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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
MICOM COMMUNICATIONS CORP.
(NAME OF SUBJECT COMPANY)
MICOM COMMUNICATIONS CORP.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.0000001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
59478P 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
WARREN B. (BARRY) PHELPS, III
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
MICOM COMMUNICATIONS CORP.
4100 LOS ANGELES AVENUE
SIMI VALLEY, CALIFORNIA 93063
(805) 583-8600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING THIS STATEMENT)
COPIES TO:
TIMOTHY F. SYLVESTER, ESQ.
DOUGLAS C. CARLETON, ESQ.
RIORDAN & MCKINZIE
300 SOUTH GRAND AVENUE
29TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 629-4824
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is MICOM Communications Corp., a Delaware
corporation (the "Company"). The principal executive offices of the Company are
located at 4100 Los Angeles Avenue, Simi Valley, California 93063. The title of
the class of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is the common stock,
par value $.0000001 per share (the "Common Stock"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1 dated May 17, 1996 (the "Schedule 14D-1") filed by
Elder Corporation, a Delaware corporation ("Purchaser") and a wholly-owned
subsidiary of Northern Telecom Inc., a Delaware corporation ("Parent"), to
purchase all outstanding shares of Common Stock (the "Shares") at $12.00 per
share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated May 17, 1996 (the
"Offer to Purchase") and the related letter of transmittal (which, as amended
and extended from time to time, together constitute the "Offer").
As set forth in the Offer to Purchase, the principal executive offices of
each of Purchaser and Parent are located at Northern Telecom Plaza, 200 Athens
Way, Nashville, Tennessee 37228.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its executive officers,
directors or affiliates are described in the Company's Proxy Statement dated
July 5, 1995 relating to the Company's Annual Meeting of Stockholders held on
August 7, 1995 (the "Proxy Statement") under the headings "Board of Directors
and Certain Board Committees," "Executive Officers, Compensation and Other
Information," "Compensation Committee Interlocks and Insider Participation" and
"Security Ownership of Certain Beneficial Owners and Management" on pages 4
through 14 of the Proxy Statement.
Severance Compensation Agreement. On November 8, 1995 the Company entered
into separate Severance Compensation Agreements (collectively, the "Severance
Compensation Agreement") with each of its executive officers (each, an
"Executive"). In order to protect each Executive against the possible
consequences of a Change in Control of the Company (as defined in the Severance
Compensation Agreement), the Company agreed that, if an Executive's employment
is terminated by the Company, other than due to Executive's Disability,
Retirement or for Cause, or if Executive shall terminate his or her employment
for Good Reason (as each such term is defined in the Severance Compensation
Agreement), in any such case within two (2) years of such Change in Control,
such Executive shall be entitled to severance compensation equal to one (1)
year's base compensation and the annual bonus target for the Company's full
fiscal year during which such termination occurred. Additionally, the Company
shall continue for a period of one (1) year all of Executive's employee benefits
plans affording protection against medical costs, including any medical, excess
medical, hospitalization or similar insurance or reimbursement plan. The
consummation of transactions contemplated by the Offer constitute a Change in
Control under the Severance Compensation Agreement. A copy of the form of
Severance Compensation Agreement is attached as an Exhibit to this Schedule
14D-9.
Amendment to Notes. The Straight Note dated September 21, 1987 between Mr.
Phelps and the Company and the Straight Note dated March 15, 1988 between Mr.
Cabral and the Company (collectively, the "Notes") were each amended on November
8, 1995 and currently include a provision which states that, on a Change in
Control (as defined in the Notes), the balance due thereunder shall be forgiven.
On May 15, 1996, an aggregate of $100,000 and $33,333 were due on Notes of each
of Messrs. Phelps and Cabral,
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respectively. The consummation of the transactions contemplated by the Offer
constitutes a Change in Control under the Notes. Copies of the Notes are
attached as an Exhibit to this Schedule 14D-9.
(b)(2) Merger Agreement. The Merger Agreement provides, among other things,
for the making of the Offer by Purchaser and further provides that, following
the Offer and subject to the satisfaction or waiver of certain conditions,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving the Merger as a wholly-owned subsidiary of Parent (the
"Surviving Corporation"). As a result of the Merger, each outstanding Share
(other than Shares held by the Company in treasury, Shares held by Purchaser or
Parent and Shares held by stockholders who have properly exercised their
appraisal rights under Delaware law) will be converted at the effective time of
the Merger (the "Effective Time") into the right to receive $12.00 in cash,
without interest (the "Merger Consideration").
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed with the
Commission as an Exhibit to this Schedule 14D-9.
The Offer. The Merger Agreement provides for the commencement of the Offer,
in connection with which Purchaser has expressly reserved the right to waive
conditions of the Offer, but without the prior written consent of the Company,
Purchaser has agreed that it will not (i) decrease or change the form of
consideration payable in the Offer Price, (ii) decrease the number of Shares
sought pursuant to the Offer, (iii) impose additional conditions to the Offer
(other than those set forth below (the "Offer Conditions")), (iv) change the
Offer Conditions (provided, that Parent or Purchaser in its sole discretion may
waive any such conditions) or (v) make any other change in the Offer Conditions
which is materially adverse to the holders of the Shares. The obligation of
Purchaser to consummate the Offer and to accept for payment and to pay for any
Shares tendered pursuant to the Offer will be subject only to the conditions set
forth below. Notwithstanding the foregoing, Parent and Purchaser may, without
the consent of the Company, (i) extend the Offer, if at the scheduled expiration
date of the Offer any of the conditions of the Offer shall not be satisfied or
waived, until such time as such conditions are satisfied or waived, (ii) extend
the Offer for any period required by statute, rule, regulation, interpretation
or position of the Commission or any other governmental authority or agency
thereof applicable to the Offer, and (iii) extend the Offer for any reason on
one or more occasions for an aggregate of not more than fifteen (15) business
days beyond the latest expiration date that would otherwise be permitted under
clauses (i) and (ii) of this sentence. In addition, Purchaser and Parent have
agreed that if at any scheduled expiration date of the Offer any of the
conditions of the Offer are not satisfied or waived by Parent or Purchaser but
are capable of being satisfied in the reasonable opinion of Parent and
Purchaser, on the written request of the Company, Purchaser shall from time to
time extend the Offer for up to thirty (30) business days in the aggregate from
the originally scheduled expiration date.
Board Representation. If, immediately following the consummation of the
Offer, Purchaser is unable to cause the Merger to be effected pursuant to
Section 253 of the Delaware General Corporation Law (the "DGCL"), promptly upon
the purchase by Purchaser pursuant to the Offer and the Investor Options (as
defined below) of such number of Shares as represents at least a majority of the
outstanding Shares and from time to time thereafter, Purchaser shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as will give Purchaser representation on
the Board of Directors of the Company equal to the product of the number of
directors on the Board of Directors of the Company and the percentage that such
number of Shares so purchased bears to the number of Shares outstanding, and the
Company shall, upon request by Purchaser, promptly increase the size of the
Board of Directors of the Company or use its best efforts to secure the
resignations of such number of directors as is necessary to provide Purchaser
with such level of representation and shall cause Purchaser's designees to be so
elected; provided, that neither Parent nor Purchaser shall take any action to
prevent at least two persons who are directors of the Company on May 13, 1996
(the "Continuing Directors") from remaining as directors of the Company until
the Effective Time, and so long as there shall be at least one such Continuing
Director, following the election or appointment of Purchaser's designees and
prior to the Effective Time, any amendment of the Merger Agreement requiring
action by the Board of Directors of the Company, any extension of time for the
performance of any of the obligations or other acts of Parent or Purchaser under
the
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Merger Agreement, and any waiver of compliance with any of the agreements or
conditions under the Merger Agreement for the benefit of the Company will
require the concurrence of a majority of the Continuing Directors. The Company
will also use its best efforts to cause persons designated by Purchaser to
constitute the same percentage as is on the entire Board of Directors of the
Company to be on (i) each committee of the Board of Directors of the Company and
(ii) each Board of Directors and each committee thereof of each subsidiary of
the Company. The Company's obligations to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act. At the request
of Purchaser and subject to applicable law, the Company has agreed to take, at
its expense, all action necessary to effect any such election or appointment of
Purchaser's designees, including mailing to its stockholders the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Purchaser and Parent are obligated to supply to the Company all
information with respect to themselves and their officers, directors and
affiliates required by such Section and Rule. At Parent's request, the Company
is furnishing to its stockholders, as Schedule 1 to this Schedule 14D-9, the
information required by such Section and Rule.
The Merger. The Merger Agreement provides that upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with relevant law,
Purchaser shall be merged with and into the Company as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions to the
Merger. The Company shall be the Surviving Corporation and shall continue its
existence under the laws of Delaware, and the Certificate of Incorporation and
the Bylaws of Purchaser as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation and Bylaws of the Surviving
Corporation (except the name of the Surviving Corporation shall be MICOM
Communications Corp.). The directors of Purchaser immediately prior to the
Effective Time and the officers of the Company immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation until their respective successors are duly elected and
qualified. Each share of the common stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation, which will thereupon become
a direct wholly owned subsidiary of Parent. The parties to the Merger Agreement
shall cause the Merger to be consummated by filing with the Secretary of State
of the State of Delaware a duly executed and verified certificate of merger, as
required by the DGCL. The Merger will become effective upon such filing or at
such time thereafter as is provided under applicable law (referred to herein as
the "Effective Time").
Consideration to be Paid in the Merger. In the Merger, each Share issued
and outstanding immediately prior to the Effective Time (other than Shares held
by Purchaser, Parent or any subsidiary of Purchaser or Parent or in the treasury
of the Company, all of which shall be canceled, and other than Dissenting Shares
(as defined in the Merger Agreement)) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the right to
receive in cash an amount per Share (subject to any applicable withholding tax)
equal to $12.00, without interest.
Termination of Stock Options and Stock Option Plans. At the Effective Time
(or at such earlier time as Purchaser shall designate, which time may be
immediately prior to the acceptance of Shares pursuant to the Offer), each
holder of a stock option issued by the Company shall, in settlement thereof,
receive from the Surviving Corporation for each Share subject to such option an
amount (subject to any applicable withholding tax) in cash equal to the excess,
if any, of the Merger Consideration over the per share exercise or purchase
price of such option. Upon receipt of such amount by the holder of the option
(or in the case of an option with an exercise price of $12.00 or greater, at the
Effective Time), the option shall be canceled. At the Effective Time, all the
Company's stock option plans shall be terminated. In the Merger Agreement, the
Company has agreed to use its best efforts, prior to the Effective Time, to
obtain all necessary consents or releases from holders of options and to take
all such other action as may be reasonably necessary to give effect to these
provisions regarding options.
Cancellation of Purchase Rights. At the Effective Time each holder of a
stock purchase right issued by the Company shall in settlement thereof receive
from the Surviving Corporation for each Share the holder of the purchase right
would have been entitled to with respect to such purchase right under the
Company's employee stock purchase plan, as calculated in accordance with the
terms of such plan (for purposes of such calculation the date of the Effective
Time shall be deemed to be the last day of any purchase right period
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under such plan which commenced on or prior to May 13, 1996), subject to
applicable withholding tax, an amount in cash equal to the Merger Consideration,
with appropriate adjustment for fractional Shares otherwise purchasable. Upon
receipt of such amounts, the purchase right shall be canceled. In the Merger
Agreement, the Company has agreed to use its best efforts to obtain all
necessary consents or releases from holders or purchase rights and to take all
other action as may be necessary to give effect to these provisions regarding
purchase rights. In the Merger Agreement, the Company has represented that as of
April 29, 1996, not more than 6,500 Shares were issuable upon the exercise of
outstanding purchase rights issued by the Company.
Effect on Warrants. After the Effective Time, the Warrants issued by the
Company will remain outstanding but, pursuant to the Warrant Agreement, will
only be exercisable for cash in an amount equal to $12.00 multiplied by the
number of Shares for which each warrant was exercisable immediately prior to the
Merger.
Stockholder Meeting. The Merger Agreement provides that if required by
applicable law, the Company will, as soon as practicable following consummation
of the Offer, duly call a meeting of its Stockholders for the purpose of
adopting the plan of merger contained in the Merger Agreement and the
transactions contemplated thereby. The Merger Agreement also provides that,
subject to the fiduciary duties of the Company's Board of Directors under
applicable law, the Company shall include in its Proxy Statement the
recommendation of its Board of Directors that the stockholders of the Company
vote in favor of the adoption of the plan of merger set forth in the Merger
Agreement. The Parent and the Purchaser have each agreed under the Merger
Agreement that, at such stockholder meeting, all of the Shares acquired pursuant
to the Offer, the Option or otherwise by the Parent or the Purchaser or any of
their affiliates will be voted in favor of the Merger.
If Purchaser or Parent acquires at least 90% of the outstanding Shares, the
Merger may be effected without a meeting of the stockholders in accordance with
the provisions of Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and good standing, capital structure, subsidiaries, corporate
authorization, absence of changes, Commission filings, consents and approvals,
no violations of other agreements, investment bank and finders' fees, employee
benefits, labor relations, litigation, taxes, compliance with applicable laws,
environmental matters, intellectual property, real property, insurance, material
contracts, related party transactions, liens and other matters.
Purchaser and Parent have also made certain representations and warranties
with respect to corporate existence and good standing, corporate authorization,
Commission filings, consents and approvals, no violations of other agreements,
ability to finance the Offer and the fees and expenses related thereto and other
matters.
Conduct of Business and Other Covenants Pending the Merger. The Company has
agreed that, except as expressly contemplated by the Merger Agreement, during
the period from the date of the Merger Agreement to the date on which a majority
of the Company's directors are designees of Parent or Purchaser, the Company
will conduct and will cause each of its subsidiaries to conduct its operations
according to its ordinary and usual course of business and consistent with past
practice and the Company will use and will cause each of its subsidiaries to use
its best efforts to preserve intact its business organization, to keep available
the services of its current officers and employees and to preserve the goodwill
of and maintain satisfactory relationships with those having business
relationships with the Company and its subsidiaries. The Company has agreed to
promptly advise Parent and Purchaser in writing of any change in the Company's
or any of its subsidiaries' condition (financial or otherwise), properties,
customer or supplier relationships, assets, liabilities, business prospects or
results of operations which may reasonably be likely to have a Material Adverse
Effect (as defined in the Merger Agreement).
In addition, without limiting the generality of the foregoing and except as
otherwise expressly provided in or contemplated by the Merger Agreement, prior
to the time specified in the first sentence in the preceding paragraph, the
Company has agreed that, without the prior written consent of Parent, it will
not (and will not
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permit any of its subsidiaries to): (i) issue, sell, grant options or rights to
purchase, pledge, or authorize or propose the issuance, sale, grant of options
or rights to purchase or pledge of (A) any securities of the Company (including
any option) or any securities of its subsidiaries, or grant or accelerate any
right to convert or exchange any securities of the Company or any of its
subsidiaries, other than Shares issuable upon exercise of the options or
warrants outstanding on the date hereof or (B) any other securities in respect
of, in lieu of or in substitution for Shares outstanding on the date of the
Merger Agreement, (ii) otherwise acquire or redeem, directly or indirectly, or
amend any of the securities of the Company or any of its subsidiaries, (iii)
split, combine or reclassify its capital stock or declare, set aside, make or
pay any dividend or distribution (whether in cash, stock or property) on any
shares of capital stock of the Company or any of its subsidiaries (other than
cash dividends paid to the Company by its wholly-owned subsidiaries with regard
to their capital stock), (iv) (A) make or offer to make any acquisition, by
means of a merger or otherwise, of assets or securities, or any sale, lease,
encumbrance or other disposition of assets or securities, in each case involving
the payment or receipt of consideration of $25,000 or more, except for purchases
of inventory made in the ordinary course of business and consistent with past
practice, or (B) enter into a contract which (1) involves or could involve
aggregate payments of more than $250,000, (2) is with MB Communications, Inc.,
Black Box Corporation or any of their affiliates, (3) is with Odyssey Partners
L.P. ("Odyssey") or any of its affiliates or (4) is or could reasonably be
expected to be material to the Company and its subsidiaries taken as a whole
(such contracts, "Material Contracts"), or amend any Material Contract, except
with respect to a one (1) year renewal of the Company's existing policies of
directors' and officers' liability insurance or the purchase of policies that
are substantially equivalent to such existing policies, or grant any release or
relinquishment of any rights under any Material Contract, (v) incur or assume
any long-term debt or short-term debt except for short-term debt incurred in the
ordinary course of business consistent with past practice, (vi) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except
wholly-owned subsidiaries of the Company, (vii) make any loans, advances or
capital contributions to, or investments in, any other person (other than
wholly-owned subsidiaries of the Company), (viii) change any of the accounting
principles or practices used by it, (ix) make any tax election or settle or
compromise any material federal, state or local income tax liability, (x)
propose or adopt any amendments to its Certificate of Incorporation or Bylaws
(or similar documents), (xi) grant any stock-related, performance or similar
awards or bonuses, (xii) forgive any loans to employees, officers or directors
or any of their respective affiliates or associates, (xiii) enter into any new
employment, severance, consulting or salary continuation agreements with any
officers, directors or employees, or grant any increases in the compensation or
benefits to officers, directors and employees other than normal increases to
persons who are not officers or directors in the ordinary course of business
consistent with past practices and that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company, (xiv) make
any deposits or contributions of cash or other property to or take any other
action to fund or in any other way secure the payment of compensation or
benefits under the Company's employee benefit plans or agreements subject to
such plans or any other plan, agreement, contract or arrangement of the Company,
(xv) enter into, amend, or extend any collective bargaining or other labor
agreement, (xvi) adopt, amend or terminate any employee benefit plan or
arrangement, (xvii) settle or agree to settle any suit, action, claim,
proceeding or investigation (including any suit, action, claim, proceeding or
investigation relating to the Merger Agreement or the transactions contemplated
thereby) or pay, discharge or satisfy or agree to pay, discharge or satisfy any
claim, liability or obligation (absolute accrued, asserted or unasserted,
contingent or otherwise) other than the payment, discharge or satisfaction of
liabilities reflected or reserved against in full in the financial statements as
at December 31, 1995 or incurred in the ordinary course of business subsequent
to December 31, 1995 or (xviii) agree in writing or otherwise to take any of the
foregoing actions or any action which would make any representation or warranty
in the Merger Agreement untrue or incorrect as of the date when made or as of a
future date or would result in any of the Offer Conditions not being satisfied.
No Solicitation. The Company has agreed that it will not and will not
permit any of its subsidiaries and their respective officers, directors,
employees, representatives, agents or affiliates to, directly or indirectly,
solicit, encourage, initiate or participate in any discussions or negotiations
with, or provide any non-public information or access to the Company or any of
its subsidiaries concerning any Acquisition Transaction (as defined below), to
any third party, and to cause any such existing activities to cease and be
terminated,
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provided that the Board of Directors of the Company is not prohibited from
furnishing information to or entering into discussions or negotiations with any
person or entity that makes an unsolicited bona fide proposal to engage in an
Acquisition Transaction that the Board of Directors of the Company in good faith
determines, with the assistance of its financial advisors, represents a
financially superior transaction for the stockholders of the Company when
compared to the Offer and the Merger, if, and only to the extent that, the Board
of Directors determines after consultation with outside legal counsel that
failure to take any such action would be inconsistent with the compliance by the
Board of Directors with its fiduciary duties to the stockholders of the Company
under the DGCL. Except as is required in the exercise of the fiduciary duties of
the Board of Directors of the Company, the Company has also agreed not to
release any third party from any confidentiality or standstill agreement to
which the Company is a party without Parent's prior written consent.
"Acquisition Transaction", as defined in the Merger Agreement, means any tender
offer or exchange offer, any merger, consolidation, liquidation, dissolution,
recapitalization, reorganization or other business combination, any acquisition,
sale or other disposition of all or a substantial portion of the assets or
securities of the Company or any other similar transaction involving the
Company, its securities or any of its material subsidiaries or divisions.
Fees and Expenses. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
expenses, except that the Company will be required to pay a termination fee to
Parent and to reimburse certain expenses of Parent under certain circumstances
described in "Termination" below.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, prior to the proposed Effective Time, of the following conditions:
(a) unless the Merger is consummated pursuant to the "short-form" merger
provisions of the DGCL, the Merger Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company required by and in
accordance with applicable law; (b) all necessary waiting periods under the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended (the "HSR
Act") applicable to the Merger shall have expired or been terminated; (c) no
statute, rule, regulation, executive order, decree or injunction shall have been
enacted, entered, promulgated or enforced by any court or governmental authority
against Parent, Purchaser or the Company and be in effect that prohibits or
restricts the consummation of the Merger or makes such consummation illegal or
otherwise restricts Parent's or Purchaser's exercise of full rights to own and
operate the Company (each party agreeing to use all reasonable efforts to have
such prohibition lifted); and (d) Purchaser shall have accepted for purchase and
paid for the Shares validly tendered; provided, however, that this condition
will be deemed satisfied with respect to Purchaser and Parent if Purchaser shall
have failed to purchase Shares pursuant to the Offer in violation of the terms
of the Offer.
The obligations of Purchaser and Parent to effect the Merger are further
subject to the satisfaction or waivers, where permissible, on or prior to the
proposed Effective Time of the following conditions: (a) the Company shall have
performed and complied in all material respects with all agreements and
obligations and conditions required by the Merger Agreement to be performed or
complied with by it on or prior to the Effective Time; (b) the representations
and warranties of the Company qualified as to materiality shall be true and
correct and those not so qualified shall be true and correct in all material
respects, in each case on the date of the Merger Agreement and at and on the
proposed Effective Time as though such representations and warranties were made
at and as such date; and (c) the Company shall have delivered to Parent and
Purchaser an officer's certification that each of the preceding conditions have
been satisfied.
