have become exchangeable for,
the Merger Consideration. If no instructions are indicated on proxies received
by CrossComm, such proxies will be voted for the proposal to approve the Merger
Agreement at the CrossComm Meeting. Those CrossComm stockholders who return
their proxies without instructions, resulting in a vote for the approval of the
Merger Agreement, will therefore not be entitled to appraisal rights.
FAILURE TO TAKE ANY NECESSARY STEPS WILL RESULT IN A TERMINATION OR WAIVER
OF THE RIGHTS OF THE HOLDER UNDER SECTION 262. A PERSON HAVING A BENEFICIAL
INTEREST IN CROSSCOMM COMMON STOCK THAT IS HELD OF RECORD IN THE NAME OF ANOTHER
PERSON, SUCH AS A TRUSTEE OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD
HOLDER TO FOLLOW THE REQUIREMENTS OF SECTION 262 IN A TIMELY MANNER IF SUCH
PERSON ELECTS TO DEMAND APPRAISAL OF SUCH SHARES.
Any holder of record of CrossComm Common Stock electing to demand the
appraisal of such shares under Section 262 must (i) deliver to CrossComm, prior
to the CrossComm Meeting, a written demand for appraisal of such shares and (ii)
not vote in favor of approval of the Merger Agreement. A holder of record of
CrossComm Common Stock electing to take such action must do so by a separate
written demand that reasonably informs CrossComm of such holder's identity and
of such holder's intention thereby to demand the appraisal of such holder's
shares of CrossComm Common Stock. A proxy or vote against approval of the Merger
Agreement does not constitute such a demand.
Only the holder of record of CrossComm Common Stock is entitled to assert
appraisal rights for the CrossComm Common Stock registered in that holder's
name. The demand should be executed by or for the holder of record, fully and
correctly, as the holder's name appears on the holder's stock certificates. If
the CrossComm Common Stock is owned of record in a fiduciary capacity (such as
by a trustee, guardian or custodian) execution of the demand should be made in
that capacity, and if the CrossComm Common Stock is owned of record by more than
one person (as in a joint tenancy or tenancy in common) the demand should be
executed by or for all owners. An authorized agent, including one of two or more
joint owners, may execute the demand for appraisal for a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is acting as agent
for the identified record owner or owners. A record holder, such as a broker,
who holds CrossComm Common Stock as nominee for the beneficial owners may
exercise the holder's right of appraisal with respect to the CrossComm Common
Stock held for all or less than all of such beneficial owners. In such case, the
written demand should set forth the number of shares of CrossComm Common Stock
covered by the written demand. Where no number of shares of CrossComm Common
Stock is expressly mentioned, the demand will be presumed to cover all shares of
CrossComm Common Stock standing in the name of the record owner.
Within ten days after the Effective Time, the Surviving Corporation is
required to send notice as to the effectiveness of the Merger to each person who
has satisfied the foregoing conditions.
Within 120 days after the Effective Time, the Surviving Corporation or any
holder of CrossComm Common Stock who has satisfied the foregoing conditions and
is otherwise entitled to appraisal rights under Section 262 may file a petition
in the Delaware Court of Chancery demanding a determination of the value of the
CrossComm Common Stock of all such holders. Holders of CrossComm Common Stock
seeking to exercise appraisal rights should not assume that Olicom or the
Surviving Corporation will file a petition with respect to the appraisal of the
value of their Dissenting Shares or that Olicom or the Surviving Corporation
will initiate any negotiations with respect to the "fair value" of such
Dissenting Shares. ACCORDINGLY, HOLDERS OF CROSSCOMM COMMON STOCK SEEKING TO
ASSERT APPRAISAL RIGHTS SHOULD REGARD IT AS THEIR OBLIGATION TO INITIATE ALL
NECESSARY ACTION
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WITH RESPECT TO THE PERFECTION OF THEIR APPRAISAL RIGHTS WITHIN THE TIME PERIODS
PRESCRIBED IN SECTION 262.
Within 120 days after the Effective Time, any holder of CrossComm Common
Stock who has complied with the requirements for exercise of appraisal rights,
as discussed above, is entitled, upon written request, to receive from the
Surviving Corporation a statement setting forth the aggregate number of shares
of CrossComm Common Stock not voted in favor of the Merger and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such CrossComm Common Stock. The Surviving Corporation is required to
mail such statement within ten days after it receives a written request therefor
or within ten days after expiration of the period for delivery of demands for
appraisal, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine which holders of
CrossComm Common Stock are entitled to appraisal rights and will appraise the
Dissenting Shares owned by such holders, determining their "fair value"
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the "fair value." Any such judicial determination of
the "fair value" of the Dissenting Shares could be based upon considerations
other than or in addition to the price paid in the Merger and the market value
of the Dissenting Shares, including, without limitation, asset values, the
investment value of the shares of CrossComm Common Stock and any other valuation
considerations generally accepted in the investment community, including,
without limitation, if appropriate, factors such as dividends, earnings
prospects, the nature of the enterprise and any other facts which would be
ascertained as of the date of the Merger which throw any light on future
prospects of the surviving corporation. The value so determined for Dissenting
Shares could be more or less than the Merger Consideration to be paid pursuant
to the Merger. The costs of the appraisal proceeding may be determined by the
Delaware Court of Chancery and taxed upon the parties as the Delaware Court of
Chancery deems equitable in the circumstances. Upon application of a holder of
CrossComm Common Stock, the Delaware Court of Chancery may order all or a
portion of the expenses incurred by any such holder in connection with the
appraisal proceeding, including, without limitation, reasonable attorney's fees
and the fees and expenses of experts, to be charged pro rata against the value
of the shares entitled to an appraisal.
After the Effective Time, any holder of CrossComm Common Stock who has duly
demanded an appraisal in compliance with Section 262 will not be entitled to
vote the Dissenting Shares subject to such demand for any purpose or be entitled
to the payment of dividends or other distributions on those Dissenting Shares
(other than those payable or deemed to be payable to CrossComm stockholders of
record as of a date prior to the Effective Time).
A holder of CrossComm Common Stock will fail to perfect, or effectively
lose, such holder's right to appraisal if no petition for appraisal is filed
with the Delaware Court of Chancery within 120 days after the Effective Time, or
if after the Effective Time such holder delivers to the Surviving Corporation a
written withdrawal of such holder's demand for an appraisal and an acceptance of
the Merger, except that any such attempt to withdraw made more than 60 days
after the Effective Time will require the written approval of the Surviving
Corporation.
In the event that an appraisal proceeding is instituted in a timely manner,
such proceeding may not be dismissed as to any holder of CrossComm Common Stock
who has perfected such stockholder's right of appraisal without the approval of
the Delaware Court of Chancery.
Pursuant to the Merger Agreement, it is a condition to the obligation of
Olicom and MergerSub to effect the Merger that, as of the taking of the vote at
the CrossComm 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 the DGCL. See "The Agreement and Plan of
Reorganization -- Conditions to the Merger."
The provisions of Section 262 of the DGCL are technical in nature and
complex. Stockholders of CrossComm desiring to exercise appraisal rights and
obtain appraisal of the value of their CrossComm
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Common Stock should consult counsel, since the failure to comply strictly with
the provisions of Section 262 of the DGCL may result in a waiver or forfeiture
of their appraisal rights.
Any demands, notices, certificates or other documents to be delivered to
CrossComm prior to the Merger may be sent to: CrossComm Corporation, attention
Chief Financial Officer, 450 Donald Lynch Boulevard, Marlborough, Massachusetts
01752-4720.
THE AGREEMENT AND PLAN OF REORGANIZATION
THE MERGER
Pursuant to the Merger Agreement, a newly-formed, wholly-owned subsidiary
of Olicom will be merged with and into CrossComm, with CrossComm to be the
surviving corporation of the Merger and thus to become a wholly-owned subsidiary
of Olicom. The discussion in this Joint Proxy Statement/Prospectus of the Merger
and the description of the principal terms and conditions of the Merger
Agreement are subject to and qualified in their entirety by reference to the
Merger Agreement, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix A and is incorporated herein by reference. You
are urged to read the Merger Agreement in its entirety.
The operation of the Exchange Ratio and the Warrant Exchange Ratio is
illustrated by the following table, which compares the value of the Merger
Consideration, including the components thereof, at various possible Final
Closing Prices:
<TABLE>
<CAPTION>
FINAL MERGER CONSIDERATION EXPRESSED AS
CLOSING PRICE VALUE PER SHARE OF CROSSCOMM COMMON STOCK
- ------------- --------------------------------------------
OLICOM
CASH COMMON STOCK WARRANTS* TOTAL
----- ------------ --------- ------
<S> <C> <C> <C> <C> <C>
$12.50...................................... $5.00 $3.33 $0.24 $ 8.57
14.50...................................... 5.00 3.87 0.35 9.22
15.54...................................... 5.00 4.14 0.41 9.55
18.50...................................... 5.00 4.93 0.62 10.55
20.83...................................... 5.00 5.56 0.81 11.37
</TABLE>
- ---------------
* The value of the Warrants is calculated in the manner described in
"Exchange of Shares" and may vary if certain underlying assumptions
change prior to the calculation of the Final Closing Price.
The foregoing table is presented for illustration purposes only, and no
inference is intended or should be drawn therefrom concerning the actual Final
Closing Price which may occur or the value of the resulting Merger Consideration
(or any component thereof). Moreover, CrossComm stockholders should be aware
that the actual market value of a share of Olicom Common Stock at the Effective
Time and at the time at which certificates for such shares are delivered
following surrender and exchange of certificates for shares of Olicom Common
Stock may be more or less than the Final Closing Price. THE VALUE OF THE MERGER
CONSIDERATION THAT MAY BE RECEIVED BY HOLDERS OF CROSSCOMM COMMON STOCK IN
CONNECTION WITH THE MERGER COULD BE LESS THAN THE PRICE AT WHICH SHARES OF
CROSSCOMM COMMON STOCK HAVE TRADED AT CERTAIN TIMES DURING RECENT MONTHS.
CROSSCOMM STOCKHOLDERS ARE URGED TO OBTAIN INFORMATION ON THE TRADING PRICE OF
OLICOM COMMON STOCK THAT IS MORE RECENT THAN THAT PROVIDED HEREIN. See
"Comparative Market Price and Dividend Information."
EXCHANGE OF SHARES
At the Effective Time, each share of CrossComm Common Stock will be
exchanged for $5.00 in cash, 0.2667 shares of Olicom Common Stock, subject to
adjustment, and Warrants to purchase 0.1075 shares of Olicom Common Stock at an
exercise price of $19.74 per whole share. No fractional shares of Olicom
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<PAGE> 72
Common Stock and no Warrants to purchase fractional shares will be issued in the
Merger. Instead, each CrossComm stockholder who would otherwise be entitled to
receive a fraction of a share of Olicom Common Stock will receive an amount of
cash equal to the Final Closing Price multiplied by the fraction of a share of
Olicom Common Stock to which the stockholder would otherwise be entitled.
Further, each CrossComm stockholder who would otherwise be entitled to receive a
Warrant to purchase a fractional share of Olicom Common Stock will receive an
amount of cash equal to the value of a Warrant (determined in the manner
described herein) multiplied by the fraction of a Warrant to which the
stockholder would otherwise be entitled. The value of a Warrant (the "Warrant
Unit Consideration") will 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 will be determined by and agreed upon by
each of the financial advisors to Olicom and CrossComm prior to the Closing,
which agreement may not be unreasonably withheld. On this basis, a holder of 100
shares of CrossComm Common Stock would receive $500 in cash, 26 shares of Olicom
Common Stock (together with cash in lieu of 0.67 shares of Olicom Common Stock),
and a Warrant to purchase 10 shares of Olicom Common Stock (and cash in lieu of
a Warrant to purchase 0.75 shares of Olicom Common Stock).
Based on the capitalization of Olicom and CrossComm as of May 2, 1997, if
the proposed Merger is approved and becomes effective, Olicom stockholders
immediately prior to the Effective Time will own approximately 85.5% of the
outstanding Olicom Common Stock at the Effective Time (approximately 79.8% on a
fully-diluted basis that gives effect to the exercise of all Warrants), and
CrossComm stockholders immediately prior to the Effective Time will own
approximately 14.5% of the outstanding Olicom Common Stock at the Effective Time
(approximately 20.2% on a fully-diluted basis that gives effect to the exercise
of all Warrants).
ASSUMPTION OF OPTIONS
At the Effective Time, each outstanding CrossComm Option, whether vested or
unvested, will be assumed by Olicom. Each such CrossComm Option so assumed by
Olicom under the Merger Agreement will continue to have, and be subject to, the
same terms and conditions set forth in the CrossComm Option Plans and the
documents governing the outstanding options under those plans, immediately prior
to the Effective Time, except that (i) such option will be exercisable for the
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 (as defined below) 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 will 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. As used in the Merger Agreement, the "Option Exchange Ratio" equals (1)
the sum of (x) $5.00, plus (y) the Warrant Exchange Ratio multiplied by the
Warrant Unit Consideration plus (z) the Exchange Ratio, multiplied by the Final
Closing Price, which result will be divided by (2) the Final Closing Price. The
other terms of the CrossComm Options, including vesting schedules, will remain
unchanged. Olicom will file a registration statement on Form S-8 with the
Commission with respect to the shares of Olicom Common Stock issuable upon
exercise of the assumed CrossComm Options.
As of the Record Date, 1,723,088 shares of CrossComm Common Stock were
subject to outstanding CrossComm Options. Upon the assumption of such options by
Olicom on consummation of the Merger, and based on an assumed Option Exchange
Ratio of .6149 (calculated for this purpose on the basis of the average high and
low sales prices for Olicom Common Stock for the ten trading days immediately
preceding, but excluding, the Record Date and a Warrant Unit Consideration of
$3.86), approximately 1,060,000 shares of Olicom Common Stock will be subject to
such options. See the discussion set forth in the immediately preceding
paragraph for a description of the manner in which the Option Exchange Ratio
will actually be determined.
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CROSSCOMM EMPLOYEE STOCK PURCHASE PLAN
If it is determined on or before June 20, 1997, that the Effective Time
will occur before July 1, 1997, the CrossComm Board will give notice to the
holders of all outstanding purchase rights under the CrossComm ESPP that all
outstanding options thereunder will be cancelled as of the Effective Date.
However, prior to the Effective Date, each holder of a purchase right under the
CrossComm ESPP will have the right to exercise such option in full based on
payroll deductions then credited to his or her account as of a date determined
by the CrossComm Board, which date may not be less than ten days preceding the
Effective Time, whereupon 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, will terminate with such exercise date,
and no purchase rights will be subsequently granted or exercised under the
CrossComm ESPP. If it is determined on or before June 20, 1997, that the
Effective Time will occur on or after July 1, 1997, CrossComm will 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
the Merger Agreement.
EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, a letter of transmittal with
instructions will be mailed to each CrossComm stockholder for use in exchanging
CrossComm Common Stock certificates for Olicom Common Stock certificates and
Warrant certificates, and the cash portion of the Merger Consideration (together
with cash in lieu of fractional shares of Olicom Common Stock and Warrants to
purchase fractional shares). Upon surrender of a CrossComm Common Stock
certificate for cancellation to American Stock Transfer & Trust Company, or to
such other agent or agents as may be appointed by Olicom, 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 in exchange therefor certificates evidencing the number of whole shares
of Olicom Common Stock, the number of Warrants to purchase whole shares of
Olicom Common Stock, the cash portion of the Merger Consideration, and payment
in lieu of fractional shares of Olicom Common Stock and Warrants to purchase
fractional shares which such holder has the right to receive in exchange for his
or her shares of CrossComm Common Stock.
Immediately after the Effective Time, each outstanding certificate for
shares of CrossComm Common Stock will be deemed for all corporate purposes,
other than the payment of dividends, to evidence the number of whole shares of
Olicom Common Stock, the number of Warrants to purchase whole shares of Olicom
Common Stock, and the cash portion of the Merger Consideration for which such
shares of CrossComm Common Stock shall have been so exchanged, together with the
right to receive an amount in cash in lieu of the issuance of any fractional
shares of Olicom Common Stock or Warrants to purchase fractional shares. No
interest will be paid or accrued on any amount payable or due on the surrender
of CrossComm Common Stock certificates. No dividends or other distributions with
respect to Olicom Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered CrossComm Common Stock certificate
until the holder of record of such certificate surrenders 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 with respect to
such shares of Olicom Common Stock.
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
CrossComm Common Stock certificate originally surrendered with respect thereto
is registered, it will be a condition of the issuance thereof that the CrossComm
Common Stock certificate so surrendered 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 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
CrossComm Common Stock 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.
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HOLDERS OF CROSSCOMM COMMON STOCK CERTIFICATES SHOULD NOT SUBMIT THEIR
CERTIFICATES FOR EXCHANGE UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL AND
INSTRUCTIONS REFERRED TO ABOVE.
NOTIFICATION REGARDING OPTIONS
Following the Effective Time, Olicom will issue to each person who,
immediately prior thereto, was a holder of an outstanding CrossComm Option, a
document evidencing the assumption of such option by Olicom. Such assumption
will be automatic and no action will be required on the part of the option
holder to convert such holder's CrossComm Option into an option to purchase
shares of Olicom Common Stock.
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Merger Agreement contains various representations and warranties of the
parties, including representations by Olicom, CrossComm and MergerSub as to
their organization and capitalization, their authority to enter into the Merger
Agreement and to consummate the transactions contemplated thereby, the existence
of certain liabilities and the absence of certain material undisclosed
liabilities and material changes in their businesses. Such representations and
warranties will not survive consummation of the Merger.
Under the terms of the Merger Agreement, during the period from the date of
the Merger Agreement and continuing until the earlier of the termination of the
Merger Agreement or the Effective Time, each of CrossComm and Olicom has agreed
(except to the extent expressly contemplated by the Merger 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 theretofore 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 will be
unimpaired at the Effective Time. Each of CrossComm and Olicom agreed to
promptly notify the other of any event or occurrence which would have a material
adverse effect on it and its subsidiaries. Each of CrossComm and Olicom agreed
that it will not, among other things, 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 and except as
expressly contemplated by the Merger Agreement: (i) cause or permit any
amendments to the CrossComm Certificate or CrossComm's Bylaws (in the case of
CrossComm), the Olicom Articles or Olicom's 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; (ii) declare
or pay any dividends on or make any other distributions (whether in cash, stock
or property) in respect of any capital stock, or split, combine or reclassify
any capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of 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; or (iii) take, or agree in
writing or otherwise to take, any of the actions described in (i) and (ii)
above, or any action which would make any of its representations or warranties
contained in the Merger Agreement to be untrue or incorrect or prevent it from
performing or cause it not to perform its covenants thereunder.
NO SOLICITATION OF TRANSACTIONS
CrossComm has further agreed that it and its subsidiaries, together with
the officers, directors, employees or other agents of CrossComm and its
subsidiaries, (i) will 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 below),
(ii) will not, directly or indirectly, subject to the terms of the immediately
following paragraph, engage in negotiations or discussions with, or disclose any
nonpublic
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information relating to CrossComm or any of its 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)
will immediately terminate any existing activities, discussions or negotiations
with any person, firm or entity conducted prior to the date of the Merger
Agreement with respect to any of the foregoing and inform any such person, firm
or entity of the obligations undertaken by CrossComm in the Merger Agreement
with respect to the foregoing; provided, however, that the foregoing will not
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 foregoing, if (i) an unsolicited bona fide written
Acquisition Proposal, or an unsolicited bona fide expression of interest that
CrossComm reasonably expects could lead to a Acquisition Proposal, is received
by the CrossComm Board, (ii) the CrossComm Board believes in good faith that
such Acquisition Proposal would, if consummated, result in a Superior Proposal,
(iii) 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 with the process described herein with respect thereto, and (iv) that
the party making such Superior Proposal has the financial means, or the ability
to obtain the necessary financing, to consummate such transaction (with the
understanding that the foregoing does not 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 foregoing) 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 will not be considered a
breach of the Merger Agreement. In each such event, CrossComm is required to
notify Olicom of such determination by the CrossComm Board and provide Olicom
with a written summary in reasonable detail of the Superior Proposal (including,
without limitation, 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. In addition, in order for
the foregoing actions not to be considered a breach of the Merger Agreement (x)
CrossComm cannot 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 must provide such
non-public information pursuant to a binding non-disclosure agreement with terms
no less favorable as to confidential information as the confidentiality
agreement between Olicom and CrossComm entered into in contemplation of the
Merger.
Further, CrossComm has agreed that it will not permit the CrossComm Board
to adopt any Acquisition Proposal unless CrossComm has terminated the Merger
Agreement and paid Olicom all amounts payable to Olicom pursuant to the Merger
Agreement. CrossComm has agreed to notify Olicom promptly (and, in any event, no
later than 24 hours) 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
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 will 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).
For purposes of the Merger 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 the Merger Agreement.
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CONDITIONS TO THE MERGER
Each party's obligations to consummate and effect the Merger is subject to,
among other things, the approval by the requisite votes of the stockholders of
Olicom and CrossComm, the Commission having declared the Registration Statement
effective, and the satisfaction at or prior to the Effective Time of these
additional conditions: (a) the absence of any 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 or rendering the consummation of the
Merger illegal, or any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing; (b) the receipt of all necessary state
securities and "blue sky" permits; (c) all material authorizations, consents,
orders or approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any governmental entity necessary for the
consummation of the transactions contemplated by the Merger Agreement and the
Certificate of Merger will 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 such authorizations and approvals required of
Olicom, in the reasonable opinion of CrossComm after consultation with Olicom,
have a material adverse effect on Olicom, and (ii) as to such authorizations and
approvals required of CrossComm, in the reasonable opinion of Olicom after
consultation with CrossComm, have a material adverse effect on CrossComm; (d)
the filing with the Nasdaq National Market of (i) a Notification Form for
Listing of Additional Shares with respect to the shares of Olicom Common Stock
issuable in connection with 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 Nasdaq National Market Application for Initial Inclusion with respect
to the Warrants; (e) the approval of the listing of the Warrants on the Nasdaq
National Market upon official notification thereof; and (f) the registration by
the Commercial and Companies Agency of the Kingdom of Denmark of the Olicom
Common Stock issuable in the Merger, to the extent required by the Companies
Act, and the amendment of the Olicom Articles that is required to increase the
share capital of Olicom.
The obligations of CrossComm to effect the Merger are subject to, among
other things, the satisfaction at or prior to the Effective Time of each of the
following conditions, unless waived in writing by CrossComm: (a) the
representations and warranties of Olicom and MergerSub in the Merger 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 the Merger
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 its Managing Director
and Chief Financial Officer); (b) Olicom and MergerSub shall have performed or
complied in all material respects with all covenants, obligations, conditions
and agreements required by the Merger 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 on behalf of Olicom by its Managing Director
and Chief Financial Officer); (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 business 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; and (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
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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.
The obligations of Olicom and MergerSub to effect the Merger are 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 the Merger 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 its President and Chief Financial Officer); (b) CrossComm shall
have performed or complied in all material respects with all agreements,
covenants, obligations and conditions required by the Merger 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 on behalf
of CrossComm by its President and Chief Financial Officer); (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; (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 business 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 Affiliates
Agreement in substantially the form attached to the Merger Agreement; (g)
CrossComm shall have delivered resignations of all officers and directors of
CrossComm and its subsidiaries; (h) as of the taking of the vote at the
CrossComm 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 the DGCL; and (i) in the event that the Final Closing Price is less than
$12.50, CrossComm shall have received an updated written opinion of Montgomery
(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 Meeting, the consideration to be received by the
stockholders of CrossComm is fair, from a financial point of view, to the
stockholders of CrossComm.
CLOSING
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in the Merger Agreement, MergerSub and CrossComm will file
a certificate of merger with the Secretary of State of Delaware and the Recorder
of the County in which the registered office of each of CrossComm and MergerSub
is located. The Merger will become effective upon such filings. Assuming all
conditions are met, it is anticipated that the Merger will occur and a closing
will be held on or before June 30, 1997.
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TERMINATION, AMENDMENTS AND WAIVERS
The Merger Agreement may be terminated at any time prior to the Effective
Time, 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;
(b) By either Olicom or CrossComm if the Merger has not been
consummated by August 1, 1997 (provided that the right to terminate the
Merger Agreement pursuant to such provision will 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 has 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 the Merger Agreement to comply
with legal requirements imposed on such party with respect to the
consummation of the Merger;
(d) By Olicom if (i) for any reason, the CrossComm Board fails to call
and hold a meeting of CrossComm stockholders to approve the Merger
Agreement and the Merger by June 30, 1997, or (ii) at such meeting
(including any adjournment or postponement thereof), the requisite vote of
the stockholders of CrossComm in favor of the Merger Agreement and the
Merger is not obtained;
(e) By CrossComm, if (i) for any reason, the Olicom Board fails to
call and hold a meeting of Olicom stockholders to approve the Merger
Agreement and the Merger by June 30, 1997, or (ii) at such meeting
(including any adjournment or postponement thereof), the requisite vote of
the stockholders of Olicom in favor of the Merger Agreement and the Merger
is not obtained;
(f) By Olicom, if (i) the CrossComm Board withdraws or modifies its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Olicom or publicly announces or discloses to any third party its intention
to do any of the foregoing, (ii) an Alternative Transaction has taken place
or the CrossComm Board recommends 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, 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 provides 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 notice of termination, CrossComm makes
the payment of the Termination Fee;
(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 the Merger Agreement, which breach (i) causes the
conditions to the obligations of Olicom to close (in the case of
termination by CrossComm), or the conditions to the obligations of
CrossComm to close (in the case of termination by Olicom) not to be
satisfied, and (ii) is not 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 the Merger
Agreement, or (ii) if the Final Closing Price is more than $20.83 and
Olicom decreases the Exchange Ratio as provided in the Merger Agreement.
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In the event of termination of the Merger Agreement as provided therein,
the Merger Agreement will terminate, and there will 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 thereto of any of its
representations, warranties or covenants set forth in the Merger Agreement;
provided, however, that, the provisions of the Merger Agreement relating to
confidentiality, expenses and termination fees, and effect of termination will
remain in full force and effect and survive any termination of the Merger
Agreement.
As used in the Merger Agreement, "Alternative Transaction" means (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.
The Merger Agreement may be amended at any time by the boards of directors
of the parties by the execution and delivery of an instrument in writing signed
on behalf of each of CrossComm, Olicom and MergerSub; provided, however, that an
amendment made subsequent to adoption of the Merger Agreement by the
stockholders of CrossComm or MergerSub cannot (i) alter or change the amount or
kind of consideration to be received on conversion of the CrossComm Common
Stock, except as provided in the Merger Agreement, (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
Merger Agreement if such alteration or change would adversely affect the holders
of CrossComm Common Stock or holders of common stock in MergerSub.
At any time prior to the Effective Time, either Olicom or CrossComm may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties made to such party contained in the Merger
Agreement or in any document delivered pursuant thereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party under the Merger Agreement.
FEES AND EXPENSES; TERMINATION FEE
Subject to the provisions described below regarding reimbursement of
expenses and payment of termination fees, in general, all fees and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated. Olicom and CrossComm have further agreed to
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/Prospectus and the Registration Statement
and any amendments or supplements relating thereto.
Whether or not a termination fee is payable by CrossComm to Olicom as
described below, CrossComm has agreed to reimburse Olicom for all of its
reasonable, documented expenses actually incurred in connection with the Merger
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) in the event that: (i)
Olicom terminates the Merger Agreement as a result of (a) the failure of the
CrossComm Board to call and hold by June 30, 1997, a stockholders' meeting to
approve the Merger Agreement and the Merger, or if at such meeting (including
any adjournment or postponement thereof), CrossComm fails to obtain the
requisite vote for approval of the Merger Agreement and the Merger by the
stockholders of CrossComm, in each case, if, at the time of such failure, there
has been announced an
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Alternative Transaction which has not been absolutely and unconditionally
withdrawn and abandoned, (b) the withdrawal or modification by the CrossComm
Board of its recommendation of the Merger Agreement or the Merger in a manner
adverse to Olicom (or the public announcement or disclosure of its intention to
do so), the occurrence of an Alternative Transaction or the recommendation by
the CrossComm Board to the CrossComm stockholders of an Alternative Transaction,
or the commencement of a tender offer or exchange offer for 25% or more of the
outstanding CrossComm Common Stock as to which the CrossComm Board recommends
that the stockholders of CrossComm tender their shares with respect thereto, or
(c) an uncured material breach by CrossComm of the Merger Agreement; or (ii)
CrossComm terminates the Merger Agreement as a result of the CrossComm Board's
receipt of a Superior Proposal, after determining 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 and after providing Olicom with
at least one business day's written notice of such Superior Proposal.
Olicom has agreed to reimburse CrossComm for all of its reasonable,
documented expenses actually incurred in connection with the Merger 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) in the event that CrossComm terminates the
Merger Agreement as a result of the failure of the Olicom Board to call and hold
the Olicom Meeting by June 30, 1997, or if at the Olicom Meeting (including any
adjournment or postponement thereof), the requisite vote of the stockholders of
Olicom in favor of the Merger Agreement and the Merger is not obtained, or as a
result of an uncured material breach by Olicom of the Merger Agreement.
In addition to the reimbursement of expenses described above, CrossComm has
agreed to pay Olicom a termination fee of $2,360,000 upon the occurrence of any
of the following events:
(a) The termination of the Merger Agreement by Olicom as a result of
its failure to receive the requisite vote for approval of the Merger
Agreement and the Merger by the stockholders of CrossComm at the CrossComm
Meeting if, at the time of such failure, there has 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;
(b) The termination of the Merger Agreement by Olicom as a result of
(i) the withdrawal or modification by the CrossComm Board of its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Olicom (or the public announcement or disclosure of its intention to do
so), (ii) the occurrence of an Alternative Transaction or the
recommendation by the CrossComm Board to CrossComm stockholders of an
Alternative Transaction, or (iii) the commencement of a tender offer or
exchange offer for 25% or more of the outstanding CrossComm Common Stock as
to which the CrossComm Board recommends that CrossComm stockholders tender
their shares with respect thereto; or
(c) The termination of the Merger Agreement by CrossComm in connection
with the CrossComm Board's receipt of a Superior Proposal, after
determining 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 and after providing Olicom with at least one business
day's written notice of such Superior Proposal and making payment of the
Termination Fee.
Fees to be Paid to Financial Advisors. Pursuant to a letter agreement dated
December 20, 1996, Olicom engaged Alex. Brown to provide financial advice and
assistance in connection with a combination involving Olicom and CrossComm, and
to render a fairness opinion in connection with the proposed combination of
Olicom and CrossComm. Pursuant to the letter agreement, Olicom agreed to pay
Alex. Brown a transaction fee of $1,000,000 for its services pursuant to the
terms of the letter agreement and has agreed to reimburse Alex. Brown for its
reasonable out-of-pocket expenses. See "The Merger -- Opinion of Olicom's
Financial Advisor."
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Pursuant to a letter agreement dated November 18, 1996, CrossComm engaged
Montgomery to provide financial advice and assistance in connection with a sale
or merger of CrossComm, and to render a fairness opinion in connection with the
proposed merger with a subsidiary of Olicom. CrossComm has agreed to pay
Montgomery a transaction fee for its services pursuant to the terms of the
letter agreement equal to $400,000 plus an amount equal to 3.5% of the excess of
the aggregate Merger Consideration over the value of CrossComm's cash and cash
equivalents at the Effective Time. At March 31, 1997, CrossComm had cash and
cash equivalents of $43,097,000. In addition, CrossComm has agreed to reimburse
Montgomery for its reasonable out-of-pocket expenses. See "The Merger -- Opinion
of CrossComm's Financial Advisor."
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that 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 the CrossComm Certificate and CrossComm's Bylaws or any indemnification
agreement with CrossComm officers and directors to which CrossComm is a party,
in each case in effect on the date of the Merger Agreement.
The Merger Agreement also provides that until July 14, 1999, Olicom will
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 of the Merger Agreement; provided, however, that in satisfying such
obligations, Olicom will 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
such insurance, it is required to obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the CrossComm Board with respect to
the Merger, stockholders of CrossComm should be aware that certain officers and
directors of CrossComm have interests in the Merger, including those referred to
below, that presented them with potential conflicts of interests. The CrossComm
Board was aware of these potential conflicts and considered them along with the
other matters described in "The CrossComm Meeting -- Board Recommendations" and
"The Merger -- Reasons for the Merger."
The Merger Agreement provides that Olicom will assume CrossComm's
outstanding stock options, after which such options will be exercisable for
Olicom Common Stock. In light of the premium reflected in the Exchange Ratio,
CrossComm's officers may receive a significant benefit from the Merger in the
form of the higher value of shares issuable upon exercise of their options.
However, officers of CrossComm will not receive or be entitled to "golden
parachute" or other change of control payments particularly by virtue of the
Merger.
Olicom has entered into a consulting agreement with Mr. Tadeusz Witkowicz,
with a term commencing as of the Effective Time. In addition, CrossComm has
entered into a noncompetition and nonsolicitation agreement, as well as a
license agreement, with Mr. Witkowicz. See "-- Related Agreements: Witkowicz
Consulting Agreement," "-- Related Agreements: Witkowicz Noncompetition
Agreement" and "-- Related Agreements: Witkowicz License Agreement." See also
"CrossComm Corporation -- Business: Certain Transactions."
The Merger Agreement provides that 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 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 the CrossComm
Certificate and CrossComm's Bylaws or any indemnification agreement with
CrossComm officers and directors to which CrossComm is a party, in each case in
effect on the date of the Merger Agreement.
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The Merger Agreement provides that Olicom will use its best efforts to
secure the election of Mr. Witkowicz to the Olicom Board at the Olicom Meeting.
However, Mr. Witkowicz has advised Olicom that he would prefer to postpone his
nomination, and Olicom has agreed to consider nominating Mr. Witkowicz, upon his
request, for election to the Olicom Board at Olicom's 1998 Annual General
Meeting.
RELATED AGREEMENTS
LSNielsen Voting Agreement. In connection with the execution of the Merger
Agreement, Mr. Lars Stig Nielsen, the Managing Director and Chief Executive
Officer of Olicom, entered into a voting agreement with CrossComm. The
provisions of such voting agreement provide that Mr. Stig Nielsen will vote all
shares of Olicom directly owned by him in favor of the approval of the Merger
Agreement and consummation of the Merger and against any competing proposals.
Mr. Stig Nielsen is the direct holder of approximately 1.8% (as of May 2, 1997,
exclusive of any shares issuable upon the exercise of options held by him) of
the shares of Olicom Common Stock entitled to vote at the Olicom Meeting.
Witkowicz Voting Agreement. In connection with the execution of the Merger
Agreement, Mr. Tadeusz Witkowicz, the President, Chief Executive Officer and
Chairman of the Board of Directors of CrossComm, entered into a voting agreement
with Olicom. The provisions of such voting agreement provide that Mr. Witkowicz
will vote all shares of CrossComm Common Stock beneficially owned by him in
favor of the approval of the Merger Agreement and consummation of the Merger and
against any competing proposals (the "Witkowicz Voting Agreement"). Mr.
Witkowicz is the holder of approximately 16.9% (as of May 2, 1997) of the shares
of CrossComm Common Stock entitled to vote at the CrossComm Meeting. Pursuant to
the Witkowicz Voting Agreement, Mr. Witkowicz is prohibited from disposing of
his Olicom Common Stock received pursuant to the Merger except pursuant to Rule
145 under the Securities Act. For so long as the provisions of Rule 145 under
the Securities Act are applicable to him, Mr. Witkowicz has agreed to make
dispositions of shares of Olicom Common Stock received by him in the Merger only
through certain designated brokers.
Witkowicz Consulting Agreement. In connection with the execution of the
Merger Agreement, Mr. Witkowicz entered into a consulting agreement for a term
commencing at the Effective Time and extending through December 31, 1997 (the
"Consulting Term"). During the Consulting Term, Mr. Witkowicz agreed to consult
with and assist Olicom in: (i) successfully and expeditiously implementing the
integration of the business of CrossComm and its subsidiaries with those of
Olicom and its subsidiaries (collectively, the "Olicom Group"); (ii) providing
advice and assistance with respect to existing customers of CrossComm, toward
the end that business relationships with such customers are preserved to the
greatest extent feasible; (iii) providing advice and assistance with respect to
key sales and marketing opportunities; and (iv) such other services relating to
the business of the Olicom Group and CrossComm as Mr. Witkowicz and the Managing
Director of Olicom mutually agree. Olicom agreed to pay Mr. Witkowicz a monthly
consulting fee of $5,500 during the Consulting Term, such amount to be reduced
by the amount of payments made to Mr. Witkowicz by Olicom pursuant to the
Noncompetition Agreement described below. In connection with the agreement of
Mr. Witkowicz to render consulting services, Olicom agreed to grant to him at
the Effective Time an option to purchase 100,000 shares of Olicom Common Stock
at an exercise price equal to the average of the high and low sales prices of
Olicom Common Stock on the date on which the Effective Time occurs. Such
consulting agreement is contingent upon the occurrence of the Merger, and will
become effective at the Effective Time.
Witkowicz Noncompetition Agreement. In connection with the execution of the
Merger Agreement, Mr. Witkowicz also entered into a noncompetition and
nonsolicitation agreement with CrossComm (the "Noncompetition Agreement").