The obligations of the Company to effect the Merger are further subject to
the satisfaction or waiver, where permissible, on or prior to the proposed
Effective Time of the following conditions: (a) Purchaser and Parent shall have
performed and complied in all material respects with all agreements and
obligations required by the Merger Agreement to be performed or complied with by
them on or prior to the proposed Effective Time; (b) the representations and
warranties of Purchaser and Parent qualified as to materiality shall be true and
correct and those not so qualified shall be true and correct in all material
respects, in each case on the date of the Merger Agreement and at and on the
Effective Time as though such representations and warranties were made at and as
such date; and (c) Parent and Purchaser shall have delivered to the Company an
officer's certification that each of the preceding conditions have been
satisfied.
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Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time notwithstanding approval thereof by the stockholders of
the Company, but prior to the Effective Time: (a) by mutual written consent of
the Boards of Directors of Company and Parent; (b) by Parent or the Company if
the Effective Time shall not have occurred on or before December 31, 1996
(provided that this right to terminate the Merger Agreement will not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date); (c) by Parent or the Company if any court
of competent jurisdiction in the United States or Canada or other United States
or Canadian governmental body shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by the Merger Agreement or the Stock Option
Agreements (as defined below) and such order, decree, ruling or other action
shall have become final and non-appealable; (d) (i) by the Company if Purchaser
fails to commence the Offer later than five business days following the public
announcement of the terms of the Merger Agreement and (ii) by Parent if the
Offer expires or is terminated on account of the failure of an Offer Condition
without any Shares being purchased thereunder; (e) by Parent, (i) if the Board
of Directors or any committee thereof of the Company withdraws or modifies or
amends in a manner adverse to Parent or Purchaser its authorization, approval or
recommendation of the Offer or the Merger or the Merger Agreement or shall have
resolved to do any of the foregoing or shall have failed to have reiterated its
recommendation within five (5) business days of any written request by Parent or
Purchaser therefor or (ii) the Company or any of its subsidiaries (or the Board
of Directors or any committee thereof of the Company) shall have approved,
recommended, authorized, proposed, publicly announced its intention to enter
into, or filed a Schedule 14D-9 not opposing any Acquisition Transaction with a
party other than Parent or Purchaser or any of their affiliates; (f) by Parent
if the Company or any of its subsidiaries participates in discussions or
negotiations with, or provides any information to or affords any access to the
properties, books and records of the Company to, or otherwise assists or
facilitates any corporation, partnership, person or other entity or group (other
than Parent or Purchaser or any affiliate or associate of Parent or Purchaser)
concerning any Acquisition Transaction; (g) by Parent if the Company shall have
breached or failed to comply in any material respect with any of its
obligations, covenants or agreements under the Merger Agreement, or any of the
representations and warranties of the Company set forth in the Merger Agreement
which is qualified as to materiality, shall not be true and correct, or any such
representation or warranty that is not so qualified, shall not be true and
correct when made or at any time prior to the Effective Time as if made at and
as such time; (h) by Parent if at any time prior to the purchase by Purchaser of
all of the Shares subject to the Investor Options, the Stock Option Agreements
shall not be in full force and effect, the Investors shall have asserted that
the Stock Option Agreements are not valid, binding or enforceable or are not in
full force and effect, there shall be a material condition to the exercise of
the Investor Options outstanding and not satisfied or the Investors shall have
breached in any material respect any representation, warranty or covenant
contained in the Stock Option Agreements; or (i) by the Company if either Parent
or Purchaser shall have breached or failed to comply in any material respect
with any of its obligations, covenants or agreements under the Merger Agreement,
or any of the representations and warranties of such party set forth in the
Merger Agreement which is qualified as to materiality, shall not be true and
correct, or any such representation and warranty that is not so qualified, shall
not be true and correct in all material respects when made or at any time prior
to the Effective Time as if made at and as such time. If the Merger Agreement is
terminated and the Merger is abandoned, the Merger Agreement, except for
obligations under the Merger Agreement to keep information confidential, as well
as the termination fees and expense provisions and any provisions of the Merger
Agreement relating to the Stock Option Agreements, shall become void.
Notwithstanding the above, all parties to the Merger Agreement shall remain
liable for any breach of the Merger Agreement.
In the event that the Merger Agreement is terminated (i) pursuant to
clauses (e) or (f) of the prior paragraph or (ii) pursuant to any other
provision of the prior paragraph (regardless of whether such termination is by
Parent or the Company) and (in the case of clause (ii) only) either (y) prior to
such termination a Trigger Event (as defined below) has occurred or (z) prior to
such termination the Offer shall have expired without the purchase of any Shares
by Purchaser pursuant thereto and within twelve (12) months from the date of
such expiration an Acquisition Event (as defined below) other than with the
Parent or Purchaser or any of their affiliates has occurred, then the Company
shall pay to Parent a fee equal to 2.5%
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<PAGE> 9
of an amount equal to $12.00 multiplied by the fully diluted number of
outstanding shares of common stock of the Company on the date of the Merger
Agreement. In such circumstances, and unless such termination results from a
material breach by Parent or Purchaser of its obligations under the Merger
Agreement, the Company will promptly, in addition to any termination fee, pay,
or reimburse Parent for, the reasonable, documented out-of-pocket fees and
expenses incurred by or on behalf of Parent and Purchaser in connection with the
transactions contemplated by the Merger Agreement, including all legal,
investment banking, accounting, printing and other fees and expenses whether
incurred prior to or following the execution of or the termination of the Merger
Agreement. "Trigger Event", as defined in the Merger Agreement, means the
occurrence of any of (i) the Company or any of its subsidiaries (or the Board of
Directors or any committee thereof of the Company) shall have recommended,
approved, authorized, proposed or filed a Schedule 14D-9 not opposing, or
publicly announced its intention to enter into, any Acquisition Transaction
(other than with Parent, Purchaser or any of their affiliates); (ii) the Board
of Directors or any committee thereof of the Company shall have withdrawn or
modified or amended in any manner adverse to Parent or Purchaser its
authorization, approval or recommendation to the stockholders of the Company
with respect to the Offer, the Merger or the Merger Agreement, or shall have
failed to have reiterated its recommendation within five business days of any
written request by Parent or Purchaser therefor; or (iii) the Company shall have
knowingly breached or willfully failed to comply in any material respect with
any of its obligations, covenants or agreements under the Merger Agreement, or
any of the representations and warranties of the Company set forth in the Merger
Agreement shall, to the knowledge of the Company, not have been true and correct
in all material respects as of the date of the Merger Agreement or shall cease
to be true in all material respects prior to the Effective Time by reason of the
willful acts of the Company. "Acquisition Event", as defined in the Merger
Agreement, means the consummation of any (i) Acquisition Transaction or (ii)
series of transactions that results in any person, entity or "group" (other than
the Investors and their affiliates and other than Parent, Purchaser or any of
their affiliates) acquiring more than 50% of the outstanding Shares or assets of
the Company or the Investors acquiring more than an additional 10% of the
outstanding Shares or assets of the Company (through any open market purchases,
merger, consolidation, recapitalization, reorganization or other business
combination).
Indemnification and Insurance. Purchaser and Parent have agreed that all
rights to indemnification existing in favor of the present or former directors,
officers and employees of the Company (as such) or any of its subsidiaries as
provided in the Company's Certificate of Incorporation or Bylaws, or the
articles of incorporation, bylaws or similar documents of any of the Company's
subsidiaries as in effect as of the date hereof with respect to matters
occurring prior to the Effective Time shall survive the Merger and shall
continue in full force and effect for a period of not less than the statutes of
limitations applicable to such matters. In addition, the Parent shall be
responsible for assuring that any successors to the Company assume such
indemnification obligations.
The Surviving Corporation will cause to be maintained in effect for a
period of four (4) years after the Effective Time, in respect of acts or
omissions occurring prior to the Effective Time (but only in respect thereof),
policies of directors' and officers' liability insurance covering the persons
currently covered by the Company's existing directors' and officers' liability
insurance policies and providing substantially similar coverage to such existing
policies; provided, however, that the Surviving Corporation will not be required
to maintain directors' and officers' liability insurance policies to the extent
that the aggregate annual cost of maintaining such policies exceeds 150% of the
aggregate annual amounts currently paid by the Company to maintain the existing
policies.
Employee Matters. Prior to the Effective Time, the Company will, and will
cause its subsidiaries to, and from and after the Effective Time, the Parent
will, and will cause the Surviving Corporation to, honor, in accordance with
their terms all existing employment and severance agreements between the Company
or any of its subsidiaries and any officer, director or employee of the Company
or any of its subsidiaries. The Parent intends to cause the Surviving
Corporation and its subsidiaries, until the first anniversary of the Effective
Time, to provide pension and welfare benefits to their employees (considered as
a group) (excluding employees covered by collective bargaining agreements and
excluding benefits that are contingent on a change in control or that are based
on, or require the issuance of, securities), which benefits will be in the
aggregate no
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<PAGE> 10
less favorable than those currently provided by the Company and its subsidiaries
in the aggregate to such employees. The Company has agreed to take all action
necessary to amend any plan (other than its stock option plans) maintained by
the Company or any of its subsidiaries to eliminate all provisions for the
purchase of Shares directly from the Company or any of its subsidiaries. In
particular, the Company has agreed to take all action necessary to ensure that
the Company's stock purchase plan for employees shall terminate as of the
Effective Time, no purchase right period under such plan will commence after the
date of the Merger Agreement, the current purchase right period will be
terminated prior to the Effective Time, and no funds will be contributed in the
current purchase period other than funds that were contributed prior to the date
of the Merger Agreement.
Amendment. Subject to applicable law, the Merger Agreement may be amended
by action taken by or on behalf of the Boards of Directors of the Company,
Parent and Purchaser, subject in the case of the Company to the review thereof
by the Continuing Directors, at any time before or after adoption of this
Agreement by the stockholders of the Company but, after any such stockholder
approval, no amendment shall be made which decreases the consideration to be
received by holders of Shares at the time of the Merger or which adversely
affects the rights of the Company's stockholders thereunder without the approval
of such stockholders. The Merger Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties thereto.
Other Agreements. Each party has agreed to use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement. However, other than the commencement of the Offer by
Purchaser (in accordance with the terms of the Merger Agreement), nothing in the
Merger Agreement shall obligate Parent or Purchaser to keep the Offer open
beyond the expiration date of the Offer (as it may be extended from time to
time, in accordance with the terms of the Merger Agreement) and nothing in the
Merger Agreement shall obligate Parent or Purchaser or any of their respective
subsidiaries or affiliates to agree (i) to limit or not to exercise any rights
of ownership of any securities (including the Shares), or to divest, dispose of
or hold separate any securities or all or a portion of their respective
businesses, assets or properties or of the business, assets or properties of the
Company or any of its subsidiaries or (ii) to limit the ability of such entities
(A) to conduct their respective businesses or own such assets or properties or
to conduct the businesses or own the properties or assets of the Company and its
subsidiaries or (B) to control their respective businesses or operations or the
businesses or operations of the Company and its subsidiaries. In addition, among
other things, (i) the Company has agreed to use its reasonable best efforts, and
Parent and Purchaser have agreed to use their best efforts to cause their
ultimate parent to use its reasonable best efforts, to make promptly any
required submissions under the HSR Act and (ii) the parties have agreed to
cooperate in preparing filings that are required under or approvals or consents
that are required by any law or regulation. In the event that any action, suit,
proceeding or investigation relating to the Merger Agreement, the Stock Option
Agreements or to the transactions contemplated thereby is commenced, whether
before or after the Effective Time, the parties to the Merger Agreement agree to
cooperate and use their best efforts to defend vigorously against it and respond
thereto.
Offer Conditions. Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment, purchase or pay for any
Shares tendered until the expiration of any applicable waiting period for the
Offer and the Investor Options under the HSR Act, and Purchaser may terminate
or, subject to the terms and conditions of the Merger Agreement, amend the Offer
as to any Shares not then accepted for payment, shall not be required to accept
for payment or pay for any Shares, or may delay the acceptance for payment of
Shares tendered, if (i) at the expiration of the Offer, the number of Shares
validly tendered and not withdrawn, together with the Shares beneficially owned
by Parent and its affiliates or which Parent and its affiliates have the right
to acquire pursuant to the Stock Option Agreements, shall not constitute a
majority of the outstanding Shares on a fully diluted basis, or (ii) at any time
on or after the date of the Merger Agreement, and prior to the acceptance for
payment of Shares, any of the following events shall occur:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction, promulgated, enacted, entered,
enforced or deemed applicable to the Offer, the Investor Options or the
Merger, that would or is reasonably likely to (i) make the acceptance for
payment of, or
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<PAGE> 11
payment for or purchase of some or all of the Shares pursuant to the Offer
or the Investor Options illegal, or otherwise restrict or prohibit or make
materially more costly the consummation of the Offer, the Investor Options
or the Merger, (ii) result in a significant delay in or restrict the
ability of Purchaser to accept for payment, pay for or purchase some or all
of the Shares pursuant to the Offer or the Investor Options or to effect
the Merger, (iii) render Purchaser unable to accept for payment or pay for
or purchase some or all of the Shares pursuant to the Offer or the Investor
Options, (iv) impose material limitations on the ability of Parent,
Purchaser or any of their respective subsidiaries or affiliates to acquire
or hold, transfer or dispose of, or effectively to exercise all rights of
ownership of, some or all of the Shares including the right to vote the
Shares purchased by it pursuant to the Offer or the Investor Options on all
matters properly presented to the stockholders of the Company, (v) require
the divestiture by Parent, Purchaser or any of their respective
subsidiaries or affiliates of any Shares, or require Parent, Purchaser, the
Company or any of their respective subsidiaries or affiliates to dispose of
or hold separate all or any material portion of their respective
businesses, assets or properties or impose any material limitations on the
ability of any of such entities to conduct their respective businesses or
own such assets, properties or Shares or on the ability of Parent or
Purchaser to conduct the business of the Company and its subsidiaries and
own the assets and properties of the Company and its subsidiaries, (vi)
impose any material limitations on the ability of Parent, Purchaser or any
of their respective subsidiaries or affiliates effectively to control the
business or operations of the Company, Parent, Purchaser or any of their
respective subsidiaries or affiliates or (vii) otherwise materially
adversely affect Parent, Purchaser, the Company or any of their respective
subsidiaries or affiliates or the value of the Shares or otherwise make
consummation of the Offer, the Investor Options or the Merger unduly
burdensome;
(b) there shall have been threatened, instituted or pending any
action, proceeding or counterclaim by or before any governmental,
administrative or regulatory agency or instrumentality or before any court,
arbitration tribunal or any other tribunal, domestic or foreign,
challenging the making of the Offer or the acquisition by Purchaser of the
Shares pursuant to the Offer or the Investor Options or the consummation of
the Merger, or seeking to obtain any material damages, or seeking to,
directly or indirectly, result in any of the consequences referred to in
clauses (i) through (vii) of paragraph (a) above;
(c) the Stock Option Agreements shall not be in full force and effect
(except due to the exercise by Purchaser of the Investor Options) or there
shall be a material condition to the exercise of the Investor Options not
satisfied or the Investors shall have breached in any material respect any
of their representations, warranties or covenants contained herein and such
breach shall have remained outstanding and uncured;
(d) there shall have occurred (i) for a period of more than one full
trading day any general suspension of, or limitation on prices for, trading
in securities on any national securities exchange or in the
over-the-counter market in the United States or the Toronto Stock Exchange,
(ii) the declaration of any banking moratorium or any suspension of
payments in respect of banks or any limitation (whether or not mandatory)
on the extension of credit by lending institutions in the United States or
Canada, (iii) the commencement of a war, armed hostilities or any other
international or national calamity involving the United States or Canada,
(iv) a material adverse change in the United States or Canadian currency
exchange rates or a suspension of, or limitation on, the markets therefor
or (v) in the case of any of the foregoing existing at the time of the
execution of the Merger Agreement, a material acceleration or worsening
thereof;
(e) any Person, entity or "group" (as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) other than Parent or the Investors or any of their respective
affiliates shall have become the beneficial owner (as that term is used in
Rule 13d-3 under the Exchange Act) of more than 14.9% of the outstanding
Shares;
(f) the Company (or the Board of Directors or any committee thereof of
the Company) shall have approved, recommended, authorized, proposed, filed
a Schedule 14D-9 not opposing, or publicly announced its intention to enter
into, any Acquisition Transaction (other than with Parent, Purchaser or any
of their affiliates);
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<PAGE> 12
(g) there shall have occurred any change, condition, event or
development in the business, condition (financial or otherwise), assets,
liabilities, results of operations or prospects of the Company or any of
its subsidiaries that is, or is reasonably likely to be, materially adverse
to the Company and its subsidiaries taken as a whole or that materially
impairs, or is reasonably likely to materially impair the ability of the
parties to consummate the Offer or the Merger;
(h) the Company shall have breached or failed to comply in any
material respect with any of its obligations, covenants or agreements under
the Merger Agreement or any representation or warranty of the Company
contained in the Merger Agreement, which is qualified as to materiality,
shall not be true and correct, or any such representation or warranty that
is not so qualified, shall not be true and correct in any material respect,
in each case either as of when made or at any time thereafter;
(i) the Merger Agreement shall have been terminated pursuant to its
terms or shall have been amended pursuant to its terms to provide for such
termination or amendment of the Offer; or
(j) the Board of Directors of any committee thereof of the Company
shall have modified or amended in any manner adverse to Parent or Purchaser
or shall have withdrawn its authorization, approval or recommendation of
the Offer, the Merger or the Merger Agreement, or shall have resolved to do
any of the foregoing or shall have failed to have reiterated its
recommendation within five (5) business days of any written request by
Parent therefor;
which, in the sole judgment of Parent or Purchaser, in any case, and regardless
of the circumstances (including any action or inaction by Parent or Purchaser or
any of their affiliates other than any action or inaction constituting a
material breach by Parent or Purchaser of their obligations under the Merger
Agreement) giving rise to any such condition, makes it inadvisable to proceed
with the Offer or with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted regardless of the circumstances (including any action or
inaction by Parent or Purchaser giving rise to any such condition other than any
action or inaction constituting a material breach by Parent or Purchaser of
their obligations under the Merger Agreement) or waived by Parent or Purchaser
in whole or in part at any time or from time to time in its discretion subject
to the terms and conditions of the Merger Agreement. The failure of Parent or
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time. Any
determination by Parent or Purchaser concerning the events described above will
be final and binding on all parties.
Appraisal Rights. No appraisal rights are available to holders of Shares in
connection with the Offer. However, if the Merger is consummated, holders of
Shares will have certain rights under Section 262 of the DGCL to dissent and
demand appraisal of, and payment in cash for the fair value of, their Shares.
Such rights, if the statutory procedures are complied with, could lead to a
judicial determination of the fair value (excluding any element of value arising
from accomplishment or expectation of the Merger) required to be paid in cash to
such dissenting holders for their Shares. Any such judicial determination of the
fair value of Shares could be based upon considerations other than or in
addition to the Offer price and the market value of the Shares, including asset
values and the investment value of the Shares. The value so determined could be
more or less than the Offer price or the Merger Consideration. As set forth in
the Merger Agreement, the Company shall give Parent and Purchaser (i) prompt
notice of any written demands for appraisal of any Shares received by the
Company, attempted written withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisals of
capital stock of the Company, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such stockholder's right to
appraisal, as provided in the DGCL, the Shares of
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<PAGE> 13
such holder will be converted into the Merger Consideration in accordance with
the Merger Agreement. A stockholder may withdraw such stockholder's demand for
appraisal by delivery to Purchaser of a written withdrawal of such stockholder's
demand for appraisal and acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
Stock Option Agreements. Concurrently with the execution of the Merger
Agreement, and as a condition to Parent and Purchaser entering into the Merger
Agreement, Purchaser and Parent entered into stock option agreements each dated
as of May 13, 1996 (together, the "Stock Option Agreements"), with Odyssey and
E.R. Yost (together, the "Investors"), the owners of 4,737,733 Shares and
413,412 Shares, respectively (together representing approximately 39% of the
outstanding Shares on a fully diluted basis) (the "Option Shares"). Pursuant to
the Stock Option Agreements, each of the Investors has agreed to grant Purchaser
options (the "Investor Options") to purchase their respective Option Shares at a
price of $12.00 per Share.
The following is a summary of the material terms of the Stock Option
Agreements. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated herein by reference and copies of which have
been filed with the Commission as Exhibits to this Schedule 14D-9.
Tender of Shares. Pursuant to the Stock Option Agreements, each of the
Investors has agreed to validly tender and not to withdraw their respective
Option Shares pursuant to and in accordance with the terms of the Offer not
later than the fifth business day after commencement of the Offer. However, each
of the Investors has agreed that if the purchase price per Share of the Offer is
increased to an amount greater than $12.00, they will not tender their
respective Option Shares into the Offer after the first public announcement of
such increase and, if any such Option Shares were tendered prior to such first
public announcement, each of the Investors will promptly withdraw their tender
of any such Option Shares. In such event, Purchaser has agreed that it will
exercise the Investor Options on the first business day following the purchase
of any Shares pursuant to the Offer at a purchase price of $12.00 per Option
Share (the "Option Closing").
Voting of Shares. At any meeting of the stockholders of the Company or in
connection with any written consent of stockholders of the Company from the date
of the Stock Option Agreements until the first to occur of the Effective Time
and the termination of the Stock Option Agreements, each of the Investors has
agreed to vote (or cause to be voted) all of their respective Option Shares (i)
in favor of the Merger and the terms of the Merger Agreement, (ii) in favor of
any other action related to the Merger or in furtherance of the transactions
contemplated by the Merger Agreement and the Stock Option Agreements, (iii)
against any action or agreement that would result in a breach by the Company
under the Merger Agreement or the Stock Option Agreements and (iv) except as
otherwise agreed to in writing in advance by Purchaser, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (x) any Acquisition Transaction; and (y)(1) any change in a majority
of the persons who constitute the Board of Directors of the Company; (2) any
change in the present capitalization of the Company or any amendment of
Company's Certificate of Incorporation or By-laws; (3) any other material change
in the Company's corporate structure or business; and (4) any other action
involving the Company or its subsidiaries which is intended, or could reasonably
be expected, to impede, interfere with, delay, postpone, or otherwise adversely
affect the Offer, the Merger and the transaction contemplated by the Merger
Agreement and the Stock Option Agreements.
Option Terms. If (i) the Offer is terminated, abandoned or withdrawn by
Parent or Purchaser (whether due to failure of any of the conditions thereto or
otherwise), (ii) the Offer is consummated but Purchaser has not accepted for
payment and paid for the Option Shares or (iii) the Merger Agreement is
terminated in accordance with its terms (other than for the failure of Parent or
Purchaser to fulfill any obligation under the Merger Agreement or by mutual
agreement of the parties thereto), the Investor Options shall, in any such case,
become exercisable, in whole but not in part, upon the first to occur of any
such event and remain exercisable in whole but not in part until the date which
is the earlier of (A) sixty (60) days after the date of the occurrence of such
event, so long as: (a) all waiting periods under the HSR Act required for the
purchase of the Option Shares upon such exercise shall have expired or been
waived and (b) there shall not be in effect
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<PAGE> 14
any preliminary or final injunction or other order issued by any court or
governmental, administrative or regulatory agency or authority prohibiting the
exercise of the Investor Options pursuant to the Stock Option Agreements. In the
event that the Investor Options are not exercisable because the circumstances
described in clauses (a) and (b) do not exist, then the Investor Options shall
be exercisable for a period not exceeding an additional thirty (30) days after
the 60-day period referred to in the preceding sentence.
In the event the Option Shares are acquired by Purchaser pursuant to the
exercise of the Investor Options ("Acquired Option Shares"), each of the
Investors shall be entitled to receive, upon any subsequent disposition,
transfer or sale (other than to an affiliate who takes such Acquired Option
Shares subject to Purchaser's obligations under the Stock Option Agreements)
("Sale") of the Acquired Option Shares for which a binding contract of sale is
entered into within one hundred eighty (180) days of the Option Closing, an
amount in cash equal to 50% of the excess (if any) of the aggregate proceeds
received in the Sale (net of selling commissions, if any) over the aggregate
purchase price for the Acquired Option Shares subject to such Sale. If any of
the consideration received by Purchaser in such Sale consists of securities, for
purposes hereof the proceeds of such Sale shall be deemed to be the net amount
that would actually have been received in an orderly sale of such securities
commencing on the first business day following actual receipt of such securities
by Purchaser, in the written opinion of an investment banking firm of national
reputation selected by Purchaser and reasonably satisfactory to each of the
Investors. Any payment due hereunder shall be paid by Purchaser to each of the
Investors within five (5) days after receipt of the Sale proceeds or, if any of
the consideration consists of securities, after the receipt of such investment
banking firm's written opinion to the parties. Nothing herein shall create any
duty by Purchaser to engage in a Sale of the Acquired Option Shares.
Restrictions on Transfer. Except as contemplated by the Stock Option
Agreements, each of the Investors shall not directly or indirectly, (i) offer
for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to, or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of their respective
Option Shares or any interest therein; (ii) grant any proxies or powers of
attorney, deposit any Option Shares into a voting trust or enter into a voting
agreement with respect to any such Option Shares; or (iii) take any action that
would make any of their representations or warranties contained therein untrue
or incorrect or have the effect of preventing or disabling the Investors from
performing their obligations thereunder.
No Solicitation. Each of the Investors (and in the case of Odyssey, its
officers, directors, employees, controlling persons and representatives) will
not, directly or indirectly, solicit, encourage or respond to any inquiries or
the making of any proposal with respect to an Acquisition Proposal (as such term
is defined in the Stock Option Agreements). Each Investor has agreed to
immediately cease and cause to be terminated any such activities. Each of the
Investors has agreed that if it receives any inquiry or proposal regarding any
Acquisition Proposal, it will promptly inform Purchaser of that inquiry or
proposal and will in the case of written proposals or inquiries, furnish
Purchaser with a copy of such proposal or inquiry (and all amendments and
supplements thereto). The Stock Option Agreement with Odyssey provides that the
covenants and agreements set forth therein will not prevent any of Odyssey's
designees on the Company's Board of Directors from taking any action, subject to
the applicable provisions of the Merger Agreement, while acting in compliance
with such designee's fiduciary duties in its capacity as a director of the
Company.
Pursuant to the Odyssey Stock Option Agreements, Odyssey Investors, Inc.,
an affiliate of Odyssey, agreed that the Services Agreement (as defined in the
Stock Option Agreements) between the Investors and the Company shall be
automatically terminated, without notice, immediately upon the consummation of
the Offer and that upon such termination (i) each party thereto shall have no
further rights, duties or liabilities under the Services Agreement, (ii) upon
such affiliate's receipt of a binding written agreement from the Company and the
Surviving Corporation (the "Releasees") similarly releasing and discharging such
affiliate, the Releasees shall automatically be released and discharged by such
affiliate from all actions, suits, debts, sums of money, covenants, obligations,
controversies, agreements, promises, damages, judgments, claims, and demands
whatsoever, in law or equity, against the Releasees which such affiliate ever
had, now has or hereafter shall or may have, for, upon, or by reason of any
matter, cause or thing whatsoever arising out of or in any way relating to the
Releasees' obligations under the Services Agreement, and (iii) such affiliate of
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<PAGE> 15
Odyssey shall automatically waive any amounts that it would have otherwise
received over and above an amount equal to the pro rata portion of the annual
fee under the Services Agreement for the period through the consummation of the
Offer or the Option Closing, as the case may be, plus any reimbursable expenses
incurred by such affiliate of Odyssey prior to such date and not yet reimbursed
by the Company.
Confidentiality Agreement
Pursuant to an agreement dated as of February 27, 1996 (the
"Confidentiality Agreement") between the Company and Northern Telecom Limited
("Nortel"), the Company has supplied Nortel with certain non-public,
confidential and proprietary information about the Company. Nortel has agreed in
the Confidentiality Agreement that it, together with its directors, officers,
employees, agents and representatives, will keep confidential all such
information supplied by the Company and that it will not, without the prior
written consent of the Board of Directors of the Company, until February 27,
1998, acquire or offer to acquire any securities or assets of the Company or
enter into or propose to enter into any business combination involving the
Company. In the Merger Agreement, the Company has represented and warranted that
the making of any offer and proposal and the taking of any other action by
Parent or Purchaser in connection with the Merger Agreement and the Stock Option
Agreements and the transactions contemplated thereby have been consented to by
the Board of Directors of the Company in accordance with the terms and
provisions of the Confidentiality Agreement. The Confidentiality Agreement is
attached as an Exhibit hereto and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a meeting held on May 12, 1996, the Board of Directors of the
Company, by the unanimous vote of the directors present, determined that the
Offer and the Merger are fair to, and in the best interests of, the stockholders
of the Company. The Board of Directors recommends that the stockholders of the
Company accept the Offer and tender their Shares pursuant to the Offer.
Additionally, at such meeting, Montgomery Securities ("Montgomery") delivered
its oral opinion to the Board that the consideration to be received by the
stockholders of the Company in the Offer and the Merger was fair to such
stockholders from a financial point of view. Montgomery's advice was confirmed
in an opinion letter dated May 13, 1996 (the "Fairness Opinion"), a copy of
which is attached as Annex 1 hereto and is incorporated herein by reference. The
Fairness Opinion is described in more detail below.
(b) Background to the Offer. In order to complement its existing Magellan
product line, Nortel and certain of its affiliated entities (the "Nortel
Entities") conducted an evaluation of a number of branch access vendors,
including the Company, from April to October 1995. In connection with that
evaluation, members of Nortel's Multimedia Networks business unit contacted the
Company in June 1995 to discuss the Company's business and products. During July
and August 1995, the Company shared certain technological information with
Nortel as part of Nortel's evaluation of the Company.
In early September 1995, George Abou-Arrage, Nortel's Assistant Vice
President and Business Manager-Magellan Access, telephoned Del Willis, Director
of Business Development of the Company, to discuss the results of Nortel's
evaluation.
On September 14, 1995, Mr. Abou-Arrage and other members of Nortel's
Multimedia Networks business unit met with Mr. Willis, Simon Lam, Vice President
Product Development, and D. Wayne Shackelford, Manager-Major Account Sales, of
the Company to discuss the commercial terms of potential cooperative efforts
with respect to the development, supply, support and marketing of a multimedia
access device. This initial contact led to various meetings and telephone
conversations between Nortel and the Company during the months of October,
November and December 1995.
On December 7, 1995, Mr. Abou-Arrage suggested the possibility of the
Nortel Entities taking an equity interest in the Company to Gilbert Cabral,
President and Chief Operating Officer of the Company.
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<PAGE> 16
On December 21, 1995, Nortel and the Company entered into a memorandum of
understanding with respect to the development, supply, support and marketing of
a multimedia access device, which contemplated the parties negotiating a
definitive development agreement by February 29, 1996. The memorandum of
understanding was generally not binding, except that it required Nortel to make
an initial $400,000 payment to the Company for the Company to continue
development work in advance of a definitive development agreement and gave
Nortel the right to begin purchasing certain existing Company products and
reselling those products as part of equipment manufactured and sold by Nortel.
The memorandum of understanding contemplated that, upon execution of a
definitive development agreement, the Company would deliver a final project plan
and Nortel would make an additional payment of $400,000 to the Company, with
subsequent payments to be made to continue to fund certain of the Company's
development efforts.
On January 27, 1996, Mr. Abou-Arrage spoke to Barry Phelps, Chairman of the
Board and Chief Executive Officer of the Company, and Mr. Cabral concerning the
possible benefits that might result from an acquisition of the Company by the
Nortel Entities. This was followed by a further discussion on February 13, 1996
between Klaus Buechner, Nortel's Group Vice President and General Manager
Multimedia Networks, and Mr. Phelps and Mr. Cabral.
On February 23, 1996, Mr. Buechner telephoned Brian Young, a director of
the Company and a former general partner of Odyssey and, in response to Mr.
Buechner's inquiry, Mr. Young indicated that Odyssey might be interested in
selling its Shares in connection with a potential acquisition of the Company by
the Nortel Entities.
In view of these preliminary discussions, Nortel and the Company entered
into the Confidentiality Agreement on February 27, 1996.
During the week of March 11, 1996, Nortel conducted a preliminary diligence
review of the Company. On March 27, 1996, Mr. Buechner, Mr. Phelps, Mr. Young
and a representative of Montgomery met to review the status of Nortel's
diligence review and discuss potential transaction structures.
On April 17, 1996, a representative of Montgomery had a discussion with Mr.
Buechner in order to quantify and evaluate Nortel's potential interest in the
Company. As a result of that conversation, the Company agreed to proceed with,
and provide information with respect to, a more thorough due diligence review
requested by Nortel.
At a meeting of the Board of Directors of the Company on April 23, 1996,
the schedule of the Nortel due diligence review was discussed. Additionally,
Montgomery reviewed with the Board of Directors potential ranges of values that
may be appropriate in the context of an acquisition of the Company.
During the week of April 29, 1996, Nortel conducted a further diligence
review. Various discussions were held during that week and during the week of
May 6, 1996 between the respective representatives of and advisors to the
Company and the Nortel Entities as to matters related to the Company's business.
On May 6, 1996 at a regularly scheduled quarterly meeting of the Board of
Directors of the Company, management and the Board discussed the Company's
quarterly and year end results. At that time, Montgomery gave the Board an
update of the Nortel due diligence review and analysis of the Company.
Since a multimedia access device development agreement had not been
finalized or entered into by February 29, 1996, as contemplated by the
memorandum of understanding, Nortel did not make the payment to be made upon
execution of the agreement. Concurrently with Nortel's due diligence, the
parties continued to work on the development project and to negotiate the terms
of the development agreement. In view of the Merger Agreement, such development
agreement was not finalized.
On the evening of May 9, 1996, a representative of CS First Boston
Corporation, the Nortel Entities' financial advisor ("CS First Boston"),
communicated to a representative of Montgomery that, if so requested by the
Company's Board of Directors, the Nortel Entities would be prepared to make a
proposal to the Board of Directors of the Company to acquire the Company for a
price of $11.00 per Share, subject to execution of satisfactory agreements. The
CS First Boston representative stated that any proposal by the Nortel Entities
would be conditioned upon obtaining satisfactory stock option agreements with
respect to the Option Shares.
15
<PAGE> 17
Substantially contemporaneously, counsel to the Nortel Entities furnished the
Company and Odyssey and their respective advisors with drafts of the Merger
Agreement and form of Stock Option Agreement.
On May 10, 1996, a representative of Montgomery indicated to a
representative of CS First Boston that an acquisition price of $11.00 per Share
was unacceptable but that the Company would be willing to enter into an
acquisition transaction at a price of $13.00 per Share.
During the evening of May 10, 1996 and over the May 11-12, 1996 weekend,
representatives of CS First Boston and Montgomery continued discussions and
negotiations regarding the proposed acquisition, including the proposed price,
and counsel for the Nortel Entities negotiated the terms of the Merger Agreement
and the Stock Option Agreements with counsel for the Company and Odyssey,
respectively. On the afternoon of May 12, 1996, representatives of Montgomery
and CS First Boston indicated that they believed that their respective clients
would be prepared to enter into a transaction with an acquisition price of
$12.00 per Share, subject to finalization of satisfactory agreements.
On May 12, 1996, the Board of Directors of the Company, by the unanimous
vote of the directors present, approved the Merger Agreement and determined to
recommend that stockholders tender their shares pursuant to the Offer and also
approved, for purposes of Section 203 of the DGCL, the Stock Option Agreement.
Early on May 13, 1996, the Merger Agreement and the Stock Option Agreements were
executed and the transactions were publicly announced.
Review of the Offer; Analysis of Alternatives. In arriving at its decision
to approve the transactions contemplated by the Merger Agreement and the Stock
Option Agreements and to recommend acceptance of the Offer, the Board of
Directors considered, among other things, (i) the terms and conditions of the
Offer and the Merger Agreement, including the amount and form of the
consideration being offered to the Company's stockholders; (ii) the recent and
historical market prices and trading volume of the Shares, and historical and
projected earnings of the Company; (iii) the Board of Directors' knowledge of
the business, operations, prospects, properties, assets and earnings of the
Company; (iv) the absence of any financing condition or any other term or
condition which in the Board's view was unduly onerous or could materially
impair the consummation of the Offer or the Merger; (v) the financial condition
and business reputation of Parent, and the ability of Parent and Purchaser to
complete the Offer and the Merger in a timely manner; (vi) possible
alternatives, which the Board concluded were not reasonably likely to result in
a more favorable combination of price, form of consideration and likelihood of
consummation than the Offer and the Merger; (vii) management's view, supported
by Montgomery, that, without a strategic partner, the Company would have
difficulty competing effectively in an industry in which, through consolidation,
the Company's competitors were growing in size and in financial resources and
(viii) the financial presentation of Montgomery and the receipt of the Fairness
Opinion. Additionally, the Board retained the right to review, and if
appropriate in the exercise of its fiduciary duties to the stockholders of the
Company accept an unsolicited proposal that the Board may determine was
financially superior to the Offer.
The Board of Directors also took into consideration the results of the
effort that Montgomery had conducted on behalf of the Company since December
1995 to explore various financial and strategic alliances and other potential
transactions between the Company and potential strategic partners and
acquisition candidates. The effort by Montgomery included identifying companies
in the telecommunications and datacommunications industries that could be
potential partners with or acquirors of the Company and contacting a number of
these candidates on a discrete basis to determine their level of interest. The
Company and Montgomery limited the parties contacted in order to avoid premature
disclosure of the possibility of a sale of the Company, which the Board of
Directors believed could adversely affect the Company's business. Montgomery
conducted discussions with eight companies who entered into Confidentiality
Agreements with the Company, four of whom met with senior management of the
Company to pursue discussions. Thereafter, Montgomery and the Company entered
into significant additional discussions with only the Nortel Entities.
Fairness Opinion. At the May 12, 1996 meeting of the Board of Directors of
the Company, Montgomery presented a detailed review of the consideration to be
paid in the Offer and the Merger. As set forth in the Fairness Opinion, among
other things, Montgomery (i) reviewed certain publicly available financial and
other data with respect to the Company and Parent, including the consolidated
financial statements for the
16
<PAGE> 18
Company for recent years and interim periods to March 31, 1996 and certain other
relevant financial and operating data relating to the Company and Parent made
available to Montgomery from published sources and from the internal records of
the Company; (ii) reviewed drafts dated May 12, 1996 of the Merger Agreement and
the Stock Option Agreements; (iii) reviewed certain publicly available
information concerning the trading of, and the trading market for, the Common
Stock; (iv) compared the Company from a financial point of view with certain
other companies in the networking industry which Montgomery deemed to be
relevant; (v) considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the networking industry
which Montgomery deemed to be comparable, in whole or in part, to the Offer and
the Merger; (vi) reviewed and discussed with representatives of the management
of the Company certain information of a business and financial nature regarding
the Company, furnished to Montgomery by management, including financial
forecasts and related assumptions of the Company; (vii) made inquiries regarding
and discussed drafts of the Merger Agreement and the Stock Option Agreements and
other matters related thereto with the Company's counsel and with counsel to
Odyssey; and (viii) performed such other analyses and examinations as Montgomery
deemed appropriate.
No limitations were imposed by the Board of Directors or management of the
Company on Montgomery with respect to the investigations made, or the procedures
followed by it in rendering the Fairness Opinion. In connection with the
Fairness Opinion, Montgomery assumed and relied upon the accuracy and
completeness of the foregoing information and did not assume any responsibility
for independent verification of such information. With respect to the financial
forecasts provided to Montgomery as described above, Montgomery assumed for
purposes of its opinion that such forecasts were reasonably prepared on bases
reflecting the best available estimates and judgments of the management of the
Company at the time of preparation as to the future financial performance of the
Company, and that such forecasts provide a reasonable basis upon which
Montgomery could form its opinion. As a matter of practice, the Company does not
publicly disclose internal management forecasts of the type provided to
Montgomery in connection with Montgomery's review of the Offer and the Merger,
and such forecasts were not prepared with a view toward public disclosure. In
addition, such forecasts were based upon numerous variables and assumptions that
are inherently uncertain, including, without limitation, factors related to
general economic and competitive conditions. Accordingly, actual results could
vary significantly from those set forth in such forecasts. Montgomery has
assumed no liability for such forecasts. Montgomery also assumed that there have
been no material changes in the Company's assets, financial condition, results
of operations, business or prospects since the respective dates of the last
financial statements of the Company made available to Montgomery. Montgomery
relied on advice of counsel and independent accountants to the Company as to all
legal and financial reporting matters with respect to the Company, the Offer,
the Merger and the Merger Agreement. Montgomery assumed that the Offer and the
Merger will be consummated in a manner that complies in all respects with the
applicable federal and state statutes, rules and regulations. In addition,
Montgomery did not assume responsibility for making an independent evaluation,
appraisal or physical inspection of the assets or individual properties of the
Company, nor was Montgomery furnished with any such appraisals. Finally,
Montgomery's opinion is based on economic, monetary and market and other
conditions as in effect on, and the information made available to Montgomery as
of, May 12, 1996.
The Fairness Opinion contains a description of the factors considered, the
assumptions made and the scope of review undertaken by Montgomery in rendering
its opinion. Stockholders are urged to read the Fairness Opinion in its
entirety. The Fairness Opinion has been provided solely for use by the Board of
Directors of the Company, only addresses the fairness of the consideration to be
received by the stockholders of the Company, from a financial point of view, and
does not constitute a recommendation to any stockholder of the Company to tender
their Shares pursuant to the Offer.
It is expected that if Shares are not accepted for payment by Purchaser in
the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Directors, will continue
to manage the Company as an on-going business. However, the Company may, under
these circumstances, continue to explore other opportunities which might involve
the sale or other change in control of the Company.
17
<PAGE> 19
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
By letter dated November 15, 1995 (the "Engagement Letter"), the Company
engaged Montgomery to provide the Company with financial advice and assistance
with respect to analyzing various financial and strategic alternatives,
identifying potential acquirors and evaluating the financial terms and
conditions of any proposals received. On such engagement, the Company paid
Montgomery $50,000 (the "Initial Fee") to cover certain costs and expenses of
Montgomery with respect to its efforts on the Company's behalf. Pursuant to the
Engagement Letter, the Company owes Montgomery an advisory fee of $150,000 (the
"Advisory Fee") for acting as financial advisor in connection with the
transactions described in this Schedule 14D-9. The Company has also agreed to
pay to Montgomery an additional fee, which is based upon the market value of
such transactions (the "Transaction Fee"), in the event that a majority of the
outstanding shares of Common Stock of the Company are acquired pursuant to the
Offer or other negotiated purchase. The Initial Fee and the Advisory Fee will be
credited against the Transaction Fee to the extent that the latter is paid by
the Company to Montgomery. Assuming that the Offer and the Merger are
consummated at the $12.00 price per Share, Montgomery will be entitled to an
aggregate fee of approximately $1,500,000.
The Company has also agreed to reimburse Montgomery for its reasonable
out-of-pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursements of its legal counsel, if retained
with the Company's consent. The Company has agreed to indemnify Montgomery and
its directors, officers, agents, employees and controlling persons for certain
costs, expenses and liabilities to which it may be subjected arising out of or
related to its engagement as financial advisor.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except pursuant to the Company's employee stock plans and for the
transactions contemplated by the Offer and the Stock Option Agreements, and
except with respect to the sale by Mr. Simon Lam of 1,300 Shares at $11.75 per
share on May 16, 1996, no transactions in the Shares have been effected during
the past 60 days by the Company or, to the best knowledge of the Company, by any
executive officer, director or affiliate of the Company.