Pursuant to the Noncompetition Agreement, Mr. Witkowicz agreed, for a period of
ten months after the Closing Date (the "Noncompetition Term"), not to compete in
the development and marketing of the following products in the computer
networking industry: Ethernet, Token Ring and Asychronous Transfer Mode switches
and network interface cards; bridges; routers; and HUBs. Mr. Witkowicz also
agreed that during the Noncompetition Term, he would not, without the prior
written consent of CrossComm (which may not be unreasonably withheld or
delayed), induce any employee of or independent contractor to CrossComm to
terminate his or her relationship with Olicom or any subsidiary or
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affiliate thereof, whether or not existing as of the date of the Noncompetition
Agreement, in order to accept any position with Mr. Witkowicz or a company
affiliated with him, except as permitted by the License Agreement described
below. CrossComm agreed to pay Mr. Witkowicz the sum of $5,500 per month during
the Noncompetition Term, to be offset against any payments made pursuant to any
consulting agreement with CrossComm or Olicom.
Witkowicz License Agreement. On March 20, 1997, CrossComm entered into a
License Agreement with Mr. Witkowicz that provides him with a non-exclusive
license to use CrossComm's partially developed Network Delta software. The
Network Delta software was being developed to, among other things, enable
CrossComm to deliver monitoring services to its customers. CrossComm
discontinued development of this software in 1996 because it failed to meet
expectations and was inconsistent with CrossComm's strategic plan. CrossComm
decided instead to utilize a third-party solution to offer monitoring services
to its customers. Under the terms of the License 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 License Agreement also
allows Mr. Witkowicz to hire up to six engineers from CrossComm. See "CrossComm
Corporation -- Business: Certain Transactions."
Reseller Agreement. Pursuant to an International VAR Agreement dated as of
September 1, 1996 (the "Reseller Agreement"), Olicom granted to CrossComm the
right to market, install and service Olicom's RapidFire(TM) Peripheral Component
Interface ATM adapter card. The Reseller Agreement, which was in effect at the
time that CrossComm announced that it had retained Montgomery as its financial
advisor to evaluate strategic alternatives, contains terms and conditions that
are customary for agreements of this nature. Olicom and CrossComm have announced
that they intend to expand the scope of the Reseller Agreement to enable each
company's field sales organizations and channel partners to cross-sell the other
company's products. Olicom and CrossComm have also entered into license
agreements with respect to the use by CrossComm of certain software code and
hardware design for the purpose of enabling CrossComm to integrate the same into
portions of the CrossComm product line.
OLICOM A/S
BUSINESS
Olicom develops and markets local area network software and hardware
products that enable computer users to communicate, exchange data and share
computing resources in workgroup and enterprise LANs or in wide area networks.
Olicom believes that its products offer superior performance, are price
competitive and are fully compatible with industry standards and networking and
internetworking products manufactured by IBM and other vendors. Olicom's
products are marketed worldwide primarily through distributors, VARs and OEMs.
Lasat, a majority-owned subsidiary, develops and markets through distributors
and Internet service providers desktop and mobile modem products. See
"-- Business: Lasat Communications."
THE LAN INDUSTRY
Since the early 1980's, the computing environments of many organizations
have evolved from a single vendor, mainframe or minicomputer orientation to
multi-vendor environments having a greater number of workstations and personal
computers ("PCs"). This trend has resulted in the development of sophisticated
local area network and wide area network hardware and software products.
To provide local interoperability among computer devices, two primary
industry standards -- Ethernet and Token Ring -- were developed by computer
vendors and adopted as industry standards. More recently, Asynchronous Transfer
Mode, a broadband technology for transmitting voice, video and data over LANs
and WANs, was developed by the International Telecommunications Union ("ITU")
and the ATM Forum and adopted as a standard by ITU, the American National
Standards Institute ("ANSI"), the European Telecommunications Standards
Institute ("ETSI") and other standard bodies. All three standards define the
method of connectivity to, the physical characteristics of, and the management
of information on the network.
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Ethernet operates at 10 and 100 mega bits per second ("Mbps"), while Token Ring
operates at 4 and 16 Mbps. ATM is capable at operating at 25 and 155 Mbps.
COMPANY HISTORY
Olicom was organized in the Kingdom of Denmark in 1985 by Lars Stig Nielsen
(Olicom's Managing Director and Chief Executive Officer). Since 1987, Olicom has
been involved in designing, developing and producing high-quality Token Ring
networking products. In 1988, Olicom began marketing an increasingly broader
range of network interface cards ("NICs" or "adapters"), internetworking
products, HUBs and cabling components, repeaters, converters, filters and
associated software drivers, followed by the introduction in 1990 of Token Ring
NICs for Industrial Standard Architecture ("ISA"), Extended Industrial Standard
Architecture ("EISA") and Micro Channel Architecture ("MCA") busses. Commencing
in late 1991 with its introduction of local and remote bridges, Olicom was able
to supply all components necessary for total enterprise-wide LAN networking. In
1992, a wholly-owned subsidiary of Olicom purchased substantially all of the
assets of Dico 1992 A/S (formerly known as Connect International A/S), thereby
enabling Olicom to further broaden its product line to take advantage of the
demand for Ethernet networks from small-and medium-sized enterprises. In 1994,
Olicom began developing ATM products and in 1995 began shipping 155 Mbps ATM
NICs. In 1996, Olicom began shipping a Token Ring switch. See "Products."
In order to provide global support of an increasingly broad product line,
Olicom has established Olicom Americas, with its headquarters in Plano, Texas,
to coordinate marketing in North and South America.
PRODUCTS
Olicom's principal goal has been to develop a leadership position among
those companies that develop and market products that are completely
interoperable with devices marketed by IBM and others, while at the same time
providing superior performance and additional features at competitive prices.
Olicom's products are fully compatible with IBM products, adhere to all relevant
Institute of Electrical and Electronics Engineers ("IEEE") standards, and
provide connectivity among all major PC architectures and network operating
systems.
Olicom selectively broadens its product line as the market for specific
networking and internetworking products develops. Further, in expanding its
product line, Olicom works closely with key end-users to define emerging market
requirements and features which should be addressed.
Token Ring Products
Olicom's Token Ring products include NICs, internetworking products, HUBs
and cabling components, switch products, repeaters, converters, filters and
associated software drivers for use in LANs using the Token Ring protocol.
Within these categories Olicom provides a broad product range of Token Ring
network products.
Network Interface Cards. Olicom Token Ring NICs are compatible with
standard PC bus architectures (including ISA, EISA, MCA, PC Card (formerly
called "PCMCIA") and Peripheral Component Interface ("PCI")). Olicom Token Ring
NICs support both types of standard wiring systems (unshielded twisted pair or
type 3 cabling ("UTP") and shielded twisted pair or type 1 cabling ("STP")),
both standard speeds (4 Mbps and 16 Mbps), and the leading network operating
systems developed by the major vendors (IBM, Novell, Inc. ("Novell"), Microsoft
Corporation ("Microsoft") and Banyan Systems Incorporated, together with UNIX
System V of American Telephone & Telegraph Co. and UNIX System V of Santa Cruz
Operation). At the end of 1993 Olicom addressed the portable computer market
sector through the introduction of its pocket and PCMCIA adapter products. The
Olicom Token Ring PCI NIC was a significant introduction in the second half of
1994, with a second generation NIC introduced in the first half of 1995.
Olicom has developed a specially-tuned high-performance version of the
Media Access Control ("MAC") code from Texas Instruments ("TI") and has also
developed a Logical Link Control ("LLC") protocol. Both the MAC code and the LLC
protocol interface with chipsets that are manufactured by TI and
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used by Olicom in its TI-based Token Ring NICs. Olicom's engineering expertise
in analog LAN front-end design, together with the MAC code and LLC protocol
developed by Olicom's software engineers for the TI chipsets, have enabled
Olicom to produce extremely reliable Token Ring products.
Olicom's drivers include a number of special intelligent frame handling
functions which are designed to handle each frame of data in native mode in a
manner that enhances performance. In addition, by performing data path analysis
of all critical program sections, Olicom minimizes data transfer delay in its
Token Ring products.
To meet additional performance demands, an increasing number of Olicom's
NICs also include "bus master" capability to provide direct memory access
("DMA") for faster data transfers and higher overall performance. Olicom's Token
Ring adapter card products currently consist of the following NICs:
ISA 16/4 Adapter: a selectable 16 and 4 Mbps bus mastering NIC that is
compatible with AT or XT bus-based PCs.
MCA 16/4 Adapter: a selectable 16 and 4 Mbps bus mastering NIC that is
compatible with Micro Channel bus-based PCs.
EISA 16/4 Workstation Adapter: a selectable 16 and 4 Mbps bus
mastering NIC that is compatible with EISA bus-based PCs.
EISA 16/4 Server Adapter: a selectable 16 and 4 Mbps shared RAM NIC
that is compatible with EISA bus-based PCs used as network servers.
PCI 16/4 Adapter: a selectable 16 and 4 Mbps NIC that is compatible
with PCI bus-based PCs.
PC Card (or PCMCIA) GoCard(TM) Adapter: a selectable 16 and 4 Mbps
credit card sized adapter for notebook PCs equipped with PCMCIA expansion
slots.
PC Card (or PCMCIA) GoCard(TM) LAN/Modem Adapter: a selectable 16 and
4 Mbps adapter and 33.6 Kbps modem for notebook PCs equipped with PCMCIA
expansion slots.
Token Ring Switch Products. Token Ring switching is seen as a way to boost
the capacity of traditional shared Token Ring LANs. Olicom's CrossFire(TM) Token
Ring switch provides eight ports for connecting eight separate rings or file
servers. Featuring a fast multi-processor architecture, the CrossFire(TM) switch
provides greater aggregate bandwidth compared to traditional two-port bridges
used for connecting rings (or LAN segments). The greater bandwidth delivers
higher overall LAN performance and enables Token Ring networks to extend the
usefulness of Token Ring LANs.
Internetworking Components. An increasing number of departmental LANs are
being connected to one another by the use of internetworking components such as
bridges and routers. To address this market, Olicom has developed and markets a
range of products that includes local and remote bridges for PCs as well as
stand alone products. In addition, Olicom markets a multi-protocol router based
on Novell's NetWare multi-protocol router software. Olicom's internetworking
products currently consist of the following:
Local Bridge 16/4: connects two closely located LAN Token Rings into
one logical network and is available in ISA and MCA bus versions.
Wire Speed Bridge 16/4: connects two closely located LAN Token Rings
into one logical network and has a frame forwarding rate which is very
close to wire speed.
Remote Bridge 16/4: connects two geographically remote Token Rings
into one logical network, and integrates the features of an intelligent
hub. The remote bridge can connect up to 40 workstations through two STP or
UTP type Lobe Attachment Modules ("LAMs") and is available in stand alone
and rack mountable product designs.
Remote Multiport Bridge 16/4: connects up to four geographically
remote Token Rings to a central site, forming one logical network. This
product is available in stand alone and rack mountable product designs.
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Multi-protocol Router Adapter: ISA, EISA and MCA Token Ring NICs that
use Novell's NetWare Multi-protocol router software to create a low cost
router product which allows the interconnection of Token Ring and Ethernet
networks.
The connected rings for all bridges can be any combination of 4 Mbps and 16
Mbps Token Ring networks. The bridges are IBM-compatible, and manageable by IBM
LAN Manager, LAN Network Manager, HP OpenView for Windows and NetView. In
addition to running under the DOS operating system, the Remote Bridge 16/4 is
also capable of operating under IBM OS/2 LAN Server. The stand alone and rack
mountable bridges can also be managed through an out-of-band management facility
in case of network link failure, which maximizes network availability for the
end-user.
Included with all Token Ring bridge products is Olicom's Bridge Manager
utility software, which is an application interface program developed by Olicom
for use in conjunction with IBM LAN Network Manager for bridge configuring and
monitoring. Olicom's Bridge Manager software programs for PC-based and
integrated bridges support IBM LAN Network Manager protocol and Simple Network
Management Protocol ("SNMP"), use integrated, remotely managed filters, and
include WAN link utilization calculation and log performance counters for trend
analysis. In addition to being provided with Olicom bridges, this software is
marketed by Olicom to selected large OEMs, who integrate Olicom's software into
their own customers' products.
HUBs and Cabling Components. Olicom's Token Ring HUBs and cabling products
provide a broad range of connectivity options. Olicom's cabling components
currently include the following:
Controlled Access Unit ("CAU"): available with either UTP or STP
cabling support, the CAU connects the main ring and up to four LAMs, each
of which can have up to 20 nodes; the CAU and associated LAMs comprise an
IBM-compatible intelligent cabling system for Token Ring LANs that allows
the user to control ports on a network and perform automatic Token Ring
error recovery.
10-Port Controlled Attachment Module ("CAM"): integrates the features
of a CAU and LAM into one compact intelligent HUB that provides
connectivity for up to ten UTP nodes; the CAM can connect up to two 20-port
UTP or STP LAMs and provides a cost-effective solution for remote branch
offices and small workgroups. Olicom also markets a 20-Port CAM.
8-Port Multistation Access Unit ("MAU"): available with either UTP or
STP cabling support, the MAU has integrated diagnostic test circuitry
which, together with lobe activity light emitting diodes, indicates the
status of relays and provides an easy and efficient way to reset relays and
test the operation of the MAU.
All HUB products feature extensive network management support for IBM LAN
Network Manager, NetView and SNMP, as well as out-of-band management.
Repeaters, Converters and Filters. To extend the physical wiring lengths in
Token Ring networks, Olicom's product line includes a Fiber Converter 16/4
(which converts electrical signals to optical signals, and optical signals back
to electrical signals) and a copper signal Repeater 16/4 (which regenerates
signals traveling on copper wiring). Further, Olicom also markets a UTP Media
Filter 16/4, which is a low-cost filter assembly that limits the amount of
electro-magnetic noise radiated across unshielded cable.
Ethernet Products
Olicom's Ethernet products have enabled Olicom to further extend its
product line to products demanded by enterprises with networking environments
comprised of both Token Ring and Ethernet products.
Network Interface Cards. Ethernet NICs are compatible with most standard PC
architectures (including ISA, EISA and MCA), and support UTP and Coaxial (RG 58)
cabling systems (as well as 10Base5 cable through AUI-interface). Ethernet NICs
are compatible with the de facto standard set by Novell, which provides
end-users with ease of installation in all major network operating systems by
utilizing standard software drivers supplied by the network operating systems.
Additionally, Olicom's ISA/II products support
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standard NE2000+ drivers and also offer fiber connectivity. Olicom's Ethernet
products currently include the following:
Ethernet MCA Adapter: a 16-bit NIC which is fully compatible with IBM
PS/2 systems and compatibles, with connectivity for UTP, Coaxial (RG 58)
and AUI.
Ethernet EISA 32 Adapter: a 32-bit EISA bus-based NIC, with
connectivity for UTP, Coaxial (RG 58) and AUI.
Ethernet ISA Adapter: a 16-bit ISA bus-based NIC, with connectivity
for UTP, Coaxial (RG 58), AUI and fiber.
Ethernet GoCard(TM) PC Card Adapter: a credit card sized adapter for
notebook PCs equipped with PCMCIA expansion slots.
Ethernet GoCard(TM) LAN/Modem PC Card: an Ethernet adapter and 14.4
Kbps modem for notebook PCs equipped with PCMCIA expansion slots.
Ethernet PCI 32 Adapter: a 32-bit PCI bus-based NIC, with connectivity
for UTP, Coaxial (RG 58) and AUI.
HUBs and Cabling Components. Olicom provides managed and unmanaged
16-port and 9-port workgroup HUBs for Ethernet cabling systems.
Fast Ethernet Products
To meet the rapidly growing demand for better Ethernet LAN performance due
to the proliferation of high-usage workgroup and multimedia applications as well
as LAN-based Internet access, Olicom introduced a comprehensive range of Fast
Ethernet adapters during 1996, as follows:
Fast Ethernet MCA 10/100 Adapter: a 16-bit NIC which is fully
compatible with IBM PS/2 systems and compatibles, with connectivity for
RJ45 connectors. This NIC functions at either 10 Mbps or 100 Mbps.
Fast Ethernet ISA Adapter: a 16-bit ISA bus-based NIC, with
connectivity for RJ45 connectors. This NIC functions at either 10 Mbps or
100 Mbps.
Fast Ethernet PCI 10/100 Adapter: a 32-bit PCI bus-based NIC, with
connectivity for RJ45 connectors. This NIC functions at either 10 Mbps or
100 Mbps.
ATM Products
ATM has emerged as a high-speed standard in deploying a new generation of
client/server and multimedia applications in enterprise networks. ATM provides
the increased speed and greater bandwidth required at the desktop for these new
applications. In 1995, Olicom began shipping the first adapters in the
RapidFire(TM) family of 155 Mbps NICs:
RapidFire(TM) PCI ATM 155 Adapter: this adapter provides high
bandwidth and high network data throughput for high-demand workstations and
servers, and supports full duplex 155 Mbps communication. There are two
versions of this adapter: a multiport fiber version and a UTP 5 version.
CellDriver(TM) LAN Emulation Software: this driver technology for the
RapidFire(TM) family of Olicom ATM adapters enables existing, off-the-shelf
application software, such as Lotus Notes, to be used over ATM networks.
CellDriver(TM) technology has been licensed from Olicom by Microsoft.
STRATEGIC RELATIONSHIPS
Olicom's strategy of working with third parties to develop new product
capabilities has resulted in relationships with Cisco, Fujitsu Microelectronics
Ltd. ("Fujitsu"), TI, Intel Corporation ("Intel"), Novell, Olivetti S.p.A. and
its affiliates (collectively, "Olivetti"), and Hewlett-Packard France
("HP-France"). In
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addition, Olicom's strategic relationship with Lasat has now evolved into a
majority-ownership interest in Lasat. See "-- Business: Lasat Communications."
Olicom works jointly with these parties in the exchange of technical information
and the mutual development of products of common interest and benefit. These
strategic relationships provide Olicom with significant market feedback, which
Olicom utilizes in new product planning. These relationships are undertaken by
Olicom pursuant to agreements which do not involve the sharing of revenue or
(except as noted below) the payment of license royalties.
Cisco. During 1996, Olicom and Cisco signed a long-term agreement to
jointly develop Token Ring products and technology. As part of the agreement,
the two companies will co-develop a number of Token Ring switch products and
subsequently offer these products separately under each company's respective
brand name. Under the agreement, Cisco will also license core Token Ring
technology from Olicom, including Olicom's PowerMACH(TM) software, for use in
future Cisco internetworking products. Among the first products from the
alliance is a Token Ring switch that Olicom intends to focus on delivering
industry leading price/performance. In connection with the license of the Cisco
technology, Olicom has agreed not to enter into direct relationship with certain
vendors for the license, distribution or development of products based on, or
using, Cisco technology or its derivatives.
Fujitsu. Olicom has entered into a strategic cooperation agreement with
Fujitsu with respect to the development of ATM NIC chipsets.
TI. Olicom has worked closely with TI in the development and testing of 4
Mbps and 16/4 Mbps Token Ring adapter cards and in the development of optimized
software drivers for these adapters to provide full 16 Mbps performance.
Intel. Olicom has entered into an OEM agreement with Intel, whereby Olicom
sells to Intel 16/4 Mbps EISA, ISA and MCA NICs, together with UTP Media Filters
16/4.
Novell. Olicom and Novell are cooperating in developing and marketing PC
bridge and router technology. Part of the cooperation is Olicom's licensing of
its Bridge Manager utility software program to Novell, and Novell's licensing of
its NetWare multi-protocol router software to Olicom on an OEM basis.
Olivetti. Olicom has entered into a strategic development contract with
Olivetti pursuant to which Olicom will develop a network management system for
Token Ring LANs. In addition, Olicom and Olivetti have entered into additional
agreements for the development of software products such as Ethernet drivers, an
Error Rate Manager software management product, and UNIX stream-based protocol
software.
HP-France. As part of an OEM agreement, HP-France has purchased Olicom's
Ethernet ISA adapter cards to integrate into PCs with remote program load, for
the purpose of marketing LAN-ready workstations.
Lasat. Olicom initially purchased a minority stake in Lasat, a modem and
ISDN developer, in 1994. Since Olicom's initial investment, Lasat has supplied
core technology for Olicom's GoCard(TM) combo LAN/modem PC Cards. During the
first quarter of 1996, Olicom increased its investment in Lasat and now holds
75% of the share capital in Lasat. See "Lasat Communications."
SALES AND MARKETING
Olicom markets and sells its products through carefully targeted indirect
distribution channels that include distributors, VARs (including dealers,
systems integrators and other resellers) and OEMs.
Olicom's resellers generally represent other lines of products that are
complementary to, or compete with, those of Olicom. While Olicom encourages its
resellers to focus on Olicom products through marketing and support programs,
there can be no assurance that these resellers will not give higher priority to
products of other suppliers, thereby reducing the efforts devoted to selling
Olicom's products. As distributors, VARs and OEMs have no long-term obligations
to purchase products from Olicom, there is a risk of unanticipated declines in
sales to Olicom's material customers for competitive reasons or because of the
internalization of the manufacture of products purchased from Olicom on an OEM
basis.
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Olicom sells its products through distributors (such as Gateway 2000 Inc.,
Dell Computer Corporation, Ingram Micro Inc., Tech Data Corporation, Computer
2000 AG and Azlan Ltd.). As brand name awareness creates demand for products
from end-users, this channel relies heavily on vendor activity, promotional
materials, advertising, show participation, direct marketing, joint selling and
similar activities to create demand, especially at the dealer level.
Olicom's products are also sold through VARs, who are experienced in the
sale and support of complex networking solutions in vertical markets. Resellers
generally provide a more basic level of systems integration and support than is
available from OEMs or VARs. VARs typically integrate Olicom products into
complex host environments, as well as into internetworking connectivity, and
provide comprehensive training and direct technical support to end-users. The
provision of such services often plays an important role in large end-user
accounts. Olicom has been increasingly successful in selling its Token Ring and
Ethernet products through VARs and intends to build on this success by extending
VAR programs.
Olicom's products are also sold through OEMs, who sell Olicom's products
under their own private label and/or who license Olicom's technology to
integrate it into their own proprietary hardware systems or special platforms.
Olicom's marketing programs include generating sales leads for its
resellers, supporting the efforts of its distributors, VARs and OEMs through
sales tools, including demand creation through telemarketing, and extensive
training, and creating brand name recognition of Olicom and its products. Brand
name recognition is enhanced through frequent participation in industry trade
shows, seminars and meetings, advertisement in major trade and other
publications, on-going communication with end-users of Olicom products, and
participation in public benchmark testing. In addition, Olicom undertakes
mailings of sales literature, technical articles and product evaluations, and
provides sales manuals and demonstration kits. Further, Olicom assists its
distributors, VARs and OEMs with on-site support by way of sales presentations
and product demonstrations. Olicom has also developed a significant marketing
presence on the Internet and promotes its products and services through its own
World Wide Web server. This medium allows all publicly available Olicom
literature to be accessible to anyone who has an Internet connection.
Olicom's distributors, VARs and OEMs generally have non-exclusive
agreements with Olicom, and purchase Olicom's products at discounts that are
typical in the industry. As is common in the LAN industry, distributor inventory
is protected with respect to price as to inventories that a distributor may have
on hand at the time of a change in the published list price, and with respect to
the rotation of slow-moving inventory in exchange for other products of equal
value.
Olicom markets its products worldwide, having established distribution
channels in North and South America, Eastern and Western Europe, Australia,
South Africa, Southeast Asia and elsewhere. Olicom has sales representatives in
the major metropolitan areas of North America and on the major continents,
including the key Western European markets. Olicom intends to further increase
its presence in various local markets.
During 1996, approximately 37% of Olicom's total sales were concentrated in
North America, European sales accounted for approximately 58% of total sales,
and Australia and other markets were responsible for approximately 5% of total
sales. See note 10 to the Consolidated Financial Statements of Olicom (the
"Olicom Consolidated Financial Statements") for information relating to net
sales during 1994, 1995 and 1996 by geographical market, as well as information
regarding net sales during 1994, 1995 and 1996 to major customers.
Olicom's international sales headquarters are located in Copenhagen. The
marketing of products in North and South America is coordinated through Olicom
Americas, which is headquartered in Plano, Texas. Olicom also maintains regional
sales offices in Austria, Australia, France, Germany, Italy, The Netherlands,
Spain, Singapore, South Africa and the United Kingdom.
As Olicom conducts its business worldwide, Olicom's sales may be affected
by changes in demand resulting from fluctuations in currency exchange rates, as
well as by governmental controls and other risks associated with international
sales (such as export licenses, political instability, trade restrictions and
changes in tariff and freight rates). Olicom generates sales primarily in U.S.
dollars and incurs expenses in a number of
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currencies, principally in U.S. dollars and Danish kroner. Although Olicom seeks
to manage its foreign currency exposures by matching non-dollar revenues and
expenses and by entering into hedging transactions, there can be no assurance
that exchange rate fluctuations will not have a material adverse effect on
Olicom's business, financial condition or results of operation.
Olicom operates with a relatively short-term backlog, and substantially all
of its net sales in each quarter result from orders booked within a generally
short cycle between order and shipment (typically less than 45 days). As a
result, if near-term demand for Olicom's products weakens or if significant
anticipated sales in any quarter are not realized as expected, Olicom's net
sales for that quarter could be adversely affected. Olicom does not believe that
its backlog as of a particular date is indicative of future sales levels.
Olicom's net sales may fluctuate as a result of other factors, including
increased price and other competition, the timing of significant orders,
announcements of new products by Olicom or its competitors, variations in net
revenues by product and distribution channel, decisions by distributors and OEMs
as to the quantity of Olicom's products to be maintained in inventories, delays
in shipment of existing or new products, and capital spending patterns of
end-users.
SUPPORT
Olicom's products are supported by Olicom's distribution partners, who, in
turn, have access to Olicom's sales support engineers, field engineers and
training specialists for end-user support. Olicom's resellers and large accounts
receive sales and technical training from Olicom at its training centers in
Copenhagen and Plano, as well as at resellers' offices. Olicom conducts
refresher/new products courses for resellers and large end-users of its
products, in which features of such products and their installation, aspects of
networking principles, and solutions to known problems are addressed. Olicom
provides on-line information access through the World Wide Web, electronic
bulletin boards, CompuServe and the Internet, as well as additional technical
support, available by telephone and telefax during extended business hours.
Depending on the distribution channel, Olicom's products generally are
warranted to be free of defects in materials and workmanship for one to three
years. Before and after the expiration of the product warranty period, Olicom
offers factory-based support, parts replacement and repair services. To date,
Olicom has not encountered any significant product maintenance problems. During
1995, Olicom introduced a limited lifetime warranty to registered users of NIC
products.
RESEARCH AND DEVELOPMENT
Olicom believes that its future success depends in substantial part on the
timely enhancement of existing products, together with the development of new
products that maintain technological excellence. Olicom is currently developing
new products and enhancements to existing products, to further improve
performance, increase price competitiveness, assure continued interoperability,
and increase market share. During 1994, 1995 and 1996, Olicom incurred expenses
of $7,531,000, $9,193,000 and $12,852,000, respectively, with respect to
research and development activities. In 1994, 1995 and 1996, Olicom's research
and development expenditures were 6.6%, 7.2% and 7.6% of net sales,
respectively. See "Olicom A/S -- Management's Discussion and Analysis of
Financial Condition and Results of Operation."
Although Olicom believes that it has certain technological and other
advantages over its competitors, maintaining such advantages will require
continued investment by Olicom in product development and marketing. There can
be no assurance that Olicom will be able to make the technological advances
necessary to maintain such competitive advantages. Further, there can be no
assurance that Olicom's products will not be rendered obsolete by new industry
standards or changing technology.
Olicom's testing laboratories in Copenhagen and Plano conduct ongoing tests
for interoperability with IBM and other vendors' products and perform benchmark
testing. Olicom is a beta partner of IBM, Novell and Microsoft, which provides
Olicom with timely access to new versions of these vendors' LAN operating system
software and facilitates Olicom's development of interoperable software drivers
for its NICs. During 1996 Olicom also participated in a large number of
interoperability testing sessions at several venues, such as
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the University of New Hampshire (UNH) ATM and Token Ring testing, the PCI SIG
(Special Interest Group) interoperability testing and others.
During 1996, Olicom introduced a complete new range of Ethernet 10/100 PC
adapters including NICs for PCI, ISA and MCA busses. Included with the products
are drivers for both Windows 95, Windows NT and Novell NetWare. Olicom is
currently developing LAN products for Token Ring, Ethernet and ATM. Included are
both adapter products and switch products. It is the intention of Olicom to
maintain its position as a quality supplier of LAN products including the newest
technologies, such as Dedicated Token Ring and adapters supporting the newest PC
Bus standards such as PCI and Cardbus.
Among Olicom's current development projects is a Token Ring switch
co-development project with Cisco. By combining Cisco's switching technology
with Olicom's Token Ring technology, including development of application
specific integrated circuit ("ASIC")-based Token Ring protocol handlers, the two
companies plan to launch competitive and state-of-the-art Token Ring switching
products during 1997. Olicom is also continuing its investment in ATM technology
and plans to release a number of new ATM switching products during 1997.
Schedules for the development of high technology products are inherently
difficult to predict, and there can be no assurance that Olicom will achieve its
scheduled initial customer shipment dates. In addition, as Olicom's strategy is
driven in significant part by customer demand, its product development schedules
are inherently subject to revision as a result of indications of change in the
requirements of its customers. Olicom's business, financial condition or result
of operations could be adversely affected if Olicom were to incur significant
delays or be unsuccessful in developing these or other new products or
enhancements, or if any such products or enhancements did not gain market
acceptance.
MANUFACTURING AND DISTRIBUTION
Olicom outsources the entire production volume in its three basic product
areas: NICs, internetworking products, and wiring components. The products are
manufactured in fully automated, high-quality production lines utilizing Surface
Mounting Technology ("SMT") techniques. The products are manufactured to meet
Olicom specifications on a turnkey basis by three different manufacturers:
GSS/Array. GSS/Array Technology Inc. manufactures Token Ring NICs and
wiring components. GSS/Array utilizes two production sites for deliveries
to Olicom, one in Thailand and one in the United States.
SCI. SCI Thailand Ltd. manufactures Ethernet and Token Ring NICs,
certain modem products and wiring components. SCI utilizes two production
sites for deliveries to Olicom, one in Thailand and another in the United
States.
Dovatron. Dovatron Ireland B.V. manufactures Ethernet NICs and wiring
components in its plant in Ireland.
While Olicom believes that additional capacity is available from other
manufacturers, an interruption in its existing subcontract manufacturing
arrangements could have a material adverse effect on Olicom's business,
financial condition or result of operations.
Olicom's manufacturing strategy is to combine Far East-based low-cost
manufacturing with U.S. compliant manufacturing for sales to governmental
agencies in the United States. Olicom's manufacturing strategy and goal is to
achieve short time-to-market cycles of 7-12 weeks from completion of product
design to start of volume production. Olicom manages quality assurance of its
products through extensive quality control procedures which Olicom believes have
been instrumental in achieving the superior performance and reliability of its
products.
Olicom's distribution strategy is to maintain finished goods inventories at
Olicom distribution centers at a minimum level of typically 1-2 months of
equivalent sales volume. Distribution effectiveness is optimized through direct
customer delivery and factory shipments to Olicom's distribution centers in
Copenhagen and Plano, Texas.
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Components and sub-assemblies for Olicom's products are procured by
Olicom's manufacturers directly from third party vendors, except for certain
critical components, including chipsets and ASICs. Olicom has entered into a
number of volume purchase agreements with major material vendors in order to
secure material availability and the most favorable terms and conditions for
material procurement.
Olicom has not experienced any significant problems in obtaining required
supplies of sole or limited source components. However, the inability to develop
alternative sources of supply, if required, or a reduction or interruption in
supply or a significant increase in the price of one or more critical
components, could materially and adversely affect Olicom's business, financial
condition or results of operations and could negatively impact customer
relationships.
Olicom has granted certain customers a non-exclusive license to use,
manufacture and sell products currently being manufactured and sold by Olicom on
an OEM basis. Such licenses generally become effective in the event that Olicom
discontinues manufacturing the products being purchased by such customer, or is
unable to provide specified quantities of products or levels of quality, and/or
upon the bankruptcy or insolvency of Olicom. The grants of manufacturing rights
are not subject to payment of royalties.
COMPETITION
The LAN industry is intensely competitive and is characterized by rapid
technological advances and evolving industry standards. The industry can be
significantly affected by new product introductions, increased product
capabilities, and improvements in the relative price and performance of
networking products, as well as by the market activities of industry
participants. Olicom's competition in the market for network interconnection
products is primarily derived from other vendors and manufacturers of LAN
products (such as IBM, Madge and 3Com).
IBM is both the dominant supplier of Token Ring network products and an
established vendor of computer and networking systems and products to a
substantial number of existing and potential end-users of Olicom products. As a
result, Olicom believes that, in order to compete successfully in the market to
Token Ring network products, Olicom's products and systems must have more
features, greater functionality and performance, and/or lower prices than those
offered by IBM. In addition, from time to time IBM establishes strategic working
relationships with independent networking vendors relating to IBM's long-term
product development programs. If IBM were to select, on a preferential basis,
one or more of Olicom's competitors for such relationships, Olicom's business,
financial condition or results of operations could be materially and adversely
affected.
The principal competitive factors in the markets served by Olicom include
product quality and functionality, compatibility, interoperability, performance,
reliability, product support, customer satisfaction, price and vendor
reputation. While Olicom believes that it has competed effectively to date,
competition in the industry is likely to intensify as current competitors expand
their product lines and new companies enter the market.
An increase in competition could have a material adverse effect on Olicom's
business, financial condition or results of operations because of price
reductions and/or loss of market share. There can be no assurance that Olicom
will be able to compete successfully in the future with these existing or
potential competitors. Olicom believes that price competition has been
increasing and will continue to increase. Such price competition is the result,
in part, of price decreases announced by IBM and other competitors on
competitive products, as well as the success of Olicom and its competitors in
successfully engineering cost reductions into their products and the entrance of
new competitors into the market. Olicom's ability to compete successfully with
current and potential competitors will depend to a significant extent on its
ability to continue developing technologically superior products and to adapt to
changes in the marketplace. There can be no assurance that price competition
will not have a material adverse effect on Olicom's business, financial
condition or results of operation.
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LASAT COMMUNICATIONS
Lasat became a majority-owned subsidiary of Olicom during the first quarter
of 1996. Lasat's principal products include desktop modems and PC-Card modems
for mobile computers. Lasat also produces modems for ISDN-based communication.
Lasat markets and sells its products through carefully targeted indirect
distribution channels that include distributors, OEMs and co-branding agreements
with Internet service providers. Lasat is currently developing new products and
enhancements to existing products, to further improve performance, increase
price competitiveness, assure continued interoperability, and increase market
share.
Lasat outsources its entire production volume, which are manufactured to
meet Lasat specifications on a turnkey basis in fully automated, high-quality
production lines utilizing Surface Mounting Technology techniques.
The modem industry is intensely competitive and is characterized by rapid
technological advances and evolving industry standards. The industry can be
significantly affected by new product introductions, increased product
capabilities, and improvements in the relative price and performance of modem
products, as well as by the market activities of industry participants. Lasat's
competition is primarily derived from other vendors and manufacturers of modem
products (including U.S. Robotics Corporation, among others).
PROPRIETARY RIGHTS
Olicom does not hold any patents and relies upon a combination of copyright
and trade secret laws to establish and maintain proprietary rights in its
products. There can be no assurance that such measures are or will be adequate
to protect Olicom's proprietary technology. Although Olicom believes that its
products and technology do not infringe the proprietary rights of others, and
Olicom does not have any knowledge that its products infringe the proprietary
rights of any third parties, there can be no assurance that third parties will
not assert infringement claims in the future or that such claims will not be
successful.
In addition, Olicom generally enters into confidentiality agreements with
its customers, suppliers and industry partners, and limits access to sensitive
information. Despite these precautions, it may be technologically possible for
competitors of Olicom to "reverse engineer" or otherwise obtain information
regarding aspects of Olicom's products that Olicom regards as proprietary. The
laws of some foreign countries in which Olicom sells or may sell its products do
not protect Olicom's proprietary rights in its products to the same extent as do
the laws of the Kingdom of Denmark and/or the United States.
Olicom believes that, due to the rapid pace of innovation within the LAN
industry, factors such as the technological and creative skills of its personnel
and ongoing product support are as important in establishing and maintaining a
leadership position within the industry as are the various legal protections of
its technology.
Certain technology used in Olicom's products is licensed, generally on a
non-exclusive basis, by Olicom from third parties. These license agreements
generally require Olicom to pay royalties and to fulfill confidentiality
obligations in order to maintain the licenses. Olicom has entered into a
non-exclusive license agreement under certain patents relating to Token Ring
technology that were issued to Olaf Soderblom in the United States and a number
of foreign countries, and have been assigned to Willemijn Houdstermaastschappij
BV ("Willemijn"). During 1996, Olicom settled litigation commenced by Olicom
against Willemijn regarding the license agreement and its obligations
thereunder.
TRADEMARK AGREEMENT
The trademark "Olicom" (the "Trademark") is a registered trademark of
Olivetti S.p.A., which has granted Olicom a worldwide, royalty-free license to
use the Trademark pursuant to a Trademark Agreement effective September 2, 1992.
During such period as Olicom is the licensee of the Trademark and for a period
of one year after any termination of the license thereof, Olivetti S.p.A has
agreed not to use itself or grant to a third party any rights to use the
Trademark on products of the type manufactured or marketed by Olicom. The
initial term of the license was three years, and the license automatically
renews on a yearly basis, unless either
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party gives the other 12 months' notice of termination. In the event that the
license of the Trademark were terminated, Olicom would be required to change its
name and cease using the Trademark on its products. A change in Olicom's name
and the creation of a new trademark could involve significant expense and the
possibility of customer confusion, which in turn could have a material adverse
effect on Olicom's business, financial condition or results of operations.