(b) To the best of the Company's knowledge, all of the Company's executive
officers, directors and affiliates (other than the Option Grantors) presently
intend to tender all Shares which are held of record or beneficially owned by
such persons pursuant to the Offer, other than Shares, if any, held by any such
person which, if tendered, could cause such person to incur liability therefore
pursuant to the short-swing profit recapture provisions of Section 16(b) of the
Exchange Act of 1934. Each Investor is subject to the terms and conditions of
the Stock Option Agreement to which it is a party, which Stock Option Agreement
is described above in Item 3(b)(2).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in Items 3(b) and 4(b) above, no negotiation is
being undertaken or is underway by the Company in response to the Offer that
relates to or would result in (i) an extraordinary transaction, such as a merger
or reorganization, involving the Company or any of its subsidiaries, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or its
subsidiaries, (iii) a tender offer for or acquisition of securities by or of the
Company or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders.
18
<PAGE> 20
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
1 Agreement and Plan of Merger dated as of May 13, 1996 among
Parent, Purchaser and the Company.*
2 Stock Option Agreement dated as of May 13, 1996 among Parent,
Purchaser and Odyssey Partners, L.P.*
3 Stock Option Agreement dated as of May 13, 1996 among Parent,
Purchaser and E.R. Yost.*
4 Pages 4 through 14 of the 1995 Proxy Statement dated July 5,
1995.*
5 Press release issued by the Company and Nortel on May 13, 1996.*
6 Fairness Opinion of Montgomery dated May 13, 1996.
7 Letter to Stockholders dated May 17, 1996 from Warren B. (Barry)
Phelps, III, Chairman and Chief Executive Officer of the Company.
8 Form of Severance Compensation Agreement.*
9 Second Amendment to Straight Note of Mr. Phelps dated November 8,
1995.*
10 Second Amendment to Straight Note of Mr. Cabral dated November 8,
1995.*
11 Confidentiality Agreement dated as of February 27, 1996 between
the Company and Parent.*
- ---------------
* Not included in copies mailed to stockholders.
19
<PAGE> 21
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
Dated: May 17, 1996
MICOM COMMUNICATIONS CORP.
By: FRANCINE M. GOOD
Francine M. Good
Chief Financial Officer
20
<PAGE> 1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
NORTHERN TELECOM INC.
ELDER CORPORATION
AND
MICOM COMMUNICATIONS CORP.
Dated as of May 13, 1996
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
THE OFFER
SECTION 1.01 The Offer .......................................................1
SECTION 1.02 Company Actions..................................................3
SECTION 1.03 Stockholder Lists................................................4
SECTION 1.04 Directors .......................................................4
ARTICLE II
THE MERGER
SECTION 2.01 The Merger ......................................................5
SECTION 2.02 Consummation of the Merger.......................................5
SECTION 2.03 Effects of the Merger............................................6
SECTION 2.04 Certificate of Incorporation and Bylaws..........................6
SECTION 2.05 Directors and Officers...........................................6
SECTION 2.06 Conversion of Shares.............................................6
SECTION 2.07 Conversion of Common Stock of the Sub............................6
SECTION 2.08 Stockholders' Meeting............................................7
SECTION 2.09 Merger Without Meeting of Stockholders...........................7
SECTION 2.10 Withholding Taxes................................................7
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 3.01 Dissenting Shares................................................8
SECTION 3.02 Payment for Shares...............................................8
SECTION 3.03 Closing of the Company's Transfer Books.........................10
SECTION 3.04 Options ........................................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification..................................11
SECTION 4.02 Capitalization..................................................12
SECTION 4.03 Authority for this Agreement....................................13
SECTION 4.04 Absence of Certain Changes......................................14
SECTION 4.05 Reports ........................................................14
i
<PAGE> 3
SECTION 4.06 Schedule 14D-9; Offer Documents and Proxy Statement.............16
SECTION 4.07 Consents and Approvals; No Violation............................17
SECTION 4.08 Brokers ........................................................17
SECTION 4.09 Employee Benefit Matters........................................18
SECTION 4.10 Litigation, etc.................................................21
SECTION 4.11 Tax Matters ....................................................21
SECTION 4.12 Compliance with Law.............................................23
SECTION 4.13 Environmental Compliance........................................23
SECTION 4.14 Intellectual Property...........................................27
SECTION 4.15 Real Property...................................................29
SECTION 4.16 Insurance ......................................................30
SECTION 4.17 Material Contracts..............................................30
SECTION 4.18 Related Party Transactions......................................31
SECTION 4.19 Liens ..........................................................32
SECTION 4.20 State Takeover Statutes Inapplicable............................32
SECTION 4.21 Required Vote of Company Stockholders...........................32
SECTION 4.22 New Jersey ISRA.................................................33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SUB
SECTION 5.01 Organization and Qualification..................................33
SECTION 5.02 Authority Relative to this Agreement............................33
SECTION 5.03 Offer Documents; Proxy Statement................................34
SECTION 5.04 Consents and Approvals; No Violation............................34
SECTION 5.05 Interim Operation of the Sub....................................35
SECTION 5.06 Financing ......................................................35
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company..............................35
SECTION 6.02 No Solicitation.................................................38
SECTION 6.03 Access to Information...........................................39
SECTION 6.04 Reasonable Best Efforts.........................................40
SECTION 6.05 Indemnification.................................................41
SECTION 6.06 Employee Plans and Benefits and Employment Contracts............41
SECTION 6.07 State Takeover Statutes.........................................42
SECTION 6.08 Proxy Statement.................................................43
SECTION 6.09 Notification of Certain Matters.................................43
ii
<PAGE> 4
SECTION 6.10 Subsequent Filings..............................................43
SECTION 6.11 Termination Fee; Expenses.......................................44
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger......45
SECTION 7.02 Conditions to the Obligations of the Parent and the Sub to
Effect the Merger...........................................46
SECTION 7.03 Conditions to the Obligations of the Company to Effect the
Merger......................................................46
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination ....................................................47
SECTION 8.02 Effect of Termination...........................................49
SECTION 8.03 Amendment ......................................................49
SECTION 8.04 Extension; Waiver...............................................49
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties......................50
SECTION 9.02 Entire Agreement; Assignment....................................50
SECTION 9.03 Enforcement of the Agreement....................................50
SECTION 9.04 Validity .......................................................50
SECTION 9.05 Notices ........................................................50
SECTION 9.06 Governing Law...................................................52
SECTION 9.07 Descriptive Headings............................................52
SECTION 9.08 Parties in Interest.............................................52
SECTION 9.09 Counterparts ...................................................53
SECTION 9.10 Fees and Expenses...............................................53
SECTION 9.11 Certain Definitions.............................................53
SECTION 9.12 Press Releases..................................................54
EXHIBIT A
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
May 13, 1996 among Northern Telecom Inc., a Delaware corporation (the "Parent"),
Elder Corporation, a Delaware corporation and a wholly-owned subsidiary of the
Parent (the "Sub"), and MICOM Communications Corp., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, the Board of Directors of each of the Parent, the Sub
and the Company has determined that it is in the best interests of their
respective stockholders for the Sub to acquire the Company upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has adopted, by
the unanimous vote of all directors present, resolutions approving, among other
things, the acquisition of the Company by the Sub, this Agreement and the
transactions contemplated hereby, and has agreed to recommend that the Company's
stockholders approve the agreement of merger (as such term is used in Section
251 of the Delaware General Corporation Law (the "DGCL")) contained in this
Agreement and the transactions contemplated hereby and tender their Shares (as
hereinafter defined) in the Offer (as hereinafter defined);
WHEREAS, concurrently with the execution hereof and in order
to induce the Parent and the Sub to enter into this Agreement, the Parent and
the Sub are entering into stock option agreements (together, the "Stock Option
Agreement") with Odyssey Partners L.P. and E.R. Yost (together, the "Option
Grantor") under which the Option Grantor has granted the Sub an irrevocable
option (together the "Odyssey Option") to purchase a total of 5,151,145 Shares
upon the terms and conditions specified therein;
WHEREAS, the Parent, the Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.01 hereof and that none of the events
set forth in clause (2) of Exhibit A hereto shall have occurred or be existing,
the Parent shall cause the Sub promptly (but in no event later than five
business days following the public announcement of the terms of this Agreement)
to commence (within the meaning of Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) an offer to purchase all outstanding
shares
<PAGE> 6
(the "Shares") of common stock of the Company, par value $0.0000001 per share
(the "Common Stock"), at a price of $12.00 per Share, net to the seller in cash
(the "Offer"). The obligation of the Sub to consummate the Offer and to accept
for payment and to pay for any Shares tendered pursuant thereto shall be subject
to only the conditions set forth on Exhibit A (the "Offer Conditions"), which
are for the sole benefit of the Parent and the Sub and may be asserted by the
Parent or the Sub regardless of the circumstances giving rise to any such
condition, or waived by the Parent or the Sub in whole or in part at any time
and from time to time in its sole discretion. The Company agrees that no Shares
held by the Company or any of its subsidiaries (as defined in Section 9.11
hereof) will be tendered to the Sub pursuant to the Offer. The Sub will not,
without the prior written consent of the Company, (i) decrease or change the
form of the consideration payable in the Offer, (ii) decrease the number of
Shares sought pursuant to the Offer, (iii) impose additional conditions to the
Offer other than the Offer Conditions, (iv) change the Offer Conditions
(provided, that the Parent or the Sub in its sole discretion may waive any such
conditions) or (v) make any other change in the terms or conditions of the Offer
which is materially adverse to the holders of the Shares. Notwithstanding the
foregoing, the Parent and the Sub may, without the consent of the Company, (x)
extend the Offer, if at the scheduled expiration date of the Offer any of the
Offer Conditions shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (xi) extend the Offer for any period
required by any statute, rule, regulation, interpretation or position of the
Securities and Exchange Commission ("SEC") or any other governmental authority
or agency thereof applicable to the Offer, and (xii) extend the Offer for any
reason on one or more occasions for an aggregate of not more than 15 business
days beyond the latest expiration date that would otherwise be permitted under
clauses (x) and (xi) of this sentence; and, if at any scheduled expiration date
of the Offer any of the Offer Conditions are not satisfied or waived by the
Parent or the Sub but are capable of being satisfied in the reasonable opinion
of the Parent and the Sub, on the written request of the Company, the Sub shall
from time to time extend the Offer for up to thirty business days in the
aggregate from the originally scheduled expiration date thereof. Subject to the
Offer Conditions and the terms and conditions of this Agreement, the Sub shall,
and the Parent shall cause Sub to, accept for payment, and pay for, all Shares
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration of the Offer.
(b) On the date of commencement of the Offer, the Parent and
the Sub shall file or cause to be filed with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer which shall contain the offer to
purchase and related letter of transmittal and other ancillary Offer documents
and instruments pursuant to which the Offer will be made (collectively with any
supplements or amendments thereto, the "Offer Documents"). The
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Company and its counsel shall be given a reasonable opportunity to review and
comment on the Offer Documents prior to their filing with the SEC.
(c) The Parent shall provide to the Sub on a timely basis the
funds necessary to accept for payment and pay for the Shares that the Sub
becomes obligated to accept for payment and pay for pursuant to the Offer.
SECTION 1.02 Company Actions. (a) The Company hereby consents
to the Offer and represents and warrants that (i) the making of any offer and
proposal and the taking of any other action by the Parent or the Sub in
connection with this Agreement and the Stock Option Agreement and the
transactions contemplated hereby and thereby have been consented to by the Board
of Directors of the Company in accordance with the terms and provisions of the
Confidentiality Agreement (as hereinafter defined), (ii) its Board of Directors
(at a meeting or meetings duly called and held) has, by the unanimous vote of
all directors present, (w) determined that the Offer and the Merger are fair to
and in the best interests of the stockholders of the Company, (x) resolved to
recommend acceptance of the Offer and approval and adoption of agreement of
merger (as such term is used in Section 251 of the DGCL) contained in this
Agreement by such stockholders of the Company, (y) taken all necessary steps to
render Section 203 of the DGCL inapplicable to the Merger, the Stock Option
Agreement and the acquisition of Shares pursuant to the Offer and the Odyssey
Option and (z) resolved to elect, to the extent permitted by law, not to be
subject to any state takeover law other than Section 203 of the DGCL that may
purport to be applicable to the Offer, the Merger, the Stock Option Agreement or
the transactions contemplated by this Agreement or the Stock Option Agreement
and (iii) Montgomery Securities, the Company's independent financial advisor,
has advised the Company's Board of Directors that, in its opinion, the
consideration to be paid in the Offer and the Merger to the Company's
stockholders is fair, from a financial point of view, to such stockholders.
(b) On the date of commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto, the "Schedule
14D-9") containing the recommendations of its Board of Directors described in
Section 1.02(a) and hereby consents to the inclusion of such recommendations in
the Offer Documents and to the inclusion of a copy of the Schedule 14D-9 with
the Offer Documents mailed or furnished to the Company's stockholders. The
Parent, the Sub and their counsel shall be given a reasonable opportunity to
review and comment on the Schedule 14D-9 prior to its filing with the SEC. The
Company agrees to provide the Parent and the Sub with any comments that may be
received from the SEC or its staff with respect to the Schedule 14D-9 promptly
after receipt thereof.
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(c) The Company hereby agrees that, subject to the terms and
conditions of this Agreement and except as is required in the exercise of the
fiduciary duties of the Board of Directors of the Company in the written opinion
of outside counsel to the Company, in the event there shall occur a change in
law or in a binding judicial interpretation of existing law which would, in the
absence of action by the Company or the Board of Directors of the Company
specified in such law or interpretation, prevent the Sub, were it to acquire a
specified percentage of the Shares then outstanding, from approving and adopting
this Agreement by its affirmative vote as the holder of a majority of Shares and
without the affirmative vote of any other holder of Shares, the Company will use
its best efforts to promptly take or cause such action to be taken.
SECTION 1.03 Stockholder Lists. In connection with the Offer,
the Company shall cause its transfer agent to promptly furnish the Parent and
the Sub with mailing labels, security position listings and any available
listing or computer file containing the names and addresses of the record
holders of the Shares as of the latest practicable date and shall cause its
transfer agent to furnish the Sub with such information and assistance
(including periodic updates of such information) as the Sub or its agents may
reasonably request in communicating the Offer to the record and beneficial
stockholders of the Shares.
SECTION 1.04 Directors. (a) If, immediately following the
consummation of the Offer, the Sub is unable to cause the Merger to be effected
pursuant to Section 253 of the DGCL, promptly upon the purchase by the Sub
pursuant to the Offer and the Odyssey Option of such number of Shares as
represents at least a majority of the outstanding Shares and from time to time
thereafter, the Sub shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
will give the Sub representation on the Board of Directors of the Company equal
to the product of the number of directors on the Board of Directors of the
Company and the percentage that such number of Shares so purchased bears to the
number of Shares outstanding, and the Company shall, upon request by the Sub,
promptly increase the size of the Board of Directors of the Company or use its
best efforts to secure the resignations of such number of directors as is
necessary to provide the Sub with such level of representation and shall cause
the Sub's designees to be so elected. The Company will also use its best efforts
to cause persons designated by the Sub to constitute the same percentage as is
on the entire Board of Directors of the Company to be on (i) each committee of
the Board of Directors of the Company and (ii) each Board of Directors and each
committee thereof of each subsidiary of the Company. The Company's obligations
to appoint designees to its Board of Directors shall be subject to Section 14(f)
of the Exchange Act. At the request of the Sub and subject to applicable law,
the Company shall take, at its expense, all action necessary to effect any such
election or appointment of the Sub's designees, including mailing to its
stockholders the information
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required by Section 14(f) of the Exchange Act and Rule 14f-l promulgated
thereunder which, unless the Sub otherwise elects, shall be so mailed together
with the Schedule 14D-9. The Parent and the Sub will supply to the Company all
information with respect to themselves and their respective officers, directors
and affiliates required by such Section and Rule.
(b) Notwithstanding anything set forth in Section 1.04(a),
neither the Parent nor the Sub shall take any action to prevent at least two
persons who are directors of the Company on the date hereof from remaining as
directors of the Company (the "Continuing Directors") until the Effective Time
(as hereinafter defined). Following the election or appointment of the Sub's
designees pursuant to Section 1.04(a) and prior to the Effective Time, and so
long as there shall be at least one Continuing Director, any amendment of this
Agreement requiring action by the Board of Directors of the Company, any
extension of time for the performance of any of the obligations or other acts of
the Parent or the Sub under this Agreement, and any waiver of compliance with
any of the agreements or conditions under this Agreement for the benefit of the
Company will require the concurrence of a majority of the Continuing Directors.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the DGCL,
the Sub shall be merged with and into the Company (the "Merger") as soon as
practicable following the satisfaction or waiver, if permissible, of the
conditions set forth in Article VII hereof. The Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") under the name "MICOM
Communications Corp." and shall continue its existence under the laws of
Delaware. The separate corporate existence of the Sub shall cease.
SECTION 2.02 Consummation of the Merger. Subject to the
provisions of this Agreement, the Sub and the Company shall cause the Merger to
be consummated by filing with the Secretary of State of the State of Delaware a
duly executed and verified certificate of merger, as required by the DGCL, and
shall take all such other and further actions as may be required by law to make
the Merger effective. Prior to the filing referred to in this Section, a closing
(the "Closing") will be held at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York (or such other place as the
parties may agree) for the purpose of confirming all the foregoing. The time the
Merger becomes effective in accordance with applicable law is referred to as the
"Effective Time."
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SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL and set forth herein.
SECTION 2.04 Certificate of Incorporation and Bylaws. The
Certificate of Incorporation and the Bylaws of the Sub, in each case as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation; provided, however, that
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read in its entirety as follows: "ARTICLE I. The name of the
Corporation is MICOM Communications Corp."
SECTION 2.05 Directors and Officers. The directors of the Sub
immediately prior to the Effective Time and the officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified.
SECTION 2.06 Conversion of Shares. Each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
the Parent, the Sub or any subsidiary of the Parent or the Sub or held in the
treasury of the Company, all of which shall be canceled, and other than
Dissenting Shares, as defined in Section 3.01 hereof) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive in cash an amount per Share (subject to any applicable
withholding tax as specified in Section 2.10 hereof) equal to $12.00, without
interest (the "Merger Consideration"), upon the surrender of the certificate
representing such Shares as provided in Section 3.02. At the Effective Time,
each holder of an Option (as hereinafter defined) with an exercise price of less
than $12.00 per share shall be entitled to receive the Option Consideration (as
hereinafter defined) pursuant to Section 3.04.
SECTION 2.07 Conversion of Common Stock of the Sub. Each share
of common stock, no par value, of the Sub issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become one share
of common stock of the Surviving Corporation.
SECTION 2.08 Stockholders' Meeting. Unless the Merger is
consummated in accordance with Section 253 of the DGCL as contemplated by
Section 2.09, and subject to applicable law, the Company, acting through its
Board of Directors, shall, in accordance with applicable law, duly call, give
notice of, convene and hold a special meeting (the "Special Meeting") of its
stockholders as soon as practicable following the consummation of the Offer for
the purpose of adopting the agreement of merger (within the meaning of Section
251 of the DGCL) set forth in this Agreement; and, subject to the fiduciary
duties of its Board of
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Directors under applicable law as set forth in a written opinion of outside
counsel, include in the Proxy Statement the recommendation of its Board of
Directors that stockholders of the Company vote in favor of the adoption of the
plan of merger set forth in this Agreement. The Parent and the Sub each agree
that, at the Special Meeting, all of the Shares acquired pursuant to the Offer,
the Option or otherwise by the Parent or the Sub or any of their affiliates will
be voted in favor of the Merger.
SECTION 2.09 Merger Without Meeting of Stockholders. If the
Sub, or any other direct or indirect subsidiary of the Parent, shall acquire at
least 90 percent of the outstanding shares of each class of capital stock of the
Company, each of the Parent, the Sub and the Company shall take all necessary
and appropriate action to cause the Merger to become effective, as soon as
practicable after the consummation of the Offer, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
SECTION 2.10 Withholding Taxes. The Parent and the Sub shall
be entitled to deduct and withhold from the consideration otherwise payable to a
holder of Shares, Options or Purchase Rights (as hereinafter defined) pursuant
to the Offer or the Merger, any stock transfer taxes and such amounts as are
required to be withheld under the Internal Revenue Code of 1986, as amended (the
"Code"), or any applicable provision of state, local or foreign tax law, as
specified in the Offer Documents. To the extent that amounts are so withheld by
the Parent or the Sub, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Shares in respect of
which such deduction and withholding was made by the Parent or the Sub.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 3.01 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Shares which are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
did not vote in favor of the Merger and who comply with all of the relevant
provisions of Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted into or be exchangeable for the right to receive the Merger
Consideration, and the holders of such Shares will be entitled to receive
payment of the appraised value of such Shares in accordance with the provisions
of Section 262, unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their rights to appraisal under the
DGCL. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right to appraisal, such holder's Shares shall thereupon
be converted into and become exchangeable only for the right to receive, as of
the Effective Time, the Merger Consideration without any interest thereon. The
Company shall
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give the Parent and the Sub (i) prompt notice of any written demands for
appraisal of any Shares received by the Company, attempted written withdrawals
of such demands, and any other instruments served pursuant to the DGCL and
received by the Company relating to stockholders' rights of appraisal and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of the Parent, voluntarily make any payment with respect
to any demands for appraisals of capital stock of the Company, offer to settle
or settle any such demands or approve any withdrawal of any such demands.
SECTION 3.02 Payment for Shares.