EMPLOYEES
As of January 1, 1997, Olicom employed or retained (as employees or
independent contractors) approximately 480 persons, including 195 in sales and
marketing, 115 in product research and development, 90 in operations/production
including quality assurance, and 80 in administration and finance. Of these
employees and independent contractors, approximately 125 were located in the
United States, 50 were located in Olicom's offices in Europe, South Africa,
Singapore and in Australia, and the remainder were located in Denmark.
Approximately 60 persons of the 480 were employed by Lasat.
None of Olicom's employees is represented by a labor union. Olicom has not
experienced any work stoppages and considers its relations with its employees to
be good.
Competition in the recruiting of highly-qualified personnel in the computer
and communications industry is intense. Olicom believes that its future success
will depend, in part, on its continued ability to hire, motivate and retain
qualified management, marketing and technical personnel. To date, Olicom has not
experienced any difficulty in attracting and retaining qualified employees.
Olicom has experienced significant growth in the past, which has required
that Olicom continue to improve its operational and financial systems, and
train, motivate and manage its employees. If management is unable to manage
Olicom's growth effectively, or if the productivity of its sales force falls
below expectations, Olicom's business, financial condition or results of
operations could be materially and adversely affected. There can be no assurance
that Olicom will be able to sustain growth.
OLICOM SHARE INCENTIVE PLANS
At April 1, 1997, Olicom had issued warrants and options to its employees
and directors, and employees and directors of Olicom Americas, to purchase an
aggregate of 663,200 shares of Olicom Common Stock under Olicom's share
incentive plans. The exercise price for such warrants and options ranges from
$5.98 to $12.00. Such warrants and options terminate on various dates through
May 1, 2001. At April 1, 1997, warrants and options to purchase an aggregate of
160,000 shares of Olicom Common Stock were held by the directors and executive
officers of Olicom.
PROPERTIES
Olicom's principal administrative, marketing, product development, support
facilities, and training center, as well as a warehouse and distribution
facility, are located in a modernized three-story building and a newly-
constructed adjacent building in Lyngby in the greater Copenhagen area where
Olicom presently leases a total of approximately 125,000 square feet of floor
space as its international headquarters.
Olicom leases its international headquarters from a third-party lessor
pursuant to a lease that may be terminated by the lessor or Olicom commencing in
2008, upon six months' notice, and which provides for increases in annual
rentals based on the increase in the Danish net price index, with an agreed
annual minimum increase of 2.5%. An immediately adjacent building that forms
part of Olicom's headquarters complex is leased from a third party lessor
pursuant to a lease that may be terminated by either party commencing in 2006,
upon 12 months' notice, and which provides for an increase in annual rental
payments based on the increase in the Danish net price index, with an agreed
annual minimum increase of 2.5%. During 1996, Olicom leased additional space
adjacent to its international headquarters from a third party lessor pursuant to
a lease that may be terminated by either party commencing in 2006, upon 12
months' notice, and which provides for an increase in annual rental payments
based on the increase in the Danish net price index, with an agreed annual
minimum increase of 2.5%. Olicom believes that its existing facilities are
adequate for
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its current needs. Olicom believes that suitable space is available in the
Copenhagen area and that the three facilities should provide sufficient
additional space for foreseeable future expansion in Copenhagen.
Olicom currently leases an aggregate of approximately 29,000 square feet of
office and warehouse space in metropolitan Dallas, Texas, to support North and
South American sales and marketing. Furthermore, Olicom leases office space in
the following cities to support sales and marketing in Europe: Milan, Italy;
Middlesex, U.K.; Munich and Morfelden, Germany; 's-Hertogenbosch, The
Netherlands; Nanterre, France; Madrid, Spain; and Vienna, Austria. Olicom also
leases space for sales offices in Singapore; Tokyo, Japan; Sydney, Australia;
and Sandton, South Africa. Olicom believes that suitable additional space will
be available in such locations as required.
LEGAL PROCEEDINGS
From time to time, Olicom is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of May 2,
1997, Olicom was not a party to any legal proceedings, the adverse outcome of
which, in management's opinion, would have a material adverse effect on Olicom's
business, results of operations or financial position. See also "Olicom
A/S -- Business: Proprietary Rights."
In March 1995, Olicom settled a consolidated class action lawsuit captioned
In Re Olicom Securities Litigation, case no. 3-94-CV-0511-D, filed in the United
States District Court for the Northern District of Texas, alleging violations of
United States securities laws. The Stipulation of Settlement acknowledged that
Olicom denied liability. The Olicom Consolidated Financial Statements at
December 31, 1994, included a charge of $4.2 million, net of insurance coverage,
in connection with this settlement (see note 12 to the Olicom Consolidated
Financial Statements). On August 30, 1996, the court entered a final judgment of
dismissal with prejudice with respect to the consolidated action.
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SELECTED FINANCIAL DATA
The following table sets forth certain financial information with respect
to Olicom for the five years ended December 31, 1996. This information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Olicom Consolidated Financial
Statements and related notes included elsewhere herein.
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $68,411 $93,927 $113,604 $127,469 $168,228
Cost of sales............................................. 38,717 52,887 61,198 65,191 95,236
------- ------- -------- -------- --------
Gross profit.............................................. 29,694 41,040 52,406 62,278 72,992
------- ------- -------- -------- --------
OPERATING EXPENSES:
Sales and marketing....................................... 9,060 13,244 23,783 31,660 40,496
Research and development.................................. 4,484 5,870 7,531 9,193 12,852
Purchased research and development........................ 1,000 -- -- -- --
General and administrative................................ 1,893 3,094 4,440 5,662 6,848
Transaction-related expenses.............................. -- -- -- -- 3,787
Special charge regarding management change................ -- -- -- -- 1,402
------- ------- -------- -------- --------
Total operating expenses............................ 16,437 22,208 35,754 46,515 65,385
------- ------- -------- -------- --------
INCOME FROM OPERATIONS...................................... 13,257 18,832 16,652 15,763 7,607
Interest income, net...................................... 276 1,928 2,462 3,297 1,531
Foreign currency gains (losses)........................... (412) 27 19 (31) 675
Related party gain on sale of investment.................. -- -- -- -- 2,878
Settlement of litigation.................................. -- -- (4,200) -- --
------- ------- -------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 13,121 20,787 14,933 19,029 12,691
Provision for income taxes................................ 4,777 7,340 5,026 6,223 4,727
------- ------- -------- -------- --------
NET INCOME BEFORE CHANGE IN ACCOUNTING METHOD............... 8,344 13,447 9,907 12,806 7,964
Minority interest......................................... -- -- -- -- 539
Cumulative effect of change in accounting methods, net of
taxes................................................... -- -- 161 -- --
------- ------- -------- -------- --------
NET INCOME.................................................. $ 8,344 $13,447 $ 10,068 $ 12,806 $ 7,425
======= ======= ======== ======== ========
EARNINGS PER SHARE.......................................... $ 0.67 $ 0.85 $ 0.66 $ 0.87 $ 0.50
======= ======= ======== ======== ========
Cash dividends declared per share(1)...................... $ 0.06 -- -- -- --
WEIGHTED AVERAGE SHARES OUTSTANDING......................... 12,475 15,873 15,298 14,748 14,786
======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $53,237 $68,481 $ 66,427 $ 78,600 $ 86,407
Total Assets.............................................. 84,690 90,240 108,917 127,327 127,924
Current portion of long-term obligations.................. 97 7 -- -- --
Long-term obligations, less current portion............... 323 152 -- -- --
Total stockholders' equity................................ 62,117 77,885 78,191 90,127 97,509
</TABLE>
- ---------------
(1) In June, 1992, Olicom paid a dividend of DKK 0.3509 ($0.06) per Common
Share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
With the exception of historical information, certain of the matters
discussed in this report contain trend analysis and other forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such forward-looking statements involve risks and
uncertainties, including, without limitation, the risks and uncertainties
described under the caption "Risk Factors," together with such risks and
uncertainties as are described in registration statements, reports and other
documents filed by Olicom from time to time with the Commission pursuant to the
Securities Act and the Exchange Act. Such risks and uncertainties could cause
Olicom's actual consolidated results for 1997 and beyond to differ materially
from those expressed in any statements made by, or on behalf of, Olicom. The
following discussion should be read in conjunction with the Olicom Consolidated
Financial Statements and related notes.
OVERVIEW
Olicom's wholly-owned subsidiaries include Olicom Ventures A/S (Connect
International A/S) ("Olicom Ventures"), Olicom Finance Limited and Olicom
Trading A/S. Olicom Americas is a wholly-owned subsidiary of Olicom Trading A/S,
and Olicom's interest in Lasat is held by Olicom Ventures.
Olicom's functional currency is the U.S. dollar. Olicom prepares its
financial statements in U.S. dollars and in accordance with accounting
principles generally accepted in the United States. References herein to "U.S.
dollars" or "$" are references to United States currency, and references to
"Danish kroner," "kroner" or "DKK" are references to Danish currency.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as percentages of Olicom's net sales. Olicom 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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 53.9 51.1 56.6
----- ----- -----
Gross profit...................................... 46.1 48.9 43.4
Operating expenses:
Sales and marketing....................................... 20.9 24.8 24.1
Research and development.................................. 6.6 7.2 7.6
Purchased research and development........................ -- -- --
General and administrative................................ 3.9 4.4 4.1
Transaction-related expenses.............................. -- -- 2.3
Special charge regarding management change................ -- -- 0.8
----- ----- -----
Total operating expenses.................................... 31.4 36.4 38.9
----- ----- -----
Income from operations...................................... 14.7 12.5 4.5
Interest income, net...................................... 2.2 2.4 0.9
Foreign currency gains (losses)........................... -- -- 0.4
Related party gain on sale of investment.................. -- -- 1.7
Settlement of litigation.................................. (3.7) -- 1.7
----- ----- -----
Income before income taxes.................................. 13.2 14.9 7.5
Provision for income taxes................................ 4.4 4.9 2.8
----- ----- -----
Net income before change in accounting method and minority
interest in income of consolidated subsidiary............. 8.8 10.0 4.7
Minority interest in income of consolidated subsidiary.... -- -- 0.3
Cumulative effect of change in accounting methods, net of
taxes.................................................. 0.1 -- 0.3
----- ----- -----
Net income.................................................. 8.9% 10.0% 4.4%
===== ===== =====
</TABLE>
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<PAGE> 98
Years Ended December 31, 1996 and 1995
Net Sales. Net sales increased from $127.5 million in 1995 to $168.2
million in 1996. Net sales in North and South America (the "Americas") increased
from $52.2 million in 1995 to $61.7 million in 1996, while sales outside of the
Americas increased from $75.3 million in 1995 to $106.5 million in 1996. The
increase in net sales in 1996 was principally due to the inclusion since January
1, 1996, of the net sales (almost exclusively in Europe) of Lasat, as well as
increases in sales of Olicom's network interface cards. In addition to these
factors, the increase in Olicom's net sales during 1996 resulted from greater
market penetration across most of Olicom's geographic regions, as well as from
increased unit sales to a broad range of customers and expansion of Olicom's
distribution channels, as a result in substantial part of refinements in
marketing and product strategies implemented by Olicom. As a result thereof,
Olicom brand-name sales (which increased 28% and 18% during 1995 and 1996,
respectively) constituted 79% of net sales during fiscal year 1996, Lasat brand-
name sales constituted 15% of net sales, while sales to OEMs (which decreased
43% in 1995 and 37% in 1996) accounted for 6% of net sales. This trend reflects
a continuation of Olicom's emphasis on brand-name sales, as such sales accounted
for 89% of net sales in 1995, while sales to OEMs constituted 11% of net sales
during the same period. While Olicom is unable to predict the relative mix of
brand-name and OEM sales during 1997, it is possible that sales of private label
products to OEMs may continue to decrease during 1997.
During 1996, Olicom's revenues were favorably influenced by several other
factors, including the continued success of Olicom's main products, Token Ring
NICs, and in general, the continued demand for LANs and the networking and
internetworking products marketed by Olicom. During the year, Olicom continued
to increase unit sales of NICs.
Sales of infrastructure products, which include switches, intelligent HUBS
and bridge products, decreased from $18.5 million in 1995 to $17.2 million in
1996. Sales of all adapter card products represented 85.5% and 74.4% of net
sales in 1995 and 1996, respectively. Olicom anticipates that a significant
portion of its revenues during 1997 will continue to be derived from sales of
NICs.
Sales to a single distributor were $12.8 million, or 7.6% of net sales, in
1996, compared to $13.9 million, or 10.9% of net sales during 1995.
Gross Profit. Gross profit increased by 17.2%, from $62.3 in 1995 to $73.0
million in 1996, and decreased as a percentage of net sales from 48.9% in 1995
to 43.4% in 1996. The decrease in gross margins was primarily due to the
inclusion of Lasat in the results of Olicom's operations, as Lasat operates at a
lower average gross margin than Olicom has historically experienced. However,
gross margins were favorably impacted by cost reductions resulting primarily
from cost improved product designs, volume-based component purchasing
efficiencies, large-scale purchasing and manufacturing, and continued reductions
in other material costs. Gross margins during 1996 continued to benefit from a
higher percentage of sales to distributors, on which Olicom typically realizes
higher margins than on sales to OEMs.
Olicom believes that gross margins may decline in the future, as Olicom's
products face increased price pressures and to the extent that Olicom's product
mix shifts toward lower margin Ethernet and modem products. Olicom will continue
to seek reductions in manufacturing costs to enable it to remain price
competitive and to lessen the impact that price reductions may have on gross
margins.
Sales and Marketing. Sales and marketing expenses increased from $31.7
million in 1995 to $40.5 million in 1996, but decreased as a percentage of net
sales from 24.8% in 1995 to 24.1% in 1996. The increase in the amount of such
expenses during 1996 was primarily due to increased marketing activities in the
United States, Europe and the Far East, including increased travel, office and
personnel expenses and due to the inclusion of Lasat's operations within the
Olicom group. During the year, Olicom committed significant additional resources
to support its direct sales organization and expand its marketing organization
and programs both in the United States and in Europe.
Research and Development. Research and development expenses increased from
$9.2 million in 1995 to $12.9 million in 1996, and increased as a percentage of
net sales from 7.2% in 1995 to 7.6% in 1996. The increase in such expenses was
primarily attributable to increased personnel associated with enhancements of
current products and to expenditures related to new product development,
including ATM and LAN
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<PAGE> 99
switching. The inclusion of Lasat's operations within the Olicom group also
contributed to higher research and development expenses during 1996.
Olicom considers research and development expenditures to be critical to
future net sales and intends to continue these expenditures at a level that
constitutes a significant percentage of net sales.
All of Olicom's research and development expenses have been charged to
operations as incurred, net of a $953,000 subsidy received from a Danish
government agency in support of ATM and LAN switching activities. The subsidy
will be repaid in the form of a royalty if and when revenue from such switching
products is realized.
General and Administrative. General and administrative expenses increased
from $5.7 million in 1995 to $6.8 million in 1996, but decreased as a percentage
of net sales from 4.4% in 1995 to 4.1% in 1996. These increased expenses
reflected the inclusion of Lasat's operations within the Olicom group, together
with the expense of salaries for additional personnel and costs related to
increases in volume.
Transaction-Related Expenses and Other Charges and Income. During the first
quarter of 1996, Olicom purchased an additional 40% interest in Lasat, which
resulted in Olicom holding 75% of Lasat's share capital. During 1996 Olicom also
made a subordinated convertible loan to a Danish ISDN hardware and software
development company. For fiscal 1996, a $3.8 million non-recurring charge was
taken as a result of the write-off of in-process engineering and development
projects of Lasat, other transaction-related expenses in connection with these
investments, and the creation of a reserve with respect to the convertible loan.
Also during 1996 Olicom implemented certain management changes primarily in
its U.S. operations, which resulted in a special charge of $1.4 million.
During 1996 Olicom also completed the sale of its minority holding in
Contex A/S to Nilex ApS, a significant shareholder in Olicom and affiliate of
its managing director, resulting in a gain of $2.9 million net of taxes. See
"Interest of Management in Certain Transactions -- Contex A/S."
Income Taxes. Olicom's effective income tax rate increased from 32.7%
during 1995 to 37.2% for 1996. The increase in the effective tax rate was
primarily due to the fact that charges relating to transactions were not
deductible for tax purposes.
Years Ended December 31, 1995 and 1994
Net Sales. Net sales increased from $113.6 million in 1994 to $127.5
million in 1995. The growth in net sales in 1995 was principally the result of
increases in sales of NICs, as well as increased sales of Olicom's intelligent
HUB products. Sales of infrastructure products increased from $11.0 million in
1994 to $18.5 million in 1995, representing 9.7% and 14.5% of net sales in 1994
and 1995, respectively. Sales of all adapter card products represented 90.3% and
85.5% of net sales in 1994 and 1995, respectively. In addition to these factors,
the increase in Olicom's net sales during 1995 resulted from greater market
penetration across all of Olicom's geographic regions, except the U.S., where
sales declined 8.7% from $57 million in 1994 to $52 million in 1995.
The growth in sales in 1995 was due primarily to increased unit sales to a
broad range of customers and expansion of Olicom's distribution channels, as a
result in substantial part of marketing and product strategies previously
implemented by Olicom that placed greater emphasis on brand-name sales. As a
result of the success of this marketing program, brand-name sales (which
increased 84% and 28% during 1994 and 1995, respectively) constituted 89% of net
sales during fiscal year 1995, while sales to OEMs (which decreased 48% in 1994
and 43% in 1995) accounted for 11% of net sales. This trend reflected a
continuation of Olicom's increased emphasis on brand-name sales, as such sales
accounted for 79% of net sales in 1994, while sales to OEMs constituted 21% of
net sales during the same period.
During 1995, Olicom's revenues were favorably influenced by many other
factors, including the continued success of Olicom's main products, Token Ring
NICs, and in general, the continued demand for LANs and the networking and
internetworking products marketed by Olicom. During the year, Olicom continued
to increase unit sales of NICs.
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<PAGE> 100
During 1995, sales to a single OEM customer were $7.0 million, or 5.5% of
net sales, compared to $13.4 million, or 11.8% of net sales, during 1994. Sales
to one single distributor were $13.9 million, or 10.9% of net sales, in 1995,
compared to $6.7 million, or 5.9% of net sales during 1994.
Gross Profit. Gross profit increased by 18.8%, from $52.4 in 1994 to $62.3
million in 1995, and increased as a percentage of net sales from 46.1% in 1994
to 48.9% in 1995. The improvement in gross margin was due to cost reductions
resulting primarily from cost improved product designs, volume-based component
purchasing efficiencies, large-scale purchasing and manufacturing, and continued
reductions in other material costs. Moreover, a higher percentage of sales
during 1995 were to distributors, on which Olicom typically realizes higher
margins than on sales to OEMs.
Sales and Marketing. Sales and marketing expenses increased substantially
from $23.8 million in 1994 to $31.7 million in 1995, and increased as a
percentage of net sales from 20.9% in 1994 to 24.8% in 1995. The significant
increase in these expenses during 1995 was primarily due to increased marketing
activities in the United States, Europe and the Far East, including increased
travel, office and personnel expenses. During the year, Olicom committed
significant additional resources to support its sales organization and expand
its marketing organization and programs both in the United States and in Europe.
Research and Development. Research and development expenses increased from
$7.5 million in 1994 to $9.2 million in 1995, and increased as a percentage of
net sales from 6.6% in 1994 to 7.2% in 1995. The increase in such expenses was
primarily attributable to increased personnel associated with enhancements of
current products and to expenditures related to new product development,
including ATM and LAN switching.
All of Olicom's research and development expenses have been charged to
operations as incurred, net of a $598,000 subsidy received from a Danish
government agency in support of ATM and LAN switching activities. The subsidy
will be repaid in the form of a royalty if and when revenue from such switching
products is realized.
General and Administrative. General and administrative expenses increased
from $4.4 million in 1994 to $5.7 million in 1995, and increased as a percentage
of net sales from 3.9% in 1994 to 4.4% in 1995. These increased expenses
reflected salaries for additional personnel and costs related to the growth in
Olicom's revenues.
Income Taxes. Olicom's effective income tax rate decreased from 33.7%
during 1994 to 32.7% for 1995.
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<PAGE> 101
Recent Developments
The following table shows certain information relating to Olicom's results
of operations for the three months ended March 31, 1996 and 1997, respectively.
This information is unaudited, but has been prepared on the same basis as the
audited financial statements appearing elsewhere in this Joint Proxy
Statement/Prospectus, and in the opinion of Olicom's management, includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of operations for such periods. This data
should be read in conjunction with the audited financial statements of Olicom,
related notes and other financial information appearing elsewhere in this Joint
Proxy Statement/Prospectus. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenues.............................................. $32,147 $48,404
Cost of revenues.......................................... $20,330 $26,149
Operating expenses, exclusive of transaction-related
expenses and special charge............................. $14,514 $15,477
Transaction-related expenses and special charge regarding
management change....................................... $ 5,189 --
Income (loss) from operations............................. $(7,886) $ 6,778
Related party gain on sale of investment.................. $ 2,878 --
Net income (loss)......................................... $(3,238) $ 4,596
Earnings (loss) per share................................. $ (0.22) $ 0.31
</TABLE>
Olicom attributes the increase in net revenues during the three months
ended March 31, 1997 ("Q1 1997"), compared to the same period in the previous
year, to increased unit shipments of all product lines, which more than offset a
decline in average selling prices for such products. During the three months
ended March 31, 1996 ("Q1 1996"), revenues were negatively impacted by a
reorganization of Olicom's U.S. operations. The increase in income from
operations during Q1 1997 was due to increased gross margins, a decline in
recurring operating expenses as a percentage of net revenues, and the absence of
non-recurring charges. Olicom management believes that gross margins experienced
during Q1 1997 were more consistent with its historical range thereof, as gross
margins during Q1 1996 were negatively impacted by changes in Olicom's pricing
policy that were implemented during such period. In addition, the decrease in
operating expenses (exclusive of transaction-related expenses and special
charge) as a percentage of net revenues during Q1 1997 is attributed to Olicom's
leveraging of such expenses over an increased revenue base.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, Olicom funded its operations with cash from operations.
Olicom's available cash and short-term investments totaled $51.6 million as of
December 31, 1996, and represented 40.3% of total assets.
Olicom had unsecured line of credit facilities for an aggregate amount of
$11.0 million at December 31, 1996, of which no advances were outstanding at
such date. These facilities support foreign currency hedging and working capital
requirements.
The increase during 1996 in net cash from operating activities of $18.5
million was primarily due to cash from net income, a significant decrease in
inventory of $12.4 million and decreases in accounts receivable of $2.6 million.
Current liabilities were reduced by $7.0 million. Management believes that the
reductions in accounts receivable and in inventories were the results of
improved operating procedures.
Capital expenditures, less proceeds from sale of property, equipment and
businesses, during 1995 and 1996 were $1.1 and $1.0 million, respectively.
Capital expenditures, other than the purchase of an additional interest in
Lasat, were associated with the expansion of sales and marketing, research and
development and
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<PAGE> 102
general and administrative activities including a new integrated management
information system. At December 31, 1996, Olicom had no material commitments for
capital expenditures. See "Subsequent Event". Olicom believes that cash
presently at its disposal and cash generated from operations will be sufficient
to finance its operations and currently projected capital expenditures through
at least the next 12 months. Olicom expects to continue to make investments in
the future to support its overall growth. Currently, it is anticipated that
ongoing operations will be financed primarily from internally generated funds.
However, as indicated in Olicom's periodic filings with the Commission, there
are several factors that could affect Olicom's ability to generate cash from
operations in the future, including general economic conditions, market
competition and changes in working capital requirements. See also "Risk
Factors -- Risks Relating to Olicom and CrossComm." Olicom believes that its
anticipated cash flows from operations and access to debt and equity markets
will permit the financing of its business requirements in an orderly manner for
at least the 12-month period thereafter.
During the first quarter of 1996, Olicom purchased an additional 40%
interest in Lasat. The purchase price for this shareholding, net of cash
acquired, was $2.5 million.
To date, inflation has not had a material impact on Olicom's financial
results. Olicom presently intends to retain any earnings for use in its business
and, therefore, does not anticipate paying any cash dividends in the foreseeable
future. If and when dividends are paid, such payment will be made in kroner.
SUBSEQUENT EVENT
On March 20, 1997, Olicom entered into an Agreement and Plan of
Reorganization under which Olicom would exchange each outstanding share of
CrossComm Common Stock for $5.00 in cash, 0.2667 shares of Olicom Common Stock
and Warrants to acquire 0.1075 shares of Olicom Common Stock at an exercise
price of $19.74 per full share of Olicom Common Stock. Pursuant to the Merger
Agreement, Olicom expects to issue approximately 2,700,000 shares of its common
stock, Warrants to purchase approximately 1,100,000 additional shares of Olicom
Common Stock, and in addition, to issue options to purchase approximately
575,000 additional shares of Olicom Common Stock. The number of shares Olicom
Common Stock may be adjusted upward or downward under certain circumstances,
based on the high and low sales prices for Olicom Common Stock during a period
prior to Closing. The Merger, if consummated, will be accounted for using
purchase accounting, and Olicom anticipates recognizing a significant
non-recurring expense aggregating approximately $36,250,000 during the second
quarter of 1997 in order to write off in-process research and development. The
foregoing is a preliminary estimate of expense and therefore subject to change.
There can be no assurance that Olicom will not incur additional charges to
reflect costs associated with the Merger. The Merger is subject to approval by
the stockholders of both Olicom and CrossComm, as well as other conditions, and
if such approvals are obtained and the other conditions are satisfied, the
transaction is expected to become effective in June, 1997. Olicom anticipates
that the cash portion of the consideration (net of acquired liquid assets) will
be funded from available working capital. See "Risk Factors -- Risks Relating to
the Merger" for a discussion of numerous issues that must be successfully
managed to obtain the anticipated benefits from the Merger. The inability of
management to successfully integrate the operations of Olicom and CrossComm
pursuant to the Merger could have an adverse effect on the business, financial
condition or results of operations of the combined company.
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<PAGE> 103
MANAGEMENT OF OLICOM
The following table and discussion provides certain information about the
current directors, nominee for director and executive officers of Olicom:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH OLICOM
---- --- --------------------
<S> <C> <C>
Jan Bech........................... 57 Chairman of the Board
Bo F. Vilstrup..................... 54 Deputy Chairman of the Board
Lars Stig Nielsen.................. 55 Managing Director, Chief Executive Officer and Member of
the Board of Directors
Kurt Anker Nielsen................. 51 Member of the Board of Directors
Frank G. Petersen.................. 64 Member of the Board of Directors
Michael J. Peytz................... 40 Member of the Board of Directors
Anders Knutsen..................... 49 Nominee to the Board of Directors
Boje Rinhart....................... 48 Chief Financial Officer
J. Michael Camp.................... 47 President and Chief Executive Officer of Olicom Americas
Niels Christian Furu............... 40 Executive Vice President and Chief Operating Officer
</TABLE>
Mr. Bech has been Chairman of the Olicom Board since 1985. Mr. Bech
previously served as a Vice-President of Olivetti S.p.A., with responsibility
for the commercial activities of Olivetti in Scandinavia (from 1985 to 1992).
Mr. Vilstrup has been Deputy Chairman of the Board since 1992. He is an
attorney and has been a partner in the law firm of Lett, Vilstrup & Partnere,
Copenhagen, Denmark, since 1972.
Mr. Stig Nielsen is the founder of Olicom and has held the positions of
Managing Director, Chief Executive Officer and member of the Board of Directors
since 1985.
Mr. Anker Nielsen, a director of Olicom since 1993, has served as Chief
Financial Officer (since 1985) and Deputy Managing Director (since 1996) of Novo
Nordisk A/S, a biotechnology company that develops, produces and markets
pharmaceutical and biochemical products.
Mr. Petersen, a director of Olicom since 1996, was employed by IBM from
1957 until his retirement in 1994. At the time of his retirement, he served as
Chairman and President of IBM Nordic AB, with responsibility for IBM's
commercial activities in Scandinavia.
Mr. Peytz, a director of Olicom since 1996, has served as Division Director
for Alcatel Kirk A/S (since 1994), with responsibility for Alcatel's space
electronics business in Denmark. He previously was a management consultant with
McKinsey & Company (from 1985 to 1994).
Mr. Knutsen, a director nominee, has served as Managing Director and Chief
Executive Officer of Bang & Olufsen A/S (since 1991), a company that develops
and markets audio and visual products.
Mr. Rinhart has been Olicom's Chief Financial Officer since 1995. Prior to
joining Olicom, Mr. Rinhart was a partner in the management consulting firm of
Hjorth & Rinhart (from 1986 to 1995).
Mr. Camp has been the President and Chief Executive Officer of Olicom
Americas since May, 1996. Prior to joining Olicom Americas, Mr. Camp served as a
Vice-President and General Manager of the Multimedia Business Applications
Division at Northern Telecom Ltd. (from 1993 to 1996). Prior thereto, he served
as a Vice-President at Northern Telecom, where he served as General Manager of
its Data Networks Division (from 1992 to 1993), and as General Manager of its
Network Integration Division (from 1991 to 1992). Prior thereto, he served as
Director, Marketing of the Data Communications Systems Division at Northern
Telecom (from 1989 to 1991).
Mr. Furu has been Olicom's Executive Vice President and Chief Operating
Officer since May 1, 1997. Prior to joining Olicom, Mr. Furu served as
Vice-President of IBM Denmark and Director of Nordic PC Sales (from 1995 to
1997). Prior thereto, he served as Director of Sales for Finance and
Telecommunications for
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<PAGE> 104
IBM Denmark (from 1993 to 1995) and as Assistant to the General Manager of
Marketing, IBM Europe (from 1991 to 1993).
There are no family relationships among directors and executive officers of
Olicom or its subsidiaries.
The business of Olicom is managed under the direction of the Olicom Board.
The Olicom Articles provide for a board of directors of four to eight members,
to be elected by Olicom's stockholders to serve one-year terms. In addition,
directors may be elected for four-year terms by the employees of Olicom and its
Danish subsidiaries, in accordance with Danish law. The statutory rights of the
employees of Olicom and its Danish subsidiaries to representation on the Olicom
Board have not been exercised to date. Officers of Olicom serve at the
discretion of the Olicom Board.
Meetings and Committees of the Olicom Board. The Olicom Board meets during
Olicom's fiscal year to review significant developments affecting Olicom and to
act on matters requiring board approval. There were 11 meetings of the Olicom
Board during fiscal year 1996.
The Olicom Board has established an Audit Committee to assist it in the
discharge of its responsibilities. The Audit Committee recommends to the Olicom
Board a firm or firms of certified public accountants to conduct audits of the
accounts and affairs of Olicom and monitors the performance of such firm,
reviews accounting objectives and procedures of Olicom (including matters
relating to internal control systems) and the findings and reports of the
independent certified public accountants, and makes such reports and
recommendations to the Olicom Board as it deems appropriate. The Audit Committee
is comprised of three non-employee directors: Messrs. Bech (Chairman), Vilstrup
and Anker Nielsen. The Annual General Meeting of Olicom's stockholders appoints
Olicom's auditors.
The Olicom Board does not have a standing compensation committee, nor does
it have a nominating committee, or any other committee performing similar
functions. The functions customarily attributable to a compensation committee
and a nominating committee are performed by the Olicom Board as a whole.
Compensation of Directors and Executive Officers. An aggregate of
approximately $900,000 was paid by Olicom to its directors and executive
officers as a group (eight persons) for services rendered during fiscal year
1996 in all capacities, and approximately $560,000 was paid by Olicom during
fiscal year 1996 to its senior management, consisting of Olicom's Managing
Director and its Chief Financial Officer registered with the Commercial and
Companies Agency of the Kingdom of Denmark.
For fiscal year 1997, Olicom has proposed that nonmanagement directors
receive directors' fees as discussed above under "The Olicom Meeting -- Matters
to Be Considered at the Olicom Meeting: Proposal 6 -- Directors' Fees."
Olicom has entered into a service agreement (the "Employment Agreement")
with Mr. Stig Nielsen, Olicom's Managing Director and a member of the Olicom
Board. The Employment Agreement does not contain a term, but is terminable by
Olicom on 24 months' notice and is terminable by Mr. Stig Nielsen on six months'
notice. In the event that either party to the Employment Agreement commits a
gross breach of contract, the other party may immediately terminate the
Employment Agreement. The Employment Agreement prohibits Mr. Stig Nielsen from
competing with Olicom for a period of 18 months after termination of the
Employment Agreement, except in the event that the Employment Agreement is
terminated by Olicom or Mr. Stig Nielsen terminates the Employment Agreement as
a result of the gross breach thereof by Olicom.
Indemnification Agreements. Olicom has entered into Indemnification
Agreements with its directors, executive officers and certain key employees.
Each such Indemnification Agreement provides for indemnification of Olicom's
directors, executive officers and certain key employees to the fullest extent
permitted by the Companies Act. Additionally, Olicom Americas has entered into
Indemnification Agreements with its directors (which include Messrs. Bech, Stig
Nielsen, Camp and Max Jensen), executive officers and certain key employees.
Each such Indemnification Agreement provides for indemnification of the
directors, executive officers and key employees of Olicom Americas to the
fullest extent permitted by the DGCL.
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<PAGE> 105
To the extent that the Board of Directors of Olicom or Olicom Americas or
their respective stockholders may in the future wish to limit or repeal the
ability of Olicom or Olicom Americas to indemnify directors, executive officers
and key employees, such repeal or limitation may not be effective as to
directors, executive officers and key employees who are parties to such
Indemnification Agreements, because their rights to full protection will be
contractually assured by the Indemnification Agreements. It is anticipated that
similar contracts may be entered into, from time to time, with future directors,
executive officers and key employees of Olicom and Olicom Americas.
CERTAIN TRANSACTIONS
International Headquarters. K/S Ulrikkenborg, a limited liability
partnership (the "Landlord"), was organized in 1992 by management and senior
employees of Olicom for the purpose of acquiring the real property and
improvements thereon that are presently occupied by Olicom as its international
headquarters. The limited partners of the Landlord included Messrs. Lars Stig
Nielsen, Asbjo/rn Smitt, Kurt Nybroe-Nielsen (Olicom's former Deputy Managing
Director), Niels Jo/rgensen (Olicom's Vice President of Engineering), and Peter
Ryaa (Olicom's former Director of Finance).
During 1995, Olicom purchased from the Landlord the real property and
improvements thereon that comprised Olicom's headquarters for a consideration of
approximately $10.5 million. Such consideration was based on valuations of the
headquarters received from independent appraisers. During 1995, Olicom sold such
real property and improvements to an unaffiliated public property investment
company for a purchase price of $10.7 million, and simultaneously entered into a
lease of the headquarters with such property investment company that may be
terminated by Olicom or the lessor commencing in 2008.
Residential Property. Olicom previously owned residential property situated
in a suburb of Copenhagen which it leased to Mr. Stig Nielsen at an annual
rental approximately equal to Olicom's mortgage payments on the property. The
lease was not subject to termination by Olicom so long as Mr. Stig Nielsen
remained its Managing Director. Pursuant to the lease, Mr. Stig Nielsen had the
option to purchase the leased property commencing January 1, 1995, at a price
equal to the official valuation thereof. In December, 1995, Mr. Stig Nielsen
exercised such option and purchased the property for DKK 3.16 million
(approximately $570,000), such amount being equal to the official valuation
thereof.
Contex A/S. Pursuant to a Share Purchase Agreement between Olicom and Nilex
Systems ApS ("Nilex") dated January 23, 1996, Olicom transferred and assigned to
Nilex Olicom's minority interest in Contex A/S (the "Contex Interest"). The
purchase price for the Contex Interest was DKK 41,000,000 (approximately
$6,420,000), which resulted in a gain to Olicom of $2,900,000, net of taxes. The
purchase price for the Contex Interest was approved by a disinterested majority
of the Olicom Board, on the basis of an appraisal of the value of the Contex
Interest by an unaffiliated third party.
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<PAGE> 106
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 2, 1997,
concerning the beneficial ownership of each current director of Olicom, each
executive officer of Olicom, the directors and executive officers of Olicom as a
group, and each stockholder in Olicom known to the management of Olicom to own
beneficially more than 5% of the outstanding shares of Olicom Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER(1) OWNERSHIP(2) OF CLASS
---------------------- ------------ --------
<S> <C> <C>
The Lake Fund........................................... 2,394,201(3) 16.2%
Lars Stig Nielsen....................................... 2,066,330(4)(5) 14.0
Asbjorn Smitt........................................... 1,970,080(4) 13.4
Nilex Systems ApS....................................... 1,753,000(6) 11.9
Jan Bech................................................ 59,500(7) *
Boje Rinhart............................................ 29,150(8) *
Bo F. Vilstrup.......................................... 29,200 *
Kurt Anker Nielsen...................................... 1,400 *
Frank G. Petersen....................................... 5,000 *
Michael J. Peytz........................................ 2,000 *
J. Michael Camp......................................... 16,250(9) *
Niels Christian Furu.................................... -- --
All directors and executive officers as a group
(consisting of 9 persons)............................. 2,208,830(2)(3)(10) 14.9
</TABLE>
- ---------------
* Less than 1%
(1) The address of Mr. Stig Nielsen is Nybrovej 114, DK-2800 Lyngby, Denmark.
The address of Mr. Smitt and Nilex is Nordre Strandvej 214, DK-3140
Aalsgaarde, Denmark. The address of The Lake Fund is c/o Plevier
Beleggingen B.V., Roemer Visschherplein 19, 2106 AG Heemmstede, The
Netherlands.
(2) Sole voting and investment power, unless otherwise indicated. Percentages
in the foregoing table are based on 14,749,095 shares of Olicom Common
Stock issued and outstanding as of May 2, 1997.
(3) Based on information set forth in a Schedule 13D, dated March 3, 1997,
filed with the Commission by The Lake Fund.
(4) Includes 1,753,000 shares of Olicom Common Stock owned by Nilex, as to
which Messrs. Stig Nielsen and Smitt have shared voting and investment
power. See Note 5.
(5) Includes 46,250 shares of Olicom Common Stock which may be acquired
pursuant to options exercisable within 60 days from the date hereof.
(6) Mr. Stig Nielsen, Olicom's Managing Director, Chief Executive Officer and a
member of the Olicom Board, is an officer and director of, and (through
Eutronic Systems ApS ("Eutronic"), a corporation in which he holds 70% of
the share capital) a principal stockholder in, Nilex. Mr. Smitt is an
officer and director of, and (through Astronic ApS ("Astronic"), a
corporation in which he holds 70% of the share capital) a principal
stockholder in, Nilex. Eutronic is the holder of the share capital in
Astronic (a 30% interest) not owned by Mr. Smitt, and Astronic is the
holder of the share capital in Eutronic (a 30% interest) not owned by Mr.
Nielsen.
(7) Includes 7,500 shares of Olicom Common Stock which may be acquired pursuant
to options exercisable within 60 days from the date hereof.
(8) Includes 18,750 shares of Olicom Common Stock which may be acquired
pursuant to options exercisable within 60 days from the date hereof.
(9) Includes 6,250 shares of Olicom Common Stock which may be acquired pursuant
to options exercisable within 60 days from the date hereof.
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<PAGE> 107
(10) Includes an aggregate of 78,750 shares of Olicom Common Stock which may be
acquired pursuant to options exercisable within 60 days from the date
hereof.
As of the close of business on May 2, 1997, Cede & Co., the nominee of The
Depository Trust Company, held of record 11,972,555 shares of Olicom Common
Stock, or 81.2% of the outstanding shares of Olicom Common Stock, all of which
were held for the accounts of member firms and institutions participating in the
facilities of The Depository Trust Company.
CROSSCOMM CORPORATION
BUSINESS
CrossComm develops, manufactures, markets and supports advanced networking
products. These products concurrently support bridging, multi-protocol routing
and high speed LAN switching functions and ATM switching. CrossComm has marketed
these products to customers transitioning mission-critical business applications
from legacy hierarchical computing environments, typically dominated by IBM
mainframe systems with 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 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, CrossComm 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.
CrossComm'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 VARs and system integrators.
CrossComm 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."
CROSSCOMM PRODUCTS
CrossComm operates in one business segment known as enterprise networking.
CrossComm's products include a family of networking products that concurrently
support standard bridging, multi-protocol routing and high speed LAN and ATM
switching functions.
CrossComm'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.
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
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<PAGE> 108
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 16 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, CrossComm 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 (155 Mbps) and
DS3 speeds (45 Mbps). Also introduced were the Ethernet Segment Switch and the
Ethernet Workgroup Switch which support a variety of 10 Mbps and 100 Mbps port
configurations.
A major software addition to CrossComm'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
functionality.
SALES AND MARKETING
CrossComm utilizes a multi-channel distribution and sales network to market
its products. In the United States and Canada, CrossComm relies on a direct
sales organization complemented by VARs. From time to time, certain computer
systems companies purchase CrossComm's products for resale as part of an
integrated system offering to their end-users. CrossComm sells its products
internationally through distributors and through a direct sales organization in
the United Kingdom.
CrossComm has established marketing programs designed to identify
prospective customers and educate them about CrossComm's products. These
programs include telemarketing, distribution of sales and product literature,
trade shows, seminars, and direct mail programs. CrossComm believes that its
marketing programs enhance its effectiveness in selling to organizations in the
commercial computing environment.
CrossComm serves the United States and Canadian markets primarily through a
direct sales organization complemented by a VAR channel. CrossComm 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, CrossComm's domestic sales organization consisted of 34
individuals operating out of 15 sales locations in North America. As of February
21, 1997, CrossComm had also contracted with 50 VARs in cities across North
America to assist in the distribution of CrossComm products.
CrossComm's international sales are conducted primarily through
international distributors located in Europe. As of February 21, 1997, CrossComm
had 30 such distributors. During 1994, 1995 and 1996, CrossComm's international
sales were approximately 18%, 25% and 37%, 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 currency exchange rates, political
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<PAGE> 109
instability, trade restrictions, changes in duty rates and seasonality of
purchases. To date, CrossComm has not experienced any material difficulties
related to such factors.
CUSTOMERS AND BACKLOG
As of December 31, 1996, CrossComm 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 1994, 1995 or 1996. Because
substantially all of CrossComm's products are shipped within 30 to 60 days of
receipt of the order, CrossComm does not believe that its backlog as of any
particular date is indicative of future sales levels.
CUSTOMER SUPPORT AND SERVICE
CrossComm services, repairs and provides technical support for its
products. The majority of its service and support activities are related to
software and network configuration and are provided by telephone support and
remote telephone access from CrossComm's headquarters. Remote access is
accomplished through a telephone connection made directly from CrossComm's
office to the customer's network and enables CrossComm, in most instances, to
quickly diagnose network problems. With this remote diagnostic capability,
CrossComm's technicians can generally respond to problems without traveling to
the customer's location.
CrossComm typically offers customers a three month warranty on products.
CrossComm also offers a number of maintenance and support contracts that include
on-site service and 24-hour telephone dial-in support. CrossComm continues to
invest in developing new network diagnostic tools, such as its IMS, and in
personnel and training in order to support its customers. CrossComm supplements
its customer service capabilities with third-party contractors, such as General
DataComm, Inc. and IBM, that provide on-site service in over 300 cities
throughout North America.
RESEARCH AND DEVELOPMENT
CrossComm 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 CrossComm'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 CrossComm's products. The
software developed in Poland is integrated with CrossComm's U.S.-developed
hardware and software and is maintained by CrossComm's U.S. employees.
CrossComm's policy is to employ English speaking software engineers in Poland to
permit easier communications with CrossComm's U.S.-based development
organization.
CrossComm believes that it achieves a significant cost advantage by
developing software in Poland. Of CrossComm's research and development expense
for 1996, approximately 35% was spent in Poland. While CrossComm 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 1994, 1995 and 1996,
CrossComm incurred expenses of $12,285,000, $13,359,000, and $9,830,000
respectively, on research and development activities.
MANUFACTURING
CrossComm's manufacturing operations primarily consist of final assembly,
test and quality control of subassemblies and systems. CrossComm presently uses
off-the-shelf subassemblies and third parties to manufacture circuit boards and
modules designed by CrossComm. CrossComm's management believes that this
approach permits CrossComm to more easily scale its production to match demand,
resulting in improved cost controls.
Although CrossComm generally uses standard parts and components for its
products, certain components are currently available only from single sources,
including microprocessors (Intel), various communications
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<PAGE> 110
controller chips or application-specific integrated circuits (TI, LSI Logic
Corporation, PMC-Sierra, Inc. and Advanced Micro Devices, Inc.), and power
supplies (Switching Power Supply, Inc. and Total Power International, Inc.).
Other components and subassemblies are available only from limited sources.
CrossComm has also contracted with Lockheed Commercial Electronics to be the
primary manufacturer of the networking modules for CrossComm's XL networking
platform. Although CrossComm 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 materially adversely affect CrossComm's operating
results. CrossComm 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. CrossComm's principal
competitors are Cisco, Bay Networks, FORE, 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. CrossComm 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 CrossComm's current and potential competitors have greater financial,
research and development and marketing resources than those of CrossComm and are
better established than CrossComm.
CrossComm 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 CrossComm
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
CrossComm 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, CrossComm 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, CrossComm 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 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 CrossComm's existing XL family of products, thereby
providing customers a path to evolving ATM switching technology.
In July 1994, CrossComm 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 CrossComm's existing XL family of products,
thereby also providing customers a path to Ethernet switching technology.
EMPLOYEES
As of February 21, 1997, CrossComm employed 309 persons, including 105
employees of the Polish subsidiary. Of such employees, 132 employees were
primarily engaged in research and development, 81 in
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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, CrossComm does not believe that its head count figures
as of any one particular date are necessarily indicative of average personnel
levels. CrossComm has no collective bargaining agreement with its employees.
CrossComm has never experienced a work stoppage and believes that its employee
relations are good.
CrossComm maintains stock option plans under which key employees have been
granted options to purchase shares of CrossComm Common Stock. The option price
per share under the plans is equal to the fair market value of CrossComm Common
Stock on the date of option grant. In November 1996, options to purchase
1,063,625 shares of CrossComm Common Stock having option exercise prices ranging
from $5.88 to $12.94 per share, were repriced to $5.00 per share by the
CrossComm Board. Similarly, in April 1994, options to purchase 729,068 shares of
CrossComm Common Stock, having option exercise prices ranging from $12.75 to
$31.25 per share, were repriced to $12.50 per share by the CrossComm Board.
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.
Competition for technical personnel in CrossComm's industry is intense.
During the course of 1996, CrossComm experienced increased competition in the
hiring and retention of its employees. CrossComm believes that its future
success will depend on its ability to attract and retain qualified personnel.
PROPERTIES
CrossComm'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. CrossComm'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. CrossComm also leases and occupies sales and
technical support offices in 14 additional locations throughout North America
and three locations in Europe. CrossComm believes that its existing facilities
are adequate for its current needs.
LEGAL PROCEEDINGS
CrossComm 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 CrossComm.
Mr. William R. Johnson, the former President and Chief Executive Officer of
CrossComm, has brought an action against CrossComm for allegedly unpaid
severance amounts of $400,000 and $50,000 in relocation costs. Mr. Johnson was
the CEO and President of CrossComm 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. CrossComm
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 commenced litigation in the
United States District Court for the Eastern District of New York against
CrossComm, Cisco, Plaintree Systems Corporation, Accton Technology Corporation,
Cabletron Systems, Inc., Bay Networks 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.
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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. Datapoint is seeking a permanent
injunction against all of the defendants, enjoining each of them from making,
using or selling any product that infringes either patent. Datapoint is also
seeking unspecified damages (which it claims should be trebled) and its costs
and attorneys' fees.
On or about December 30, 1996, CrossComm 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 discovery is in the earliest stages. As a
result, the outcome remains uncertain.
SELECTED FINANCIAL DATA
The following table sets forth certain financial information with respect
to CrossComm for the five years ended December 31, 1996. This information should
be read in conjunction with "CrossComm Corporation -- Management's Discussion
and Analysis of Financial Condition and Results of Operations" and CrossComm's
Consolidated Financial Statements and related notes included elsewhere herein.
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $29,325 $49,790 $ 50,319 $ 44,528 $44,874
Income (loss) from operations............................... 3,465 7,481 (14,189) (18,798) (9,233)
Net income (loss)........................................... 2,901 6,095 (12,207) (13,803) (5,280)
Earnings (loss) per share................................... $ 0.30 $ 0.70 $ (1.37) $ (1.52) $ (0.58)
BALANCE SHEET DATA:
Working capital............................................. $29,340 $71,749 $ 55,978 $ 47,624 $46,695
Total assets................................................ 37,625 89,746 79,298 71,346 66,859
Stockholders' equity........................................ $33,220 $79,798 $ 67,058 $ 57,363 $54,362
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
With the exception of historical information, certain of the matters
discussed in this report contain trend analysis and other forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Such forward-looking statements involve risks and
uncertainties, including, without limitation, the risks and uncertainties
described under the caption "Risk Factors," together with such risks and
uncertainties as are described in registration statements, reports and other
documents filed by CrossComm from time to time with the Commission pursuant to
the Securities Act and the Exchange Act. Such risks and uncertainties could
cause CrossComm's actual consolidated results for 1997 and beyond to differ
materially from those expressed in any statements made by, or on behalf of,
CrossComm.
RESULTS OF OPERATIONS
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. CrossComm 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.
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE (DECREASE)
YEAR TO YEAR
YEAR ENDED DECEMBER 31, --------------------
--------------------------- 1994 1995
1994 1995 1996 TO 1995 TO 1996
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues:
Product................................. 88.0% 78.4% 76.0% (21.6)% (1.8)%
Service................................. 12.0 21.6 24.0 57.8 12.9
----- ----- -----
Total revenues............................ 100.0 100.0 100.0 (12.0) 1.4
Cost of revenues:
Cost of goods sold...................... 46.0 40.6 40.8 (22.4) 2.0
Cost of services........................ 7.9 16.9 12.9 88.3 (22.7)
----- ----- -----
Total cost of revenues.................... 53.9 57.5 53.7 (6.2) (5.3)
----- ----- -----
Gross profit.............................. 46.1 42.5 46.3 (18.9) 10.4
Operating expenses:
Selling, general and administrative..... 46.0 52.4 43.2 0.1 (16.3)
Research and development................ 24.4 30.2 21.9 8.7 (26.4)
Restructuring and other charges......... 3.9 2.4 1.7 * *
----- ----- -----
Total operating expenses........ 74.3 85.0 66.8 0.6 (20.2)
Income (loss) from operations............. (28.2) (42.5) (20.5) (32.5) 50.9
Interest income, net...................... 3.9 5.3 4.6 * *
Gain on sale of investments, net.......... -- 6.3 4.6 * *
Other income (expense).................... 0.1 (0.3) (0.5) * *
Income (loss) before provision for income
taxes................................... (24.2) (31.2) (11.8) (13.5) 61.7
Provision for income taxes................ 0.1 -- -- * *
----- ----- -----
Net income (loss)......................... (24.3)% (31.2)% (11.8)% (13.1)% 61.7%
----- ----- -----
</TABLE>
- ---------------
* Not meaningful
Revenues. CrossComm'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 CrossComm's router products and the later
than anticipated release of CrossComm's new switching products resulted in the
1995 and 1996 declines in product revenues. Both router volume and average
selling prices of router products declined in 1996.
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CrossComm 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 CrossComm'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 CrossComm's customer base, and CrossComm'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 CrossComm'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 CrossComm'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 CrossComm's indirect
sales channel in Canada. CrossComm believes that international sales will
continue to represent a significant portion of CrossComm'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.
CrossComm recorded approximately $3,200,000 of charges in the fourth
quarter of 1994 to address inventory valuation issues caused by the finalization
of CrossComm's router product line and changes in CrossComm'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 CrossComm'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 CrossComm's predecessor ILAN Universal
Router product, which was no longer actively marketed and had been replaced by
CrossComm's XL branch office products in the fourth quarter of 1994. In
addition, CrossComm recorded approximately $750,000 of charges primarily related
to customer hardware upgrades to enable a migration to high speed switched
networks. Finally, CrossComm incurred approximately $450,000 of costs related to
the provision of additional memory capacity on its XL product line, in order to
support new product features which were then being introduced.
In the fourth quarter of 1995, CrossComm recorded approximately $2,976,000
of charges to address asset valuation issues necessitated by CrossComm'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 CrossComm's router products, which have been
de-emphasized given the transition to ATM and LAN switching technologies.
Additionally, CrossComm 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 CrossComm 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
CrossComm recognized in both 1995 and 1994, (ii) a reduction in
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<PAGE> 115
manufacturing costs and (iii) increased gross profit margins on service revenues
as CrossComm 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.
CrossComm 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 features, engineering change orders related to existing
products, CrossComm'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 CrossComm 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 CrossComm'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 CrossComm'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 CrossComm's
sales force. These decreases were offset partially by higher commission costs
paid to CrossComm's sales force because 1996 incentive compensation plans were
based on quotas lower than those used for 1995, higher costs of CrossComm's new
senior management team (see Note 10 of Notes to the CrossComm Consolidated
Financial Statements (the "CrossComm 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, CrossComm 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
CrossComm'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
CrossComm's research and development organization.
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<PAGE> 116
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
CrossComm's existing products. In the fourth quarter of 1995, CrossComm 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 CrossComm'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
during 1996 and (iii) a decline in development costs associated with high speed
networking products involving ATM and LAN switching technologies due to
CrossComm's introduction of these products in 1996.
CrossComm believes that the markets for its products are characterized by
rapid rates of technological innovation for both hardware and software products.
CrossComm expects to continue to invest a significant amount of its resources in
new products, product enhancements and software development. If CrossComm
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.
Restructuring and Other Charges. In the fourth quarter of 1994, CrossComm
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 CrossComm'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 CrossComm's
sales and service functions outside of the United Kingdom. See Note 10 of Notes
to the CrossComm Consolidated Financial Statements for further discussion of the
1994 restructuring charges.
In the fourth quarter of 1995, CrossComm recorded approximately $1,074,000
of charges related to a corporate restructuring of all functions, designed to
enable CrossComm to better address the ATM and LAN switching market opportunity
and to more appropriately align CrossComm'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, CrossComm recorded approximately $874,000 of
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 CrossComm's decision not to
fund previously planned development projects that it considered outside the
realm of CrossComm's current strategy.
Interest Income, Net. Interest income, net, generated from the investment
of the proceeds from CrossComm's initial public offering in June 1992 and
CrossComm's secondary offering in April 1993 was $1,987,000 in 1994, $2,349,000
in 1995 and $2,044,000 in 1996. CrossComm'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, CrossComm sold its minority
equity interest in ANT to FORE in connection with FORE's acquisition of ANT. In
exchange for its ownership interest in ANT, CrossComm received shares of FORE
common stock, and recorded a gain on this transaction of $2,100,000
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during the second quarter of 1995. In July 1995, a portion of the FORE shares
were sold by CrossComm, whereby CrossComm realized an additional gain of
approximately $725,000. See Note 11 of Notes to the CrossComm Consolidated
Financial Statements for a further discussion of these transactions.
In September 1996, CrossComm 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," CrossComm 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, CrossComm'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 the CrossComm Consolidated Financial
Statements.
RECENT DEVELOPMENTS
The following table shows certain information relating to CrossComm's
results of operations for the three months ended March 31, 1996 and 1997,
respectively. This information is unaudited, but has been prepared on the same
basis as the audited financial statements appearing elsewhere in this Joint
Proxy Statement/Prospectus, and in the opinion of CrossComm's management,
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of results of operations for such periods.
This data should be read in conjunction with the audited financial statements of
CrossComm, related notes and other financial information appearing elsewhere in
this Joint Proxy Statement/Prospectus. The operating results for any quarter are
not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenues.............................................. $10,658 $11,803
Cost of revenues.......................................... $ 5,685 $ 5,521
Total operating expenses, exclusive of transaction related
expenses................................................ $ 7,062 $ 5,943
Transaction-related expenses regarding merger with
Olicom.................................................. -- $ 356
Income (loss) from operations............................. $(2,089) $ (17)
Net income (loss)......................................... $(1,594) $ 358
Earnings (loss) per share................................. $ (0.17) $ 0.04
</TABLE>
CrossComm attributes the increase in net revenues during the three months
ended March 31, 1997 ("Q1 1997"), compared to the same period in the previous
year ("Q1 1996"), to increased switching product revenues and sustained router
product revenues, as decreases in the XL router unit sales were offset by
increases in ILAN router unit sales. CrossComm's switching product line had not
yet been completed in Q1 1996. The decrease in the loss from operations during
Q1 1997 was due to increased gross margins and a decline in operating expenses,
exclusive of transaction-related expenses, that was partially offset by expenses
related to the merger transaction with Olicom. Gross margins increased due to
the increased net revenues, lower product costs as a percentage of revenue and a
higher percentage of ILAN router revenues for which CrossComm generally realizes
higher gross margins as a percentage of revenue. The decrease in operating
expenses, exclusive of transaction-related expenses, was due primarily to
reduced headcount levels as CrossComm has decreased expenses to better reflect
its revenue levels and a decline in the development costs associated with high
speed networking products involving ATM and LAN switching technologies due to
CrossComm's introduction of these products in 1996.
LIQUIDITY AND CAPITAL RESOURCES
To date, CrossComm has satisfied its cash requirements principally with the
proceeds of equity financings. During 1996, CrossComm used $5,914,000 in cash
from operating activities compared to the use of
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<PAGE> 118
$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, CrossComm had $6,461,000 in cash and cash equivalents and
$37,279,000 in available-for-sale securities. CrossComm also has a credit line
available for 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.
CrossComm believes that existing cash and available for sale securities as
well as cash generated from operations will be sufficient to finance its
operations and currently projected capital expenditures through at least the
next 24 months. While CrossComm believes that its ongoing operations will be
financed primarily from internally generated funds, it anticipates funding costs
related to the Merger out of existing cash and available for sale securities. As
indicated in "Factors That May Affect Operating Results of CrossComm as a Stand
Alone Entity," there are several factors that could affect CrossComm's ability
to generate cash from operations in the future.
FACTORS THAT MAY AFFECT OPERATING RESULTS OF CROSSCOMM AS A STAND ALONE ENTITY
In the event the Merger is not consummated, CrossComm's future operating
results as a stand alone entity 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 CrossComm operates, the ability of CrossComm to develop, market
and forecast demand of new and existing products, customer acceptance of new
products introduced by CrossComm, dependence on suppliers, CrossComm's ability
to successfully increase distribution and CrossComm'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
CrossComm. CrossComm lacks the critical mass and product line breadth and depth
of these much larger competitors. Accordingly, CrossComm has had a difficult
time getting opportunities to bid its products and services to potential
customers and to give these potential customers the confidence that CrossComm
has a sustainable business and has the ability to deliver its products and
services. CrossComm also competes against other companies that focus on specific
technologies within the networking products industry. CrossComm's continued net
losses during the past three years has made it very difficult for CrossComm to
retain customers and to attract new customers. There can be no assurance that
CrossComm will be able to compete successfully as a stand alone entity in the
future or that competitive pressures will not adversely affect CrossComm's
financial condition and results of operations.
CrossComm's continued net losses and the highly competitive networking
industry resulted in a high rate of employee turnover at CrossComm in 1996,
especially in the research and development and direct sales groups. There can be
no assurances that CrossComm will not continue to experience such high rates of
turnover in the future. In the highly competitive networking products industry,
CrossComm has also found it difficult to recruit qualified replacements.
CrossComm believes that its future success is contingent on its ability to
attract and retain key employees. If CrossComm 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
CrossComm'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,
CrossComm 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 CrossComm's ability to bring them to market
on a timely basis,
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<PAGE> 119
successful product performance, market acceptance of the modules and CrossComm's
ability to produce the modules in quantities sufficient to meet the expected
demand.
In the latter part of 1996, CrossComm decided not to proceed with further
development of its completed Ethernet switching products due to pricing
pressures from competitors and CrossComm's inability to manufacture these
products at lower costs and realize acceptable gross profit levels. CrossComm is
currently re-evaluating its earlier decisions and although CrossComm continues
to support all Ethernet switching products that have been sold, the prior
decision to eliminate further development could have a negative impact on
CrossComm's ability to sell Ethernet switching products.
CrossComm 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 CrossComm's results of operations and
financial position.
CrossComm's backlog at the beginning of each quarter is not necessarily
indicative of actual sales for any succeeding period. CrossComm'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 CrossComm 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 CrossComm's
results of operations and financial position.
CrossComm expects to continue to make significant investments in research
and development, sales and marketing and technical support staff. If CrossComm
is not able to increase revenue levels, results of operations could be
materially adversely affected.
MANAGEMENT OF CROSSCOMM
The directors and executive officers of CrossComm and their ages as of
March 14, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
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+*
</TABLE>
- ---------------
+ Member of the Audit Committee
* Member of the Compensation and Stock Option Committees
# Member of the Nominating Committee
Mr. Witkowicz, the founder of CrossComm, has been Chairman of the Board of
Directors since CrossComm's inception in April 1987 and was President and Chief
Executive Officer of CrossComm from April 1987 to March 1996. In October 1996,
Mr. Witkowicz was re-appointed President and Chief Executive Officer of
CrossComm. Prior to founding CrossComm, 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 CrossComm 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
CrossComm's Controller.
Mr. Machin was appointed President, Enterprise Products Division of
CrossComm, on October 1, 1996. From July 1995 to September 1996, Mr. Machin
served as CrossComm's Vice President of Business
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<PAGE> 120
Development. From July 1994 to June 1995, Mr. Machin served as CrossComm's
General Manager of High Speed Networking Development. From October 1993 to June
1994, Mr. Machin served as CrossComm's Vice President of Strategic Sales and
from May 1988 to September 1993, Mr. Machin served as CrossComm's Vice President
of Sales.
Ms. Casey has been a director of CrossComm 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 CrossComm 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 CrossComm 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 and
Commonwealth Energy Corporation.
Officers are elected on an annual basis and serve at the discretion of the
CrossComm Board.
COMPENSATION OF DIRECTORS
Prior to November 5, 1996, non-employee directors ("outside directors") of
CrossComm received an annual fee of $2,500 plus $500 for attendance at each
meeting of the full CrossComm Board or any committee thereof. Commencing
November 5, 1996, CrossComm 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 CrossComm Board 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 CrossComm'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 CrossComm Common
Stock to directors of CrossComm who were not officers or employees of CrossComm
or of any subsidiary of CrossComm 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
CrossComm 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 CrossComm.
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<PAGE> 121
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all cash compensation paid by CrossComm
during the fiscal years ended December 31, 1994, 1995 and 1996 to each
individual who served as CrossComm's Chief Executive Officer and CrossComm's two
most highly compensated executive officers (other than the Chief Executive
Officer) whose total cash compensation exceeded $100,000 in 1996 (the "Named
Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS GRANTED(#)
--------------------------- ---- --------- -------- ------------------ ---------------------
<S> <C> <C> <C> <C> <C>
Tadeusz Witkowicz............ 1996 $ 4 $ 648 -- --
President and Chief 1995 10,751 -- -- --
Executive Officer(2) 1994 173,184 -- -- --
Nigel C. Machin.............. 1996 98,504 -- -- 200,000
President, Enterprise
Products(3)
Douglas G. Bryant............ 1996 109,958 14,089 -- 52,500
Chief Financial Officer
and Treasurer(4)
William R. Johnson........... 1996 120,504 100,000 -- 350,000
Former Chief Executive
Officer(5)
</TABLE>
- ---------------
(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 served as President and Chief Executive Officer of CrossComm
from April 1987 to March 3, 1996. In October 1996, Mr. Witkowicz was
re-appointed President and Chief Executive Officer of CrossComm. In late
January 1995, Mr. Witkowicz agreed to have his salary reduced to $1 per
quarter. In March 1997, the CrossComm Board approved the reinstatement of
Mr. Witkowicz's salary.
(3) Mr. Machin was appointed President, Enterprise Products Division in October
1996. From July 1995 to September 1996, Mr. Machin served as CrossComm's
Vice President of Business Development. From July 1994 to June 1995, Mr.
Machin served as CrossComm's General Manager of High Speed Networking
Development. From October 1993 to June 1994, Mr. Machin served as
CrossComm's Vice President of Strategic Sales, and from May 1988 to
September 1993, Mr. Machin served as CrossComm's Vice President of Sales.
(4) Mr. Bryant was appointed Chief Financial Officer of CrossComm 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
CrossComm's Controller.
(5) Mr. Johnson was appointed Chief Executive Officer on March 4, 1996. Mr.
Johnson left CrossComm on October 7, 1996.
CHANGE IN CONTROL ARRANGEMENTS.
Pursuant to the terms of an Employee Retention Agreement dated March 9,
1997 between CrossComm and Nigel C. Machin, President, Enterprise Products (the
"Machin Agreement"), if Mr. Machin's employment is terminated by CrossComm
(other than for cause, disability or his death) or by him for "Good Reason" (as
defined in the Machin Agreement) within 24 months following a "Change in
Control" of CrossComm (as defined in the Machin Agreement), he is entitled to a
severance payment equal to one month's salary plus an additional one month's
salary for each year of service.
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Pursuant to the terms of an Employee Retention Agreement dated March 9,
1997 between CrossComm and Douglas G. Bryant, Chief Financial Officer and
Treasurer (the "Bryant Agreement"), if Mr. Bryant's employment is terminated by
CrossComm (other than for cause, disability or his death) or by him for "Good
Reason" (as defined in the Bryant Agreement) within 24 months following a
"Change in Control" of CrossComm (as defined in the Bryant Agreement), he is
entitled to a severance payment equal to one month's salary plus an additional
one month's salary for each year of service.
On March 9, 1995, the CrossComm Board adopted a resolution amending the
Amended 1988 Incentive Stock Option Plan, the Amended 1989 Incentive Stock
Option Plan, the 1991 Incentive Stock Option Plan, as amended, the 1992 Stock
Option Plan, as amended, the 1992 Directors' Option Plan, and the 1994 Stock
Option Plan, as amended (collectively, the "CrossComm Plans") providing for the
following: upon a change in control of CrossComm, if an optionholder's
employment with CrossComm is terminated by CrossComm other than for cause, death
or disability or by the optionholder for good reason within two years after such
a change in control, then in such event all options to purchase shares of
capital stock of CrossComm, issued and outstanding as of the date of such
termination and then held by such terminated optionholder pursuant to the
CrossComm Plans shall immediately vest and become fully exercisable in
accordance with their terms. Such change in control provision is also included
in CrossComm's 1996 Stock Option Plan.
The following table sets forth certain information regarding options
granted during the year ended December 31, 1996 by CrossComm to the Named
Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tadeusz Witkowicz...... -- -- -- -- -- --
Nigel C. Machin........ 110,000 $ 5.00 11/5/06 $ 345,892 $ 876,558
40,000 5.00 2/23/03 71,989 164,637
30,000 5.00 12/9/04 72,628 174,406
20,000 5.00 11/17/05 55,382 136,535
7.40%
Douglas G. Bryant...... 5,000 9.50 9/3/06 29,872 75,703
10,000 5.00 11/5/06 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 9/3/06 15,381 38,786
1.95
William R. Johnson..... 350,000 12.98 10.00 3/4/06(2) 2,201,131 5,578,099
</TABLE>
- ---------------
(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 CrossComm 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
CrossComm Common Stock to date, if any. Actual gains, if any, on stock
option exercises will depend on the future performance of CrossComm Common
Stock and the date on which the option is exercised.
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<PAGE> 123
(2) Unvested options cancelled upon October 7, 1996, termination. Vested options
cancelled on October 17, 1996.
The following table sets forth certain information regarding stock options
exercised during the year ended December 31, 1996, and the value of stock
options held as of December 31, 1996, by the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END(#) 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....... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Total value of unexercised options is based on $5.25, the last sale price of
the CrossComm 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 CrossComm
Common Stock underlying the option.
Repricing of Options
The following table sets forth certain information regarding the repricing
of options for all Named Executives for the past ten fiscal years.
STOCK OPTION REPRICING 10-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE OPTION TERM
UNDERLYING OF STOCK AT EXERCISE REMAINING
OPTIONS TIME OF PRICE AT TIME NEW AT DATE
REPRICED OR REPRICING OR OF REPRICING EXERCISE OF REPRICING OR
NAME DATE AMENDED AMENDMENT OR AMENDMENT PRICE AMENDMENT(1)
---- ------- ----------- ------------ ------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Douglas G. Bryant.................. 4/28/94 13,500 $10.50 $ 23.25 $12.50 106
Chief Financial 4/28/94 2,500 10.50 19.75 12.50 118
Officer and 11/5/96 4,000 5.00 8.00 5.00 65
Treasurer 11/5/96 13,500 5.00 12.50 5.00 75
11/5/96 2,500 5.00 12.50 5.00 86
11/5/96 5,000 5.00 10.75 5.00 92
11/5/96 2,500 5.00 10.75 5.00 105
11/5/96 5,000 5.00 11.875 5.00 108
11/5/96 5,000 5.00 9.50 5.00 118
Nigel C. Machin.................... 4/28/94 40,000 10.50 23.25 12.50 106
President, 11/5/96 19,255 5.00 12.50 5.00 75
Enterprise 11/5/96 20,745 5.00 12.50 5.00 75
Products 11/5/96 18,780 5.00 8.50 5.00 97
11/5/96 2,002 5.00 8.50 5.00 97
11/5/96 2,209 5.00 8.50 5.00 97
11/5/96 629 5.00 8.50 5.00 97
11/5/96 3,162 5.00 8.50 5.00 97
11/5/96 2,705 5.00 8.50 5.00 97
11/5/96 513 5.00 8.50 5.00 97
11/5/96 9,890 5.00 11.875 5.00 108
11/5/96 10,110 5.00 11.875 5.00 108
</TABLE>
- ---------------
(1) Data is presented in terms of months.
106
<PAGE> 124
REPORT ON REPRICING OF OPTIONS
On November 5, 1996, the Board of Directors approved the repricing of
certain outstanding options to purchase shares of CrossComm Common Stock under
CrossComm's 1992 Stock Option Plan and 1994 Stock Option Plan (the "Stock
Plans"), having option exercise prices ranging from $5.88 to $12.94 per share
(the "Existing Options"). Such options were repriced to $5.00 per share by
canceling the existing options and granting new options at $5.00 per share (the
"New Options").
Because of significant declines in the market value of CrossComm Common
Stock, most outstanding options in November 1996 were exercisable at prices
which substantially exceeded the market value of CrossComm Common Stock. In view
of such declines in market value and in keeping with CrossComm's philosophy of
utilizing equity incentives to motivate and retain qualified employees, the
CrossComm Board felt it was important to regain the incentive intended to be
provided by options to purchase shares of CrossComm Common Stock.
The New Options modify only the exercise price of the Existing Options to
which each relates and will be issued under and governed by the respective
CrossComm Plan under which such options were originally granted. Therefore,
other than the different exercise price, the option agreements relating to the
New Options will be substantially the same as the option agreements for the
Existing Options that they replace.
The Compensation Committee
ALEXANDER M. LEVINE
MICHAEL C. RUETTGERS
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PHILOSOPHY
CrossComm's executive compensation program is designed to align executive
compensation with financial performance, business strategies and company values
and objectives. This program seeks to enhance the profitability of CrossComm,
and thereby enhance stockholder value, by linking the financial interests of
CrossComm's executives with those of the stockholders. Under the guidance of the
CrossComm Board's Compensation Committee, CrossComm has developed and
implemented an executive compensation program to achieve these objectives while
providing executives with compensation opportunities that are competitive with
companies of comparable size in related industries.
In applying this philosophy, the Compensation Committee has established a
program to (i) attract and retain executives of outstanding abilities who are
critical to the long-term success of CrossComm and (ii) reward executives for
long-term strategic management and the enhancement of stockholder value by
providing equity ownership in CrossComm. Through these objectives, CrossComm
integrates its compensation programs with its annual and long-term strategic
planning.
EXECUTIVE COMPENSATION PROGRAM
The Compensation Committee, which is comprised solely of outside directors,
approves the executive compensation program on an annual basis, including
specified levels of compensation for all executive officers. CrossComm's
executive compensation program has been designed to implement the objectives
described above and is comprised of the following fundamental elements:
- Base salary that is determined by individual contributions and sustained
performance within an established competitive salary range.
107
<PAGE> 125
- Long-term incentive program that rewards executives when stockholder
value is created through an increase in the market value of CrossComm
Common Stock or through significant performance achievements that enhance
the long-term success of CrossComm.
Each of these elements of compensation is discussed below.
Salary. Salary levels for CrossComm's executive officers are determined
based primarily on historical compensation levels of the executive officers and
salary levels at companies within the networking industry. Salaries for
executive officers are reviewed by the Compensation Committee on an annual basis
and, in determining salary adjustments, the Compensation Committee considers
individual performance and contributions to CrossComm.
Long-Term Incentive Compensation. CrossComm's long-term incentive
compensation program is primarily implemented through the grant of stock
options. This program is intended to align executive interests with the
long-term interests of stockholders by linking executive compensation with
stockholder enhancement. In addition, the program motivates executives to
improve long-term stock market performance by allowing them to develop and
maintain a significant, long-term equity ownership position in CrossComm Common
Stock. Stock options are granted at prevailing market rates and will only have
value if CrossComm's stock price increases in the future. Generally, stock
options vest in equal quarterly amounts over a four-year or five-year period.
Further, executives generally must be employed by CrossComm at the time of
vesting in order to exercise the options. The Compensation Committee acting as
the Stock Option Committee determines the number of shares to be issued pursuant
to option grants made to CrossComm's executive officers, based on individual
accomplishments measured against certain non-budgeted objectives and
contributions to CrossComm. The Compensation Committee also considers the number
and value of options held by each executive officer that will vest in the
future.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee evaluates the performance of the Chief Executive
Officer on an annual basis and reports its assessment to the outside members of
the CrossComm Board. The Compensation Committee's assessment of the Chief
Executive Officer is based on a number of factors, including the following:
achievement of short- and long-term financial and strategic targets and
objectives, considering factors such as sales and earnings per share; company
position within the industry in which it competes, including market share;
overall economic climate; individual contribution to CrossComm; and such other
factors as the Compensation Committee may deem appropriate.
The salary of the Chief Executive Officer is reviewed by the Compensation
Committee on an annual basis and, in determining any salary adjustment, the
Compensation Committee considers the above factors.
Mr. Witkowicz served as President and Chief Executive Officer of CrossComm
from April 1987 to March 3, 1996. In October 1996, Mr. Witkowicz was
re-appointed President and Chief Executive Officer of CrossComm. In late January
1995, Mr. Witkowicz agreed to have his salary reduced to a $1 per quarter. In
March 1997, the CrossComm Board approved the reinstatement of Mr. Witkowicz's
salary.
On March 4, 1996, William J. Johnson became the Chief Executive Officer of
CrossComm. Mr. Johnson's base salary was $200,000 per year. Mr. Johnson was also
entitled to an annual incentive payment of up to $200,000 based on achievement
objectives determined by the Compensation Committee. For calendar year 1996, the
incentive payment was guaranteed to the extent of $100,000 (which was paid in
the form of a signing bonus in March 1996), with the balance of $100,000 to be
based upon the accomplishment of achievement of objectives determined by the
Compensation Committee. In October 1996, CrossComm terminated Mr. Johnson's
employment agreement for cause. Mr. Johnson has brought an action against
CrossComm for alleged unpaid severance amounts. See "Business -- Legal
Proceedings."