(a) Prior to the Effective Time, the Parent will cause the Sub
to make available to a bank or trust company designated by the Parent (the
"Paying Agent") sufficient funds to make the payments pursuant to Section 2.06
hereof on a timely basis to holders (other than the Parent or the Sub or any of
their respective subsidiaries) of Shares that are issued and outstanding
immediately prior to the Effective Time (such amounts being hereinafter referred
to as the "Payment Fund"). The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in the preceding sentence out of
the Payment Fund. The Payment Fund shall not be used for any other purpose,
except as provided in this Agreement.
(b) As soon as practicable after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to each record
holder, as of the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Shares (the
"Certificates") a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificate and payment
therefor. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be paid in exchange therefor cash in an amount (subject to any applicable
withholding tax as specified in Section 2.10 hereof) equal to the product of the
number of Shares represented by such Certificate multiplied by the Merger
Consideration, and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with the provisions of this Section 3.02, each
Certificate (other than Certificates
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representing Shares owned by the Parent or the Sub or any of their respective
subsidiaries and Certificates representing Dissenting Shares) shall represent
for all purposes solely the right to receive the Merger Consideration in cash
multiplied by the number of Shares evidenced by such Certificate, without any
interest thereon.
(c) Any portion of the Payment Fund (including the proceeds of
any investments thereof) that remains unclaimed by the former stockholders of
the Company for six months after the Effective Time shall be repaid to the
Surviving Corporation. Any former stockholders of the Company who have not
complied with Section 3.01 hereof prior to such six-month period shall
thereafter look only to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) but only as general creditors thereof
for payment of their claim for the Merger Consideration, without any interest
thereon. Neither the Parent nor the Surviving Corporation shall be liable to any
holder of Shares for any monies delivered from the Payment Fund or otherwise to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to two
years after the Effective Time, unclaimed funds payable with respect to such
certificates shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
SECTION 3.03 Closing of the Company's Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of Shares shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for cash as provided in this Article III, subject to applicable
law in the case of Dissenting Shares.
SECTION 3.04 Options; Purchase Rights.
(a) At the Effective Time (or at such earlier time as the Sub
shall designate, which time may be immediately prior to the acceptance of Shares
pursuant to the Offer), each holder of a then outstanding option to purchase
shares of Common Stock, whether or not then exercisable (the "Options"), which
theretofore has been granted under either the Company's 1994 Employee Stock
Option Plan or the Company's 1994 Directors Stock Option Plan (together, the
"Stock Option Plans") shall, in settlement thereof, receive from the Surviving
Corporation for each Share subject to such Option an amount (subject to any
applicable withholding tax as specified in Section 2.10 hereof) in cash equal to
the excess, if any, of the Merger Consideration over the per share exercise or
purchase price of such Option (such amount being hereinafter referred to as the
"Option Consideration"). Upon receipt of the Option Consideration (or in the
case of an Option with an exercise price of $12.00 or greater, at the Effective
Time), the Option shall be canceled. The surrender of an Option to the Surviving
Corporation in exchange for the Option Consideration shall be deemed a release
of
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any and all rights the holder had or may have had in respect of such Option.
Prior to the Effective Time, the Company shall use its best efforts to obtain
all necessary consents or releases from holders of Options and take all such
other action as may be reasonably necessary to give effect to the transactions
contemplated by this Section 3.04. Except as otherwise agreed to by the parties,
(i) the Stock Option Plans shall terminate as of the Effective Time and, except
with respect to the right to receive the Option Consideration under this Section
3.04, any and all rights under any provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary thereof shall be canceled
as of the Effective Time, and (ii) the Company shall take all reasonable action
necessary to ensure that no person shall have any right under any Stock Option
Plan (or any Option granted thereunder) or other plan, program or arrangement
with respect to, including any right to acquire, equity securities of the
Company, the Surviving Corporation, the Parent or any subsidiary of any of the
foregoing following the Effective Time.
(b) At the Effective Time each holder of a Purchase Right
shall in settlement thereof receive from the Surviving Corporation for each
Share the holder of the Purchase Right would have been entitled to with respect
to such Purchase Right under the 1995 Plan (as hereinafter defined), as
calculated in accordance with the terms of the 1995 Plan (for purposes of such
calculation the date of the Effective Time shall be deemed to be the last day of
the Current Purchase Period (as hereinafter defined)) (subject to applicable
withholding tax as specified in Section 2.10 hereof) an amount in cash equal to
the Merger Consideration, with appropriate adjustment for fractional Shares
otherwise purchaseable. Upon receipt of such amounts, the Purchase Right shall
be canceled. Prior to the Effective Time, the Company shall use its best efforts
to obtain all necessary consents or releases from holders of Purchase Rights and
shall take such other action, including pursuant to Section 6.05(d), as may be
necessary to give effect to the transactions contemplated by this Section
3.04(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Parent and the Sub
as follows:
SECTION 4.01 Organization and Qualification. Each of the
Company and its subsidiaries is a duly organized and validly existing
corporation in good standing under the laws of its jurisdiction of
incorporation, with all corporate power and other authority to own its
properties and conduct its business and is duly qualified and in good standing
as a foreign corporation authorized to do business in each of the jurisdictions
in which the character of the
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properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing, in the aggregate, could not be reasonably
expected to have a Material Adverse Effect. The Company has heretofore delivered
to the Parent and the Sub accurate and complete copies of the Certificates of
Incorporation and Bylaws as currently in effect of the Company and its
subsidiaries. All of the outstanding shares of capital stock of each of the
Company's subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all of such shares owned by the Company or another of its
subsidiaries are owned free and clear of all liens, claims or encumbrances.
Except with respect to the Company's ownership of its subsidiaries or the
ownership of one of the Company's subsidiaries by another of the Company's
subsidiaries neither the Company nor any of its subsidiaries, directly or
indirectly, owns any interest in any corporation, partnership, joint venture or
other business association or entity.
SECTION 4.02 Capitalization. (a) The authorized capital stock
of the Company consists of 40,000,000 shares of the Common Stock and 5,000,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). As
of the close of business on April 29, 1996: 11,449,918 Shares were issued and
outstanding; no shares of Preferred Stock were issued and outstanding; no Shares
were held in the Company's treasury; and there were outstanding Options to
purchase an aggregate of 1,362,328 Shares under the Stock Option Plans, and
warrants (the "Warrants") to purchase an aggregate of 291,525 Shares pursuant to
the Warrant Agreement, dated as of January 28, 1992, among the Company and the
parties thereto, and certain stock purchase rights under the Company's 1995
Employee Stock Purchase Plan (the "1995 Plan"), respectively (copies of which
have previously been made available to the Parent and the Sub), and there are no
stock appreciation rights or limited stock appreciation rights granted under the
Stock Option Plans or otherwise outstanding. The Purchase Rights do not (and at
the Effective Time will not) represent in the aggregate the right to purchase in
excess of 6,500 Shares. Since such date, the Company (i) has not issued any
Shares other than upon the exercise of Options, Warrants and Purchase Rights
outstanding on such date, (ii) has not granted any options, warrants or rights
or entered into other agreements or commitments to purchase Shares (under the
Stock Option Plans, the 1995 Plan or otherwise) and (iii) has not split,
combined or reclassified any of its shares of capital stock. All of the
outstanding Shares have been duly authorized and validly issued and are fully
paid and nonassessable and are free of preemptive rights. Section 4.02(a) of the
disclosure letter, dated the date hereof, delivered by the Company to the Parent
and the Sub prior to the execution of this Agreement setting forth certain
information with respect to certain matters referred to in this Agreement (the
"Disclosure Letter"), contains a true, accurate and complete list, as of the
close of business on the day immediately preceding the date hereof, of the name
of each Option holder, the number of outstanding Options held by such holder,
the grant date
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of each such Option, the number of Shares such holder is entitled to receive
upon the exercise of each Option and the corresponding exercise price. Except as
set forth in this Section 4.02(a) and in Section 4.02(a) of the Disclosure
Letter, there are no outstanding (i) shares of capital stock or other voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities or ownership
interests in the Company and (iii) options, warrants, rights or other agreements
or commitments to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or other ownership interests in, or
securities convertible into or exchangeable for capital stock or voting
securities or other ownership interests in the Company, and no obligation of the
Company to grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement or commitment
(the items in clauses (i), (ii) and (iii) being referred to collectively as
"Company Securities") and no obligations by the Company or any of its
subsidiaries to make payments based on the price of the Common Stock. Except
pursuant to the 1995 Plan, there are no outstanding obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any
Company Securities and there are no performance awards outstanding under the
Company's Stock Option Plans or any other outstanding stock related awards.
There are no voting trusts or other agreements or understandings to which the
Company or any of its subsidiaries is a party with respect to the voting of
capital stock of the Company or any of its subsidiaries.
(b) The Company is, directly or indirectly, the record and
beneficial owner of all the outstanding shares of capital stock of each of its
subsidiaries, free and clear of any lien, mortgage, pledge, charge, security
interest or encumbrance of any kind, and there are no irrevocable proxies with
respect to any such shares. There are outstanding (i) no securities of the
Company or any subsidiary convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any subsidiary, and
(ii) no options, warrants, rights or other agreements or commitments to acquire
from the Company or any of its subsidiaries, and no other obligation of the
Company or any of its subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, any of its subsidiaries, and no other obligation of the Company or any of
its subsidiaries to grant, extend or enter into any subscription, warrant,
right, convertible or exchangeable security or other similar agreement or
commitment (the items in clauses (i) and (ii) being referred to collectively as
the "Subsidiary Securities"). There are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any outstanding Subsidiary Securities.
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SECTION 4.03 Authority for this Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated (other than the approval and adoption of the
agreement of merger (as such term is used in Section 251 of the DGCL) contained
in this Agreement by the holders of a majority of the Shares prior to the
consummation of the Merger if required by applicable law). This Agreement has
been duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes the legal, valid and binding obligation of each of the
Parent and the Sub, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principles of
equity (whether considered in a proceeding in equity or at law).
SECTION 4.04 Absence of Certain Changes. Except as disclosed
in the SEC Reports (as defined in Section 4.05), since December 31, 1995, (i)
the Company and its subsidiaries have not suffered any Material Adverse Effect,
(ii) the Company and its subsidiaries have conducted their respective businesses
only in the ordinary course consistent with past practice, except in connection
with the negotiation and execution and delivery of this Agreement, and (iii)
there has not been (a) any declaration, setting aside or payment of any dividend
or other distribution in respect of the Shares or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any outstanding
shares of capital stock or other securities in, or other ownership interests in,
the Company or any of its subsidiaries; (b) any entry into any employment
agreement or severance compensation agreement with, or any increase in the rate
or terms (including any acceleration of the right to receive payment), of
compensation payable or to become payable by the Company or any of its
subsidiaries to, their respective directors, officers or employees, except
increases to employees who are not officers or directors occurring in the
ordinary course of business in accordance with its customary past practices; (c)
any increase in the rate or terms (including any acceleration of the right to
receive payment) of any Plan (as hereinafter defined) or any other bonus,
severance, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such directors, officers or employees; (d)
any action by the Company which, if taken after the date hereof, would
constitute a breach of any of clauses (iii) through (vii) inclusive, clause (x)
or clause (xii) of Section 6.01 hereof; (e) any change by the Company in
accounting methods, principles or practices except as required by changes in
United States generally accepted accounting principles; (f) any labor dispute,
other than
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routine individual grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any
subsidiary, which employees were not then subject to a collective bargaining
agreement or any lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to such employees; or (g) any revaluation by the Company or
any of its subsidiaries of any of their respective assets, including write-downs
of inventory or of accounts receivable other than in the ordinary course of
business consistent with past practice; or (h) any entry into any agreement,
commitment or transaction by the Company which is material to the Company and
its subsidiaries taken as a whole other than in the ordinary course of business.
SECTION 4.05 Reports.
(a) The Company has timely filed with the SEC all forms,
reports and documents required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder since June 4, 1994,
all of which have complied as of their respective filing dates in all material
respects with all applicable requirements of the Exchange Act and the rules
promulgated thereunder. True and correct copies of all filings made by the
Company with the SEC (the "SEC Reports"), whether or not required under
applicable laws, rules and regulations and including any registration statement
filed by the Company under the Securities Act of 1933, as amended (the
"Securities Act"), have been furnished to the Parent and the Sub. None of the
SEC Reports, including any financial statements or schedules included or
incorporated by reference therein, at the time filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The audited and unaudited consolidated financial
statements of the Company included (or incorporated by reference) in the SEC
Reports have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto) and present fairly the consolidated financial position of
the Company as of their respective dates, and the consolidated balance sheets,
statements of changes in stockholders' equity, statements of operations and
statements of cash flows at and for the periods presented therein, except that
unaudited interim financial statements were or are subject to normal and
necessary year end adjustments.
(c) The Company has furnished to the Parent and the Sub the
condensed consolidated balance sheet of the Company as at March 31, 1996 and the
condensed consolidated statements of operations for the fourth fiscal quarter
and the fiscal year, in each case ending on March 31, 1996. Such balance sheet
and statements of operations have been prepared in accordance with United States
generally accepted accounting principles applied on
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a consistent basis and present fairly the information set forth therein. The
audited consolidated balance sheet and the audited consolidated statements of
operations of the Company at March 31, 1996 and for the year then ended will not
differ in any material respect from such unaudited balance sheet and statement
of operations.
(d) Except (i) as reflected or reserved against or disclosed
in the financial statements of the Company (and the notes thereto) included in
the SEC Reports or as otherwise disclosed in the SEC Reports or in the condensed
consolidated balance sheet referred to in Section 4.05(c), (ii) as incurred
subsequent to March 31, 1996 in the ordinary course of business consistent with
past practice and (iii) as may arise pursuant to this Agreement, neither the
Company nor any of its subsidiaries has any liabilities of any nature, whether
accrued, absolute, contingent or otherwise, whether due or to become due and
whether required to be recorded or reflected on a balance sheet (or the notes
thereto) under United States generally accepted accounting principles. Since
April 2, 1995, neither the Company nor any of its subsidiaries has incurred any
liabilities other than liabilities which (i) have been incurred in the ordinary
course of business consistent with past practice and (ii) have not had and will
not have a Material Adverse Effect.
SECTION 4.06 Schedule 14D-9; Offer Documents and Proxy
Statement.
(a) None of the information supplied or to be supplied by or
on behalf of the Company or any affiliate of the Company for inclusion in the
Offer Documents and any other schedule or document required to be filed with the
SEC in connection with the Offer and the Merger will, at the times such
documents are filed with the SEC and are first mailed to stockholders of the
Company, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, or to correct any statement made in any communication with respect
to the Offer previously filed with the SEC or disseminated to the stockholders
of the Company. The Schedule 14D-9 will not, at the time the Schedule 14D-9 is
filed with the SEC and at all times prior to the purchase of Shares by the Sub
pursuant to the Offer, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation or warranty is being made by the
Company with respect to information supplied by the Parent, the Sub or any
affiliate of the Parent or the Sub for inclusion therein. The Schedule 14D-9
will comply as to form in all material respects with the provisions of the
Exchange Act.
(b) The Proxy Statement, if any, will not, at the time Proxy
Statement is first mailed and at the Special Meeting, contain any untrue
statement of a material fact or omit to
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state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, or to correct any statement made in any earlier communication with
respect to the solicitation of any proxy or approval for the Merger in
connection with which the Proxy Statement shall be mailed, except that no
representation or warranty is being made by the Company with respect to
information supplied by the Parent, the Sub or an affiliate of the Parent or the
Sub for inclusion therein. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act. The letter to
stockholders, notice of meeting, proxy statement and form of proxy, or the
information statement, as the case may be, that may be provided to stockholders
of the Company in connection with the Merger (including any supplements), and
any schedules required to be filed with the SEC in connection therewith, as from
time to time amended or supplemented, are collectively referred to as the "Proxy
Statement".
(c) The Company agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 or the Proxy Statement if and to
the extent that such information shall have become false and misleading in any
material respect, and to take all steps necessary to cause the Schedule 14D-9 or
the Proxy Statement, as the case may be, as so corrected, to be filed with the
SEC and to be disseminated to all holders of Shares, in each case as and to the
extent required by applicable federal securities laws.
SECTION 4.07 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation or Bylaws
(or other similar governing documents) of the Company or any of its
subsidiaries, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
(A) as disclosed in Section 4.07(ii) of the Disclosure Letter and (B) as may be
required under, and other applicable requirements of, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Exchange Act
and the DGCL, (iii) require any consent, waiver or approval or result in a
default (or give rise to any right of termination, cancellation, modification or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement, contract or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its assets or subsidiaries may be bound, except (x) for such defaults (or rights
of termination, cancellation, modification or acceleration) which would not in
the aggregate have a Material Adverse Effect, or (y) as disclosed in Section
4.07(iii) of the Disclosure Letter, (iv) result in the creation or imposition of
any mortgage, lien, pledge, charge, security interest or encumbrance of any kind
on any asset of the Company or any of its subsidiaries which would have a
Material Adverse Effect;
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or (v) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its subsidiaries or by which any of their
respective assets are bound, except for violations which would not in the
aggregate have a Material Adverse Effect.
SECTION 4.08 Brokers. No broker, finder or other investment
banker (other than Montgomery Securities, whose fee has heretofore been
disclosed to the Parent and the Sub, and a copy of whose engagement letter will
be furnished to the Parent and the Sub on the execution of this Agreement) is
entitled to receive any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated hereby based
upon agreements made by or on behalf of the Company, any of its subsidiaries or
any of their respective officers, directors or employees.
SECTION 4.09 Employee Benefit Matters.
(a) Except as set forth in Section 4.09(a) of the Disclosure
Letter, neither the Company nor any of its subsidiaries maintains or contributes
to, or has any obligation to contribute to or has any liability (including a
liability arising out of an indemnification, guarantee, hold harmless or similar
agreement) with respect to any plan, program, arrangement, agreement or
commitment which is an employment, consulting or deferred compensation
agreement, or an executive compensation, incentive bonus or other bonus,
employee pension, profit-sharing, savings, retirement, stock option, stock
purchase, stock appreciation rights, severance pay, life, health, disability or
accident insurance plan, or other employee benefit plan, program, arrangement,
agreement or commitment, including any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (individually, a "Plan," or collectively, the "Plans"). Each such Plan
with an aggregate annual cost of providing benefits exceeding $50,000 is
identified in Section 4.09(a) of the Disclosure Letter to the extent applicable,
as one or more of the following: an "employee pension plan" (as defined in
Section 3(2) of ERISA) or an "employee welfare plan" (as defined in Section 3(1)
of ERISA). No Plan is a "defined benefit plan" (as defined in Section 414 of the
Code) or a "multiemployer plan" (as defined in Section 3(37) of ERISA). No Plan
is subject to Section 302 of ERISA, Section 412 of the Code or Title IV of
ERISA.
(b) Neither the Company nor any of its subsidiaries is subject
to any actual or contingent liability under Title IV of ERISA, Section 302 of
ERISA, Section 412 or 4971 of the Code or any similar provision of foreign law
or regulation, whether in respect of any employer benefit plan maintained by the
Company or any of its subsidiaries or by any other employer or person or
otherwise.
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(c) No event has occurred, and no circumstance exists, in
connection with which the Company, any of its subsidiaries or any Plan, directly
or indirectly, could be subject to any material liability under ERISA, the Code
or any other law, regulation or governmental order applicable to any Plan,
including Section 406, 409, 502(i) or 502(1) of ERISA, or Part 6 of Title I of
ERISA, or Section 4971, 4972, 4975, 4976, 4977 or 4980B of the Code, or under
any agreement, instrument, statute, rule of law or regulation pursuant to or
under which the Company or any of its subsidiaries has agreed to indemnify or is
required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order.
(d) With respect to each Plan, (i) all material payments due
from the Company or any of its subsidiaries to date have been timely made and
all material amounts properly accrued to date or as of the Effective Time as
liabilities of the Company or any of its subsidiaries which have not been paid
have been and will be properly recorded on the books of the Company; (ii) each
such Plan which is an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) and intended to qualify under Section 401 of the Code has
received a favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and, to the knowledge of
the Company, nothing has occurred since the date of such letter that has or is
likely to adversely affect such qualification or exemption; (iii) there are no
actions, suits or claims pending (other than routine claims for benefits) or, to
the knowledge of the Company, threatened with respect to such Plan or against
the assets of such Plan and (iv) the Company has complied with, and such Plan
conforms in form and operation to, all applicable laws and regulations,
including ERISA and the Code, in all material respects.
(e) No deduction for federal income tax purposes has been or
is expected by the Company to be disallowed for remuneration paid by the Company
or any of its subsidiaries by reason of Section 162(m) of the Code.
(f) No Plan is under audit or is the subject of an
investigation by the Internal Revenue Service, the U.S. Department of Labor or
any other federal or state governmental agency.
(g) To the Company's knowledge, the transactions contemplated
by this Agreement will not result in the payment or series of payments by the
Company or any of its subsidiaries to any person of an "excess parachute
payment" within the meaning of Section 280G of the Code, or any other payment
which is not deductible for federal income tax purposes under the Code.
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(h) Except as set forth in Section 4.09(h) of the Disclosure
Letter, the consummation of the transactions contemplated by this Agreement
(alone or together with any other event) will not (i) entitle any person to any
benefit under any Plan or (ii) accelerate the time of payment or vesting, or
increase the amount, of any compensation due to any person under any Plan.
(i) Except as disclosed in the financial statements referred
to in Section 4.05(b) above or in Section 4.09(i) of the Disclosure Letter,
neither the Company nor any of its subsidiaries has any material liability with
respect to an obligation to provide benefits, including death or medical
benefits (whether or not insured) with respect to any person beyond their
retirement or other termination of service other than (i) coverage mandated by
Part 6 of Title I of ERISA or Section 4980B of the Code or state law, (ii)
retirement or death benefits under any employee pension plan, (iii) disability
benefits under any employee welfare plan that have been fully provided for by
insurance or otherwise, (iv) deferred compensation benefits accrued as
liabilities on the books of the Company, or (v) benefits in the nature of
severance pay.