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Code, enacted in 1993, generally disallows tax
deductions to publicly-traded corporations for compensation over $1 million paid
to the corporation's Chief Executive Officer or any of its
108
<PAGE> 126
other four most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to this disallowance if
certain requirements are met. CrossComm structures the compensation arrangements
of its executive officers to attempt to avoid disallowances under Section
162(m).
The Compensation Committee
ALEXANDER M. LEVINE
MICHAEL C. RUETTGERS
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
CrossComm Common Stock of CrossComm during the period from June 18, 1992 (the
date on which CrossComm Common Stock began trading on the Nasdaq National
Market) to December 31, 1996, with the cumulative total return of (i) the
Russell 2000 Index and (ii) a Peer Group Index selected by CrossComm over the
same time period. This comparison assumes the investment of $100 on June 18,
1992, in CrossComm Common Stock, the Russell 2000 Index and the Peer Group Index
and assumes any dividends are reinvested.
<TABLE>
<CAPTION>
Measurement Period CrossComm
(Fiscal Year Covered) Corporation Russell 2000 Index Peer Group Index*
<S> <C> <C> <C>
6/18/92 100.00 100.00 100.00
12/31/92 260.87 119.06 147.27
12/31/93 173.91 141.57 166.69
12/31/94 100.00 138.99 176.24
12/31/95 98.91 178.51 202.71
12/31/96 45.65 207.96 255.99
</TABLE>
* The Peer Group Index reflects stock performance of the following companies:
Artisoft, Inc., Cabletron Systems, Inc., Chipcom Corporation, Cisco, Computer
Network Technology Corporation, Network Systems, Inc., Novell, Optical Data
Systems, Inc., Proteon, Inc., Retix Corporation, SynOptics Communications,
Inc., 3Com, Bay Networks (formerly Wellfleet Communications, Inc.) and Xyplex,
Inc. Bytex Corporation, which was included in the Peer Group Index in
CrossComm's 1993 Proxy Statement, ceased to be publicly-traded in November
1993. SynOptics Communications, Inc. and Xyplex, Inc., which were included in
CrossComm's 1993 and 1994 Proxy Statements, were acquired in October 1994.
ChipCom Corporation which was included in the Peer Group Index in CrossComm's
1993, 1994 and 1995 Proxy Statements was acquired in 1995.
109
<PAGE> 127
CERTAIN TRANSACTIONS AND EMPLOYMENT ARRANGEMENTS
Pursuant to the terms of an Employment Agreement dated March 4, 1996,
between CrossComm and William J. Johnson, Mr. Johnson agreed to serve as
CrossComm'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. CrossComm
terminated Mr. Johnson's Employment Agreement for cause in October 1996.
On March 20, 1997, CrossComm entered into a License Agreement with Tadeusz
Witkowicz, Chief Executive Officer and President, that provides Mr. Witkowicz
with a non-exclusive license to use CrossComm's partially developed Network
Delta software. The Network Delta software was being developed to, among other
things, enable CrossComm to deliver monitoring services to its customers.
CrossComm discontinued development of this software in 1996 because it failed to
meet expectations and was inconsistent with CrossComm's strategic plan.
CrossComm decided to utilize a third-party solution to offer monitoring services
to its customers. Under the terms of the License 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 License Agreement also
allows Mr. Witkowicz to hire up to six engineers from CrossComm. See also
"Management of CrossComm -- Change in Control Arrangements."
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires CrossComm's directors, executive
officers and holders of more than 10% of CrossComm Common Stock to file with the
Commission initial reports of ownership and reports of changes in ownership of
the CrossComm Common Stock. CrossComm believes that all officers, directors and
holders of 10% of CrossComm Common Stock complied with all Section 16(a) filing
requirements, except that in June 1995, pursuant to the 1992 Directors' Plan,
CrossComm granted an option to purchase 5,000 shares of CrossComm Common Stock
to each of Alexander Levine, Michael Ruettgers and Nancy Casey, each of whom
failed to timely file a Form 5.
110
<PAGE> 128
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 28, 1997,
with respect to the beneficial ownership of CrossComm Common Stock by (i) each
current director of CrossComm, (ii) the Named Executives, (iii) all directors
and executive officers of CrossComm as a group and (iv) each person known by
CrossComm to own beneficially more than 5% of the outstanding shares of
CrossComm Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON
NUMBER OF SHARES STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING(2)
---------------- --------------------- --------------
<S> <C> <C>
Tadeusz Witkowicz(3)........................................ 1,574,125 16.9%
c/o CrossComm Corporation
450 Donald Lynch Boulevard
Marlborough, Massachusetts 01752
William R. Johnson.......................................... -- --
Douglas G. Bryant(4)........................................ 34,391 *
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)............................................... 1,791,709 18.9%
5% STOCKHOLDERS (EXCLUDING MR. WITKOWICZ)
- ------------------------------------------------------------
Pioneering Management Corporation........................... 918,000 9.9
William H. Keough
60 State Street
Boston, MA 02109(10)
Trimark Financial Corporation............................... 909,000 9.8
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5(11)
Kopp Investment Advisors, Inc. ............................. 728,200 7.8
LeRoy C. Kopp
6600 France Avenue South
Suite 672
Edina, MN 55435(12)
Travelers Group Inc. ....................................... 573,300 6.2
388 Greenwich Street
New York, NY 10013(13)
</TABLE>
- ---------------
* Less than 1%.
(1) The number of shares of CrossComm Common Stock beneficially owned by each
person or entity is determined under rules promulgated by the Commission.
Under such rules, beneficial ownership 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 28, 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 of any shares deemed
beneficially owned does not constitute an admission of beneficial ownership
of such shares.
(2) Percentage of CrossComm Common Stock outstanding is based on 9,302,285
shares of Common Stock outstanding as of March 28, 1997. For purposes of
calculating the percentage of CrossComm Common Stock outstanding, the
number of outstanding shares of CrossComm Common Stock is adjusted for
111
<PAGE> 129
each director and executive officer to include the number of shares of
CrossComm Common Stock into which any options held by such person are
exercisable within 60 days after March 28, 1997.
(3) Includes 10,000 shares 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.
(4) Includes 33,406 shares which Mr. Bryant may acquire upon the exercise of
options within 60 days of March 28, 1997.
(5) Includes 75,093 shares which Mr. Machin may acquire upon the exercise of
options within 60 days of March 28, 1997.
(6) Includes 17,500 shares which Ms. Casey may acquire upon the exercise of
options within 60 days after March 28, 1997.
(7) Includes 17,500 shares which Mr. Levine may acquire upon the exercise of
options within 60 days after March 28, 1997.
(8) Includes 12,500 shares which Mr. Ruettgers may acquire upon the exercise of
options within 60 days after March 28 1997.
(9) Includes 155,999 shares which all directors and executive officers as a
group may acquire upon the exercise of options within 60 days after March
28 1997.
(10) Shares were owned beneficially at December 31, 1996, by Pioneering
Management Corporation, an investment adviser registered under the Advisers
Act. The above information is based on Schedule 13G filed with the
Commission by Pioneering Management Corporation on or about January 14,
1997.
(11) Certain Trimark mutual funds (the "Funds"), which are trusts organized
under the laws of Ontario, Canada, are owners of record of the securities
referenced above. 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 filed with the Commission by TFC on or about February 5, 1997.
(12) 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 Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Kopp Investment Advisors, Inc., exercises discretion as to
641,000 of these shares. Neither Kopp Investment Advisors, Inc., nor Mr.
Kopp votes 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.
(13) Shares were owned beneficially at December 31, 1996 by Travelers Group
Inc., an investment adviser registered under the Advisers Act. The above
information is based on Schedule 13G filed with the Commission by Travelers
Group Inc., on or about February 14, 1997.
112
<PAGE> 130
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma consolidated information gives pro forma
effect to the acquisition by Olicom of CrossComm. The unaudited pro forma
consolidated balance sheet as of December 31, 1996, and the unaudited pro forma
consolidated statement of operations for the year ended December 31, 1996,
combine the consolidated historical balance sheet of Olicom and the consolidated
historical balance sheet of CrossComm as if the acquisition of CrossComm had
been completed on December 31, 1996, and combine the consolidated historical
statement of income of Olicom and the consolidated historical statement of
operations of CrossComm as if the acquisition has been completed on January 1,
1996. This pro forma information should be read in conjunction with the
respective consolidated historical financial statements (including notes
thereto) of Olicom and CrossComm appearing elsewhere herein.
The pro forma adjustments reflecting the consummation of the acquisition on
the purchase method of accounting are based on available financial information
and certain estimates and assumptions set forth in the notes to unaudited pro
forma consolidated financial information. The assumptions include the
acquisition of all of the outstanding shares of CrossComm Common Stock for
$50,828,000 cash, the issuance of approximately 2,700,000 shares of Olicom
Common Stock with a market price of $15.50 per share and the issuance of
Warrants to purchase approximately 1,100,000 shares of Olicom Common Stock, each
such warrant having an estimated market value of $3.81 (based on a Warrant Unit
Consideration of $0.41). Olicom and CrossComm estimate that they will incur, in
the aggregate, direct transaction costs of approximately $5 million associated
with the Merger. This is a preliminary estimate only and is therefore subject to
change. There can be no assurance that Olicom will not incur additional charges
to reflect costs associated with the Merger. The pro forma adjustments do not
reflect any operating efficiencies and cost savings that may be achievable with
respect to the combined companies.
The consideration anticipated to be paid and costs anticipated to be
incurred to acquire CrossComm comprise the following (in thousands):
<TABLE>
<S> <C>
Cash...................................................... $ 50,828
Assumed issuance of 2,700,000 shares of Olicom Common
Stock................................................... 42,020
Assumed issuance of 1,100,000 Warrants.................... 4,191
Estimated professional fees and other
direct transaction costs................................ 5,000
--------
$102,039
========
</TABLE>
The following information is not necessarily indicative of the future
financial position or operating results of the combined company or the financial
position or operating results of the combined company had the acquisition
occurred on December 31, 1996, or at the beginning of the year. For purposes of
preparing its consolidated financial statements, Olicom will establish a new
basis for CrossComm's assets and liabilities based upon the fair values thereof
and the Olicom's purchase price thereof, including the costs of the acquisition.
A final determination of required purchase accounting adjustments, including the
allocation of the purchase price to the identifiable tangible and intangible
assets, including in-process research and development, acquired assets of the
combined company and liabilities assumed based on their respective fair values
has not yet been made. Accordingly, the purchase accounting adjustments made in
connection with the preparation of the unaudited pro forma consolidated
financial information are preliminary and have been made solely for the purposes
of preparing such financial information. Olicom will undertake a study to
determine the fair value of certain of CrossComm's assets and liabilities and
will make appropriate purchase accounting adjustments upon completion of that
study. The unaudited pro forma consolidated financial information reflects
Olicom's best estimates; however the actual financial position and results of
operations may differ significantly from the pro forma amounts reflected herein
because of various factors, including, without limitation, access to additional
information, changes in value and changes in operating results between the date
of preparation of the unaudited pro forma consolidated financial information and
the date on which the acquisition closes.
113
<PAGE> 131
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
PRO FORMA PRO FORMA
OLICOM CROSSCOMM ADJUSTMENTS CONSOLIDATED
-------- --------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents (Note 1)........ $ 41,663 $ 6,461 $(37,228) $ 10,896
Short-term investments (Note 1)........... 9,887 37,279 (9,200) 37,966
Accounts receivable....................... 39,625 8,277 47,902
Inventories............................... 22,252 5,473 27,725
Deferred income taxes..................... 945 -- 945
Prepaid expenses.......................... 1,769 1,702 3,471
-------- -------- -------- ---------
116,141.. 59,192 (46,428) 128,905
Property and equipment...................... 11,032 5,464 16,496
Other assets................................ -- 2,203 2,203
Goodwill (Note 8)........................... 751 -- 7,029 7,780
-------- -------- -------- ---------
Total Assets...................... $127,924 $ 66,859 $(39,399) $ 155,384
======== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable (Note 3)................. $ 21,083 $ 3,537 $ 5,000 $ 29,620
Accrued payroll and related expenses...... 5,258 4,459 9,717
Accrued product warranty expense.......... 823 1,162 1,985
Income taxes payable...................... 2,570 -- 2,570
Deferred revenue.......................... -- 3,339 3,339
-------- -------- -------- ---------
Total current liabilities......... 29,734 12,497 5,000 47,231
Minority interest........................... 681 -- 681
Common Stock (Note 4)....................... 614 92 22 728
Additional paid-in capital (Note 4)......... 52,348 72,534 (26,435) 98,447
Retained earnings (Note 5).................. 56,849 (21,449) (14,801) 20,599
Treasury stock.............................. (11,831) -- (11,831)
Unrealized gain/loss........................ (471) 3,185 (3,185) (471)
-------- -------- -------- ---------
Total stockholders' equity........ 97,509 54,362 (44,389) 107,472
-------- -------- -------- ---------
Total liabilities and
stockholders' equity............ $127,924 $ 66,859 $(39,399) $ 155,384
======== ======== ======== =========
</TABLE>
114
<PAGE> 132
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
PRO FORMA PRO FORMA
OLICOM CROSSCOMM ADJUSTMENTS CONSOLIDATED
-------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales.................................. $168,228 $ 44,874 $ $ 213,102
Cost of sales.............................. (95,236) (24,098) (119,334)
-------- -------- ------- ---------
Gross profit............................... 72,992 20,776 93,768
Research and development................... (12,852) (9,830) (22,682)
Sales, general and administration (Note
2)....................................... (47,344) (20,179) (1,004) (68,527)
Acquisition related expenses............... (3,787) -- (3,787)
Special charge re. management change....... (1,402) -- (1,402)
-------- -------- ------- ---------
Income (loss) from operations.............. 7,607 (9,233) (1,004) (2,630)
Interest and gain on investments (Note
6)....................................... 5,084 3,953 (2,554) 6,483
-------- -------- ------- ---------
Income (loss) before taxes................. 12,691 (5,280) (3,558) 3,853
Income tax (Note 6)........................ (4,727) -- 868 (3,859)
-------- -------- ------- ---------
7,964 (5,280) (2,690) (6)
Minority interest.......................... (539) -- (539)
-------- -------- ------- ---------
7,425 (5,280) (2,690) (545)
======== ======== ======= =========
Net income (loss) per share................ $ 0.50 $ (0.03)
Weighted average shares outstanding (Note
7)....................................... 14,786 17,394
======== =========
</TABLE>
115
<PAGE> 133
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
(IN THOUSANDS)
NOTE 1: Cash adjustments assume a decrease of short-term investments of $9,200,
proceeds from the exercise of vested CrossComm Options of $4,400, and a
cash payment on closing of $50,828.
NOTE 2: The part of the purchase price to be accounted for as goodwill has been
assumed to be $7,029, which is assumed to be amortized over a seven
year period. The goodwill amortization is not tax deductible.
NOTE 3: Accounts payable adjustment reflects estimated transaction charges of
$5,000.
NOTE 4: Common stock and additional paid in capital adjustments reflect the
issuance of shares of Olicom Common Stock at closing. Additional paid
in capital adjustment reflects the issuance of shares of Olicom Common
Stock and Warrants at Closing.
NOTE 5: Retained earnings adjustment reflects an assumed write-off of
in-process research and development in the amount of $36,250.
NOTE 6: Interest income foregone with respect to the portion of the Merger
Consideration to be paid in cash has been assumed to be 5.5% per annum.
The tax consequence has been assumed to be 34%.
NOTE 7: The number of shares of Olicom Common Stock outstanding has been
adjusted to reflect the issuance of new shares.
NOTE 8: The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Book value of net assets of CrossComm..................... $ 58,760*
Goodwill recognized....................................... 7,029
In-process research and development....................... 36,250
--------
$102,039
========
</TABLE>
- ---------------
* Includes proceeds from exercise of vested CrossComm Options
NOTE 9: The $36,250 of acquired in-process research and development will be
written off to expense in the period in which the Closing of the Merger
occurs. This write off of in-process research and development is not
reflected in the Unaudited Pro Forma Consolidated Statement of
Operations because pro forma adjustments are limited to those events
that are expected to have a continuing impact.
The $36,250 of acquired in-process research and development represents
management's estimate of the current fair value of those specifically
identified CrossComm research and development projects for which
technological feasibility has not been established and for which
alternative future uses do not exist. In estimating such current fair
value, management considered the estimated future after-tax cash flows
attributable to these projects, which were then discounted to present
value utilizing appropriate discount rates commensurate with the risks
of reaching technological feasibility, completing the in-process
projects, and achieving the estimated cash flows.
The specifically identified research and development projects are
predominantly in the areas of ATM switching, edge routers and network
management software.
NOTE 10: Following the Merger, Olicom estimates that it will incur additional
charges to operations for the costs associated with integrating the
operations of the two companies.
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TAX CONSIDERATIONS
The following summary is based on tax laws of the United States and Denmark
as in effect on the date of this Joint Proxy Statement/Prospectus, and is
subject to changes in United States and Danish law, including changes that could
have retroactive effect. The following summary is based on the current United
States-Denmark Double Taxation Convention and the proposed convention signed on
June 17, 1980, and modified by a protocol signed on August 23, 1983. The
discussion assumes that the Merger will be consummated as contemplated herein
and that a CrossComm stockholder holds its CrossComm Common Stock and will hold
its Olicom Common Stock and Warrants as capital assets. This discussion is based
on current laws and interpretations thereof, and there can be no assurance that
future legislation, regulations, administrative rulings or court decisions will
not adversely affect the accuracy of the statements contained herein. The
discussion does not take account of rules that may apply to stockholders that
are subject to special treatment under United States federal or Danish income
tax laws (including, without limitation, trusts, insurance companies, dealers in
securities, certain retirement plans, financial institutions, tax exempt
organizations, holders who are not United States citizens or residents and
CrossComm stockholders who acquired CrossComm Common Stock pursuant to the
exercise of an employee stock option or otherwise as compensation). No rulings
have been requested or received from the Internal Revenue Service (the "IRS") as
to the matters discussed herein, and there is no intent to seek any such
rulings. Accordingly, no assurance can be given that the IRS will not challenge
the tax treatment of certain matters discussed in this summary or, if it does
challenge the tax treatment, that it will not be successful.
THE DISCUSSION BELOW DOES NOT ADDRESS STATE, LOCAL, PROVINCIAL, TERRITORIAL
OR FOREIGN TAX CONSEQUENCES (OTHER THAN THOSE DESCRIBED UNDER "DANISH TAX
CONSEQUENCES OF OWNERSHIP OF OLICOM COMMON STOCK" AND "DANISH TAX CONSEQUENCES
OF OWNERSHIP OF WARRANTS") OF THE MERGER OR THE OWNERSHIP OF OLICOM COMMON STOCK
OR WARRANTS, AND THE SPECIFIC TAX CONSEQUENCES TO EACH CROSSCOMM STOCKHOLDER MAY
DIFFER. CONSEQUENTLY, EACH CROSSCOMM STOCKHOLDER SHOULD CONSULT ITS OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER AND THE OWNERSHIP OF
OLICOM COMMON STOCK AND WARRANTS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Olicom, MergerSub and CrossComm. The merger of MergerSub into CrossComm,
with CrossComm surviving and with CrossComm stockholders receiving the Merger
Consideration in the transaction, constitutes a taxable reverse subsidiary
merger which will be treated for United States federal income tax purposes as a
direct purchase by Olicom of the CrossComm Common Stock from the CrossComm
stockholders in exchange for the Merger Consideration, and as such, the
transitory existence of MergerSub as the wholly-owned subsidiary of Olicom will
be disregarded for United States federal income tax purposes. Because Olicom
will be treated as purchasing the CrossComm Common Stock directly from the
CrossComm stockholders, unless a Code Section 338 election is made (or is deemed
to have been made under the Code) to treat the purchase by Olicom of the
CrossComm Common Stock as a purchase of the assets of CrossComm resulting in a
stepped up basis in the CrossComm assets, no gain or loss will be recognized by
CrossComm as a result of the Merger. Further, no gain or loss will be recognized
by Olicom upon the receipt of the shares of CrossComm Common Stock from the
CrossComm stockholders in exchange for the Merger Consideration. Olicom's
adjusted tax basis in the CrossComm Common Stock acquired in the Merger will
generally be equal to the value of the Merger Consolidation paid by Olicom to
the CrossComm stockholders in exchange for such CrossComm Common Stock.
Net Operating Losses. CrossComm had net operating loss carryforwards of
approximately $20,965,000 as of December 31, 1996. Under Section 382 of the
Code, the ability of CrossComm to utilize its net operating losses will be
limited if CrossComm experiences an "ownership change" as a consequence of the
Merger. Section 382 defines an "ownership change" as an increase of more than 50
percentage points in ownership of stock owned by one or more 5% stockholders
over the lowest percentage of stock owned by such stockholders during the
preceding three year period. It is anticipated that the Merger will result in an
"ownership change"
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within the meaning of Code Section 382, and thus will result in the utilization
of any remaining carryforwards of CrossComm being limited under Section 382. The
limitation on such net operating carryforwards (the "Section 382 Limitation") is
determined as follows: first, the value of CrossComm is determined (i.e., the
fair market value of all outstanding equity of CrossComm immediately prior to
the ownership change, subject to adjustment in certain cases); and second, a
percentage equal to the long-term tax-exempt rate determined by the Treasury
Department is multiplied by the value of CrossComm to determine the amount of
the net operating loss carryforwards of CrossComm which may be used in any given
year to offset taxable income of CrossComm (subject to exception for certain
built-in gain items). To the extent that CrossComm uses less than the Section
382 Limitation in any taxable year, the unused portion of such Section 382
Limitation is added to the Section 382 Limitation for the next taxable year.
CrossComm Stockholders. A CrossComm stockholder will recognize gain or loss
as a result of the Merger, measured by the difference between such stockholder's
amount realized and its adjusted basis in its CrossComm Common Stock. Such
amount realized will generally equal the fair market value of the Merger
Consideration received by such CrossComm stockholder in exchange for its
CrossComm Common Stock.
The gain or loss recognized as a result of the Merger will be treated as a
capital gain or loss, provided that CrossComm is not treated for federal income
tax purposes as a "collapsible corporation." CrossComm's management believes
that CrossComm is not a collapsible corporation for federal income tax purposes.
For United States federal income tax purposes, capital losses are generally
deductible only against capital gains and not against ordinary income.
UNITED STATES TAX CONSEQUENCES OF OWNERSHIP OF OLICOM COMMON STOCK
Dividends. For United States federal income tax purposes, the gross amount
of all dividends (that is, the amount before reduction for Danish withholding
tax) paid with respect to Olicom Common Stock out of the current or accumulated
earnings and profits of Olicom ("E&P") to a citizen or resident of the United
States (for United States federal income tax purposes), a corporation or
partnership organized under the laws of the United States or any state thereof,
or estates or trusts the income of which is subject to United States federal
income tax regardless of its source (collectively, "United States Stockholders")
will be subject to United States federal income taxation as foreign source
dividend income. United States corporations that hold shares of Olicom Common
Stock will not be entitled to the dividends received deduction available for
dividends received from United States corporations. To the extent that a
distribution exceeds E&P, it will be treated first as a return of capital to the
extent of the United States Stockholder's basis, and then, as gain from the sale
of a capital asset.
For United States federal income tax purposes, the amount of any dividend
paid in Danish kroner will be the United States dollar value of the kroner at
the exchange rate in effect on the date of receipt, whether or not the kroner is
converted into United States dollars at that time.
The withholding tax imposed by Denmark generally is a creditable foreign
tax for United States federal income tax purposes. Therefore, a United States
Stockholder generally will be entitled to include the amount withheld as foreign
tax paid in computing a foreign tax credit (or in computing a deduction for
foreign income taxes paid, if the United States Stockholder does not elect to
use the foreign tax credit provisions of the Code). The Code, however, imposes a
number of limitations on the use of foreign tax credits, based on the particular
facts and circumstances of each taxpayer. United States Stockholders who hold
Olicom Common Stock should consult their tax advisors regarding the availability
of the foreign tax credit.
A United States Stockholder also may be subject to backup withholding at
the rate of 31% with respect to dividends paid on or proceeds from the sale or
other disposition of shares of Olicom Common Stock, unless the United States
Stockholder (i) is a corporation or comes within certain other exempt categories
or (ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules.
Sale or Other Disposition of Olicom Common Stock. Gain or loss recognized
by a United States Stockholder on the sale or other disposition of Olicom Common
Stock will be subject to United States federal
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income taxation as capital gain or loss in an amount equal to the difference
between such United States Stockholder's basis in its Olicom Common Stock and
the amount realized upon such disposition. The capital gain or loss will be
short-term or long-term, depending on whether the United States Stockholder has
held the Olicom Common Stock for more than one year. Capital losses are
generally deductible only against capital gains and not against ordinary income.
UNITED STATES TAX CONSEQUENCES OF OWNERSHIP OF WARRANTS
Exercise of Warrants. Generally, no gain or loss will be recognized for
United States federal income tax purposes upon exercise of a Warrant. A holder's
initial tax basis in a Warrant will be equal to the value of the Warrant at the
time the holder receives such Warrant. The tax basis of shares of Olicom Common
Stock acquired upon exercise of a Warrant will be equal to the sum of (i) the
holder's tax basis in such Warrant and (ii) the exercise price. The holding
period of the Olicom Common Stock acquired upon exercise of a Warrant will begin
on the date of exercise of the Warrant.
Disposition of Warrants. In general, the sale, exchange or other taxable
disposition of a Warrant will result in gain or loss to the holder in an amount
equal to the difference between the amount realized on such sale, exchange or
other disposition and the holder's tax basis in the Warrant. Such gain or loss
generally will be long-term capital gain or loss if the Warrant is held by the
holder for more than one year at the time of the disposition and the Olicom
Common Stock issuable upon exercise of such Warrant would have been a capital
asset if acquired by the holder.
Expiration. The expiration of a Warrant should generally result in a
long-term capital loss to the holder equal to the holder's tax basis in the
Warrant if (i) the Warrant is held by the holder for more than one year at the
time of the expiration and (ii) the Olicom Common Stock issuable upon exercise
of the Warrant would have been a capital asset if acquired by such stockholder.
Adjustments to Conversion Ratio. Adjustments made to the number of shares
of Olicom Common Stock that may be acquired upon the exercise of a Warrant, or
the failure to make such adjustments, may result in a taxable distribution to
the holders of Warrants pursuant to Section 305 of the Code.
DANISH TAX CONSEQUENCES OF THE MERGER
Olicom, MergerSub and CrossComm. The Merger of MergerSub into CrossComm
should not result in the recognition of taxable gain or loss by Olicom,
MergerSub or CrossComm for Danish income tax purposes.
CrossComm Stockholders. The exchange by a United States Stockholder of
CrossComm Common Stock for its allocable share of the Merger Consideration
should not result in the recognition of taxable gain or loss by such United
States Stockholder for Danish income tax purposes.
DANISH TAX CONSEQUENCES OF OWNERSHIP OF OLICOM COMMON STOCK
Dividends. For Danish income tax purposes, the gross amount of all
distributions made by Olicom to its stockholders prior to the fiscal year in
which Olicom is completely liquidated and dissolved is taxed as a dividend,
including distributions that otherwise exceed Olicom's E&P. Distributions made
by Olicom to its stockholders during the fiscal year in which Olicom is
completely liquidated and dissolved are taxed as capital gains. In addition, the
gross amount paid by Olicom to redeem Olicom Common Stock owned by a stockholder
generally is taxed as a dividend. However, a stockholder may apply to Danish tax
authorities for an exemption from the dividend tax. If the exemption request is
granted, the redemption will be taxed as capital gains. The granting of bonus
shares to stockholders, and the right of stockholders to subscribe for Olicom
Common Stock at a price that is less than the current trading value of such
Olicom Common Stock, are not considered taxable distributions to stockholders.
In general, a Danish withholding tax of 25% is levied on all dividends.
However, a United States Stockholder may apply to the Danish tax authorities for
a partial refund of the dividends tax that has been withheld. If this refund
request if granted, the Danish withholding tax on such dividends is effectively
reduced to 15%. Olicom does not presently contemplate the payment of any cash
dividends on Olicom Common Stock.
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Should Olicom, however, decide to make payment of a cash dividend, Olicom will
apply to the Danish tax authorities for a blanket exemption that would allow
Olicom to withhold only 15% of all dividends paid to a United States
Stockholder. While Olicom believes that such an exemption will be granted, there
can be no assurance that this will occur.
Sale of Shares. Capital gains realized by United States Stockholders upon
the sale of Olicom Common Stock should be exempt from Danish taxation.
DANISH TAX CONSEQUENCES OF OWNERSHIP OF WARRANTS
Exercise of Warrants. Generally, a United States Stockholder should not
recognize taxable gain or loss for Danish income tax purposes upon the exercise
of a Warrant.
Sale of Warrants. Generally, a United States Stockholder should not
recognize taxable gain or loss for Danish income tax purposes upon the sale of a
Warrant.
Expiration. Upon the expiration of a Warrant, a United States Stockholder
should not recognize taxable gain or loss for Danish income tax purposes.
DESCRIPTION OF OLICOM COMMON STOCK
Set forth below is a summary of certain information concerning Olicom's
share capital and a brief description of certain provisions contained in the
Olicom Articles and of provisions of the Companies Act applicable to the
formation, organization and operation of Olicom. An English translation of the
Olicom Articles has been filed as an exhibit to this Joint Proxy
Statement/Prospectus. The following summary and description do not purport to be
complete statements of these provisions and are qualified in their entirety by
reference to the Olicom Articles, such exhibit and applicable Danish law.
AUTHORIZED CAPITAL
The authorized share capital of Olicom consists of 15,938,000 shares of
common stock, of which there were issued and outstanding 14,734,000 shares as of
May 2, 1997, and 1,204,000 shares were held in the treasury of Olicom. In
addition, 633,345 shares of Olicom Common Stock are currently reserved for
issuance pursuant to options or warrants which have been or may be granted under
Olicom's Share Incentive Plans. See "The Olicom Meeting -- Matters to Be
Considered at the Olicom Meeting: Proposal 8 -- Approval of the 1997 Share
Incentive Plan."
Olicom has further authorized the issuance of 8,000,000 shares in
connection with private placements or the acquisition of assets or companies at
such times and on such terms as may be determined by the Olicom Board. The
authorizations relating to the issuance of shares for the specific purposes of
private placements, acquisitions of assets or companies are valid until August
25, 1997, and the authorizations relating to the issuance of shares under
Olicom's Share Incentive Plans are valid until May 5, 1998, unless extended by
an annual general meeting of stockholders (a "General Meeting") prior thereto.
All shares of Olicom Common Stock are issued in registered form.
LIABILITY TO FURTHER CALL OR ASSESSMENT
The shares of Olicom Common Stock to be issued in connection with the
Merger, and upon exercise of Warrants, when issued and paid for, will be fully
paid and non-assessable.
EXCHANGE CONTROLS
There are no governmental laws, decrees or regulations of the Kingdom of
Denmark that restrict the export or import of capital (including, without
limitation, foreign exchange controls), or that affect the remittance of
dividends, interest or other payments to nonresident holders of Olicom Common
Stock. There
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are no limitations imposed by the laws of the Kingdom of Denmark or the Olicom
Articles on the right of nonresident or foreign holders to hold or vote shares
of Olicom Common Stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company or its successor is the transfer
agent and registrar for the Olicom Common Stock.
COMPARISON OF STOCKHOLDER RIGHTS
UNDER THE LAWS OF DENMARK AND DELAWARE
The following is a summary of material differences between the rights of
holders of CrossComm Common Stock and holders of Olicom Common Stock, and
between the DGCL and the Companies Act which may affect the rights and interests
of CrossComm stockholders. This summary is not, and does not purport to be,
complete and does not purport to identify all differences that may, under given
circumstances, be material to CrossComm stockholders. This summary is qualified
in its entirety be reference to the DGCL and the Companies Act, and the Olicom
Articles and the CrossComm Certificate. This summary should be read in
conjunction with the "Description of Olicom Common Stock."
MEETINGS OF STOCKHOLDERS
The General Meeting is the supreme authority in the determination of all
matters affecting the affairs of Olicom, subject to the limitations provided in
the Companies Act and the Olicom Articles. The Olicom Articles require that a
General Meeting be held in greater Copenhagen not later than the end of May
during each year. Any stockholder in Olicom is entitled to submit proposals to
be discussed at a General Meeting; however, in order to be considered at a
General Meeting, any proposal that would require consideration by the Olicom
Board is required to be submitted in writing to the Olicom Board not later than
February 1 following the end of the year to which such General Meeting relates.
However, if a proposal is received subsequent to the February 1 deadline, the
Olicom Board is required to consider such proposal to the extent that it is
practical to include consideration of such proposal in the agenda of a General
Meeting. At a General Meeting, the audited accounts of Olicom (which are
prepared in accordance with Danish law) are submitted for approval, together
with the proposed appropriations of profit and the election of the board of
directors and auditors. In addition, at a General Meeting the Olicom Board
submits a report on the activities of Olicom during the previous year.
Under the DGCL, an annual meeting of stockholders must be held for the
election of directors on a date and at a time designated by or in the manner
provided in the bylaws. Any other proper business may be transacted at the
annual meeting of stockholders.
STOCKHOLDER POWER TO CALL SPECIAL MEETINGS
Generally, extraordinary General Meetings are held at the request of the
Olicom Board, Olicom's auditors or stockholders representing at least one tenth
of the nominal value of the total share capital.
Under the DGCL, a special meeting of stockholders may be called by the
board of directors or any other person authorized to do so in the corporation's
certificate of incorporation or bylaws. The DGCL does not provide stockholders
with an automatic right to call special meetings of stockholders.
QUORUM OF STOCKHOLDERS
Pursuant to the Companies Act, a quorum of stockholders is not required for
a General Meeting to conduct business.
Under the DGCL, the presence in person or by properly executed proxy of
holders of a majority of the outstanding shares of stock entitled to vote is
required to constitute a quorum at meetings of stockholders. A quorum is
required in order for a stockholders' meeting to conduct business.
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VOTING RIGHTS
Except as described below, a holder of a share of Olicom Common Stock is
entitled to one vote at any General Meeting. Except as described below and
subject to provisions of the Companies Act (which require that certain
resolutions be passed by a greater vote), matters (including the election of
directors) are decided at a General Meeting by a simple majority of the votes
cast. Any stockholder is entitled to attend and vote at a General Meeting,
either in person or by proxy. However, under the Olicom Articles a stockholder
who has acquired shares by means of a transfer and who is not registered in
Olicom's list of stockholders or who has not notified and documented to Olicom
such acquisition of shares at the time that Olicom notices a General Meeting has
no right to vote at such meeting.
Under the DGCL, each stockholder is entitled to one vote per share, unless
the certificate of incorporation provides otherwise. In addition, the
certificate of incorporation may provide for cumulative voting at all elections
of directors of a corporation.
CUMULATIVE VOTING
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number of
directors to be elected. A stockholder may then cast all such votes for a single
candidate or may allocate them among as many candidates as the stockholder may
choose. Without cumulative voting, the holders of a majority of the shares
present at a meeting held to elect directors would have the power to elect all
the directors to be elected at that meeting, and no person could be elected
without the support of holders of a majority of the shares voting at such
meeting.
The Companies Act contains no regulation regarding cumulative voting. The
Olicom Articles do not provide for cumulative voting. Under the DGCL, cumulative
voting is permitted only if it is specifically provided for in the corporation's
certificate of incorporation.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Under the Companies Act, any decisions that are required to be taken at a
meeting of stockholders (including decisions with respect to the election of
directors, amendments of articles of association and other similar matters) may
only be undertaken at a General Meeting. The formal requirements for notice may
only be waived if all stockholders consent to such waiver.
The DGCL provides that, unless otherwise provided in a corporation's
certificate of incorporation, any action that may be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize such action at a meeting,
consent in writing.
VOTING REQUIREMENTS
Resolutions for the dissolution of Olicom, its merger with another
corporation, the amendment of the Olicom Articles, and certain other matters are
required by the Companies Act to be approved by (i) two-thirds of the votes cast
at the General Meeting, and (ii) two-thirds in nominal value of the voting
capital represented and entitled to vote at the meeting. The approval at a
General Meeting of any proposal that has not been made or endorsed by the Olicom
Board requires that more than one-half of the shares and votes be represented at
such meeting, and that three-fourths of the shares and votes represented at such
meeting vote in favor of such proposal. Amendments which lessen the effect of
Article 6 of the Olicom Articles (which provides for the limitation of any
person's ownership of Olicom's share capital or votes (see "Limitations on Share
Ownership")) require the approval of at least three-fourths of the votes cast at
a General Meeting, unless such amendment has been proposed or endorsed by the
Olicom Board, in which case the amendment can be adopted in the manner
ordinarily required for amendments to the Olicom Articles.
Under the DGCL, an amendment to the certificate of incorporation requires
the affirmative vote of the holders of majority of the shares entitled to vote
thereon, unless the corporation's certificate of incorporation requires a
greater or lesser number for approval. Furthermore, under the DGCL, the holders
of the
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outstanding shares of a class are entitled to vote as a class upon any proposed
amendment to the certificate of incorporation, whether or not they are entitled
to vote thereon by the provisions of the corporation's certificate of
incorporation, if the amendment would increase or decrease the aggregate number
of authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to adversely affect them.
Under the DGCL, an agreement of merger, exchange or consolidation must be
approved by the directors of each constituent corporation and adopted by the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote thereon, or by a greater vote as provided in a corporation's charter.
The DGCL does not require the separate vote of any class of shares, unless any
provision of the plan of merger would, if contained in a proposed amendment to
the certificate of incorporation, entitle the class or series to vote as a class
or series. Additionally, the DGCL provides generally that, unless its charter
provides otherwise, no vote of the stockholders of the surviving corporation is
required to approve the merger if (i) the agreement of merger does not amend in
any respect the corporation's charter, (ii) each share outstanding immediately
prior to the effective date is to be an identical outstanding share of the
surviving corporation after the effective date and (iii) the number of shares of
the surviving corporation's common stock to be issued in the merger plus the
number of shares of common stock into which any other securities to be issued in
the merger are initially convertible does not exceed 20% of its common stock
outstanding immediately prior to the effective date of the merger.
Under the DGCL, a dissolution must be approved by stockholders holding 100%
of the total voting power or the dissolution must be initiated by the board of
directors and approved by the holders of a majority of the outstanding voting
shares of the corporation, unless a greater vote is provided in the certificate
of incorporation.
BOARD OF DIRECTORS
Olicom is managed by a board of directors which, under the Olicom Articles,
is required to consist of between four and eight members elected, with a simple
majority, by the stockholders at a General Meeting. Directors are elected for
one-year terms expiring at the end of the following year's General Meeting, and
are eligible for reelection. Absent an exemption from the Ministry of Industry
of Denmark, at least 50% of the directors must be residents of Denmark; however,
exemptions are automatically granted if at least 50% of the directors are
residents of other countries in the European Community. In addition, the
employees of Olicom may be represented on the Olicom Board by directors elected
in accordance with statutory Danish law to that effect. The statutory rights of
the employees of Olicom and its Danish subsidiaries (which rights have not been
exercised to date) include the following principal features. Employees of
corporations registered in Denmark that constitute a "Group" which, during the
past three years, has employed an average of not fewer than 35 employees (such
as Olicom and its Danish subsidiaries) have the right to elect from among such
employees a number of directors of the parent corporation, so that the total
number of employee-directors and substitutes therefor will equal one-half of the
total number of directors elected by the stockholders at a General Meeting (but
not fewer than three directors).
Under the DGCL, the board of directors of a corporation must consist of one
or more members. The number of directors must be fixed by, or in a manner
provided in, the bylaws, unless the certificate of incorporation fixes the
number of directors. Each director holds his or her office until a successor is
elected and qualified or until his or her resignation or removal. The directors
are elected at the annual meeting of stockholders. The DGCL permits the board of
directors of a Delaware corporation to change the authorized number of directors
by amendment to the corporation's bylaws or in the manner provided in the bylaws
unless the number of directors is fixed in the corporation's certificate of
incorporation, in which case a change in the number of directors may be made
only by amendment to the certificate of incorporation.
REMOVAL OF DIRECTORS
Under the Companies Act, any director or the entire board of directors may
be removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote. However, board members
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elected by the employees in accordance with the statutory rights of the
employees as described above cannot be removed by the stockholders at a General
Meeting. Such employee-elected directors (who are elected for a four-year
period) may be removed at any time by utilizing the same procedure as is used
for their election. In addition, an employee-elected director is required to
resign his directorship at such time as his employment terminates.
Under the DGCL, any director or the entire board of directors of a
corporation without a classified board of directors may be removed with or
without cause by the holders of a majority of the shares then entitled to vote
at an election of directors.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one in which a certain number, but not all, of the
directors are elected on a rotating basis each year. This method of electing
directors makes a change in the composition of the board of directors, and a
potential change in control of a corporation, a lengthier and more difficult
process. The DGCL permits, but does not require, a classified board of directors
with staggered terms under which the directors are elected for terms of two or
three years. The Olicom Articles do not currently provide for a classified
board.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the Companies Act, a member of the board of directors may retire from
the board of directors at any time by giving notice to the board. Where a member
of the board of directors resigns his directorship before the expiration of his
term and no deputy board member has been elected to replace him, the other
members of the board of directors may elect a new member to hold office for the
remainder of the resigning director's term. Where the election of a director is
effected by a General Meeting, the election of a new member of the board of
directors can be postponed until the next ordinary General Meeting at which
election for the board of directors can take place, provided that the remaining
members and deputies of the board of directors constitute a quorum.
The DGCL provides that any vacancy or newly-created directorship may be
filled by a majority of the directors then in office (even though less than a
quorum) unless (i) otherwise provided in the certificate of incorporation or
bylaws of the corporation or (ii) the certificate of incorporation directs that
a particular class is to elect such director, in which case any other directors
elected by such class, or sole remaining director, shall fill such vacancy or
newly-created directorship.
APPRAISAL RIGHTS
Under the Companies Act, in connection with a merger, stockholders in a
non-surviving corporation may claim compensation from the corporation if they
dissent at the General Meeting and if the consideration for their shares is not
reasonable and appropriate. In such event, legal action must be instituted by
the dissenting stockholder within two weeks of the adoption of the merger by the
merging corporations.
Under the DGCL, appraisal rights are available only in connection with
statutory mergers or consolidations. Generally, stockholders of a Delaware
corporation who dissent from a merger or consolidation of the corporation for
which a stockholders' vote is required are entitled to appraisal rights,
requiring the surviving corporation to purchase the dissenting shares at fair
value. There are, however, no statutory rights of appraisal with respect to
stockholders of a Delaware corporation whose shares of stock are either (i)
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
stockholders, in each case where such stockholders receive only shares of stock
of the corporation surviving or resulting from the merger or consolidation, or
cash in lieu of fractional interests therein, or a combination thereof.
INSPECTION OF STOCKHOLDER LIST
Under the Companies Act, the register of stockholders is not open to
stockholders, but is available at the corporation's office for inspection by
public authorities. In corporations where the employees have not elected
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<PAGE> 142
members to the board of directors, the register of stockholders is also
available to a representative of the employees.
Under the DGCL, any stockholder may inspect for any proper purpose the
stock ledger, list of stockholders and other books and records of a Delaware
corporation during the usual hours of business.
STOCKHOLDER DERIVATIVE ACTIONS
Any resolution to the effect that a Danish corporation shall institute
legal proceedings against the founders, directors, managers, valuers, auditors,
investigators or stockholders in pursuance of the applicable provisions of the
Companies Act regarding such persons' liabilities towards the corporation, is
subject to the adoption of such a resolution at a General Meeting by
stockholders. Where stockholders representing at least one-tenth of the share
capital oppose the decision in favor of an exemption from liability or in favor
of waiving the right to institute legal proceedings against such persons, any
stockholder can institute legal proceedings claiming that the responsible
persons be required to pay to the corporation the cost of such matter; however,
such persons will be entitled to have such costs reimbursed by the corporation
to the extent that the corporation recovers its costs in such action.
Stockholders who thereafter take legal action are responsible for the payment of
the costs of the case; however, they are entitled to have such costs reimbursed
by the corporation. Any such legal action may not be instituted later than six
months after the adoption of the resolution by the General Meeting, or if an
investigation into the affairs of the corporation has been commenced in
pursuance of the provisions of the Companies Act providing for investigations,
six months after such investigation has been completed.
Under the DGCL, a stockholder may bring a derivative action on behalf of
the corporation to enforce the rights of the corporation. The person may
institute and maintain such a suit only if such person was a stockholder at the
time of the transaction which is the subject of the suit. Additionally, under
the DGCL, the plaintiff generally must be a stockholder not only at the time of
the transaction which is the subject of the suit, but also through the duration
of the derivative suit. The DGCL also requires that the derivative plaintiff
make demand on the directors of the corporation to assert the corporate claim
before the suit may be prosecuted by the derivative plaintiff, unless such
demand would be futile.
FIDUCIARY DUTIES OF DIRECTORS
Under the Companies Act, the board of directors and management of a
corporation have an obligation to act in the best interests of the corporation
and its stockholders. The directors are required to arrange for an appropriate
organization of the corporation's activities. The management of a corporation
chartered under the Companies Act is in charge of the day-to-day management of
the corporation, and in this connection, is required to comply with instructions
or orders of the board of directors. Without the approval of the board of
directors, management may not conduct transactions that, in light of the general
circumstances, are of an unusual nature or importance. The board of directors is
required to assure that the corporation's accounts and financial administration
are controlled in a manner deemed to be satisfactory in view of the
corporation's circumstances. In this regard, the board of directors is required
to assure that the bookkeeping and administration of assets of the corporation
are controlled in a satisfactory manner in light of the corporation's
circumstances. The board of directors is obligated to take into consideration
and protect interests other than those of the stockholders. For example, members
of the board of directors who have intentionally or negligently caused damage to
creditors of a corporation may be liable to the corporation's creditors. The
board of directors also has an obligation to assure that other laws, such as
environmental laws and laws with respect to workers' protection, are duly
complied with. Under the Companies Act, a corporation may not make loans to, or
grant a security interest that benefits, stockholders of the corporation, or
with respect to the directors or managers of such corporation or its parent.
Under the DGCL, the members of a board of directors have substantially
similar legal obligations and fiduciary duties to the corporation and its
stockholders. A Delaware corporation may lend money to, or guarantee any
obligation incurred by, its officers or directors, if, in the judgment of the
board of directors, such loan or guarantee may reasonably be expected to benefit
the corporation. With respect to any other contract or
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<PAGE> 143
transaction between the corporation and one or more of its directors or
officers, such transactions are neither void nor voidable if either (i) the
director's or officer's interest is made known to the disinterested directors or
the stockholders of the corporation, who thereafter approve the transaction in
good faith, or (ii) the contract or transaction is fair to the corporation as of
the time it is approved or ratified by either the board of directors, a
committee thereof or the stockholders.
LIABILITY AND INDEMNIFICATION
Under the Companies Act, directors and managers who, in connection with the
performance of their duties, deliberately or negligently inflict damage on the
corporation are liable to compensate the corporation for such damage. Directors
and managers are also liable for damage inflicted on stockholders, creditors of
the corporation or any third party through a violation of the Companies Act or
the corporation's articles of association. A stockholder may be liable for
losses suffered by a corporation, other stockholders or any third party, to the
extent that such losses are the result of a violation of the Companies Act or a
corporation's articles of association committed deliberately or through gross
negligence. In the event that a court finds that there is a danger of continued
abuse or there are other circumstances that support remedial action, a court can
require a stockholder who so violates the Companies Act or a corporation's
articles of association to purchase the shares of other stockholders who are
injured as a consequence thereof. In such event, the purchase price for such
shares is to be determined with due regard for the corporation's financial
condition and other matters that the court determines are reasonable in the
circumstances. Where several persons become liable to pay compensation at the
same time, they shall be joint and severally liable for the compensation. The
concept of indemnification of directors or managers of a corporation for
liabilities arising from their actions toward third parties as directors or
managers is not well known in Denmark. It is therefore not clear to what extent,
if any, an agreement for indemnification of directors or managers is effective
under Danish law.
Under the DGCL, a corporation may include in its certificate of
incorporation a provision which would, subject to the limitations described
below, eliminate or limit directors' liability for monetary damage for breaches
of their fiduciary duty of care. Under the DGCL, a director's liability cannot
be eliminated or limited (i) for breaches of duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for the payment of unlawful dividends or expenditure of
funds for unlawful stock purchases or redemptions or (iv) for transactions from
which such director derived an improper personal benefit. The DGCL further
provides that no such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.
Generally, Section 145 of the DGCL permits a corporation to indemnify
certain persons made a party to an action by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. To the extent that person has been
successful in any such matter, that person shall be indemnified against expenses
actually and reasonably incurred by him or her. In the case of an action by or
in the right of the corporation, no indemnification may be made in respect of
any matter as to which that person was adjudged liable unless and only to the
extent that the Delaware Court of Chancery or the court in which the action was
brought determines that despite the adjudication of liability that person is
fairly and reasonably entitled to indemnity for proper expenses.
LIMITATIONS ON SHARE OWNERSHIP
The Olicom Articles provide that no person, firm or entity (each, a
"person") may, without obtaining the approval of the Olicom Board, own more than
33% of Olicom's share capital or votes at any time (the "Share Ownership
Limit"). The Olicom Board may condition its approval on the satisfaction of such
conditions that it determines to be appropriate. For the purpose of determining
ownership of shares or votes, a person will generally be deemed to own shares or
votes which are considered to be beneficially owned by such person under Rule
13d-3 under the Exchange Act.
A person who owns more than 33% of Olicom's share capital or votes at any
time who has not obtained the approval of the Olicom Board cannot be registered
or otherwise accepted as a stockholder, and such person
126
<PAGE> 144
will have no voting rights, rights to dividends or distributions, or any other
rights as a stockholder, for such portion of such person's stockholding that
exceeds 33%. The Olicom Board may approve the ownership by a person of more than
33% of Olicom's share capital or votes (i) in the event that such person has,
prior to purchasing more than 33% of Olicom's share capital or votes, requested
the approval by the Olicom Board to own more than the Share Ownership Limit,
(ii) in the event that such person has made a legally binding and irrevocable
bona fide offer to all stockholders of Olicom (other than such person, to the
extent that he is a stockholder) to purchase all the shares and votes in Olicom
at a price deemed favorable by the Olicom Board, in its discretion or (iii) in
such other circumstances, as determined by the Olicom Board. The Olicom Board
has given its approval to the ownership by Nilex, Olivetti Realty N.V., Lars
Stig Nielsen and Asbjo/rn Smitt of shares in excess of the Share Ownership
Limit.
The Olicom Articles contain no other specific antitakeover provision.
Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder." For purposes of this provision an
"interested stockholder" is a stockholder that is directly or indirectly a
beneficial owner of 15% or more of the voting power of the outstanding voting
stock of a Delaware corporation (or its affiliate or associate). This provision
prohibits certain business combinations between an interested stockholder and a
corporation for a period of three years after the date the interested
stockholder acquired its stock, unless (i) the business combination is approved
by the corporation's board of directors prior to the stock acquisition date,
(ii) the interested stockholder acquired at least 85% of the voting stock of the
corporation in the transaction in which he became an interested stockholder or
(iii) the business combination is approved by a majority of the board of
directors and the affirmative vote of two-thirds of the disinterested
stockholders.
PRE-EMPTIVE RIGHTS
Except for shares issued pursuant to authorizations granted to the Olicom
Board as described in the Olicom Articles, all stockholders of Olicom have
pre-emptive rights in the event of any increase in Olicom's share capital.
Changes in the share capital can be made by the decision of Olicom's
stockholders at a General Meeting or by the decision of the Olicom Board
pursuant to the authorizations in the Olicom Articles. At a General Meeting,
Olicom's stockholders may agree to deviations from the general pre-emptive
rights of the existing stockholders for the purpose of specific increases of
Olicom's share capital; however, such resolutions may be adopted only by a
majority of two-thirds of the share capital and votes represented at the General
Meeting (subject to higher voting requirements if shares will be issued at a
price below the market value of the shares). No stockholder of Olicom will have
pre-emptive rights to purchase any shares of Olicom Common Stock in connection
with the Merger, or in connection with the exercise of Warrants.
The DGCL provides that a corporation's stockholders have pre-emptive rights
only if such rights are expressly granted in the corporation's certificate of
incorporation.
DIVIDEND RIGHTS
Under the Companies Act, distributions of profits may only be authorized by
stockholders based on the latest annual audited accounts of Olicom. The
financial year of Olicom is the calendar year. Interim dividends cannot be paid,
and stockholders cannot authorize the payment of an annual dividend greater than
the amount that has been recommended or agreed to by the Olicom Board. The
Companies Act requires that any distribution of profits available for
distribution, after covering any losses for previous years, be distributed pro
rata to all stockholders. All dividends that remain unclaimed for a period of
five years after having been declared are forfeited and revert to Olicom.
Subject to any restrictions contained in a corporation's certificate of
incorporation, the DGCL generally provides that a corporation may declare and
pay dividends out of surplus (defined as net assets minus stated capital) or,
when no surplus exists, out of net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year. Dividends may not be
paid out of net profits if the capital of the corporation is less than the
amount of capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets. In determining the amount
of surplus of a Delaware corporation, the
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<PAGE> 145
assets of the corporation, including stock of subsidiaries owned by the
corporation, must be valued at their fair market value as determined by the
board of directors, without regard to their historical book value.
RIGHTS OF PURCHASE
Under the Companies Act, a corporation may, if authorized by a General
Meeting, acquire its own shares against payment of consideration, although the
aggregate amount of such shares held by a corporation and its subsidiaries may
not exceed 10% of the aggregate amount of issued shares. At the Annual General
Meeting held on May 8, 1996, the Olicom Board was authorized to purchase up to
10% of Olicom's share capital at the market price of the shares on the date of
purchase, with deviation of up to 10% from the market price. Such authorization
expires on the earlier of the next General Meeting or November 7, 1998.
Under the DGCL, a corporation may redeem or repurchase its own shares,
except that a corporation may not generally make such a purchase or redemption
if it would cause impairment of its capital.
PROVISIONS RELATED TO NON-DANISH STOCKHOLDERS
There are no special limitations or provisions in the Olicom Articles or
Danish law applicable to stockholders who are not citizens or residents of
Denmark to hold or vote shares.
STOCKHOLDER PROPOSALS
Any stockholder in Olicom is entitled to submit proposals to be discussed
at a General Meeting; however, in order to be considered at a General Meeting,
any proposal that would require consideration by the Olicom Board is required to
be submitted in writing to the Olicom Board not later than February 1 following
the end of the year to which such General Meeting relates. A proper proposal
submitted by a stockholder in accordance with applicable rules and regulations
for presentation at Olicom's next General Meeting that is received at Olicom's
principal executive offices by February 1, 1998, will be included in the
Olicom's proxy statement and form of proxy for that meeting.
If the Merger is not consummated, CrossComm will hold a 1998 Annual Meeting
of Stockholders. Proposals of stockholders intended to be presented at
CrossComm's 1998 Annual Meeting of Stockholders, if the Merger is not
consummated prior thereto, must be received by CrossComm at its principal office
in Marlborough, Massachusetts, not later than December , 1997, for inclusion
in the proxy statement for that meeting.
LEGAL MATTERS
The validity of the shares of Olicom Common Stock offered in connection
with the Merger will be passed upon for Olicom by Advokatfirmaet O. Bondo Svane,
Copenhagen, Denmark. Certain other legal matters relating to the Merger and the
transactions contemplated thereby will be passed upon for Olicom by Liddell,
Sapp, Zivley, Hill & LaBoon, L.L.P., Dallas, Texas. As of the Record Date,
partners of Advokatfirmaet O. Bondo Svane participating in the consideration of
legal matters relating to the Merger and the transactions contemplated thereby
owned 13,550 shares of Olicom Common Stock.
EXPERTS
The Consolidated Financial Statements of Olicom at December 31, 1995 and
1996, and for each of the three years in the period ended December 31, 1996,
included in the Joint Proxy Statement of Olicom and CrossComm which is referred
to and made a part of this Joint Proxy Statement/Prospectus and Registration
Statement, have been audited by Ernst & Young A/S, independent auditors, as set
forth in their report appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
128
<PAGE> 146
The Consolidated Financial Statements and related schedule of CrossComm at
December 31, 1995 and 1996, and for each of the three years in the period ended
December 31, 1996, included in the Joint Proxy Statement of Olicom and CrossComm
which is referred to and made a part of this Joint Proxy Statement/Prospectus
and Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
Representatives of Ernst & Young A/S are expected to be present at the
Olicom Meeting. Representatives of Ernst & Young LLP are expected to be present
at the CrossComm Meeting.
FINANCIAL STATEMENTS AVAILABLE
A copy of Olicom's 1996 Annual Report containing Olicom's audited
consolidated balance sheets at December 31, 1995 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years ended December 31, 1994, 1995 and 1996, prepared in
accordance with accounting principles generally accepted in the United States,
is being mailed with this Joint Proxy Statement/Prospectus to stockholders
entitled to notice of the Olicom Meeting. The Annual Report does not constitute
a part of the proxy solicitation material.
Upon written request to Olicom's Investor Relations Department (Attention:
Tyge Trier), c/o Olicom A/S, Nybrovej 114, DK-2800 Lyngby, Denmark, or c/o
Olicom, Inc., 900 East Park Blvd., Suite 250, Plano, Texas 75074, Olicom will
provide, without charge, copies of (i) its Annual Report on Form 20-F for fiscal
year 1996 and (ii) Olicom's Annual Accounts.
129
<PAGE> 147
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Olicom A/S
Fiscal years ended December 31, 1994, 1995 and 1996
Report of Independent Auditors............................ F-2
Financial Statements:
Consolidated Balance Sheets at December 31, 1995 and
1996.................................................. F-3
Consolidated Statements of Income for each of the three
years in the period ended December 31, 1996........... F-4
Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended December
31, 1996.............................................. F-5
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1996..... F-6
Notes to Consolidated Financial Statements............. F-7
CrossComm Corporation
Years ended December 31, 1994, 1995 and 1996
Report of Independent Auditors............................ F-19
Financial Statements:
Consolidated Balance Sheets at December 31, 1995 and
1996.................................................. F-20
Consolidated Statements of Operations for the years
ended December 31, 1994, 1995 and 1996................ F-21
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996.......... F-22
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1995 and 1996................ F-23
Notes to Consolidated Financial Statements............. F-24
</TABLE>
F-1
<PAGE> 148
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Olicom A/S
We have audited the accompanying consolidated balance sheets of Olicom A/S
and subsidiaries as of December 31, 1995 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Olicom A/S and
subsidiaries at December 31, 1995 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles in the United States of America.
Ernst & Young
Statsautoriseret Revisionsaktieselskab
Copenhagen, April 2, 1997
F-2
<PAGE> 149
OLICOM A/S
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 33,065 $ 41,663
Short-term investments (Note 3)........................... 10,099 9,887
Accounts receivable, less allowance of $490 in 1995 and
$1,055 in 1996......................................... 37,137 37,712
Accounts receivable, other................................ 2,155 1,913
Inventories:
Finished goods............................................ 22,497 13,967
Raw materials............................................. 9,762 8,285
-------- --------
32,259 22,252
Deferred income taxes (Note 6).............................. 15 945
Prepaid expenses............................................ 1,070 1,769
-------- --------
Total current assets........................................ 115,800 116,141
Investments in affiliated companies (Notes 4 and 9A)........ 5,889 0
Property and equipment:
Leasehold improvements.................................... 649 2,280
Equipment................................................. 9,954 17,740
-------- --------
10,603 20,020
Accumulated depreciation.................................. (5,564) (8,988)
-------- --------
5,039 11,032
Goodwill, net of accumulated amortization of $1,506 in 1995
and $2,832 in 1996........................................ 599 751
-------- --------
Total assets................................................ $127,327 $127,924
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks (Note 5)........................... $ 6,430 $ 0
Accounts payable.......................................... 25,746 21,083
Accrued payroll and related expenses...................... 2,572 3,424
Accrued product warranty expense.......................... 704 823
Other accrued expenses.................................... 285 1,834
Income taxes payable...................................... 1,463 2,570
-------- --------
Total current liabilities......................... 37,200 29,734
Minority interest in equity of consolidated subsidiary...... 0 681
Shareholders' equity:
Common stock, DKK 0.25 nominal value authorized and
issued -- 15,837 in 1995 and 15,938 in 1996............ 610 614
Additional paid-in capital................................ 51,754 52,348
Retained earnings......................................... 49,424 56,849
Treasury stock -- 1,275 in 1995 and 1,255 in 1996......... (12,020) (11,831)
Currency translation adjustments.......................... 617 0
Unrealized gains/(losses) (Note 3)........................ (258) (471)
-------- --------
Total shareholders' equity........................ 90,127 97,509
-------- --------
Total liabilities and shareholders' equity........ $127,327 $127,924
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 150
OLICOM A/S
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1994 1995 1996
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales
Related parties (Note 9E)............. $ 12,127 $ 5,134 $ 0
Other................................. 101,477 122,335 168,228
-------- -------- --------
Total net sales............... 113,604 127,469 168,228
Cost of sales........................... 61,198 65,191 95,236
-------- -------- --------
Gross profit............................ 52,406 62,278 72,992
-------- -------- --------
Operating expenses:
Sales and marketing................... 23,783 31,660 40,496
Research and development.............. 7,531 9,193 12,852
General and administrative............ 4,440 5,662 6,848
Transaction-related expenses.......... 0 0 3,787
Special charge regarding management
change............................. 0 0 1,402
-------- -------- --------
Total operating expenses...... 35,754 46,515 65,385
-------- -------- --------
Income from operations.................. 16,652 15,763 7,607
Interest and other financial income..... 3,307 4,580 2,446
Interest and other financial expense.... (845) (1,283) (915)
Foreign currency gains (losses)......... 19 (31) 675
Related party gain on sale of investment
(Note 9A)............................. 0 0 2,878
Settlement of litigation (Note 12)...... (4,200) 0 0
-------- -------- --------
Income before income taxes.............. 14,933 19,029 12,691
Income taxes (Note 6)................... 5,026 6,223 4,727
-------- -------- --------
Net income before change in accounting
method and minority interest in income
of consolidated subsidiary............ $ 9,907 $ 12,806 $ 7,964
Minority interest in income of
consolidated subsidiary............... 0 0 539
Cumulative effect of change in
accounting method, net of tax $0 (Note
2).................................... 161 0 0
-------- -------- --------
Net income.................... $ 10,068 $ 12,806 $ 7,425
======== ======== ========
Net income per share.................... $ 0.66 $ 0.87 $ 0.50
======== ======== ========
Weighted average shares outstanding..... 15,298 14,748 14,786
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 151
OLICOM A/S
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TREASURY TRANSLATION UNREALIZED
STOCK CAPITAL EARNINGS STOCK ADJUSTMENTS GAINS/(LOSSES) TOTAL
------ ---------- -------- -------- ----------- -------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993............ $610 $51,789 $26,550 $ (853) ($211) $ 0 $77,885
Adjustment to opening balance for
change in accounting method, net of
tax $0 (Note 2).................... 0 0 0 0 0 (161) (161)
Net income for 1994................... 0 0 10,068 0 0 0 10,068
Purchase of treasury stock --
997 common stock................... 0 0 0 (9,141) 0 0 (9,141)
Warrants exercised --
10 treasury stock.................. 0 (31) 0 91 0 0 60
Change in unrealized gains/(losses)... 0 0 0 0 0 (917) (917)
Currency translation adjustments...... 0 0 0 0 397 0 397
---- ------- ------- -------- ----- ------- -------
Balance at December 31, 1994............ $610 $51,758 $36,618 $ (9,903) $186 ($1,078) $78,191
Net income for 1995................... 0 0 12,806 0 0 0 12,806
Purchase of treasury stock --
257 common stock................... 0 0 0 (2,400) 0 0 (2,400)
Options exercised --
31 common stock.................... 0 (4) 0 283 0 0 279
Change in unrealized gains/(losses)... 0 0 0 0 0 820 820
Currency translation adjustments...... 0 0 0 0 431 0 431
---- ------- ------- -------- ----- ------- -------
Balance at December 31, 1995............ $610 $51,754 $49,424 $(12,020) $617 $(258) $90,127
Net income for 1996................... 0 0 7,425 0 0 0 7,425
Purchase of treasury stock --
3 common stock..................... 0 0 0 (28) 0 0 (28)
Options and warrants exercised --
23 common stock.................... 0 (10) 0 217 0 0 207
Warrants exercised --
101 common stock................... 4 604 0 0 0 0 608
Change in unrealized gains/(losses)... 0 0 0 0 0 (213) (213)
Currency translation adjustments...... 0 0 0 0 (617) 0 (617)
---- ------- ------- -------- ----- ------- -------
Balance at December 31, 1996............ $614 $52,348 $56,849 $(11,831) $ 0 $(471) $97,509
==== ======= ======= ======== ===== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 152
OLICOM A/S
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income............................................... $ 10,068 $ 12,806 $ 7,425
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization......................... 1,862 2,478 3,585
Related party gain on sale of investment.............. 0 0 (2,878)
Deferred income taxes................................. (1,506) 1,588 (930)
Minority interest in earnings......................... 0 0 539
Equity in net income of affiliates.................... (366) (692) 0
Purchased research and development.................... 0 0 2,170
Changes in operating assets and liabilities:
Accounts receivable................................. (14,433) (2,494) 2,572
Other receivables................................... 159 (1,938) 242
Inventories......................................... 1,875 (16,117) 12,375
Prepaid expenses.................................... (32) 14 (545)
Accounts payable.................................... 3,445 10,486 (6,285)
Accrued payroll and related expenses................ 1,661 584 (3,298)
Accrued product warranty expense.................... 153 (427) 119
Other accrued liabilities........................... 1,179 (1,167) 2,509
Net liability of settlement......................... 4,200 (4,200) 0
Income taxes payable................................ 1,200 209 901
-------- -------- --------
Net cash provided by operating activities........ 9,465 1,130 18,501
Investing activities
Capital expenditures..................................... (1,526) (13,780) (8,199)
Proceeds from sale of property and equipment............. 0 12,666 0
Proceeds from sale of investment......................... 0 0 7,193
Acquisition of Lasat Communications -- net of cash
acquired (Note 4)..................................... (1,786) 0 (2,545)
Short-term investments................................... (287) 0 0
-------- -------- --------
Net cash used in investing activities............ (3,599) (1,114) (3,551)
Financing activities
Change in short-term borrowings.......................... 5,857 549 (6,451)
Long-term debt and capital lease obligations............. (166) 0 0
Sale (purchase) of treasury stock........................ (9,141) (2,400) 180
Proceeds from options and warrants exercised............. 60 279 608
-------- -------- --------
Net cash used in financing activities.................... (3,390) (1,572) (5,663)
Effects of exchange rates on cash........................ 655 76 (689)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents..... 3,131 (1,480) 8,598
Cash and cash equivalents at beginning of year........... 31,414 34,545 33,065
-------- -------- --------
Cash and cash equivalents at end of year................. $ 34,545 $ 33,065 $ 41,663
======== ======== ========
Interest paid during the year............................ $ 183 $ 321 $ 187
======== ======== ========
Income taxes paid during the year........................ $ 5,392 $ 4,730 $ 4,819
======== ======== ========
</TABLE>
See accompanying notes
F-6
<PAGE> 153
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Description of Business
Olicom A/S (the "Company") is a world-wide vendor of Asynchronous Transfer
Mode, Token Ring and Ethernet products used in local area networks and wide area
networks. The Company designs, develops, markets and supports software and
hardware products which permit computer users operating different types of
equipment to communicate, exchange data and share computing resources.
Reporting Currency
Although the Company and its Danish subsidiaries maintain their books and
records in Danish kroner, as required by Danish law, the Consolidated Financial
Statements have been prepared in U.S. dollars because the U.S. dollar is the
currency of the primary economic environment in which the Company and its
subsidiaries conduct their operations.
The majority of the Company's sales are billed and collected in U.S.
dollars, and the majority of the Company's purchases of raw materials and
finished goods inventories are invoiced and paid in U.S. dollars.
Principles of Consolidation
The consolidated financial statements include the accounts of Olicom A/S
and its majority-owned subsidiaries. The Company's investments in affiliated
companies are accounted for by the equity method of accounting.
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.
Cash and Cash Equivalents
Cash and cash equivalents represent cash and short-term deposits with
maturities of less than three months at the time of purchase.
Short-term Investments
Management determines the appropriate classification of securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Short-term investments not classified as held-to-maturity are classified as
available-for-sale. Short-term investments available-for-sale are carried at
fair value, with the unrealized gains and losses, net of tax, reported in a
separate component of shareholders' equity. Realized gains and losses and
declines in value judged to be other than temporary on available-for-sale short-
term investments are included in interest income. The cost of short-term
investments is based on the average cost method. Interest and dividends on
short-term investments classified as available-for-sale are included in interest
income.
Inventories
Inventories are stated as the lower of cost or market with cost determined
on the basis of the first in, first out method. Raw materials inventories are
sold at the Company's cost to subcontractors who assemble products to the
Company's specifications. Finished goods inventories include completed products
purchased from subcontractors.
F-7
<PAGE> 154
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Leasehold Improvements and Equipment
Leasehold improvements and equipment are carried at cost. Depreciation is
charged on a straight-line basis to costs and expenses over the expected useful
lives of the assets. Equipment is depreciated over four years, and leasehold
improvements are amortized over the shorter of their estimated lives or
non-cancelable term of the lease.
Goodwill
Cost in excess of net assets of businesses acquired (goodwill), represents
the unamortized excess of the cost of acquiring a business over the fair value
of the assets acquired at the date of acquisition. Amortization is computed by
the straight-line method over the estimated life of the benefit received, which
is five years.
On an annual basis, an impairment test is performed on the basis of future
undiscounted operating cash-flows expected in respect of the assets to which the
goodwill relates. Should the amount of these undiscounted operating cash-flows
exceed the carrying amount of the related assets, an impairment write-off would
be recorded based on discounted expected operating cash-flows.
Revenue Recognition
Revenue is recognized when products are shipped. Certain sales have been
made allowing a limited right of return; however, the Company has not
experienced any significant amounts of such returns.
Accrued Product Warranty Expense
The Company provides for the estimated cost of warranty at the time of
product shipment.
Research and Development Costs
Research and development costs, including costs of developing software
products, are expensed as incurred. Application of Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed," has not had any material effect on the
Company's consolidated financial position or results of operations.
Foreign Currency Translation
Gains and losses resulting from non-U.S. dollar transactions, and the
remeasurement of foreign currency balances and accounts denominated in
currencies other than the U.S. dollar, are included in the determination of net
income in the period in which they occur, in accordance with the requirements of
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation".
Gains and losses resulting from translation of the Company's equity
investments into U.S. dollars are included as a separate component of equity.
Income Taxes
The Company accounts for income taxes by the liability method, as required
by Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
Net Income per Share
Net income per share is computed based on the weighted average number of
common stock and common stock equivalents outstanding during each year. Common
stock equivalents are determined under the
F-8
<PAGE> 155
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assumption that outstanding warrants and options are exercised. Outstanding
warrants and options have been included in earnings per share computations based
on the treasury stock method.
Other Post-retirement and Post-employment Benefits
The Company does not provide its employees with post-retirement or
post-employment benefits.
Advertising
Advertising costs are expensed as incurred.
2. ACCOUNTING CHANGES
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company adopted the provisions of the new
standard for short-term investments held as of or acquired after January 1,
1994. In accordance with the Statement, prior period financial statements have
not been restated to reflect the change in accounting principle. The cumulative
effect as of January 1, 1994 of adopting Statement 115 increased net income by
$161,000 net of $0 in deferred income taxes, or $0.01 per share. The opening
balance of shareholders' equity was reduced by $161,000 net of $0 in deferred
income taxes to reflect the net unrealized holding losses on securities
classified as available-for-sale previously carried at aggregate lower cost or
market value.
3. SHORT-TERM INVESTMENTS
The following is a summary of available-for-sale securities held as current
assets:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED BOOKED
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Private U.S. Mutual Fund..................... $10,357 $ 820 $1,078 $10,099
------- ------ ------ -------
December 31, 1995............................ $10,357 $ 820 $1,078 $10,099
======= ====== ====== =======
Private U.S. Mutual Fund..................... $10,357 $1,050 $1,521 $ 9,887
------- ------ ------ -------
December 31, 1996............................ $10,357 $1,050 $1,521 $ 9,887
======= ====== ====== =======
</TABLE>
Unrealized holding losses on available-for-sale short-term investments
included as a separate component of shareholders' equity totaled $1,078,000,
$258,000 and $471,000 on December 31, 1994, 1995 and 1996, respectively.
4. INVESTMENTS IN LASAT COMMUNICATIONS A/S
In 1994 the Company acquired 35% of the equity in Lasat Communications A/S
("Lasat"), a Danish company whose business is the development and marketing of
modems. The investment includes $0.6 million (net book value) representing
goodwill which was being amortized on a straight-line basis over five years.
In 1996 the Company exercised an option to acquire an additional 40% of the
equity in Lasat, for $3.5 million (DKK 20.0 million). The acquisition was funded
with existing cash.
The acquisition of additional equity was accounted for using the purchase
method of accounting. Accordingly, a portion of the purchase price was allocated
to the net assets acquired based on their estimated fair values. The fair value
of tangible assets acquired was $3.8 million (cash $0.8 million, accounts
receivable
F-9
<PAGE> 156
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$1.4 million, inventory $1.4 million, and fixed assets $0.2 million) and the
fair value of liabilities assumed $3.0 million (accounts payable $1.5 million
and loan and other liabilities $1.5 million). In addition, $2.3 million of the
purchase price was allocated to in-process engineering and development projects
that had not reached technological feasibility and had no probable alternative
future use. The Company expensed such amount at the date of acquisition. The
balance of the purchase price, $0.5 million, was recorded as excess of cost over
net assets acquired (goodwill) and is being amortized over five years on a
straight-line basis.
Lasat has been included in the consolidation from January 1, 1996, with
preacquisition earnings being charged to minority interest in income of
consolidated subsidiary.
5. NOTES PAYABLE TO BANKS
The Company has unsecured lines of credit with two banks, providing maximum
facilities as of December 31, 1995 and 1996 of $11.2 million and $11.0 million,
respectively. The unused element thereof as of December 31, 1995 and 1996,
amounted to $4.8 million and $11.0 million, respectively.
Interest rates fluctuate with the market rates of major banks. The weighted
average interest rates as of December 31, 1995 and 1996 were 6.5% and 5.8%,
respectively.