(j) The Company has delivered to the Parent and the Sub, with
respect to each Plan for which the following exists:
(i) a copy of the Form 5500 with respect to each Plan;
(ii) a copy of the Summary Plan Description, together with
each Summary of Material Modifications, required under ERISA with
respect to such Plan in the past two years, all material employee
communications relating to such Plan, and, unless the Plan is embodied
entirely in an insurance policy to which the Company or any of its
subsidiaries is a party, a true and complete copy of such Plan;
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust
or other funding agreement delivered under the cover of Section
4.09(j)(iii) of the Disclosure Letter; and
(iv) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to
be a "qualified plan" under Section 401 of the Code.
(k) With respect to each Plan for which financial statements
are required by ERISA, there has been no material adverse change in the
financial status of such Plan since the date of the most recent such statements
provided to the Parent and the Sub.
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(l) With respect to each Plan that is funded wholly or
partially through an insurance policy, all material amounts of the premiums
required to have been paid to date under the insurance policy have been paid,
all material amounts of the premiums required to be paid under the insurance
policy through the Effective Time will have been paid on or before the Effective
Time and, as of the Effective Time, there will be no material liability of the
Company or any of its subsidiaries under any such insurance policy or ancillary
agreement with respect to such insurance policy in the nature of a retroactive
rate adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring prior to the
Effective Time.
(m) Neither the Company nor any of its subsidiaries has any
announced plan or legally binding commitment to create any additional Plans or
to amend or modify any existing Plan, other than amendments required by law or
those that would not materially increase costs under any such Plan.
(n) Except as disclosed in Section 4.09(n) of the Disclosure
Letter, neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreements. With the exception of such agreements, there
are no labor unions or other organizations representing, purporting to represent
or attempting to represent, any employee of the Company or any of its
subsidiaries.
(o) To the knowledge of the Company, neither the Company nor
any of its subsidiaries has violated any statute, law, ordinance, rule or
regulation, or any order, ruling, decree, judgment or arbitration award of any
court, arbitrator or any government agency regarding the terms and conditions of
employment of employees, former employees or prospective employees or other
labor related matters, including laws, rules, regulations, orders, rulings,
decrees, judgments and awards relating to discrimination, fair labor standards
and occupational health and safety, wrongful discharge or violation of the
personal rights of employees, former employees or prospective employees which,
taken alone or together with any other such violation or violations, could
reasonably be expected to have a Material Adverse Effect.
SECTION 4.10 Litigation, etc. Except as set forth in Section
4.10 of the Disclosure Letter, there is no claim, action, proceeding or
governmental investigation pending or, to the knowledge of the Company,
threatened against or relating to the Company or any of its subsidiaries or with
respect to any of their employee benefit or pension plans before any court or
governmental or regulatory authority or body acting in an adjudicative capacity
which in the aggregate could be reasonably expected to have a Material Adverse
Effect or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Offer or the Merger or any of the other transactions
contemplated hereby. Neither the Company nor any
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subsidiary of the Company is subject to any outstanding order, writ, injunction
or decree that has had or could be reasonably expected to have a Material
Adverse Effect.
SECTION 4.11 Tax Matters.
(a) All returns and reports relating to Taxes (as defined in
Section 9.11 hereof) required to be filed with respect to each of the Company
and its subsidiaries or any of their income, properties or operations as of the
date hereof have been duly filed in a timely manner (taking into account all
extensions of due dates), except with respect to state sales tax returns
relating to insignificant sums. All information provided in such returns,
declarations and reports was true, correct and complete as of the date filed.
Taxes attributable to each of the Company and its subsidiaries that were due and
payable as reflected on such returns or otherwise due have been paid.
(b) Adequate provisions in accordance with United States
generally accepted accounting principles consistently applied to each of the
Company and its subsidiaries have been made in the audited consolidated
financial statements included in the SEC Reports for the payment of all Taxes
for which each of the Company and its subsidiaries may be liable for the periods
covered thereby that were not yet due and payable as of the dates thereof,
regardless of whether the liability for such Taxes is disputed.
(c) Except as set forth in Section 4.11(c) of the Disclosure
Letter, there is no claim or assessment pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against the Company or any of its
subsidiaries for any alleged deficiency in Taxes attributable to the Company or
any of its subsidiaries, and neither the Company nor any of its subsidiaries
knows of any audit or investigation with respect to any liability of the Company
or any of its subsidiaries for Taxes attributable to the Company or any of its
subsidiaries.
(d) Each of the Company and the subsidiaries has satisfied for
all periods through the date hereof all applicable withholding Tax requirements.
(e) No consent has been filed relating to the Company or any
of its subsidiaries pursuant to Section 341(f) of the Code.
(f) Except disclosed in Section 4.11(f) of the Disclosure
Letter, there is no contract, agreement or intercompany account system in
existence under which the Company or any of its subsidiaries has, or may at any
time in the future have, an obligation to contribute to the payment of any
portion of a Tax (or pay any amount calculated with reference to any portion of
a Tax) of any group of corporations of which the Company or its subsidiaries is
or was a part.
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(g) Except as set forth in Section 4.11(g) of the Disclosure
Letter, the Company has made available to the Parent and the Sub complete and
accurate copies of the portions applicable to each of the Company and its
subsidiaries of all income and franchise Tax returns, and any amendments
thereto, filed by or on behalf of the Company or any of its subsidiaries or any
member of a group of corporations including the Company or any of its
subsidiaries for the taxable years ending 1990 through 1995.
(h) There are no agreements in effect to extend the period of
limitations for the assessment or collection of any Tax for which the Company or
any of its subsidiaries may be liable.
(i) The Company has maintained the books and records required
to be maintained pursuant to Section 6001 of the Code and the rules and
regulations thereunder, and comparable laws, rules and regulations of the
countries, states, counties, provinces, localities and other political divisions
wherein it is required to file returns and reports relating to Taxes.
SECTION 4.12 Compliance with Law. Neither the Company nor any
of its subsidiaries is in conflict with, or in default or violation of, (i) any
statute, law, ordinance, rule, regulation, order, judgment or decree applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or affected, in each case except for any such conflicts, defaults or
violations that in the aggregate have not had and are not reasonably expected to
have a Material Adverse Effect. The Company and its subsidiaries have all
permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct their businesses as now being
conducted (the "Company Permits"), except for such permits, licenses,
authorizations, consents, approvals and franchises the absence of which in the
aggregate have not had and are not reasonably expected to have a Material
Adverse Effect. The Company and its subsidiaries are in compliance with the
terms of the Company Permits, except where the failure so to comply in the
aggregate has not had and is not reasonably expected to have a Material Adverse
Effect. Without limiting any other provision herein, the Company and its
subsidiaries have timely filed with the relevant governmental authorities or
agencies thereof all forms, reports and documents required to be filed by them
pursuant to all relevant laws, rules and regulations since January 1, 1994,
except failures to file that have not, and are not reasonably expected to have,
a Material Adverse Effect.
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SECTION 4.13 Environmental Compliance.
(a) Except as set forth in Section 4.13(a) of the Disclosure
Letter, to the knowledge of the Company:
(i) the Company and each of its subsidiaries have been at all
times and are in material compliance with all applicable Environmental
Laws (as hereinafter defined) (including compliance with standards,
schedules and timetables therein);
(ii) the Company and each of its subsidiaries have obtained
all permits, licenses, consents, approvals, waivers, variances and
other authorizations ("Authorizations") that are required by and
material to the operation of its business, property and assets under
the Environmental Laws and all such Authorizations are in full force
and effect, and the Company and each of its subsidiaries are in
compliance with all terms and conditions of such Authorizations;
(iii) the Company and its subsidiaries have filed as required
all applications, notices and other documents necessary to effect the
timely renewal or issuance of all Authorizations necessary for each
facility of the Company and its subsidiaries under any Environmental
Law in order to allow the continued conduct of the business and
operations of the Company and its subsidiaries in the manner now
conducted;
(iv) there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, plans or
pending changes in any Environmental Law or Authorization that are
likely to interfere with or otherwise materially and adversely affect
the continued operation of the facilities or the business of the
Company and of its subsidiaries in the manner now conducted, to
interfere substantially with compliance or continued compliance of the
facilities of the Company and its subsidiaries with any Environmental
Law or Authorization, or to give rise to any material liability under
Environmental Laws;
(v) no real property or facility currently or formerly owned,
used, operated, leased or managed by the Company, each of its
subsidiaries or any predecessor in interest, is listed or proposed for
listing on the National Priorities List or the Comprehensive
Environmental Response, Compensation, and Liability Information System
("CERCLIS"), both promulgated under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any comparable state or local list established
pursuant to any Environmental Law;
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(vi) neither the Company, any of its subsidiaries nor any
predecessor in interest has received any written notification of
potential or actual liability or request for information under CERCLA
or any comparable state or local law;
(vii) there is no civil, criminal or administrative action,
suit, demand, hearing, notice of violation or deficiency,
investigation, proceeding, notice, demand letter, decree, judgment,
complaint, agreement, claim or citation pending or threatened against
the Company or any of its subsidiaries under any Environmental Law,
except where such liability or action, suit, demand, hearing, notice,
investigation, proceeding, notices demand letter, decree, judgment,
complaint, agreement, claim or citation would not in the aggregate have
a Material Adverse Effect and, also would not adversely affect the
ability to continue to operate each facility in the manner in which it
is presently operating;
(viii) no Hazardous Material has been at any time or is on the
date hereof treated, recycled, or disposed of at, in, on or under any
facility or real property owned, operated, leased or managed by the
Company or any of its subsidiaries, and none of the Company or any of
its subsidiaries presently require or previously required interim
status or a hazardous waste permit for the treatment, storage or
disposal of hazardous waste pursuant to the Resource Conservation and
Recovery Act, as amended, or pursuant to any comparable state hazardous
waste statute or regulation; or
(ix) neither the Company nor any of its subsidiaries has
leased, operated or owned any facilities which are not elsewhere
identified as being currently leased, operated or owned by the Company
or its subsidiaries.
(b) Except as set forth in Section 4.13(b) of the Disclosure
Letter, to the knowledge of the Company, all the items enumerated below would
not in the aggregate have a Material Adverse Effect:
(i) the presence of an underground storage tank or related
piping on any real property or facility owned, operated, leased or
managed by the Company or any of its subsidiaries;
(ii) the presence of asbestos in, at, on or under any real
property or facility owned, operated, leased or managed by the Company
or any of its subsidiaries;
(iii) the presence of polychlorinated biphenyls in, at, on or
under any facility or real property owned, leased or managed by the
Company or any of its subsidiaries;
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(iv) any Release at, on, under, from or into any facility or
real property owned, operated, leased or managed by the Company or any
of its subsidiaries; and
(v) any Release at, on, under, from or into any facility or
real property in the vicinity of any facility or real property owned,
operated, leased or managed by the Company or any of its subsidiaries
or any predecessor in interest, which Release has affected or is
reasonably likely to affect said facility or real property.
(c) The Company has given the Parent and the Sub access to all
records and files in its possession, if any, at both its corporate headquarters
and its facilities currently owned, operated, leased or managed by the Company,
or any of its subsidiaries, including all reports, studies, analyses, tests or
monitoring results, pertaining to the existence of Hazardous Material or any
other environmental concerns relating to facilities or real property owned,
operated, leased or managed by the Company or any of its subsidiaries or
concerning compliance with or liability under any Environmental Laws.
(d) For purposes of this Section 4.13, the definition of the
Company shall include all of the Company's subsidiaries.
(e) Prior to the Effective Time, the Company shall have made
all notifications, registrations, and filings, if any, required under and have
taken all other necessary steps to comply with all State and Local Real Property
Disclosure Requirements applicable to its assets and the assets of its
subsidiaries, including the use of forms provided by state or local agencies,
where such forms exist, to or with the state or local agency; provided, however,
that where notification, registration, or filing was made to a state or local
agency, a copy of such notification, registration, or filing shall be provided
to the Sub prior to the Effective Time.
(f) For purposes of this Agreement, "Environmental Law" means
any law, statute, ordinance, code, rule, regulation, standard, requirement,
order, writ, injunction, decree, demand, judgment, ruling, decision,
determination, award or binding agreement, issued or entered into by any
governmental, judicial, legislative, executive, administrative or regulatory
authority of the United States or of any state, local or foreign government,
relating to: (i) pollution, contamination, cleanup, preservation, protection or
reclamation of the environment (including any ambient, workplace or indoor air,
surface water, drinking water, groundwater, land surface, subsurface strata,
river sediment, plant or animal life, natural resources, workplace and real
property and the physical buildings, structures, improvement and fixtures
thereon); (ii) health or safety, including the exposure of employees and other
persons to any Hazardous Material; (iii) any Release or threatened Release,
including investigation, study, assessment, testing, monitoring, containment,
removal, remediation, cleanup and abatement of such Release or threatened
Release; (iv) the management of any Hazardous Material, including the
manufacture, generation, formulation,
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processing, labeling, distribution, introduction into commerce, registration,
use, treatment, handling, storage, disposal, transportation, re-use, recycling
or reclamation of any Hazardous Material; and (v) the physical structure or
condition, or appropriate use of a building, facility, fixture or other
structure.
(g) For purposes of this Agreement, "Hazardous Material" means
any pollutant, contaminant, constituent, chemical, mixture, raw material,
intermediate, product or by-product, petroleum or any fraction thereof, asbestos
or asbestos-containing-material, polychlorinated biphenyls, urea formaldehyde
foam insulation, or industrial, solid, toxic, radioactive, infectious,
disease-causing or hazardous substance, material, waste or agent, including all
substances, materials or wastes which are identified or regulated under any
Environmental Law.
(h) For purposes of this Agreement, "Release" means any spill,
discharge, leak, emission, injection, escape, dumping, leaching, dispersal,
emanation, migration or release of any kind whatsoever of any Hazardous
Substance or noxious noise or odor, at, in, on, into or onto the Environment,
including the movement of any Hazardous Substance through or in the Environment,
the abandonment or discard of barrels, containers, tanks or other receptacles
containing or previously containing any Hazardous Substance, or any release,
emission or discharge as those terms are defined in any Environmental Law.
(i) For the purposes of this Agreement, "State and Local Real
Property Disclosure Requirements" means any state and local laws requiring
notification of the buyer of real property, or notification, registration, or
filing with any state or local agency, prior to the sale of any real property or
transfer of control of an establishment, of the actual or threatened presence or
release into the environment, or the use, disposal, or handling of Hazardous
Materials on, at, under, or near the real property to be sold or the
establishment for which control is to be transferred.
SECTION 4.14 Intellectual Property.
(a) Section 4.14(a) of the Disclosure Letter sets forth a
true, correct and complete list of all Intellectual Property (as hereinafter
defined) (other than that Intellectual Property included in clauses (vi) and
(vii) of Section 4.14(d)) owned or held by the Company or any of its
subsidiaries (or otherwise used in the business of the Company and its
subsidiaries) on the date hereof and identifies all license agreements in effect
on the date hereof pursuant to which any such Intellectual Property is licensed
to or by the Company or its subsidiaries, in each case, which have been, are, or
may in the forseeable future be, material to the Company and its subsidiaries
taken as a whole.
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(b) Except as otherwise indicated in Section 4.14(b) of the
Disclosure Letter or in the license agreements referred to in the immediately
preceding paragraph (a), (i) the Company and its subsidiaries at the Effective
Time will be the sole and exclusive owners or holders of such Intellectual
Property free and clear of any royalty or other payment obligation, lien or
charge, (ii) the Intellectual Property is fully assignable, without conditions,
limitations or restrictions of any kind, (iii) there are no agreements which
restrict or limit the use by the Company or its subsidiaries of the Intellectual
Property and (iv) record title to all Intellectual Property owned or held by the
Company or its subsidiaries or otherwise used in the business of the Company or
its subsidiaries is registered (or a registration application for which has been
submitted) in the name of the Company or any of its subsidiaries in the
respective patent, trademark and copyright offices of countries indicated in
Section 4.14(a) of the Disclosure Letter.
(c) Except as set forth in Section 4.14(c) of the Disclosure
Letter and except to the extent that it in the aggregate would not have a
Material Adverse Effect:
(i) to the knowledge of the Company, (w) such Intellectual
Property is valid and enforceable, (x) such Intellectual Property does
not infringe on any patents, trademarks, copyrights or any other
intellectual property or proprietary rights of any person or entity in
any country, (y) all maintenance taxes, annuities and renewal fees have
been paid and all other necessary actions to maintain such Intellectual
Property have been taken through the date hereof and will continue to
be paid or taken by the Company through the Effective Time and (z)
there exists no impediment which would impair the Company's rights to
conduct its business or the business of its subsidiaries after the
Effective Time pursuant to such Intellectual Property;
(ii) during the two-year period immediately preceding the date
of this Agreement, neither the Company nor any of its subsidiaries has
received any written notice of claim that any of such Intellectual
Property is not valid or enforceable in any country or that it
infringes upon or conflicts with any patent, trademark, service mark,
copyright or trade name of any third party, and, to the knowledge of
the Company, no such claims or controversies, whenever filed or
threatened, currently exist;
(iii) during the two-year period immediately preceding the date
of this Agreement, neither the Company nor any of its subsidiaries has
given any notice of infringement to any third party with respect to any
of such Intellectual Property or has become aware of facts or
circumstances evidencing the infringement by any third party of any of
such Intellectual Property, and, to the knowledge of the Company, no
claim or controversy with respect as any such alleged infringement
currently exists; and
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(iv) certificates of registration and renewal, letter patents
and copyright registration certificates and all other instruments
evidencing ownership of such Intellectual Property are in the
possession of the Company or its subsidiaries.
(d) The term "Intellectual Property" shall mean:
(i) all trademarks, service marks, trademark registrations,
service mark registrations, trade names and applications for
registration of trademarks and service marks;
(ii) all licenses which create rights in or to the trademark,
service mark or trade name properties described in clause (i) above;
(iii) all copyrights, copyright registrations and applications
for registration of copyrights;
(iv) all renewals, modifications and extensions of any items
referred to in clauses (i) through (iii) above;
(v) all patents, design patents and utility patents, all
applications for grant of any such patents pending as of the date
hereof or as of the Effective Date or filed within five years prior to
the date hereof, and all reissues, divisions, continuations-in-part and
extensions thereof;
(vi) all technical documentation, trade secrets, designs,
inventions, processes, formula, know-how, operating manuals and guides,
plans, new product development, technical and marketing surveys,
material specifications, product specifications, invention records,
research records, labor routings, inspection processes, equipment
lists, engineering reports and drawing, architectural or engineering
plans, know-how agreements and other know-how;
(vii) all marketing and licensing records, sales literature,
customer lists, trade lists, sales forces and distributor networks
lists, advertising and promotional materials, service and parts
records, warranty records, maintenance records and similar records;
(viii) all rights arising under, and rights to develop, use and
sell under, any of the foregoing and all licenses with respect thereto;
and
(ix) all rights and incidents of interest in and to all
noncompetition or confidentiality agreements.
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SECTION 4.15 Real Property.
(a) Section 4.15(a) of the Disclosure Letter sets forth a
true, correct and complete list of all of the real property owned in fee by the
Company and its subsidiaries. Except as set forth in Section 4.15(a) of the
Disclosure Letter, each of the Company and its subsidiaries has good and
marketable title to each parcel of real property owned by it free and clear of
all mortgages, pledges, liens, encumbrances and security interests, except (i)
those reflected or reserved against in the balance sheet of the Company dated as
of December 31, 1995 and included in the SEC Reports, (ii) Taxes and general and
special assessments not in default and payable without penalty and interest, and
(iii) other liens, mortgages, pledges, encumbrances and security interests which
do not materially interfere with the Company's use and enjoyment of such real
property or materially detract from or diminish the value thereof.
(b) Section 4.15(b) of the Disclosure Letter sets forth a
true, correct and complete list of all written leases, subleases and other
agreements under which the Company or any of its subsidiaries uses or occupies
or has the right to use or occupy any real property (the "Real Property
Leases"). The Company has heretofore delivered to the Parent and the Sub true,
correct and complete copies of all Real Property Leases (including all written
modifications, amendments, supplements, waivers and side letters thereto). Each
Real Property Lease is valid, binding and in full force and effect, all rent and
other sums and charges payable by the Company and its subsidiaries as tenants
thereunder are current, and no termination event or condition or uncured default
of a material nature on the part of the Company or any such subsidiary exists
under any Real Property Lease. Each of the Company and its subsidiaries has a
good and valid leasehold interest in each parcel of real property leased by it
free and clear of all mortgages, pledges, liens, encumbrances and security
interests, except (i) those reflected or reserved against in the balance sheet
of the Company dated as of December 31, 1995, (ii) Taxes and general and special
assessments not in default and payable without penalty and interest; and (iii)
other liens, mortgages, pledges, encumbrances and security interests which do
not materially interfere with the Company's use and enjoyment of such real
property or materially detract from or diminish the value thereof.
SECTION 4.16 Insurance. Set forth in Section 4.16 of the
Disclosure Letter is a list of insurance policies (including information on the
premiums payable in connection therewith) maintained by the Company or any of
its subsidiaries which policies have been issued by insurers, which, to the
Company's knowledge, are reputable and financially sound and provide coverage
for the operations conducted by the Company and its subsidiaries of a scope and
coverage consistent with customary industry practice. The Company has previously
provided the Parent and the Sub with summaries of such policies and of
outstanding claims thereunder.