6. INCOME TAXES
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. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1995 and
1996, are as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities
Tax over book depreciation................................ $ 273 $1,105
Inventory write down...................................... 729 223
Other..................................................... 0 55
------ ------
1,002 1,383
------ ------
Deferred tax assets
Book over tax depreciation................................ 232 318
Allowance for uncollectible receivables................... 251 410
Inventory valuations...................................... 407 940
Other accruals.............................................. 127 660
------ ------
1,017 2,328
------ ------
Net deferred tax liabilities (assets)............. $ (15) $ (945)
====== ======
</TABLE>
For financial reporting purposes, income before income taxes includes the
following components:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Pretax income:
Denmark............................................. $ 9,888 $19,167 $ 9,034
United States....................................... 5,045 (138) 3,657
------- ------- -------
$14,933 $19,029 $12,691
======= ======= =======
</TABLE>
F-10
<PAGE> 157
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Denmark.............................................. $ 3,840 $ 4,312 $3,468
United States........................................ 2,692 323 2,189
------- ------- ------
6,532 4,635 5,657
------- ------- ------
Deferred:
Denmark.............................................. (765) 1,822 (101)
United States........................................ (741) (234) (829)
------- ------- ------
(1,506) 1,588 (930)
------- ------- ------
$ 5,026 $ 6,223 $4,727
======= ======= ======
</TABLE>
The reconciliation of income tax computed at the Danish statutory tax rates
to income tax expense is:
<TABLE>
<CAPTION>
1994 1995 1996
---------------- ---------------- ----------------
(IN THOUSANDS)
PERCENT PERCENT PERCENT
------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Danish tax.............................. $5,077 34% $6,470 34% $4,315 34%
Goodwill amortization and purchased
research and development written
off................................... 98 1 125 1 247 2
Acquisition-related expenses............ 0 0 0 0 336 2
Benefit of foreign tax relief........... (636) (3) (58) (0) (117) (1)
United States taxes net of credits...... 213 1 44 0 118 1
Tax on USD currency gains following
Danish tax rules...................... 68 0 0 0 0 0
Other net............................... 206 1 (358) (2) (172) (1)
------ -- ------ -- ------ --
$5,026 34% $6,223 33% $4,727 37%
====== == ====== == ====== ==
</TABLE>
Undistributed earnings of the Company's United States subsidiary amounted
to $16.2 million in 1996. Those earnings are considered to be indefinitely
reinvested. Upon distribution of those earnings in the form of dividends, the
amount thereof would be subject only to withholding tax at a rate of 5% in
accordance with the provisions of the Denmark/United States double tax treaty.
7. EMPLOYEE WARRANT AND STOCK OPTION PLANS
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 employee stock options and warrants
because, as discussed below, the alternative fair value accounting provided for
under FASB Statement No. 123, "Accounting for Stock-Based Compensation,"
requires use of option valuation models that were not developed for use in
valuing employee stock options and warrants. Under APB 25, because the exercise
price of the Company's employee stock options and warrants equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
1992 Warrant Plan
On May 5, 1992, the Company's shareholders approved a reserve of 1,600,000
common shares in connection with the issuance of warrants for the benefit of
employees, officers and directors of the Company
F-11
<PAGE> 158
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and its subsidiaries. As of December 31, 1992, warrants to purchase 565,000
shares at an exercise price of $5.98 had been issued. During 1993 8,000 warrants
were cancelled, and 426,680 warrants were exercised. During 1994 10,000 warrants
were exercised, and during 1996 101,300 warrants were exercised.
The holders of the remaining 19,020 outstanding warrants as of December 31,
1996 may exercise their rights in whole or part, at a price of $5.98 per share,
during the period from April 21 to May 5, 1997. In the event that all or any
part of the warrants are not exercised by May 5, 1997, then such warrants will
expire.
1994 and 1996 Warrant and Stock Option Plans
The Company's 1994 and 1996 Share Incentive Plans authorized the grant of
options and warrants to directors, executives and key employees for up to
425,000 and 1,000,000 shares, respectively, of the Company's common stock. The
majority of options and warrants granted have 5-year terms and vest and become
fully exercisable at the end of 5 years of continued employment.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options and warrants was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1995 and 1996; risk-free interest rates of 5.5%
to 6.0%; dividend yields of 0%; volatility factors of the expected market price
of the Company's common stock of 0.4; 25% of these options and warrants granted
are expected to expire without being exercised; and weighted-average expected
life of the options and warrants of 3 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options and warrants have
characteristics significantly different from those of traded options and
warrants, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of fair value of its employee
stock options and warrants.
For purposes of pro forma disclosures, the estimated fair value of the
options and warrants is amortized to expense over the options' and warrants'
vesting periods. The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ---------
(IN THOUSANDS, EXCEPT
FOR EARNINGS PER SHARE)
<S> <C> <C>
Net income -- as reported................................... $12,806 $7,425
Net income -- pro forma..................................... $12,791 $7,156
Earnings per share -- as reported........................... $ 0.87 $ 0.50
Earnings per share -- pro forma............................. $ 0.87 $ 0.48
</TABLE>
F-12
<PAGE> 159
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's stock option and warrant activity, and related
information for the years ended December 31 follows:
<TABLE>
<CAPTION>
1995 1996
-------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- ---------------- ------- ----------------
(IN THOUSANDS, EXCEPT FOR PRICE PER SHARE)
<S> <C> <C> <C> <C>
Outstanding-beginning of year........ 323.5 $ 9.00 291.5 $ 9.00
Granted............................ 30.0 9.00 466.1 11.49
Exercised.......................... (31.0) 9.00 (23.0) 9.00
Expired............................ (31.0) 9.00 (68.9) 9.00
----- ------- ----- -------
Outstanding -- end of year........... 291.5 $ 9.00 665.7 $10.74
===== ======= ===== =======
Exercisable at end of year........... 47.3 $ 9.00 77.9 $ 9.00
Weighted -- average fair value of
options granted during the year.... $ 3.24 $ 3.63
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, ranged
from $9 to $12. The weighted-average remaining contractual life of those options
is 4 years.
8. LEASE COMMITMENTS
As of October 1, 1995 the Company entered into a noncancellable operating
lease with a public property investment company for office space, as its
international headquarters.
The lease may be cancelled by either party commencing April 1, 2008 with
six months' notice. The lease provides for increases in annual rental payments
based upon the increase in the Danish net price index, with an agreed annual
minimum increase of 2.5%.
During June 1995 the Company entered into a noncancellable operating lease
starting January 22, 1996, with a property investment partnership for additional
office space at its international headquarters.
The lease may be cancelled by either party commencing January 22, 2006 with
12 months' notice. If the lease is not cancelled by either party at that time,
the agreement provides for a new five year noncancellable term under the same
rental conditions. The lease provides for an increase in annual rental payments
based upon the increase in the Danish net price index, with an agreed annual
minimum increase of 2.5%.
During December 1996 the Company entered into a noncancellable operating
lease starting January 1, 1998 with a property investment partnership for an
expansion of office space at its international headquarters.
The lease may be cancelled by either party commencing January 1, 2007 with
12 months' notice. If the lease is not cancelled by either party at that time,
the agreement provides for a new five year noncancellable term under the same
rental conditions. The lease provides for an increase in annual rental payments
based upon the increase in the Danish net price index, with an agreed annual
minimum increase of 2.5%.
Additionally, the Company and its subsidiaries are lessees in other
noncancellable lease arrangements for office buildings and warehouses, expiring
on different dates.
F-13
<PAGE> 160
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total future minimum rental payments under the foregoing leases at
December 31, 1996 are:
<TABLE>
<CAPTION>
HEADQUARTER OTHER TOTAL
----------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
1997.................................... $ 1,422 $ 800 $ 2,222
1998.................................... 2,042 641 2,683
1999.................................... 2,093 614 2,707
2000.................................... 2,146 475 2,621
2001.................................... 2,199 293 2,492
Remaining............................... 13,743 508 14,251
------- ------ -------
Total minimum lease
payments.................... $23,645 $3,331 $26,976
======= ====== =======
</TABLE>
Total lease amounts charged to expense are $1,118,000 in 1994, $1,420,000
in 1995 and $2,469,000 in 1996.
9. RELATED PARTY TRANSACTIONS
A. Contex A/S
On January 23, 1996 the Company completed the sale of its 35.6% investment
in Contex A/S to Nilex ApS, a related party, for a cash consideration of $7.2
million (DKK 41.0 million). The sale resulted in a gain of $2,878,000 net of
taxes.
B. K/S Ulrikkenborg
K/S Ulrikkenborg was a limited liability partnership, the partners of which
were Lars S. Nielsen, Asbjorn Smitt, and three other officers and employees of
the Company. Messrs. Nielsen and Smitt collectively controlled 75% of the
partnership. The partnership was formed for the purpose of purchasing, and
leasing to the Company, real property and improvements thereon, in greater
Copenhagen for operation as the Company's international headquarters. In July
1995 the Company purchased the real property and improvements from K/S
Ulrikkenborg for an amount of $10.5 million, including leasehold improvements.
The Company paid $767,000 in 1994, $441,000 in 1995 and $0 in 1996, in rent
to the partnership.
C. Olivetti
Olivetti Realty N.V. a corporation registered in the Netherlands Antilles,
owned 8.7% of the share capital of the Company as of December 31, 1994. In June
1995 Olivetti Realty N.V. sold all of its shares in the Company. As a related
party the Company purchased and sold products to affiliates of Olivetti Realty
N.V. ("Olivetti group") in the normal course of business as described in
paragraph E below.
D. Management
In December 1995 the Company sold the residential building, previously
rented by Lars S. Nielsen in accordance with the terms of the lease for
$570,000.
F-14
<PAGE> 161
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
E. Transactions
The Company had no transactions with related parties during 1996.
Transactions with related parties in 1994 and 1995 are shown below:
<TABLE>
<CAPTION>
1994 1995
------- ------
(IN THOUSANDS)
<S> <C> <C>
Sales
Olivetti group........................ $12,115 $5,104
Contex A/S............................ 12 0
Lasat Communications A/S.............. 0 30
------- ------
$12,127 $5,134
Purchases
Olivetti group........................ $ 72 $ 6
Contex A/S............................ 78 75
Lasat Communications A/S.............. 6 644
------- ------
$ 156 $ 725
Accounts receivable
Olivetti group........................ $ 3,642 $ 0
Lasat Communications A/S.............. 0 27
Contex A/S............................ 0 0
------- ------
$ 3,642 $ 27
Accounts payable
Olivetti group........................ $ 35 $ 0
Contex A/S............................ 0 0
Lasat Communications A/S.............. 4 0
K/S Ulrikkenborg...................... 14 0
------- ------
$ 53 $ 0
</TABLE>
10. SEGMENT INFORMATION, EXPORT SALES AND MAJOR CUSTOMERS
The Company currently operates in one principal industry segment: the
design and marketing of Asynchronous Transfer Mode, Token Ring and Ethernet
products. Export sales to unaffiliated customers were divided as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Included in U.S. operations:
Canada.............................................. $ 4,429 $ 2,147 $ 1,181
South America....................................... $ 0 $ 0 $ 1,710
Pacific Basin & other............................... $ 0 $ 0 $ 223
Included in Danish operations:
United States....................................... $ 560 $ 0 $ 637
United Kingdom...................................... $11,641 $20,517 $19,437
Europe (other than Denmark and the United
Kingdom)......................................... $34,558 $38,434 $58,323
Pacific Basin & other............................... $ 4,550 $ 7,717 $ 8,628
</TABLE>
As disclosed in Note 9E, sales to Olivetti group accounted for more than
10% of sales in 1994. Sales to one other customer exceeded 10% of sales in 1994,
amounting to $13.4 million. Sales to one other customer exceeded 10% of sales in
1995, amounting to $13.9 million. In 1996, no single customer accounted for more
than 10% of sales.
F-15
<PAGE> 162
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information about the Company's operations by geographic areas is as
follows:
<TABLE>
<CAPTION>
DANISH US
OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
Net sales:
Customers.......................... $106,507 $61,721 $ 0 $168,228
Intercompany....................... 34,136 0 (34,136) 0
-------- ------- -------- --------
Total......................... $140,643 $61,721 $(34,136) $168,228
======== ======= ======== ========
Operating income........................ $ 4,918 $ 3,657 $ (968) $ 7,607
======== ======= ======== ========
Identifiable assets..................... $102,938 $29,840 $ (4,854) $127,924
======== ======= ======== ========
1995
Net sales:
Customers.......................... $ 75,307 $52,162 $ 0 $127,469
Intercompany....................... 41,382 0 (41,382) 0
-------- ------- -------- --------
Total......................... $116,689 $52,162 $(41,382) $127,469
======== ======= ======== ========
Operating income........................ $ 17,896 $ (138) $ (1,995) $ 15,763
======== ======= ======== ========
Identifiable assets..................... $110,904 $29,722 $(13,299) $127,327
======== ======= ======== ========
1994
Net sales:
Customers.......................... $ 56,502 $57,102 $ 0 $113,604
Intercompany....................... 36,182 0 (36,182) 0
-------- ------- -------- --------
Total......................... $ 92,684 $57,102 $(36,182) $113,604
======== ======= ======== ========
Operating income........................ $ 11,215 $ 5,995 $ (558) $ 16,652
======== ======= ======== ========
Identifiable assets..................... $ 90,760 $21,708 $ (3,551) $108,917
======== ======= ======== ========
</TABLE>
Intercompany sales between geographic areas are accounted for at cost plus
amounts to cover handling and other similar expenses.
11. FINANCIAL INSTRUMENTS
A. Fair value of financial instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents and notes payable to banks: The carrying
amount reported in the balance sheet for cash and cash equivalents and
notes payable to banks approximates its fair value.
Short-term investments: The fair values for short-term investments are
based on quoted market prices.
Foreign currency exchange contracts: The fair value of the Company's
foreign currency exchange contracts are based on quoted market prices.
Foreign currency options: The fair value of the Company's foreign
currency options are based on quoted market prices.
F-16
<PAGE> 163
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents................... $33,065 $33,065 $41,663 $41,663
Short-term investments...................... 10,099 10,099 9,887 9,887
Notes payable to banks...................... 6,430 6,430 0 0
Foreign currency exchange contract.......... 92 92 0 (259)
Foreign currency options.................... 47 47 0 0
</TABLE>
B. Off-balance sheet risk
The Company enters into forward currency exchange contracts and options to
hedge foreign currency transactions on a continuing basis for periods consistent
with its foreign currency exposures. The objective of this practice is to reduce
the impact of foreign exchange movements on the Company's operating results. The
Company's hedging activities do not create exchange rate risk because gains and
losses on these contracts generally offset losses and gains on the assets,
liabilities and transactions being hedged.
At December 31, 1995 and 1996 the stated or notional amounts of the
Company's outstanding off-balance sheet financial instruments were as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Forward currency exchange contracts......................... $16,260 $12,000
Foreign currency purchased options.......................... 12,000 0
Foreign currency sold options............................... 6,000 0
</TABLE>
C. Concentrations of credit risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents, short-term
investments and accounts receivable.
Cash is maintained with major banks in Denmark and the United States.
Foreign currency exchange contracts and options are entered into with a major
bank in Denmark. Short-term investments are shares in a U.S. mutual fund. The
fund's investment policy is to invest a major part of its assets in U.S.
Government bonds and other securities rated AAA by Standard & Poor's. The
expected average maturity is approximately three to five years.
The Company markets its products principally to distributors, value added
resellers and original equipment manufacturer customers in the computer
industry.
Concentrations of credit risk with respect to accounts receivable of
customers located outside Denmark are limited under the terms of an agreement
entered into with the company "EKR CreditInsurance A/S". This agreement
guarantees up to 90% of the amount of the related receivables. The amounts so
covered at December 31, 1995 and 1996 were $19,692,000 and $19,645,000,
respectively.
12. LITIGATION
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of December
31, 1996, the Company is not a party to any legal proceedings,
F-17
<PAGE> 164
OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the adverse outcome of which, in management's opinion, would have a material
adverse effect on the Company's results of operations or financial position.
During fiscal year 1994 three lawsuits were filed against the Company in
the United States District Court for the Northern District of Texas, and were
subsequently consolidated into one action. The Company's Consolidated Financial
Statements at December 31, 1994, include a charge of $4,200,000, net of
insurance coverage, in connection with the settlement of the consolidated
action. This represents the Company's anticipated total liability with regard to
the settlement and was paid into an escrow account in 1995. The settlement was
approved by the court, and on August 30, 1996, the court entered a final
judgment of dismissal with prejudice with respect to the consolidated action.
13. SPECIAL CHARGE REGARDING MANAGEMENT CHANGE
In the first quarter of 1996, the Company recorded certain special charges
of $1.4 million, consisting primarily of severance pay and other costs incurred
relating to the Company's management reorganization of its U.S. operations and
other senior management changes.
14. SUBSEQUENT EVENT
On March 20, 1997, the Company entered into an Agreement and Plan of
Reorganization under which the Company would exchange each outstanding share of
common stock in CrossComm Corporation for $5.00 in cash, .2667 shares of common
stock in the Company and three-year warrants evidencing the right to acquire
.1075 shares of common stock in the Company at an exercise price of $19.74 per
whole share of common stock. Pursuant to the agreement, the Company expects to
issue approximately 2,700,000 shares of its common stock, warrants to purchase
approximately 1,100,000 additional shares of common stock, and in addition, to
issue options for approximately 575,000 shares of its common stock. The number
of shares of common stock in the Company may be adjusted upward and downward
under certain circumstances, based on the high and low sales prices for common
stock in Olicom during a period prior to closing. The acquisition, if
consummated, will be accounted for using purchase accounting, and the Company
anticipates recognizing a significant non-recurring expense during the second
quarter of 1997 in order to write off in-process research and development and
certain other acquisition- and integration-related expenses. The acquisition is
subject to approval by the shareholders of both the Company and CrossComm, as
well as other conditions, and if such approvals are obtained and the other
conditions are satisfied, the transaction is expected to become effective in
June 1997. CrossComm is a publicly-held corporation that develops and markets
ATM and multi-protocol router technology for mission-critical SNA/Token Ring
environments. The Company anticipates that the cash portion of the consideration
(net of acquired liquid assets) will be funded from available working capital.
F-18
<PAGE> 165
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, 1995 and 1996, 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, 1995 and 1996, 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.
F-19
<PAGE> 166
CROSSCOMM CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 2,244,382 $ 6,461,027
Available-for-sale securities............................. 44,528,825 37,279,483
Accounts receivable -- trade, net of allowances of
$803,000 at December 31, 1995 and $997,000 at December
31, 1996............................................... 7,141,395 8,276,496
Inventories, net.......................................... 6,394,525 5,473,065
Prepaid expenses and other current assets................. 1,253,527 1,701,755
----------- -----------
Total current assets.............................. 61,562,654 59,191,826
Equipment and leasehold improvements, net of accumulated
depreciation of $12,295,413 at December 31, 1995 and
$14,448,916 at December 31, 1996.......................... 7,079,290 5,463,578
Other assets, net........................................... 2,703,974 2,203,520
----------- -----------
Total assets...................................... $71,345,918 $66,858,924
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,727,819 $ 3,536,566
Accrued payroll and commissions........................... 686,932 843,412
Accrued liabilities....................................... 3,795,658 3,615,317
Warranty reserves......................................... 1,380,000 1,162,334
Deferred revenue.......................................... 3,348,157 3,338,954
----------- -----------
Total current liabilities......................... 13,938,566 12,496,583
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,
1995 or December 31, 1996.............................. -- --
Common stock, $.01 par value, 20,000,000 shares
authorized, 9,147,557 shares issued and outstanding at
December 31, 1995 and 9,236,132 shares issued and
outstanding at December 31, 1996....................... 91,476 92,361
Paid-in capital in excess of par value.................... 71,949,833 72,533,642
Retained earnings (accumulated deficit)................... (16,169,429) (21,449,166)
Unrealized gain (loss) on available-for-sale securities... 1,490,987 3,185,504
----------- -----------
Total stockholders' equity........................ 57,362,867 54,362,341
----------- -----------
Total liabilities and stockholders' equity........ $71,345,918 $66,858,924
=========== ===========
</TABLE>
See accompanying notes.
F-20
<PAGE> 167
CROSSCOMM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
Revenues:
Product........................................... $ 44,264,746 $ 34,704,046 $34,082,608
Service........................................... 6,054,002 9,554,380 10,791,311
------------ ------------ -----------
Total revenues...................................... 50,318,748 44,258,426 44,873,919
Cost of revenues:
Cost of goods sold................................ 23,130,911 17,954,065 18,317,385
Cost of services.................................. 3,973,351 7,480,637 5,780,425
------------ ------------ -----------
Total cost of revenues.................... 27,104,262 25,434,702 24,097,810
------------ ------------ -----------
Gross profit........................................ 23,214,486 18,823,724 20,776,109
Operating expenses:
Selling, general & administrative................. 23,155,431 23,188,994 19,401,907
Research and development.......................... 12,285,426 13,358,542 9,829,719
Restructuring and other charges................... 1,962,705 1,074,075 777,258
------------ ------------ -----------
Total operating expenses.................. 37,403,562 37,621,611 30,008,884
------------ ------------ -----------
Income (loss) from operations....................... (14,189,076) (18,797,887) (9,232,775)
Interest income, net................................ 1,987,288 2,348,901 2,043,521
Gain on sale of investments......................... -- 2,803,193 2,086,743
Other income (expense).............................. 43,020 (157,318) (177,226)
------------ ------------ -----------
Income (loss) before provision for income taxes..... (12,158,768) (13,803,111) (5,279,737)
Provision for income taxes.......................... 47,934 -- --
------------ ------------ -----------
Net income (loss)......................... $(12,206,702) $(13,803,111) $(5,279,737)
============ ============ ===========
Earnings (loss) per share........................... $ (1.37) $ (1.52) $ (0.58)
============ ============ ===========
Shares used in computing earnings (loss) per
share............................................. 8,902,000 9,058,700 9,178,500
============ ============ ===========
</TABLE>
See accompanying notes.
F-21
<PAGE> 168
CROSSCOMM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<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.
F-22
<PAGE> 169
CROSSCOMM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
------------ ------------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................... $(12,206,702) $(13,803,111) $(5,279,737)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation expense............................... 4,335,318 5,406,007 2,239,391
Amortization expense............................... 950,176 1,128,165 849,820
Non-recurring charges and other write-offs......... 2,136,044 367,600 --
Provision for accounts receivable allowances....... 376,754 838,186 370,203
Provision for inventory reserves................... 3,568,426 2,244,345 (366,617)
Deferred income taxes.............................. 19,000 -- --
Gain on sale of investments........................ -- (2,803,193) (2,086,743)
Other.............................................. 341,420 274,846 274,805
Changes in operating assets and liabilities:
Accounts receivable............................. 840,085 2,343,928 (1,227,349)
Inventories..................................... (2,639,692) (4,527,621) 1,202,189
Prepaid expenses and other current assets....... 283,835 93,872 (448,228)
Accounts payable................................ 961,187 (872,769) (1,191,253)
Accrued liabilities, payroll and commissions.... 2,038,560 1,499,289 (241,527)
Deferred revenue................................ 541,070 1,118,689 (9,203)
------------ ------------ -----------
Total adjustments.......................... 13,752,183 7,111,344 (634,512)
------------ ------------ -----------
Net cash provided (used) by operating
activities............................... 1,545,481 (6,691,767) (5,914,249)
INVESTING ACTIVITIES
Purchases of available-for-sale securities........... (30,566,542) (74,579,071) (46,495,324)
Sales and maturities of available-for-sale
securities......................................... 37,901,567 78,679,886 57,526,027
Acquisition of fixed assets.......................... (6,259,246) (4,199,726) (537,791)
Additions to other assets............................ (2,456,617) (1,137,231) (946,712)
------------ ------------ -----------
Net cash provided (used) by investing
activities............................... (1,380,838) (1,236,142) 9,546,200
FINANCING ACTIVITIES
Payments of capital lease obligations................ (16,327) (4,010) --
Proceeds from employee stock plans................... 638,124 1,445,633 584,694
------------ ------------ -----------
Net cash provided (used) by financing activities..... 621,797 1,441,623 584,694
------------ ------------ -----------
Net increase (decrease) in cash and cash
equivalents........................................ 786,440 (6,486,286) 4,216,645
Cash and cash equivalents at beginning of period..... 7,944,228 8,730,668 2,244,382
------------ ------------ -----------
Cash and cash equivalents at end of period........... $ 8,730,668 $ 2,244,382 $ 6,461,027
============ ============ ===========
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.
F-23
<PAGE> 170
CROSSCOMM CORPORATION
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, 1995 and 1996. 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.
F-24
<PAGE> 171
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 1994, 1995 and 1996 includes approximately $613,000, $763,000 and
$352,000, respectively, resulting from changes in estimates of the depreciable
lives of certain equipment. Depreciation expense for 1994, 1995 and 1996 also
includes approximately $750,000, $1,224,000 and $100,000, 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, 1995 and 1996, capitalized software
development costs, net of accumulated amortization, aggregated approximately
$214,000 and $82,000, respectively. Amortization expense related to capitalized
software costs approximated $172,000, $198,000 and $232,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
Other intangibles included in other assets total approximately $2,825,000
at December 31, 1995 and 1996. 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 $1,290,000 and $1,908,000 at December
31, 1995 and 1996, respectively. During 1994 and 1995 software technology
license fees with unamortized costs aggregating approximately $600,000 and
$710,000, 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.
F-25
<PAGE> 172
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1994,
1995, and 1996 approximated $1,021,000, $1,551,000, and $317,000, respectively.
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, 1994, 1995, and 1996.
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 1994 and 1995 consolidated financial statements
has been reclassified to conform with the 1996 presentation.
2. AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
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>
F-26
<PAGE> 173
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<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
=========== ========== ======== ===========
</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, 1995 and 1996
approximated $740,000 ($725,000 of which related to a single transaction) and
$2,093,000 ($2,062,000 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, 1995 and 1996 approximated $37,000 and $6,000,
respectively.
The equity securities held at December 31, 1995 and 1996 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.
The amortized cost and fair value of available-for-sale securities as of
December 31, 1996, by contractual maturity, are as follows:
<TABLE>
<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
Inventories, net of reserves of approximately $4,036,000 and $2,240,000 at
December 31, 1995 and 1996, respectively, were composed of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Raw materials............................................... $2,250,349 $1,253,906
Work in process............................................. 1,826,143 1,628,055
Finished goods.............................................. 2,318,033 2,591,104
---------- ----------
$6,394,525 $5,473,065
========== ==========
</TABLE>
F-27
<PAGE> 174
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1995 and 1996, the Company recorded inventory provisions of
$2,244,345 and $366,617, 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 "Option Plans"). The terms and provisions of the employee plans are similar,
in all material respects, while the Directors' Option 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, 1995 and 1996, 1,755,137 shares and 2,429,434 shares, respectively, were
reserved for future issuance under the Option Plans.
F-28
<PAGE> 175
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option activity for the three year period ended December 31, 1996 is
as follows:
<TABLE>
<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.
The following table summarizes the status of the Company's stock options,
outstanding and exercisable at December 31, 1996:
<TABLE>
<CAPTION>
STOCK OPTIONS
OUTSTANDING STOCK OPTIONS
------------------------------------ EXERCISABLE
WEIGHTED -------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICES SHARES LIFE PRICE SHARES 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>
F-29
<PAGE> 176
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 $6.40 in 1995 and $3.10 in 1996, follows:
<TABLE>
<CAPTION>
1995 1996
------------ -----------
<S> <C> <C>
Pro forma net income (loss)............................... $(15,164,129) $(8,125,835)
Pro forma earnings (loss) per share....................... $ (1.67) $ (0.89)
</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 1995 and
1996 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.
F-30
<PAGE> 177
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------------
TOTAL CURRENT NON-CURRENT
------------ ----------- ------------
<S> <C> <C> <C>
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>
<TABLE>
<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).......... $ -- $ -- $ --
============ =========== ============
</TABLE>
F-31
<PAGE> 178
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
1994 1995 1996
--------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates... $(4,133,981) (34%) $(4,693,058) (34%) $(1,795,110) (34%)
Tax exempt interest........... (131,160) (1) (25,789) -- -- --
Unbenefitted loss............. 4,193,159 34 4,673,683 34 1,752,212 33
Other......................... 119,916 1 45,164 -- 42,898 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 1994, 1995 or 1996. 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
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.
<TABLE>
<CAPTION>
NORTH CONSOLIDATED
AMERICA EUROPE ELIMINATION TOTAL
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
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
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
</TABLE>
Included in North America net sales are export sales of $6,081,000 in 1995
and $10,249,000 in 1996. 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
F-32
<PAGE> 179
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
sources. The Company has also contracted with a contract 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.
The following is a schedule of future minimum lease payments required under
operating leases as of December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C> <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,
1994, 1995, and 1996 approximated $1,240,000, $1,408,000, and $1,292,000,
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, 1994 and 1995, sales were approximately
$415,000, and $60,000, respectively, of which no amounts were outstanding at
December 31, 1995 and 1996.
10. RESTRUCTURING AND OTHER CHARGES
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 prospects derived from its 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
F-33
<PAGE> 180
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
In the fourth quarter of 1995, the Company recorded approximately
$1,074,000 of 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 charges by that
amount.
In the fourth quarter of 1996, the Company recorded approximately $874,000
of 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.
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 three-year warrants to acquire .1075 shares of Olicom common stock at an
exercise price of $19.74 for each whole 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.
F-34
<PAGE> 181
CROSSCOMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
EARNINGS
NET INCOME (LOSS)
REVENUE GROSS PROFIT (LOSS) PER SHARE
------- ------------ ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
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)
======= ======= ======== =======
1996
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)
======= ======= ======== =======
</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 1995 include (i) approximately
$1,074,000 of 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.
The results of the fourth quarter of 1996 include approximately $874,000 of
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.
See Management's Discussion and Analysis for a further discussion of the
1995 and 1996 fourth quarter charges.
F-35
<PAGE> 182
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
OLICOM A/S,
PW ACQUISITION CORPORATION
AND
CROSSCOMM CORPORATION
MARCH 20, 1997
<PAGE> 183
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- THE MERGER........................... A-1
1.1 The Merger.............................. A-1
1.2 Closing; Effective Time................. A-1
1.3 Effect of the Merger.................... A-1
1.4 Certificate of Incorporation; Bylaws.... A-2
1.5 Directors and Officers.................. A-2
1.6 Effect on Capital Stock................. A-2
1.7 Dissenting Shares....................... A-3
1.8 Surrender of Certificates............... A-4
No Further Ownership Rights in CrossComm
1.9 Common Stock............................ A-5
Lost, Stolen or Destroyed
1.10 Certificates............................ A-5
Taking of Necessary Action; Further
1.11 Action.................................. A-5
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF
CROSSCOMM....................................... A-5
2.1 Organization, Standing and Power........ A-5
2.2 Capital Structure....................... A-6
2.3 Authority............................... A-6
2.4 Governmental Authorization.............. A-7
2.5 SEC Documents........................... A-7
2.6 Financial Statements.................... A-7
2.7 Absence of Certain Changes.............. A-8
2.8 Absence of Undisclosed Liabilities...... A-8
2.9 Litigation.............................. A-8
2.10 Restrictions on Business Activities..... A-8
2.11 Title to Property....................... A-8
2.12 Intellectual Property................... A-9
2.13 Environmental Matters................... A-10
2.14 Taxes................................... A-10
2.15 Employee Benefit Plans.................. A-11
2.16 Employee Matters........................ A-12
2.17 Certain Agreements...................... A-12
2.18 Compliance With Laws.................... A-12
2.19 Customers and Suppliers................. A-12
2.20 Brokers' and Finders' Fees.............. A-12
Registration Statement; Joint Proxy
2.21 Statement/Prospectus.................... A-13
2.22 Opinion of Financial Advisor............ A-13
2.23 Vote Required........................... A-13
2.24 Board Approval.......................... A-13
Section 203 of Delaware Law Not
2.25 Applicable.............................. A-13
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF
OLICOM AND MERGERSUB............................ A-13
3.1 Organization, Standing and Power........ A-14
3.2 Capital Structure....................... A-14
3.3 Authority............................... A-14
3.4 Governmental Authorization.............. A-15
3.5 SEC Documents........................... A-15
3.6 Financial Statements.................... A-15
3.7 Absence of Certain Changes.............. A-16
3.8 Absence of Undisclosed Liabilities...... A-16
3.9 Litigation.............................. A-16
</TABLE>
i
<PAGE> 184
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.10 Restrictions on Business Activities..... A-16
3.11 Title to Property....................... A-16
3.12 Intellectual Property................... A-17
3.13 Environmental Matters................... A-17
3.14 Taxes................................... A-17
3.15 Employee Benefit Plans.................. A-18
3.16 Employee Matters........................ A-19
3.17 Certain Agreements...................... A-19
3.18 Compliance With Laws.................... A-19
3.19 Brokers' and Finders' Fees.............. A-19
Registration Statement; Joint Proxy
3.20 Statement/Prospectus.................... A-19
3.21 Opinion of Financial Advisor............ A-20
3.22 Vote Required........................... A-20
3.23 Board Approval.......................... A-20
ARTICLE IV -- CONDUCT PRIOR TO THE EFFECTIVE
TIME............................................ A-20
Conduct of Business of CrossComm and
4.1 Olicom.................................. A-20
4.2 Conduct of Business of CrossComm........ A-20
4.3 No Solicitation......................... A-21
ARTICLE V -- ADDITIONAL AGREEMENTS................ A-22
Joint Proxy Statement/Prospectus;
5.1 Registration Statement.................. A-22
5.2 Meetings of Stockholders................ A-22
Access to Information; Advice of
5.3 Changes................................. A-22
5.4 Confidentiality......................... A-23
5.5 Public Disclosure....................... A-23
5.6 Consents; Cooperation................... A-23
5.7 Affiliate Agreements.................... A-23
5.8 Voting Agreements....................... A-24
5.9 Legal Requirements...................... A-24
5.10 Blue Sky Laws........................... A-24
5.11 Employee Benefit Plans.................. A-24
Letter of Olicom's and CrossComm's
5.12 Accountants............................. A-25
5.13 Directorship............................ A-25
5.14 Form S-8................................ A-25
5.15 Indemnification......................... A-26
Listing of Additional Shares, Warrants
5.16 and Warrant Shares...................... A-26
5.17 Best Efforts and Further Assurances..... A-26
ARTICLE VI -- CONDITIONS TO THE MERGER............ A-27
Conditions to Obligations of Each Party
6.1 to Effect the Merger.................... A-27
Additional Conditions to Obligations of
6.2 CrossComm............................... A-28
Additional Conditions to the Obligations
6.3 of Olicom and MergerSub................. A-28
ARTICLE VII -- TERMINATION, AMENDMENT AND
WAIVER.......................................... A-29
7.1 Termination............................. A-29
7.2 Effect of Termination................... A-30
7.3 Expenses and Termination Fees........... A-30
7.4 Amendment............................... A-31
7.5 Extension; Waiver....................... A-31
ARTICLE VIII -- DEFINITIONS....................... A-31
8.1 Defined Terms........................... A-31
ARTICLE IX -- GENERAL PROVISIONS.................. A-32
9.1 Non-Survival at Effective Time.......... A-32
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.2 Notices................................. A-32
9.3 Interpretation.......................... A-33
9.4 Counterparts............................ A-33
Entire Agreement; Nonassignability;
9.5 Parties in Interest..................... A-33
9.6 Severability............................ A-33
9.7 Remedies Cumulative..................... A-33
9.8 Governing Law........................... A-33
9.9 Rules of Construction................... A-33
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
</TABLE>
iii
<PAGE> 186
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 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.
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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 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
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time, on the fifth trading day prior to the date of the CrossComm
Stockholders' Meeting by telephone followed by telecopied confirmation
thereof.
(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 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
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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").
(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 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.
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(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 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.
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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 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.
(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
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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 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,
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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, 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 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
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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
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
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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 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 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
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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 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
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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 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
"multiple employer 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 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
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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 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.
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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 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 (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
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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.
(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
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MergerSub enforceable against Olicom and MergerSub, as the case may be, 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 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
NASD 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.
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,
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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).
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, 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
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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 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 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
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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, 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.
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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.
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.
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,
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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;
(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;
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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, 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 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
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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 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.
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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 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.
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
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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.
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
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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.
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
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
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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, 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 by Olicom. CrossComm shall cooperate with and assist Olicom in the
preparation of such registration statement.
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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 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
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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
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.
(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.
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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.
(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.
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(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.
(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;
(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
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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);
(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,
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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 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).
(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.
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(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 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
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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.
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
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
A-36
<PAGE> 222
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.
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]
A-37
<PAGE> 223
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/ TADEUSZ WITKOWICZ
------------------------------------
Tadeusz Witkowicz
President
OLICOM A/S
By: /s/ LARS STIG NIELSEN
------------------------------------
Lars Stig Nielsen
Managing Director
By: /s/ JAN BECH
------------------------------------
Jan Bech
Chairman of the Board
PW ACQUISITION CORPORATION
By: /s/ LARS STIG NIELSEN
------------------------------------
Lars Stig Nielsen
Chairman of the Board
A-38
<PAGE> 224
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:
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.
<PAGE> 225
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
<PAGE> 226
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 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.
<PAGE> 227
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:
--------------------------------
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.
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)
<PAGE> 228
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
<PAGE> 229
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.
<PAGE> 230
APPENDIX B
[letterhead of Alex. Brown & Sons Incorporated]
March 20, 1997
Olicom A/S
Nybrovej 114
DK-2800 Lyngby
Denmark
Dear Sirs:
Olicom A/S, a corporation organized under the laws of the Kingdom of
Denmark ("Olicom" or the "Company"), PW Acquisition Corporation, a corporation
organized under the laws of the State of Delaware and a wholly-owned subsidiary
of Olicom ("MergerSub") and CrossComm Corporation, a corporation organized under
the laws of the State of Delaware (the "Target"), have entered into an Agreement
and Plan of Reorganization dated as of March 20, 1997 (the "Agreement").
Pursuant to the Agreement, the implementation of which is contingent on
stockholder approval by the Company's stockholders and Target stockholders,
MergerSub shall merge with and into Target and the separate corporate existence
of MergerSub shall cease and Target shall continue as the surviving corporation
(the "Merger"), and each share of Target common stock issued and outstanding
immediately prior to the effective time of the Merger will be converted into
$5.00 cash, 0.2667 shares of Olicom common stock, subject to adjustment under
certain conditions at the option of the Company, and 0.1075 warrants to purchase
one share of Olicom common stock with a term of 3 years and a strike price equal
to $19.74 (the "Merger Consideration"). You have requested our opinion as to
whether the Merger Consideration payable by the Company is fair, from a
financial point of view.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of the
Company in connection with the transaction described above and will receive a
fee for our services, a portion of which is contingent upon the consummation of
the Merger. We have also acted as the Company's lead-managing underwriter for
the October 22, 1992 initial public offering of the Company's common stock.
Alex. Brown maintains a market in the common stock of the Company and regularly
publishes research reports regarding the technology industry and the businesses
and securities of the Company and other publicly owned companies in the
technology industry. In the ordinary course of business, Alex. Brown may
actively trade the securities of both the Company and the Target for our own
account and the account of our customers and, accordingly, may at any time hold
a long or short position in securities of the Company and the Target.
In connection with this opinion, we have reviewed certain publicly
available financial information and other information concerning the Company and
Target and certain internal analyses and other information furnished to us by
the Company and Target. We have also held discussions with the members of the
senior managements of the Company and Target regarding the businesses and
prospects of their respective companies and the joint prospects of a combined
company. In addition, we have (i) reviewed the reported prices and trading
activity for the common stock of both the Company and Target, (ii) compared
certain financial and stock market information for the Company and Target with
similar information for certain other companies whose securities are publicly
traded, (iii) reviewed the financial terms of certain recent business
combinations, (iv) reviewed the terms of the Agreement, and (v) performed such
other studies and analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of the
Company and Target, we have assumed that such information reflects the best
currently
B-1
<PAGE> 231
available judgments and estimates of the managements of the Company and Target
as to the likely future financial performances of their respective companies and
of the combined entity. In addition, we have not made nor been provided with an
independent evaluation or appraisal of the assets of the Company and Target, nor
have we been furnished with any such evaluations or appraisals. Our opinion is
based on market, economic and other conditions as they exist and can be
evaluated as of the date of this letter.
Our advisory services and the opinion expressed herein were prepared for
the use of the Board of Directors of the Company and do not constitute a
recommendation to the Company's stockholders as to how they should vote at the
stockholders' meeting in connection with the Merger. We hereby consent, however,
to the inclusion of this opinion as an exhibit to any proxy or registration
statement distributed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Merger Consideration payable by the Company is fair,
from a financial point of view.
Very truly yours,
By: /s/ ALEX BROWN & SONS
INCORPORATED
B-2
<PAGE> 232
APPENDIX C
[letterhead of Montgomery Securities]
March 20, 1997
Board of Directors
CrossComm Corporation
450 Donald Lynch Boulevard
Marlborough, MA 01752
Members of the Board:
We understand that CrossComm Corporation, a Delaware corporation
("Seller"), Olicom A/S, a Danish corporation ("Buyer"), and PW Acquisition
Corporation, a Delaware Corporation and wholly-owned subsidiary of Buyer
("MergerSub"), propose to enter into an Agreement and Plan of Reorganization to
be dated as of March 20, 1997 (the "Merger Agreement"), pursuant to which
MergerSub will be merged with and into Seller, which will be the surviving
entity (the "Merger"). Pursuant to the Merger, as more fully described in the
draft of the Merger Agreement dated March 19, 1997 provided to us by Seller and
as further described to us by management of Seller, we understand that each
outstanding share of the common stock, $0.01 par value per share ("Seller Common
Stock"), of Seller will be exchanged for (1) 0.2667 shares of the common stock,
DKK 0.25 nominal value per share of Buyer ("Buyer Common Stock") so long as the
Final Closing Price (as defined in Section 1.6(b) of the Merger Agreement) is
not less than $12.50 [nor greater than $20.83], subject to certain adjustments,
(2) $5.00 in cash, and (3) a warrant to purchase 0.1075 shares of Buyer Common
Stock at an exercise price of $19.74 per share (collectively, the
"Consideration"). The terms and conditions of the Merger are set forth in more
detail in the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of Seller pursuant to the
Merger is fair to such shareholders from a financial point of view, as of the
date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Seller and
Buyer, including the consolidated financial statements for recent years ending
December 31, 1996 and 1995 and certain other relevant financial and operating
data relating to Seller and Buyer made available to us from published sources
and from the internal records of Seller; (ii) reviewed the financial terms and
conditions of the draft of the Merger Agreement; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for,
Seller Common Stock and Buyer Common Stock; (iv) compared Seller and Buyer from
a financial point of view with certain other companies in the data
communications industry which we deemed to be relevant; (v) considered the
financial terms, to the extent publicly available, of selected recent business
combinations of companies in the data communications industry which we deemed to
be comparable, in whole or in part, to the Merger; (vi) reviewed and discussed
with representatives of the management of Seller and Buyer certain information
of a business and financial nature regarding Seller and Buyer, including
financial forecasts and related assumptions of Seller provided to us by
management of Seller and of Buyer obtained by us from third party research
analysts; and (vii) performed such other analyses and examinations as we have
deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for Seller provided to us by its management, upon their advice and
with your consent we have assumed for purposes of our opinion that the forecasts
have been reasonably prepared on bases reflecting the best available estimates
and judgments of their respective managements at the time of preparation as to
the future financial performance of Seller and that they provide a reasonable
basis upon which we can form our opinion. With respect to the financial
forecasts for Buyer obtained by us from third-party research analysts, upon the
advice of Buyer's management and with your consent we have assumed that they
provide a
C-1
<PAGE> 233
reasonable basis upon which we can form our opinions. We have also assumed that
there have been no material changes in Seller's or Buyer's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to us. We have relied on
advice of counsel and independent accountants to Seller as to all legal and
financial reporting matters with respect to Seller, the Merger and the Merger
Agreement, including the legal status and financial reporting of litigation
involving Seller. We have assumed that the Merger will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes, rules
and regulations. In addition, we have not assumed responsibility for making an
independent evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of Seller or Buyer, nor have we been
furnished with any such appraisals. You have informed us, and we have assumed,
that the Merger will be recorded as a purchase under generally accepted
accounting principles. Finally, our opinion is based on economic, monetary and
market and other conditions as in effect on, and the information made available
to us as of, the date hereof. Accordingly, although subsequent developments may
affect this opinion, we have not assumed any obligation to update, revise or
reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the draft of the Merger
Agreement, without any further material amendments thereto, and without waiver
by Seller of any of the conditions to its obligations thereunder.
We have acted as financial advisor to Seller in connection with the Merger
and will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the Merger.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
Seller pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
This opinion is directed to the Board of Directors of Seller in its
consideration of the Merger and is not a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to the
shareholders and does not address the relative merits of the Merger and any
alternatives to the Merger, Seller's underlying decision to proceed with or
effect the Merger, or any other aspect of the Merger. This opinion may not be
used or referred to by Seller, or quoted or disclosed to any person in any
manner, without our prior written consent, which consent is hereby given to the
inclusion of this opinion in any proxy statement or prospectus filed with the
Securities and Exchange Commission in connection with the Merger. In furnishing
this opinion, we do not admit that we are experts within the meaning of the term
"experts" as used in the Securities Act and the rules and regulations
promulgated thereunder, nor do we admit that this opinion constitutes a report
or valuation within the meaning of Section 11 of the Securities Act.
Very truly yours,
/s/ MONTGOMERY SECURITIES
C-2
<PAGE> 234
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262 -- APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this Section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this Section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this Chapter shall be entitled to
an appraisal by the Court of Chancery of the fair value of the stockholder's
shares of stock under the circumstances described in subsections (b) and (c) of
this Section. As used in this Section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a non-
stock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of a
member of a non-stock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251 (other than a merger effected pursuant to
sec. 251(g) of this Chapter), 252, 254, 257, 258, 263 or 264 of this Chapter;
(1) provided, however, that no appraisal rights under this Section
shall be available for the shares of any class or series of stock which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this Chapter.
(2) Notwithstanding the provisions of subsection (b)(1) of this
Section, appraisal rights under this Section shall be available for the
shares of any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of merger or
consolidation pursuant to Sections 251, 252, 254, 257, 258, 263 and 264 of
this Chapter to accept for such stock anything except (i) shares of stock
of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof; (ii) shares of
stock of any other corporation, or depository receipts in respect thereof,
which shares of stock or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 holders; (iii) cash in lieu of fractional
shares or fractional depository receipts described in the foregoing clauses
(i) and (ii); or (iv) any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares, or fractional depository
receipts described in the foregoing clauses (i), (ii) and (iii) of this
subsection.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this Chapter is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this Section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains
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such a provision, the procedures of this Section, including those set forth in
subsections (d) and (e), shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this Section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
Section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with the
provisions of this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation
has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this Chapter, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this Section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that,
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and
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who is otherwise entitled to appraisal rights, may file a petition in the Court
of Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this Section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this Section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this Section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any other state.
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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this Section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this Section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this Section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX E
OLICOM 1997 SHARE INCENTIVE PLAN
1. PURPOSE. The purpose of the Olicom A/S 1997 Share Incentive Plan (the
"Plan") is to advance the interests of Olicom A/S, a corporation organized under
the laws of the Kingdom of Denmark, with its registered office in the
municipality of Lyngby-Taarbaek (the "Company"), by strengthening the ability of
the Company to attract and retain key personnel of high caliber through
encouraging a sense of proprietorship by means of stock ownership. Certain
options issued pursuant to the Plan are intended to qualify as "incentive stock
options" pursuant to Section 422 of the United States Internal Revenue Code of
1986, as amended (the "Code") ("Incentive Options"), while certain other options
issued pursuant to the Plan shall constitute options that are not so qualified
("Nonqualified Options"). In addition to Incentive Options and Nonqualified
Options, warrants ("Warrants") may also be issued pursuant to the Plan.
2. DEFINITIONS. As used in this Plan and in any Agreement (as defined
herein), the following terms shall have the indicated meanings, unless the
context otherwise requires:
"Board" means the Board of Directors of the Company.
"Common Shares" means the common shares of the Company, nominal value
DKK 0.25 per share.
"Date of Issue" means the date on which an Option is granted or a
Warrant is issued pursuant hereto.
"Fair Market Value" means the closing sale price (or average of the
quoted closing bid and asked prices if there is no closing sale price
reported) of the Common Shares on the date specified as reported by the
Nasdaq National Market (the "NNM") or by the principal national stock
exchange on which the Common Shares are then listed. In the event that if
there is no reported price information for such date, the Fair Market Value
shall be determined by the reported price information for the Common Shares
on the day nearest preceding such date. If the Common Shares are not listed
on the NNM or any national stock exchange, Fair Market Value shall be such
price as determined in good faith by the Board.
"Optionee" means a person to whom an Option is granted under the Plan
or who has obtained the right to exercise an Option in accordance with the
provisions of the Plan.
"Options" means Incentive Options and Nonqualified Options.
"Subsidiary" means any now existing or hereinafter organized or
acquired corporation of which more than 50% of the issued and outstanding
voting stock is owned or controlled, directly or indirectly, by the Company
or through one or more Subsidiaries of the Company.
"Warrant Holder" means a person to whom a Warrant is issued under the
Plan or who has obtained the right to exercise a Warrant in accordance with
the provisions of the Plan.
3. SHARES SUBJECT TO THE PLAN. The aggregate amount of shares subject to
purchase or subscription pursuant to Options granted and Warrants issued
pursuant hereto shall not exceed 2,000,000 Common Shares. Any shares subject to
unexercised portions of Options granted or Warrants issued pursuant to the Plan
which shall have terminated, been canceled or expired may again be subject to
Options granted or Warrants issued pursuant hereto.
4. ADMINISTRATION. The Plan shall be administered by the Board. Option and
Warrant agreements (collectively, "Agreements"), in the form as approved by the
Board, and containing such terms and conditions not inconsistent with the
provisions of the Plan as shall have been determined by the Board, may be
executed on behalf of the Company by its Chairman of the Board and Managing
Director, and on behalf of any Subsidiary by its President, Managing Director or
Chief Executive Officer. The Board, from time to time, may adopt rules and
regulations for carrying out the provisions and purposes of the Plan and make
such other determinations, not inconsistent with the terms of the Plan, as the
Board shall deem appropriate. The Board shall have complete authority to (a)
construe, interpret and administer the provisions of the Plan and the provisions
of the Agreements executed pursuant hereto, (b) prescribe, amend and rescind
rules and
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regulations pertaining to the Plan, and (c) make all other determinations
necessary or deemed advisable in the administration of the Plan. Notwithstanding
the foregoing, the Board may delegate to a committee of the Board the authority
to determine the Optionees to whom Options may be granted and the Warrant
Holders to whom Warrants may be issued (the persons responsible for making such
determinations are referred to herein as the "Committee"). The interpretations
and constructions by the Board of any provision of the Plan shall be final and
conclusive, and any proceedings relating to the foregoing shall occur in Greater
Copenhagen.
5. ELIGIBILITY. Incentive Options may be issued pursuant hereto to such key
employees of the Company or its Subsidiaries (including any director who is also
a key employee of the Company or one or more of its Subsidiaries) as shall be
determined by the Committee. Nonqualified Options and Warrants may be issued
pursuant hereto to such employees, managers or directors of the Company or its
Subsidiaries as shall be determined by the Committee. The Board shall determine
the number of Options and Warrants, the consideration for each Warrant, the
exercise price of each Option and Warrant, the vesting and exercise period of
each Option and Warrant, the existence of any window periods during which
Options and Warrants may be exercised, and such other terms and conditions of
each Option and Warrant as are not inconsistent with the provisions of this
Plan. The Board (or upon delegation of authority to it, the Committee) shall
determine which persons are to be issued Options and Warrants pursuant hereto,
and the number of Common Shares subject to each Option and Warrant. In addition,
the Board may, in its sole discretion, provide for vesting of Options and
Warrants to accelerate upon a change in control of the Company. In connection
with the issuance of Incentive Options, the aggregate Fair Market Value
(determined at the Date of Issue of an Incentive Option) of the Common Shares
with respect to which Incentive Options are exercisable for the first time by an
Optionee during any calendar year (under all such plans of the Optionee's
employer corporation and its parent and subsidiary corporations, as defined in
Section 424 of the Code) shall not exceed US$100,000 or such other amount as
from time to time provided in Section 422(d) of the Code or any successor
provision.
6. PURCHASE PRICE FOR WARRANTS. The consideration to be received by Company
in consideration for the issuance of each Warrant issued pursuant hereto (the
"Purchase Price") shall be determined by the Board at the Date of Issue.
7. EXERCISE PRICE. The subscription price or prices for Common Shares
subject to an Option or Warrant (the "Exercise Price") issued pursuant thereto
shall be determined by the Board at the Date of Issue; provided, however, that
(a) the Exercise Price for any Option shall not be less than the Fair Market
Value of the Common Shares on the Date of Issue, (b) the sum of the Purchase
Price and the Exercise Price for any Warrant shall not be less than the Fair
Market Value of the Common Shares on the Date of Issue, and (c) if the Optionee
is the holder of more than 10% of the total combined voting power of all classes
of shares of the Company or its parent or any of its subsidiaries, as more fully
described in Section 422(b)(6) of the Code or any successor provision thereof
(such shareholder is referred to herein as a "10% Shareholder"), the Exercise
Price for any Incentive Option issued to such Optionee shall not be less than
110% of the Fair Market Value of the Common Shares on the Date of Issue.
Notwithstanding the foregoing, in the event that the Company determines, in
connection with the acquisition of a business enterprise, to assume options
issued by such acquired business enterprise, as set forth in Section 10(b), the
Exercise Price of such assumed options shall be the exercise price thereof
immediately prior to the closing of such acquisition, adjusted to give effect to
the consideration received by the equity holders of such acquired business
enterprise, such adjustment to be made in such manner as the Board shall
determine.
8. TERM OF OPTIONS AND WARRANTS; LIMITATIONS ON RIGHT TO EXERCISE. Subject
to the provisions of the Company's Articles of Association, as amended from time
to time (the "Articles"), and the Companies Act of the Kingdom of Denmark, as
amended from time to time (the "Companies Act"), (a) Incentive Options issued
pursuant hereto shall not be exercisable (i) more than five years after the Date
of Issue with respect to a 10% Shareholder, or (ii) more than ten years after
the Date of Issue with respect to all persons other than 10% Shareholders, (b)
Nonqualified Options issued pursuant hereto shall not be exercisable more than
ten years after the Date of Issue, and (c) Warrants issued pursuant hereto shall
not be exercisable more than five years after the Date of Issue. Subject to the
provisions of the Articles and the Companies Act, Nonqualified Options and
Warrants issued to non-management members of the Board or of the board of
directors of any Subsidiary shall not be exercisable for more than ten and five
years, respectively, except (x) that in the event
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of the death or termination of service of such member as a director of the
Company or a Subsidiary, Nonqualified Options and Warrants issued to such a
director shall not be exercisable after the expiration of one year following the
date of such member's death or termination (or if shorter, the remaining term of
the Option or Warrant), and (y) as otherwise provided by the Board at the time
that such Option or Warrant is granted or issued. The Company shall not be
required to issue any fractional shares upon the exercise of any Option or
Warrant. No Optionee or Warrant Holder, or his or her representatives, legatees
or distributees, as the case may be, shall be, or shall be deemed to be, a
holder of any Common Shares subject to an Option or Warrant, as the case may be,
unless and until (x) the Purchase Price of such Warrant has been paid, (y) such
Option or Warrant has been exercised, and (z) the Exercise Price of the Common
Shares in respect of which the Option or Warrant has been exercised has been
paid. Options and Warrants shall be exercisable only by the Optionee or the
Warrant Holder or by a person who has obtained the Optionee's or Warrant
Holder's rights under the Option or Warrant by will or under the laws of descent
and distribution.
9. TERMINATION OF EMPLOYMENT. The Board shall determine at the Date of
Issue what conditions, if any, shall apply to the exercise of an Option or
Warrant issued pursuant hereto in the event that an Optionee or Warrant Holder
ceases to be employed by the Company or a Subsidiary for any reason. In the
event of the death of an Optionee or Warrant Holder while in the employ, or
while serving as a director, of the Company or a Subsidiary, the Option or
Warrant theretofore issued to him or her shall be exercisable by the executor or
administrator of the estate of the deceased Optionee or Warrant Holder (the
"Decedent"), or if such Decedent's estate is not in administration, by the
person or persons to whom the Decedent's rights shall have passed under the
Decedent's will or under the laws of descent and distribution, no later than 12
months following the date of death or such other shorter period as may be
specified in the Agreement, but in no case later than the expiration date of
such Option or Warrant, and then only to the extent that the Decedent was
entitled to exercise such Option or Warrant at the date of his or her death.
Neither the Plan nor any Option or Warrant issued pursuant hereto is intended to
confer upon any Optionee or Warrant Holder any rights with respect to
continuation of employment or other utilization of his or her services by the
Company or a Subsidiary, nor to interfere in any way with his or her right, or
that of his or her employer, to terminate his or her employment or other
services at any time (subject to the terms of any applicable contract or
applicable law). No spouse of an Optionee or Warrant Holder shall have any
rights with respect to any Option or Warrant issued pursuant hereto, except as
to rights pursuant to will or the laws of descent and distribution that a spouse
of a Decedent acquires in an Option or Warrant issued to such Decedent.
10. MERGERS, CONSOLIDATIONS, SALE OF ASSETS, ETC.
(a) In the event of changes in the outstanding Common Shares of the Company
by reason of stock dividends, recapitalizations, mergers, consolidations,
split-ups, combinations or exchanges of shares and the like, the aggregate
number and class of shares available under the Plan, and the number, class and
the price of Common Shares subject to outstanding Options and Warrants shall be
appropriately adjusted by the Board, whose determination shall be final and
conclusive.
(b) The Company may grant options under this Plan in substitution for, or
in connection with the assumption of, options held by employees or directors of
another business enterprise who become employees or directors of the Company, or
a subsidiary of the Company, as the result of the acquisition of another
business enterprise by the Company or any of its subsidiaries (whether by a
merger or consolidation of the Company or a subsidiary thereof with such other
business enterprise, or as a result of the acquisition by the Company or a
subsidiary thereof of property or stock of such other business enterprise, or
other means by which such acquisition may be effected). The Company may direct
that substitute options be granted, or that the options or option plans of such
other business enterprise be assumed, on such terms and conditions as the Board
considers appropriate in the circumstances.
11. EXPIRATION AND TERMINATION OF THE PLAN. The Plan became effective on
April 2, 1997, pursuant to a resolution of the Board on such date, conditioned
on and subject to approval of the Plan by an Annual General Meeting of the
Company's shareholders. Subject to the provisions of the Articles and the
Companies Act, the Plan shall terminate on April 2, 2002, or at such earlier
date as may be determined by the Board or mandated by the Articles or the
Companies Act. Termination of the Plan shall not affect the rights of Optionees
or
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Warrant Holders under Options and Warrants theretofore issued, and all Options
and Warrants that have not expired shall continue in force and operation after
termination of the Plan, except as same may lapse or be terminated by their own
terms and conditions or as may be provided by the Articles or the Companies Act.
12. RELATIONSHIP TO ARTICLES OF ASSOCIATION. Pursuant to provisions of the
Articles, the Board has been, and may in the future be, granted the authority to
issue warrants, grant options and issue other instruments that entitle the
holders thereof to subscribe for Common Shares. Notwithstanding anything
contained herein, the action of the Board and of the Annual General Meetings in
authorizing this Plan or any amendment(s) hereto shall not derogate from or
otherwise affect the power of the Board to issue warrants, grant options or
issue other instruments pursuant to the authority granted to the Board in the
Articles [(including, without limitation, the authority set forth in Article 8,
Section 2 of the Articles, as in effect on March 8, 1996, for the Board to issue
at any time earlier than May 5, 1997, by one or several stages, as the Board
shall determine, not more than 1,173,320 units of warrants for shares of DKK
0.25 each)].
13. RESTRICTIONS ON ISSUANCE OF SHARES.
(a) The Company shall not be obligated to issue any Common Shares upon the
exercise of any Option or Warrant issued under this Plan unless (i) the offer
and sale of Common Shares with respect to which such Option or Warrant is being
exercised have been registered under applicable securities laws or are exempt
from such registration, (ii) the prior approval of such sale or issuance has
been obtained from any regulatory body having jurisdiction, and (iii) in the
event the Common Shares have been listed on the NNM or any national stock
exchange, the shares with respect to which such Option or Warrant is being
exercised have been duly listed on the NNM or such exchange on which the Common
Shares are then listed, all in accordance with the procedures specified
therefor.
(b) No Incentive Option issued pursuant hereto shall be transferable by the
Optionee other than by will or the laws of descent and distribution.
Nonqualified Options and Warrants may be issued to an affiliate of a person
otherwise permitted to be an Optionee or Warrant Holder pursuant hereto. For the
purposes of the Plan, an "affiliate" of a person shall include any person, group
or entity controlled by, controlling or under common control of such person.
14. DETERMINATION OF BREACH OF CONDITIONS. The determination of the Board
as to whether an event has occurred resulting in a forfeiture or a termination
or reduction of the Company's obligations in accordance with the provisions of
the Plan or any Agreement shall be final and conclusive.
15. TAXES. Optionees and Warrant Holders shall be entitled to satisfy the
obligation to pay any amounts required by any governmental entity to be withheld
or otherwise deducted and paid with respect to the exercise of an Option or
Warrant (including, without limitation, all applicable taxes or other
governmental impost or levy) (collectively, "Applicable Taxes"), calculated on
the basis of the rate of taxation applicable to such Optionee or Warrant Holder,
by providing the Company with funds sufficient to enable the Company to pay such
Applicable Taxes or subject to the authority of the Company under the Articles
to repurchase Common Shares, by requiring the Company to retain or to accept,
upon delivery thereof by the Optionee or Warrant Holder, Common Shares
sufficient in value (based on Fair Market Value on the date on which the Company
receives notice of exercise or conversion) to cover the amount of such
Applicable Taxes.
16. AMENDMENT OF THE PLAN. The Board may amend the Plan from time to time
in such respects as it may deem advisable in its sole discretion or in order
that the Options and Warrants issued hereunder shall conform to any change in
applicable laws, in regulations or rulings of administrative agencies, or in
order that Options and Warrants issued or Common Shares acquired upon exercise
thereof may qualify for simplified registration under applicable securities or
other laws.
17. PAYMENT UPON EXERCISE.
(a) Upon the exercise of any Option or Warrant issued hereunder, the
Company may, in its sole discretion, make financing available, from time to time
on such terms and to such Optionees or Warrant Holders as the Board may
determine in its sole discretion, for the purchase of the Common Shares that may
be purchased or subscribed for pursuant to the exercise of such Option or
Warrant. An Optionee or Warrant
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Holder may pay the Exercise Price of the Common Shares as to which an Option or
Warrant is being exercised by the delivery of cash or a certified or cashier's
check.
(b) Any Option or Warrant issued under the Plan may be exercised by a
broker-dealer acting on behalf of an Optionee or a Warrant Holder, as the case
may be, if (i) the broker-dealer has received from the Optionee, the Warrant
Holder or the Company a fully-executed counterpart of the Agreement evidencing
such Option or Warrant, together with instructions signed by the Optionee or
Warrant Holder, as the case may be, requesting the Company to deliver the Common
Shares subject to such Option or Warrant to the broker-dealer on behalf of such
Optionee or Warrant Holder and specifying the account into which such shares
should be deposited, (ii) adequate provision has been made with respect to the
payment of Applicable Taxes due upon such exercise, and (iii) the broker-dealer,
on the one hand, and the Optionee or Warrant Holder, on the other hand, have
otherwise complied with Section 220.3(e)(4) of the Regulation T of the United
States Federal Reserve System, 12 CFR Part 220, or any successor provision, to
the extent applicable.
18. LIABILITY OF THE COMPANY. By accepting any benefits under this Plan,
each Optionee and Warrant Holder, together with each person claiming under or
through such Optionee and Warrant Holder, shall be conclusively deemed to have
indicated acceptance and ratification of, and consented to, any action taken or
made to be taken or made under the Plan by the Company and the Board (and the
Committee). No Optionee or Warrant Holder, or any person claiming under or
through him or her, shall have any right or interest, whether vested or
otherwise, in the Plan or in any Option or Warrant hereunder, contingent or
otherwise, unless and until such Optionee or Warrant Holder shall have complied
with all of the terms, conditions and provisions of the Plan, together with the
Agreement relating thereto. Neither the Company, its directors, officers or
employees, nor any of the Company's Subsidiaries which are in existence or
hereafter come into existence, shall be liable to any Optionee or Warrant Holder
or other person if it is determined for any reason by the United States Internal
Revenue Service or any court having jurisdiction that any Incentive Options
issued hereunder do not qualify for tax treatment as "incentive stock options"
under Section 422 of the Code.
19. APPLICABLE LAW. The obligations of the Company pursuant hereto shall be
governed and construed in accordance with the laws of the Kingdom of Denmark;
provided, however, that the provisions of this Plan relating to Incentive
Options shall be construed in a manner consistent with the treatment of same as
"incentive stock options" pursuant to Section 422 of the Code. In the event of
any conflict between the provisions hereof, on the one hand, and the provisions
of the Companies Act and/or the Articles, on the other hand, the provisions of
the Companies Act and/or the Articles shall be deemed paramount and controlling.
Signed this the day of April 14, 1997
on behalf of the Board of Directors
------------------------------------------------------
Jan Bech, Chairman of the Board
------------------------------------------------------
Lars Stig Nielsen, Managing Director
E-5
<PAGE> 243
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the Companies Act, directors of the Registrant and the Registrant's
officers who are registered as managers with the Companies and Commercial Agency
of the Kingdom of Denmark (Messrs. Lars Stig Nielsen and Boje Rinhart are the
only officers of the Registrant so registered) are liable to the Registrant and
to third parties for any breach of the Registrant's Articles of Association or
the Companies Act. Officers not so registered are indemnified under the
Companies Act in respect of actions and claims arising out of actions taken by
them in their official capacity, provided that such actions do not involve gross
negligence or fraud.
The Registrant has entered into Indemnification Agreements with its
directors and officers which provide indemnification to the fullest extent
permitted by the Companies Act. In addition, Olicom, Inc., has entered into
Indemnification Agreements with its directors and officers who are not directors
and officers of the Registrant. Such Indemnification Agreements provide
indemnification to the fullest extent permitted by the Delaware General
Corporation Law, as amended.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*2.1 -- Agreement and Plan of Reorganization (the "Merger
Agreement") dated as of March 20, 1997, among the
Registrant, PW Acquisition Corporation and CrossComm
Corporation (attached as Appendix A to the Joint Proxy
Statement/Prospectus included in Part I of this
Registration Statement and incorporated herein by
reference). The following Exhibits to the Merger
Agreement are included as separate Exhibits to this
Registration Statement: Form of CrossComm Affiliates
Agreement (see Exhibit 10.2); Voting Agreement --
CrossComm Affiliates (Stockholder's Agreement) (see
Exhibit 10.3); Voting Agreement -- Olicom Affiliates
(Stockholder's Agreement) (see Exhibit 10.4)
*3.1 -- Articles of Association (English translation) of the
Registrant
*4.1 -- Specimen certificate for shares of Olicom Common Stock
(filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form F-1 filed September 9, 1992 (File No.
33-51818), and incorporated by reference herein)
*4.2 -- Specimen certificate for common stock purchase warrant
(included as Exhibit B to the Merger Agreement)
*5.1 -- Opinion of Advokatfirmaet O. Bondo Svane
*10.1 -- Form of Warrant Agreement
*10.2 -- Form of CrossComm Affiliates Agreement
*10.3 -- Stockholder's Agreement dated as of March 20, 1997,
between the Registrant and Tadeusz Witkowicz
*10.4 -- Stockholder's Agreement dated as of March 20, 1997,
between CrossComm Corporation and Lars Stig Nielsen
</TABLE>
II-1
<PAGE> 244
<TABLE>
<C> <S>
*10.5 -- Consulting Agreement dated March 20, 1997, between Olicom, Inc. and Tadeusz Witkowicz
(including form of Stock Option Agreement to evidence grant to Mr. Witkowicz of option
in common shares of the Registrant)
*10.6 -- Agreement dated March 20, 1997, between CrossComm Corporation and Tadeusz Witkowicz
*10.7 -- Share Purchase Agreement dated January 23, 1996 between Olicom A/S and Nilex Systems
ApS
23.1 -- Consent of Ernst & Young A/S
23.2 -- Consent of Ernst & Young LLP
*23.3 -- Consent of Advokatfirmaet O. Bondo Svane (included in Exhibit 5.1 hereto)
*23.4 -- Consent of Alex. Brown & Sons Incorporated (included in Appendix B to the Joint Proxy
Statement/Prospectus)
*23.5 -- Consent of Montgomery Securities (included in Appendix C to the Joint Proxy
Statement/Prospectus)
*23.6 -- Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
*99.1 -- Form of Olicom proxy
*99.2 -- Form of CrossComm proxy
*99.3 -- Consent of persons named to become directors
</TABLE>
(b) Financial Statement Schedules
* Schedule II -- Valuation and Qualifying Accounts; included in
financial statements of CrossComm Corporation attached hereto.
(c) Item 4(b) Information
The opinions of Alex. Brown & Sons Incorporated and Montgomery
Securities are included as Appendix C and Appendix D, respectively, to the
Joint Proxy Statement/Prospectus included in this Registration Statement.
- ---------------
* Previously filed.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate
II-2
<PAGE> 245
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
4. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
5. That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
6. That every prospectus: (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
7. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes: (i) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the United States for the purpose of responding to such requests.
The undertaking in subparagraph (i) above shall include information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to such requests.
II-3
<PAGE> 246
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 247
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Copenhagen,
Kingdom of Denmark, on the 9th day of May, 1997.
OLICOM A/S
By: /s/ LARS STIG NIELSEN
----------------------------------
Lars Stig Nielsen
Managing Director and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE AND CAPACITY DATE
--------- ------------------ ----
<C> <S> <C>
/s/ JAN BECH * Chairman of the Board and Director May 9, 1997
- -----------------------------------------------------
Jan Bech
/s/ BO F. VILSTRUP * Deputy Chairman of the Board and May 9, 1997
- ----------------------------------------------------- Director
Bo F. Vilstrup
/s/ LARS STIG NIELSEN Managing Director, Chief Executive May 9, 1997
- ----------------------------------------------------- Officer and Director
Lars Stig Nielsen
/s/ BOJE RINHART Principal Financial and Accounting May 9, 1997
- ----------------------------------------------------- Officer
Boje Rinhart
/s/ KURT ANKER NIELSEN * Director May 9, 1997
- -----------------------------------------------------
Kurt Anker Nielsen
/s/ FRANK G. PETERSEN * Director May 9, 1997
- -----------------------------------------------------
Frank G. Petersen
/s/ MICHAEL J. PEYTZ * Director May 9, 1997
- -----------------------------------------------------
Michael J. Peytz
*By: /s/ LARS STIG NIELSEN
------------------------------------------------
Lars Stig Nielsen,
Attorney-In-Fact
</TABLE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below on May 9, 1997 by the
undersigned as the duly authorized representative of Olicom A/S in the United
States.
/s/ J. MICHAEL CAMP
------------------------------------
J. Michael Camp
II-5
<PAGE> 248
SCHEDULE II
CROSSCOMM CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<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, 1994:
Accounts receivable allowances...... $475,000 $377,000 $0 $ 65,000 $787,000
======== ======== == ======== ========
Year ended December 31, 1995:
Accounts receivable allowances...... $787,000 $838,000 $0 $822,000 $803,000
======== ======== == ======== ========
Year ended December 31, 1996:
Accounts receivable allowances...... $803,000 $480,000 $0 $286,000 $997,000
======== ======== == ======== ========
</TABLE>
- ---------------
(1) Uncollectible accounts receivable written-off, net of recoveries
<PAGE> 249
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
* 2.1 -- Agreement and Plan of Reorganization (the "Merger
Agreement") dated as of March 20, 1997, among the
Registrant, PW Acquisition Corporation and CrossComm
Corporation (attached as Appendix A to the Joint Proxy
Statement/ Prospectus included in Part I of this
Registration Statement and incorporated herein by
reference). The following Exhibits to the Merger
Agreement are included as separate Exhibits to this
Registration Statement: Form of CrossComm Affiliates
Agreement (see Exhibit 10.2); Voting
Agreement -- CrossComm Affiliates (Stockholder's
Agreement) (see Exhibit 10.3); Voting Agreement -- Olicom
Affiliates (Stockholder's Agreement) (see Exhibit 10.4)
* 3.1 -- Articles of Association (English translation) of the
Registrant
* 4.1 -- Specimen certificate for shares of Olicom Common Stock
(filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form F-1 filed September 9, 1992 (File No.
33-51818), and incorporated by reference herein)
* 4.2 -- Specimen certificate for common stock purchase warrant
(included as Exhibit B to the Merger Agreement)
* 5.1 -- Opinion of Advokatfirmaet O. Bondo Svane
*10.1 -- Form of Warrant Agreement
*10.2 -- Form of CrossComm Affiliates Agreement
*10.3 -- Stockholder's Agreement dated as of March 20, 1997,
between the Registrant and Tadeusz Witkowicz
*10.4 -- Stockholder's Agreement dated as of March 20, 1997,
between CrossComm Corporation and Lars Stig Nielsen
*10.5 -- Consulting Agreement dated March 20, 1997, between
Olicom, Inc. and Tadeusz Witkowicz (including form of
Stock Option Agreement to evidence grant to Mr. Witkowicz
of option in common shares of the Registrant)
*10.6 -- Agreement dated March 20, 1997, between CrossComm
Corporation and Tadeusz Witkowicz
*10.7 -- Share Purchase Agreement dated January 23, 1996 between
Olicom A/S and Nilex Systems ApS
23.1 -- Consent of Ernst & Young A/S
23.2 -- Consent of Ernst & Young LLP
*23.3 -- Consent of Advokatfirmaet O. Bondo Svane (included in
Exhibit 5.1 hereto)
*23.4 -- Consent of Alex. Brown & Sons Incorporated (included in
Appendix B to the Joint Proxy Statement/Prospectus)
*23.5 -- Consent of Montgomery Securities (included in Appendix C
to the Joint Proxy Statement/Prospectus)
*23.6 -- Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
23.7 -- Consent of Ernst & Young A/S
23.8 -- Consent of Ernst & Young LLP
*99.1 -- Form of Olicom proxy
*99.2 -- Form of CrossComm proxy
*99.3 -- Consent of persons named to become directors
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts," and to
the use of our report dated April 2, 1997 included in the Joint Proxy Statement
of Olicom A/S and CrossComm Corporation that is made a part of Amendment No. 1
to the Registration Statement on Form F-4 (No. 333-24655) and Joint Proxy
Statement/Prospectus of Olicom A/S for the registration of 3,805,647 shares of
its common stock.
/s/ ERNST & YOUNG
Statsautoriseret Revisionsaktieselskab
Copenhagen, Denmark
May 9, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts," and to
the use of our report dated January 28, 1997, except for Note 12, as to which
the date is March 20, 1997, included in the Joint Proxy Statement of Olicom A/S
and CrossComm Corporation that is made a part of Amendment No. 1 to the
Registration Statement on Form F-4 (No. 333-24655) and Joint Proxy
Statement/Prospectus of Olicom A/S for the registration of 3,805,647 shares of
its common stock.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 9, 1997