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SECTION 4.17 Material Contracts. The Company has filed with
the SEC, or disclosed under Section 4.17 of the Disclosure Letter, a true,
correct and complete list of all Material Contracts (as hereinafter defined),
and made available to the Parent and the Sub, true, correct and complete copies
of all written Material Contracts. For purposes of this Agreement, Material
Contracts shall mean all contracts, agreements, commitments, arrangements,
leases (including with respect to personal property), policies, and other
instruments, but excluding purchase orders and other similar obligations (other
than those disclosed on Section 4.17 of the Disclosure Letter) entered into or
delivered by the Company in the ordinary course of business, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound which (a) involves or could involve aggregate payments
of more than $250,000, (b) is with MB Communications, Inc., Black Box
Corporation or any of their respective affiliates (collectively, the "Former
Affiliates") (the "Specified Contracts"), (c) is with the Option Grantor or any
of its affiliates, or (d) is or could reasonably be expected to be material to
the Company and its subsidiaries taken as a whole. Except as described under
Section 4.17 of the Disclosure Letter, neither the Company nor any of its
subsidiaries is, or has received any notice or has any knowledge that any other
party is, in default in any respect under any Material Contract, and, to the
knowledge of the Company, there has not occurred any event that with the lapse
of time or the giving of notice or both would constitute such a material
default. Neither the Company nor any Former Affiliate nor any other party to any
of the Specified Contracts has made any claims against, or sought
indemnification from, the Company as to any matter arising under or with respect
to any Specified Contract, and none of the Former Affiliates has advised the
Company or any of its directors or officers of any alleged basis for any such
claims. Except as set forth in Section 6.11, no valid claim against the Company
or its subsidiaries exists for payment of any "topping", "profit-participation",
"termination", "break-up" or "bust-up" fee or any similar compensation or
payment arrangement as a result of the transactions contemplated hereby.
SECTION 4.18 Related Party Transactions. (a) Except as set
forth in Section 4.18 of the Disclosure Letter, no director, officer, partner,
employee, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company or any of its subsidiaries (i) has
borrowed any monies from or has outstanding any indebtedness or other similar
obligations to the Company or any of its subsidiaries; (ii) owns any direct or
indirect interest of any kind in, or is a director, officer, employee, partner,
affiliate or associate of, or consultant or lender to, or borrower from, or has
the right to participate in the management, operations or profits of, any person
or entity which is (x) a competitor, supplier, customer, distributor, lessor,
tenant, creditor or debtor of the Company or any of its subsidiaries, (y)
engaged in a business related to the business of the Company or any of its
subsidiaries or (z) participating in any transaction to which the Company or any
of
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its subsidiaries is a party; or (iii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its subsidiaries.
(b) Each of the consulting arrangement between the Company and
Mr. Michael Barker pursuant to which Mr. Barker is compensated at an annual rate
of $75,000 and the consulting arrangement between the Company and Mr. William
Norred pursuant to which Mr. Norred is compensated at an annual rate of $24,000,
has been amended to provide that such consulting arrangement shall be
automatically terminated, without notice, immediately upon the consummation of
the Offer and upon such termination each party thereto shall have no further
rights, duties or liabilities under relevant consulting arrangement, as the case
may be, and each party thereto (the "Releasor") shall release and discharge the
other party thereto (the "Releasee") from all actions, suits, debts, sums of
money, covenants, obligations, controversies, agreements, promises, damages,
judgments, claims, and demands whatsoever, in law or equity, against the
Releasee, which the Releasor ever had, now has or hereafter shall or may have,
for, upon, or by reason of any matter, cause or thing whatsoever arising out of
or in any way relating to the Releasee's obligations under the relevant
consulting arrangements, as the case may be; provided that, pursuant to the
relevant amendment, the Company shall be obligated to pay to Mr. Barker and to
Mr. Norred the respective amounts owed to them, if any, under the relevant
consulting arrangement for consulting services rendered prior to the
consummation of the Offer.
SECTION 4.19 Liens. Except as set forth in Section 4.19 of the
Disclosure Letter or as disclosed pursuant to Sections 4.14 and 4.15 hereof and
other than liens, mortgages, security interests, pledges and encumbrances which
do not materially interfere with the Company's use and enjoyment of its property
or assets or materially diminish or detract from the value thereof, neither the
Company nor any of its subsidiaries has granted, created or suffered to exist
with respect to any of its assets, any mortgage, pledge, charge, hypothecation,
collateral, assignment, lien (statutory or otherwise), encumbrance or security
agreement of any kind or nature whatsoever.
SECTION 4.20 State Takeover Statutes Inapplicable. As of the
date hereof and at all times on or prior to the Effective Time, Section 203 of
the DGCL shall be inapplicable to the Offer, the Merger, the Stock Option
Agreement and the transactions contemplated by this Agreement and the Stock
Option Agreement.
SECTION 4.21 Required Vote of Company Stockholders. Unless the
Merger is consummated in accordance with Section 253 of the DGCL as contemplated
by Section 2.09, the only vote of the stockholders of the Company required to
adopt the plan of merger contained in this Agreement and approve the Merger is
the affirmative vote of the holders of not less than a majority of the
outstanding Shares. No other vote of the
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stockholders of the Company is required by law, the Certificate of Incorporation
or Bylaws of the Company as currently in effect or otherwise to adopt the plan
of merger contained in this Agreement and approve the Merger. The Sub will have
full voting power with respect to any Shares purchased pursuant to the Offer or
the Stock Option Agreement, unless such voting power is otherwise restricted by
any action on the part of the Sub or the Parent.
SECTION 4.22 New Jersey ISRA. None of the assets, facilities
or real property of the Company or any of its subsidiaries located in the State
of New Jersey would be considered an "industrial establishment" pursuant to
N.J.S.A. C.13:1K-8, and accordingly the transaction contemplated by this
Agreement is not subject to the New Jersey Industrial Site Recovery Act
("ISRA").
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF THE PARENT AND THE SUB
The Parent and the Sub represent and warrant to the Company as
follows:
SECTION 5.01 Organization and Qualification. Each of the
Parent and the Sub is a duly organized and validly existing corporation in good
standing under the laws of the state of its incorporation with all requisite
corporate power and authority to own its properties and conduct its business.
All of the issued and outstanding capital stock of the Sub is owned directly by
the Parent.
SECTION 5.02 Authority Relative to this Agreement. Each of the
Parent and the Sub has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate proceedings on the part of the Parent and the Sub. No vote
of the Parent's shareholders is required to approve this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Parent and the Sub and, assuming this Agreement
constitutes legal, valid and binding obligation of the Company, this Agreement
constitutes a legal, valid and binding agreement of each of the Parent and the
Sub, enforceable against each of the Parent and the Sub in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity (whether considered in a proceeding in equity or at law).
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SECTION 5.03 Offer Documents; Proxy Statement.
(a) None of the information contained in the Offer Documents
or any schedule or document required to be filed with the SEC in connection with
the Offer and the Merger will, at the times such documents are filed with the
SEC and are mailed to the stockholders of the Company, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Parent or the Sub with respect to
information supplied by the Company or an affiliate of the Company for inclusion
therein. The Offer Documents will comply as to form in all material respects
with the provisions of the Exchange Act. Each of the Parent and the Sub agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false and
misleading in any material respect, and to take all steps necessary to cause the
Offer Documents, as so corrected, to be filed with the SEC and to be
disseminated to all holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Parent and the Sub agree to
provide the Company and its counsel in writing with any comments that the
Parent, the Sub or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly upon receipt thereof.
(b) None of the information supplied by the Parent, the Sub or
any affiliate of the Parent or the Sub specifically for inclusion in the Proxy
Statement or the Schedule 14D-9 will, at the date of filing with the SEC, and,
in the case of the Proxy Statement, at the time the Proxy Statement is mailed
and at the time of the Special Meeting, 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.
SECTION 5.04 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by each of the Parent or the Sub nor
the consummation of the transactions contemplated hereby will (i) conflict with
or result in any breach of any provision of the respective Certificates of
Incorporation or Bylaws (or other similar governing documents) of the Parent or
the Sub; (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
(A) as may be required under, and other applicable requirements of, the HSR Act,
the Exchange Act, the DGCL, the "takeover" or "blue sky" laws of various states,
Canadian laws or regulations or the laws of jurisdictions outside the United
States or Canada, or (B) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a material adverse effect on the ability of the Parent or the
Sub to consummate the transactions contemplated hereby; (iii) result in a
default
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(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, license, agreement or
other instrument or obligation to which the Parent or the Sub is a party or by
which any of their respective assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or which would not in the aggregate have
an adverse effect on the financial condition, business or results of operations
of the Parent or the Sub which is material to the Parent and the Sub taken as a
whole or have a material adverse effect on the ability of the Parent or the Sub
to consummate the transactions contemplated hereby; (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Parent
or the Sub or any of their respective assets, except for violations which would
not in the aggregate have an adverse effect on the financial condition, business
or results of operations of the Parent or the Sub which is material to the
Parent and the Sub taken as a whole or has a material adverse effect on the
ability of the Parent or the Sub to consummate the transactions contemplated
hereby.
SECTION 5.05 Interim Operation of the Sub. The Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted and, will conduct, its
operations only as contemplated hereby.
SECTION 5.06 Financing. Parent has sufficient funds available
to purchase all the Shares and all of the Options pursuant to the Offer and to
the terms of this Agreement and to pay all fees and expenses related to the
transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
expressly contemplated by this Agreement, during the period from the date of
this Agreement to the date on which a majority of the Company's directors are
designees of the Parent or the Sub, the Company will conduct and will cause each
of its subsidiaries to conduct its operations according to its ordinary and
usual course of business and consistent with past practice and the Company will
use and will cause each of its subsidiaries to use its best efforts to preserve
intact its business organization, to keep available the services of its current
officers and employees and to preserve the goodwill of and maintain satisfactory
relationships with those having business relationships with the Company and its
subsidiaries, and the Company will promptly advise the Parent and the Sub in
writing of any change in the Company's or any of its subsidiaries' condition
(financial or otherwise), properties, customer or supplier relationships,
assets, liabilities, business prospects or results of operations which may be
reasonably likely to have a Material Adverse Effect. Without limiting the
generality of the
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foregoing and except as otherwise expressly provided in or contemplated by this
Agreement, prior to the time specified in the preceding sentence, without the
prior written consent of the Parent, the Company will not and will not permit
any of its subsidiaries to:
(i) issue, sell, grant options or rights to
purchase, pledge, or authorize or propose the issuance, sale, grant of
options or rights to purchase or pledge of (A) any Company Securities
(including any Option) or Subsidiary Securities, or grant or accelerate
any right to convert or exchange any Company Securities or Subsidiary
Securities, other than Shares issuable upon exercise of the Options or
Warrants outstanding on the date hereof or (B) any other securities in
respect of, in lieu of or in substitution for Shares outstanding on the
date hereof;
(ii) otherwise acquire or redeem, directly or
indirectly, or amend any of the Company Securities or the Subsidiary
Securities;
(iii) split, combine or reclassify its capital
stock or declare, set aside, make or pay any dividend or distribution
(whether in cash, stock or property) on any shares of capital stock of
the Company or any of its subsidiaries (other than cash dividends paid
to the Company by its wholly-owned subsidiaries with regard to their
capital stock);
(iv) (1) make or offer to make any acquisition, by
means of a merger or otherwise, of assets or securities, or any sale,
lease, encumbrance or other disposition of assets or securities, in
each case involving the payment or receipt of consideration of $25,000
or more, except for purchases of inventory made in the ordinary course
of business and consistent with past practice, or (2) enter into a
material contract or amend any Material Contract, except with respect
to a one year renewal of the Company's existing policies of directors'
and officers' liability insurance or the purchase of policies that are
substantially equivalent to such existing policies, or grant any
release or relinquishment of any rights under any Material Contract;
(v) incur or assume any long-term debt or
short-term debt except for short-term debt incurred in the ordinary
course of business consistent with past practice;
(vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly-owned
subsidiaries of the Company;
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(vii) make any loans, advances or capital
contributions to, or investments in, any other person (other than
wholly-owned subsidiaries of the Company);
(viii) change any of the accounting principles or
practices used by it;
(ix) make any tax election or settle or compromise
any material federal, state or local income tax liability;
(x) propose or adopt any amendments to its
Certificate of Incorporation or Bylaws (or similar documents);
(xi) grant any stock-related, performance or
similar awards or bonuses;
(xii) forgive any loans to employees, officers or
directors or any of their respective affiliates or associates;
(xiii) enter into any new employment, severance,
consulting or salary continuation agreements with any officers,
directors or employees, or grant any increases in the compensation or
benefits to officers, directors and employees other than normal
increases to persons who are not officers or directors in the ordinary
course of business consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company;
(xiv) make any deposits or contributions of cash or
other property to or take any other action to fund or in any other way
secure the payment of compensation or benefits under the Plans or
agreements subject to the Plans or any other plan, agreement, contract
or arrangement of the Company;
(xv) enter into, amend, or extend any collective
bargaining or other labor agreement;
(xvi) adopt, amend or terminate any Plan or other
employee benefit plan or arrangement;
(xvii) settle or agree to settle any suit, action,
claim, proceeding or investigation (including any suit, action, claim,
proceeding or investigation relating to this Agreement or the
transactions contemplated hereby) or pay, discharge or satisfy or agree
to pay, discharge or satisfy any claim, liability or obligation
(absolute accrued, asserted or unasserted, contingent or otherwise)
other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in full in the financial statements
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as at December 31, 1995 or incurred in the ordinary course of business
subsequent to December 31, 1995; or
(xviii) agree in writing or otherwise to take any of
the foregoing actions or any action which would make any representation
or warranty in this Agreement untrue or incorrect as of the date when
made or as of a future date or would result in any of the conditions
set forth in Exhibit A not being satisfied.
Prior to making a general distribution of any communication to
their respective employees relating to the transactions contemplated hereby, the
Company and its subsidiaries shall consult with the Parent and the Sub.
SECTION 6.02 No Solicitation. The Company shall not, and shall
not permit any of its subsidiaries and their respective officers, directors and
employees, representatives, agents or affiliates to, directly or indirectly,
encourage, solicit, initiate or participate in any way in any discussions or
negotiations with, or provide any non-public information to, or afford any
access to the properties, books or records of the Company or any of its
subsidiaries to, or otherwise assist or facilitate, any corporation,
partnership, person or other entity or group (other than the Parent or the Sub
or any affiliate or associate of the Parent or the Sub) concerning any
Acquisition Transaction (as hereinafter defined); provided, however, that
nothing contained in this Section 6.02 shall prohibit the Board of Directors of
the Company from furnishing information to or entering into discussions or
negotiations with any person or entity that makes an unsolicited bona fide
proposal to engage in an Acquisition Transaction that the Board of Directors of
the Company in good faith determines, with the assistance of its financial
advisor, represents a financially superior transaction for the stockholders of
the Company when compared to the Offer and the Merger if, and only to the extent
that, the Board of Directors determines after consultation with outside legal
counsel that failure to take any such action would be inconsistent with the
compliance by the Board of Directors with its fiduciary duties to the
stockholders of the Company under the DGCL; and provided, further, that nothing
contained in this Section 6.02 shall prohibit the Company or its Board of
Directors from taking and disclosing to the Company's stockholders a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act. The Company will immediately notify
the Parent and the Sub if any such information is requested from it or any such
negotiations or discussions are sought to be initiated with the Company and will
immediately communicate to the Parent and the Sub the terms of any proposal or
inquiry and the identity of the party making such proposal or inquiry which it
may receive in respect of any such transaction including in the case of written
proposals or inquiries, furnishing the Parent and the Sub with a copy of such
proposal or inquiry (and all amendments and supplements thereto). Subject to the
first sentence of this Section 6.02, the Company will and will cause its
subsidiaries, affiliates and their respective
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officers, directors, employees, representatives and agents to immediately cease
and cause to be terminated any existing activities, discussions, or negotiations
with any parties other than the Parent, the Sub or any of their respective
affiliates or associates conducted heretofore with respect to any Acquisition
Transaction. Except as is required in the exercise of the fiduciary duties of
the Board of Directors of the Company in the written opinion of outside counsel
to the Company, the Company agrees not to release any third party from any
confidentiality or standstill agreement to which the Company is a party without
the Parent's prior written consent and to take all steps deemed necessary or
appropriate by the Parent to enforce to the fullest extent possible all such
agreements.
SECTION 6.03 Access to Information.
(a) Between the date of this Agreement and the Effective Time,
the Company will (i) give the Parent and the Sub and their authorized
accountants, investment bankers, counsel and other representatives complete
access (during regular business hours upon reasonable advance notice) to all
employees, plants, offices, warehouses and other facilities and to all books,
contracts, commitments and records (including tax returns) of the Company and
its subsidiaries (subject to any outstanding confidentiality agreements between
the Company and any third party, in which case the Company will advise the
Parent and the Sub of any limits on access and use its best efforts to obtain
the consent of such third party to the provision of such access to the Parent
and the Sub) and cause the Company's and its subsidiaries' independent public
accountants to provide access to their work papers and such other information as
the Parent or the Sub may reasonably request, (ii) permit the Parent and the Sub
to make such inspections as they may require, (iii) cause its officers and those
of its subsidiaries to furnish the Parent and the Sub with such financial and
operating data and other information with respect to the business, properties
and personnel of the Company and its subsidiaries as the Parent or the Sub may
from time to time reasonably request and (iv) furnish promptly to the Parent and
the Sub a copy of each report, schedule and other document filed or received by
the Company during such period pursuant to the requirements of the federal or
state securities laws.
(b) Non-public information obtained by the Parent or the Sub
pursuant to Section 6.03(a) shall be subject to the provisions of the
confidential agreement between the Parent and the Company, dated February 27,
1996 (the "Confidentiality Agreement"), the terms of which are incorporated
herein by reference.
SECTION 6.04 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided for,
each of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all appropriate
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action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement; provided, however, that nothing in this
Agreement (other than as expressly provided for in Section 1.01) shall obligate
the Parent or the Sub to keep the Offer open beyond the expiration date of the
Offer (as it may be extended from time to time) and nothing in this Agreement
shall obligate the Parent, the Sub or any of their respective subsidiaries or
affiliates to agree (i) to limit or not to exercise any rights of ownership of
any securities (including the Shares), or to divest, dispose of or hold separate
any securities or all or a portion of their respective businesses, assets or
properties or of the business, assets or properties of the Company or any of its
subsidiaries or (ii) to limit the ability of such entities (A) to conduct their
respective businesses or own such assets or properties or to conduct the
businesses or own the properties or assets of the Company and its subsidiaries
or (B) to control their respective businesses or operations or the businesses or
operations of the Company and its subsidiaries. In connection with and without
limiting the foregoing, (a) the Company shall, and the Parent and the Sub shall
use their best efforts to cause their ultimate parent to, use its reasonable
best efforts to make promptly any required submissions under the HSR Act which
the Company and the Parent and the Sub determines should be made, in each case,
with respect to the Offer, the Merger or the Stock Option Agreement and the
transactions contemplated by this Agreement and the Stock Option Agreement and
(b) the Parent, the Sub and the Company shall cooperate with one another (i) in
promptly determining whether any filings are required to be or should be made or
consents, approvals, permits or authorizations are required to be or should be
obtained under any other federal, state or foreign law or regulation or whether
any consents, approvals or waivers are required to be or should be obtained from
other parties to loan agreements or other contracts or instruments material to
the Company's business in connection with the consummation of the Offer or the
Merger contemplated by this Agreement and (ii) in promptly making any such
filings, furnishing information required in connection therewith and seeking to
obtain timely any such consents, permits, authorizations, approvals or waivers.
Without limiting the foregoing, the Company shall use its best efforts to obtain
prior to the consummation of the Offer the consents, approvals and waivers
listed in Section 4.07(iii) of the Disclosure Letter. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall take all such necessary action as may be reasonable in the
context thereof.
(b) In the event that any action, suit, proceeding or
investigation relating hereto or to the Stock Option Agreement or to the
transactions contemplated hereby or thereby is commenced, whether before or
after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend vigorously against it and respond thereto.
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SECTION 6.05 Indemnification and Insurance.
(a) The Parent and the Sub agree that all rights to
indemnification existing in favor of the present or former directors, officers
and employees of the Company (as such) or any of its subsidiaries as provided in
the Company's Certificate of Incorporation or Bylaws, or the articles of
incorporation, bylaws or similar documents of any of the Company's subsidiaries
as in effect as of the date hereof with respect to matters occurring prior to
the Effective Time shall survive the Merger and shall continue in full force and
effect for a period of not less than the statutes of limitations applicable to
such matters, and the Parent agrees to cause the Surviving Corporation to comply
fully with its obligations hereunder and thereunder.
(b) The Surviving Corporation will cause to be maintained in
effect for a period of four years after the Effective Time, in respect of acts
or omissions occurring prior to the Effective Time (but only in respect
thereof), policies of directors' and officers' liability insurance covering the
persons currently covered by the Company's existing directors' and officers'
liability insurance policies and providing substantially similar coverage to
such existing policies; provided, however, that the Surviving Corporation will
not be required to maintain directors' and officers' liability insurance
policies to the extent that the aggregate annual cost of maintaining such
policies exceeds 150% of the aggregate annual amounts currently paid by the
Company to maintain the existing policies.
(c) This Section 6.05 shall survive the consummation of the
Merger and is intended to benefit, and shall be enforceable by, the Company, the
Surviving Corporation, and any person or entity indemnified hereunder (whether
or not parties to this Agreement).
SECTION 6.06 Employee Plans and Benefits and Employment
Contracts.
(a) Prior to the Effective Time, the Company will, and will
cause its subsidiaries to, and from and after the Effective Time, the Parent
will, and will cause the Surviving Corporation to, honor, in accordance with
their terms all existing employment and severance agreements between the Company
or any of its subsidiaries and any officer, director or employee of the Company
or any of its subsidiaries specified in Section 4.09(a) of the Disclosure
Letter.
(b) The Parent intends to cause the Surviving Corporation and
its subsidiaries, until the first anniversary of the Effective Time, to provide
pension and welfare benefits to their employees (considered as a group)
(excluding employees covered by collective bargaining agreements and excluding
benefits that are contingent on a change in control or that are based on, or
require the issuance of, securities), which benefits will be in the aggregate no
less favorable than those currently provided by the Company and its subsidiaries
in the aggregate to
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such employees. Nothing in this Section 6.06(b) shall be deemed to constitute an
amendment of any employee benefit plan, program or arrangement or to prevent the
Surviving Corporation or any of its subsidiaries from making any change in any
plan, program or arrangement, including any change required by law or deemed
necessary or appropriate to comply with applicable law or regulation.
(c) The Company shall take, or cause to be taken, all action
necessary, as promptly hereafter as reasonably practicable, to amend any plan,
other than the Stock Option Plans, maintained by the Company or any of its
subsidiaries to eliminate, as of the date hereof, all provisions for the
purchase of Shares directly from the Company or any of its subsidiaries or
securities of any subsidiary.
(d) Without limiting the foregoing paragraph (c), the Company
shall take, or cause to be taken, all action necessary, to ensure that (i) the
1995 Plan shall terminate as of the Effective Time, (ii) no purchase right
period under the 1995 Plan commences after the date hereof, (ii) any purchase
right period under the 1995 Plan which commenced on or prior to the date hereof
(the "Current Purchase Period") is terminated, prior to the Effective Time,
(iii) no funds are contributed in the Current Purchase Period other than funds
that were contributed prior to the date hereof (regardless of the amount any
employee elected to contribute in the Current Purchase Period) and (iv) no
person shall have any right under the 1995 Plan (or any Purchase Right granted
thereunder) with respect to, including the right to acquire, equity securities
of the Company, the Surviving Corporation, the Parent or any subsidiary of any
of the foregoing following the Effective Time.
SECTION 6.07 State Takeover Statutes. The Company shall, upon
the request of the Parent or the Sub, take all reasonable steps to assist in any
challenge by the Parent or the Sub to the validity, or applicability to the
Offer or the Merger, of any state takeover law.
SECTION 6.08 Proxy Statement. Unless the Merger is consummated
in accordance with Section 253 of the DGCL as contemplated by Section 2.09, the
Company shall prepare and file with the SEC, subject to the prior approval of
the Parent (which approval shall not be unreasonably withheld), as soon as
practicable after the consummation of the Offer, a preliminary proxy or
information statement (the "Preliminary Proxy Statement") relating to the Merger
as required by the Exchange Act and the rules and regulations thereunder, with
respect to the transactions contemplated hereby. The Company shall obtain and
furnish the information required to be included in the Preliminary Proxy
Statement, shall respond promptly to any comments made by the SEC with respect
to the Preliminary Proxy Statement, shall cause the Proxy Statement to be mailed
to the Company's stockholders at the earliest practicable date and shall use its
best efforts to obtain the necessary approval of the
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Merger by its stockholders. In that regard, the Parent and the Sub agree to vote
all shares held thereby pursuant to the Offer, the Odyssey Option or otherwise
in favor of the Merger.
SECTION 6.09 Notification of Certain Matters. The Company
shall give prompt notice to the Parent and the Sub, and the Parent or the Sub,
as the case may be, shall give prompt notice to the Company, of the occurrence,
or non-occurrence, of any event the occurrence, or non-occurrence, of which is
likely (i) to cause any representation or warranty of such party contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) to result in any material failure of such party to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.09 shall not limit or otherwise affect the remedies
available hereunder to any of the parties receiving such notice.
SECTION 6.10 Subsequent Filings. Until the Effective Time, the
Company will timely file (subject to any extension in compliance with applicable
law) with the SEC each form, report and document required to be filed by the
Company under the Exchange Act and will promptly deliver to the Parent and the
Sub copies of each such report filed with the SEC. As of their respective dates,
none of such reports shall contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included in such reports
shall be prepared in accordance with generally accepted accounting principles in
the United States applied on a consistent basis (except as may be indicated in
the notes thereto) and shall fairly present the financial position of the
Company and its consolidated subsidiaries as at the dates thereof and the
results of their operations and changes in financial position for the periods
then ended, subject in the case of unaudited interim financial statements to
normal and recurring year end adjustments.
SECTION 6.11 Termination Fee; Expenses. (a) In the event that
this Agreement is terminated (i) pursuant to Sections 8.01(e) or 8.01(f) or (ii)
pursuant to any other provision of Section 8.01 (regardless of whether such
termination is by the Parent or the Company) and (in the case of clause (ii)
only) either (y) prior to such termination a Trigger Event (as such term is
defined in Section 6.11(b)) has occurred or (z) prior to such termination the
Offer shall have expired without the purchase of any Shares by the Sub pursuant
thereto and within twelve months from the date of such expiration an Acquisition
Event (as such term is defined in Section 6.11(c)) other than with the Parent,
the Sub or any of their affiliates has occurred, then the Company shall pay to
the Parent a fee of 2.5% of an amount equal to $12.00 multiplied by the fully
diluted number of outstanding shares of Common Stock on the date hereof (the
"Termination Fee"). Such fee shall be payable in immediately available funds
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at the time of termination if such fee becomes payable pursuant to clause (i) or
clause (ii)(y) above, or on the second business day following the occurrence of
the Acquisition Event if such fee becomes payable in the circumstances described
in clause (ii)(z) above.
(b) As used herein, "Trigger Event" shall mean the occurrence
of any of the following events:
(i) The Company or any of its subsidiaries (or the Board of
Directors or any committee thereof of the Company) shall have
recommended, approved, authorized, proposed, filed a Schedule 14D-9 not
opposing, or publicly announced its intention to enter into, any
Acquisition Transaction (other than with the Parent, the Sub or any of
its affiliates). For purposes of this Agreement "Acquisition
Transaction" shall mean any tender offer or exchange offer, any merger,
consolidation, liquidation, dissolution, recapitalization,
reorganization or other business combination, any acquisition, sale or
other disposition of all or a substantial portion of the assets or
securities of the Company or any other similar transaction involving
the Company, its securities or any of its material subsidiaries or
divisions; or
(ii) the Board of Directors or any committee thereof of the
Company shall have withdrawn or modified or amended in any manner
adverse to the Parent or the Sub its authorization, approval or
recommendation to the stockholders of the Company with respect to the
Offer, the Merger or this Agreement, or shall have failed to have
reiterated its recommendation within five business days of any written
request by the Parent or the Sub therefor.
(iii) the Company shall have knowingly breached or willfully
failed to comply in any material respect with any of its obligations,
covenants or agreements under this Agreement, or any of the
representations and warranties of the Company set forth in this
Agreement shall, to the knowledge of the Company, not have been true
and correct in all material respects as of the date of this Agreement
or shall cease to be true in all material respects prior to the
Effective Time by reason of the willful acts of the Company.
(c) As used herein, "Acquisition Event" shall mean the
consummation of any (i) Acquisition Transaction or (ii) series of transactions
that results in any person, entity or "group" (other than the Option Grantor and
its affiliates and other than the Parent, the Sub or any of their affiliates)
acquiring more than 50% of the outstanding Shares or assets of the Company or
the Option Grantor acquiring more than an additional 10% of the outstanding
Shares or assets of the Company (through any open market purchases, merger,
consolidation, recapitalization reorganization or other business combination).
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(d) In the event that this Agreement is terminated in the
manner described in Section 6.11(a) and unless such termination results solely
from a material breach by the Parent or the Sub of its obligations hereunder,
the Company shall promptly at such time assume and pay (in addition to any
amounts payable pursuant to Section 6.11(a) hereof), or reimburse the Parent
for, the reasonable documented out-of-pocket fees and expenses actually incurred
by or on behalf of the Parent and the Sub in connection with the transactions
contemplated hereby, including all legal, investment banking, accounting,
printing and other fees and expenses whether incurred prior to or following the
execution of or the termination of this Agreement ("Reimbursable Expenses").
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, prior to the proposed
Effective Time, of the following conditions:
(a) unless the Merger is consummated pursuant to Section 253
of the DGCL as contemplated by Section 2.09, the agreement of merger
(as such term is used in Section 251 of the DGCL) contained in this
Agreement shall have been adopted by the affirmative vote of the
stockholders of the Company required by and in accordance with
applicable law;
(b) all necessary waiting periods under the HSR Act
applicable to the Merger shall have expired or been terminated;
(c) no statute, rule, regulation, executive order, judgment,
decree or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority against
the Parent, the Sub or the Company and be in effect that prohibits or
restricts the consummation of the Merger or makes such consummation
illegal or otherwise restricts the Parent's or the Sub's exercise of
full rights to own and operate the Company (each party agreeing to use
all reasonable efforts to have such prohibition lifted); and
(d) The Sub shall have accepted for purchase and paid for the
Shares tendered pursuant to the Offer; provided, however, that this
condition will be deemed satisfied with respect to the Parent and the
Sub if the Sub shall have failed to purchase Shares pursuant to the
Offer in violation of the terms of the Offer.
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SECTION 7.02 Conditions to the Obligations of the Parent and
the Sub to Effect the Merger. The obligations of the Parent and the Sub to
effect the Merger are further subject to the satisfaction or waiver, where
permissible, on or prior to the proposed Effective Time of the following
conditions:
(a) the Company shall have performed and complied in all
material respects with all agreements and obligations and conditions
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time and the representations and warranties of
Company contained herein that are qualified as to materiality shall be
true and correct, and the representations and warranties that are not
so qualified shall be true and correct in all material respects, in
each case on the date of this Agreement and at and on the proposed
Effective Time as though such representations and warranties were made
at and as such date; and
(b) the Company shall have furnished such certificates of its
officers to evidence compliance with the conditions set forth in
Section 7.02(a) hereof as may be reasonably requested by the Sub.
SECTION 7.03 Conditions to the Obligations of the Company to
Effect the Merger. The obligations of the Company to effect the Merger are
further subject to the satisfaction or waiver, where permissible, on or prior to
the proposed Effective Time of the following conditions:
(a) the Parent and the Sub shall have performed and complied
in all material respects with all agreements and obligations required
by this Agreement to be performed or complied with by them on or prior
to the proposed Effective Time and the representations and warranties
of the Parent and the Sub contained herein that are qualified as to
materiality shall be true and correct, and the representations that are
not so qualified shall be true and correct in all material respects, in
each case on the date of this Agreement and at and on the proposed
Effective Time as though such representations and warranties were made
at and as such date; and
(b) the Parent and the Sub shall have furnished such
certificates of its officers to evidence compliance with the conditions
set forth in Section 7.03(a) hereof as may be reasonably requested by
the Company.
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ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time notwithstanding approval thereof by the
stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the Boards of Directors of
the Company and the Parent;
(b) by the Parent or the Company if the Effective Time shall
not have occurred on or before December 31, 1996 (provided that the
right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date);
(c) by the Parent or the Company if any court of competent
jurisdiction in the United States or Canada or other United States or
Canadian governmental body shall have issued an order, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement or
the Stock Option Agreement and such order, decree, ruling or other
action shall have become final and non-appealable;
(d) (i) by the Company if the Sub fails to commence the Offer
as provided in Section 1.01 and (ii) by the Parent if the Offer expires
or is terminated on account of the failure of a condition specified in
Exhibit A hereto without any Shares being purchased thereunder;
(e) by the Parent, (i) (x) if the Board of Directors or any
committee thereof of the Company withdraws or modifies or amends in a
manner adverse to the Parent or the Sub its authorization, approval or
recommendation of the Offer or the Merger or this Agreement or shall
have resolved to do any of the foregoing or shall have failed to have
reiterated its recommendation within five business days of any written
request by the Parent or the Sub therefor or (y) the Company or any of
its subsidiaries (or the Board of Directors or any committee thereof of
the Company) shall have approved, recommended, authorized, proposed,
publicly announced its intention to enter into or filed a Schedule
14D-9 not opposing any Acquisition Transaction with a party other than
the Parent, the Sub or any of their affiliates;
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(f) by the Parent if the Company or any of its subsidiaries
participates in discussions or negotiations with, or provides any
information to or affords any access to the properties, books and
records of the Company to, or otherwise assists or facilitates any
corporation, partnership, person or other entity or group (other than
the Parent or the Sub or any affiliate or associate of the Parent or
the Sub) concerning any Acquisition Transaction, whether or not
permitted by Section 6.02 hereof;
(g) by the Parent if the Company shall have breached or failed
to comply in any material respect with any of its obligations,
covenants or agreements under this Agreement, or any of the
representations and warranties of the Company set forth in this
Agreement which is qualified as to materiality, shall not be true and
correct, or any such representation or warranty that is not so
qualified, shall not be true and correct when made or at any time prior
to the Effective Time as if made at and as such time;
(h) by the Parent if at any time prior to the purchase by the
Sub of all of the Shares subject to the Option, the Stock Option
Agreement shall not be in full force and effect, the Option Grantor
shall have asserted that the Stock Option Agreement is not valid,
binding or enforceable or is not in full force and effect, there shall
be a material condition to the exercise of the Option outstanding and
not satisfied or the Option Grantor shall have breached in any material
respect any representation, warranty or covenant contained in the Stock
Option Agreement; or
(i) by the Company if either the Parent or the Sub shall have
breached or failed to comply in any material respect with any of its
obligations, covenants or agreements under this Agreement, or any of
the representations and warranties of such party set forth in this
Agreement which is qualified as to materiality, shall not be true and
correct, or any such representation and warranty that is not so
qualified, shall not be true and correct in all material respects when
made or at any time prior to the Effective Time as if made at and as
such time.
SECTION 8.02 Effect of Termination. If this Agreement is
terminated and the Merger is abandoned pursuant to Section 8.01 hereof, this
Agreement, except for the provisions of Sections 6.03(b), 6.11 and 9.10 hereof
and except to the extent provisions of this Agreement relate to the Stock Option
Agreement, shall forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers or stockholders. Nothing in
this Section 8.02 shall relieve any party to this Agreement of liability for
breach of this Agreement.
SECTION 8.03 Amendment. To the extent permitted by applicable
law, this Agreement may be amended by action taken by or on behalf of the Boards
of Directors of the
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Company, the Parent and the Sub, subject in the case of the Company to Section
1.04(b), at any time before or after adoption of this Agreement by the
stockholders of the Company but, after any such stockholder approval, no
amendment shall be made which decreases the Merger Consideration or which
adversely affects the rights of the Company's stockholders hereunder without the
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties hereto.
SECTION 8.04 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken by or on behalf of the
respective Boards of Directors of the Company, the Parent and the Sub, subject
in the case of the Company to Section 1.04(b), may (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 contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party 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 IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties. The
representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
SECTION 9.02 Entire Agreement; Assignment. This Agreement,
together with the Disclosure Letter and the Confidentiality Agreement,
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
The Agreement shall not be assigned by operation of law or otherwise; provided,
however, that the Parent or the Sub may assign any of their respective rights
and obligations to any affiliate of the Parent or the Sub, as the case may be,
but no such assignment shall relieve the Parent or the Sub, as the case may be,
of its obligations hereunder. It is understood and agreed that either the Sub or
any affiliates of the Sub may purchase Shares under the Offer.
SECTION 9.03 Enforcement of the Agreement. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were
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not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of Delaware (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 9.04 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 9.05 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to the Parent or the Sub:
c/o Northern Telecom Limited
3 Robert Speck Parkway
Mississauga, Ontario
Canada L42 3C8
Facsimile: 905-566-3082
Attention: Mr. William R. Kerr
Vice President and Treasurer
with a copy to:
Northern Telecom Limited
3 Robert Speck Parkway
Mississauga, Ontario
Canada L42 3C8
Facsimile: 905-566-3457
Attention: Anthony J. Lafleur, Esq.
Vice President and Associate General Counsel
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and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile: 212-225-3999
Attention: Victor I. Lewkow, Esq.
if to the Company:
MICOM Communications Corp.
4100 Los Angeles Avenue
Simi Valley, CA 93062
Facsimile: 805-583-3183
Attention: Warren B. Phelps, III
Chairman and Chief Executive Officer
with a copy to:
Riordan & McKinzie
5743 Corsa Avenue, #116
Westlake Village, CA 91362
Facsimile: 818-706-2956
Attention: Lawrence Weeks, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.06 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware regardless
of the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 9.07 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.08 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement except for Section 6.05 (which is intended to
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be for the benefit of the persons referred to therein, and may be enforced by
any such persons).
SECTION 9.09 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.10 Fees and Expenses. Whether or not the Offer or
the Merger is consummated, all fees, costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, except as contemplated by Section 6.11 hereof.
SECTION 9.11 Certain Definitions.
(a) The term "subsidiary" shall mean, when used with reference
to an entity, any other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions, or a majority of the outstanding
voting securities of which, are owned directly or indirectly by such entity.
(b) "Material Adverse Effect" shall mean any change,
condition, event or development in the business, condition (financial or
otherwise), assets, liabilities, results of operations or prospects of the
Company or any of its subsidiaries that is, or is reasonably likely to be,
material and adverse to the Company and its subsidiaries taken as a whole, or
that materially impairs, or is reasonably likely to materially impair, the
ability of the parties to consummate the transactions contemplated by this
Agreement.
(c) "Tax" shall mean all taxes, charges, fees, levies,
imposts, duties, and other assessments, including any income, alternative
minimum or add-on tax, estimated, gross income, gross receipts, sales, use,
transfer, transactions, intangibles, ad valorem, value-added, franchise,
registration, title, license, capital, paid-up capital, profits, withholding,
employee withholding, payroll, worker's compensation, unemployment insurance,
social security, employment, excise (including the federal communications excise
tax under Section 4251 of the Code), severance, stamp, occupation, premium,
recording, real property, personal property, federal highway use, commercial
rent, environmental (including taxes under Section 59A of the Code) or windfall
profit tax, custom, duty or other tax, fee or other like assessment or charge of
any kind whatsoever, together with any interest, penalties, related liabilities,
fines or additions to tax imposed by any country, any state, county, provincial
or local government or subdivision or agency thereof.
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<PAGE> 56
(d) The term "including" shall be deemed to be followed by
the phrase "without limitation."
SECTION 9.12 Press Releases. The Parent, the Sub and the
Company will consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement except upon advice of counsel that such press
release or public statement is required by law or by obligations pursuant to any
listing agreement with any relevant national securities exchange.
52
<PAGE> 57
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all at or on the day and year first above written.
NORTHERN TELECOM INC.
By: /s/ Peter W. Currie
-----------------------------------------------
Name: Peter W. Currie
Title: Attorney-in-Fact
ELDER CORPORATION
By: /s/ A. J. Lafleur
-----------------------------------------------
Name: A. J. Lafleur
Title: Vice President and Assistant Secretary
MICOM COMMUNICATIONS CORP.
By: /s/ Warren B. Phelps, III
-----------------------------------------------
Name: Warren B. Phelps, III
Title: Chairman and Chief Executive Officer
53
<PAGE> 58
EXHIBIT A
CONDITIONS TO THE OFFER
Capitalized terms used in this Exhibit A and not otherwise
defined herein shall have the meanings assigned to them in the Agreement to
which it is attached (the "Merger Agreement").
Notwithstanding any other provision of the Offer, the Sub
shall not be required to accept for payment, purchase or pay for any Shares
tendered until the expiration of any applicable waiting period for the Offer and
the option granted pursuant to the Stock Option Agreement (the "Option") under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the Sub may terminate or, subject to the terms and conditions of the
Merger Agreement, amend the Offer as to any Shares not then accepted for
payment, shall not be required to accept for payment or pay for any Shares, or
may delay the acceptance for payment of Shares tendered, if (1) at the
expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by the Parent and its
affiliates or which the Parent and its affiliates have the right to acquire
pursuant to the Stock Option Agreement, shall not constitute a majority of the
outstanding Shares on a fully diluted basis, or (2) at any time on or after the
date of the Merger Agreement and prior to the acceptance for payment of Shares,
any of the following events shall occur or exist:
(a) there shall have been any action taken, or any statute,
rule, regulation, judgment, order or injunction, promulgated, enacted,
entered, enforced or deemed applicable to the Offer, the Option or the
Merger, that would or is reasonably likely to (i) make the acceptance
for payment of, or payment for or purchase of some or all of the Shares
pursuant to the Offer or the Option illegal, or otherwise restrict or
prohibit or make materially more costly the consummation of the Offer,
the Option or the Merger, (ii) result in a significant delay in or
restrict the ability of the Sub to accept for payment, pay for or
purchase some or all of the Shares pursuant to the Offer or the Option
or to effect the Merger, (iii) render the Sub unable to accept for
payment or pay for or purchase some or all of the Shares pursuant to
the Offer or the Option, (iv) impose material limitations on the
ability of the Parent, the Sub or any of their respective subsidiaries
or affiliates to acquire or hold, transfer or dispose of, or
effectively to exercise all rights of ownership of, some or all of the
Shares including the right to vote the Shares purchased by it pursuant
to the Offer or the Option on all matters properly presented to the
stockholders of the Company, (v) require the divestiture by the Parent,
the Sub or any of their respective subsidiaries or affiliates of
A-1
<PAGE> 59
any Shares, or require the Sub, the Parent, the Company, or any of
their respective subsidiaries or affiliates to dispose of or hold
separate all or any material portion of their respective businesses,
assets or properties or impose any material limitations on the ability
of any of such entities to conduct their respective businesses or own
such assets, properties or Shares or on the ability of the Parent or
the Sub to conduct the business of the Company and its subsidiaries and
own the assets and properties of the Company and its subsidiaries, (vi)
impose any material limitations on the ability of the Parent, the Sub
or any of their respective subsidiaries or affiliates effectively to
control the business or operations of the Company, the Parent, the Sub,
or any of their respective subsidiaries or affiliates (vii) otherwise
materially adversely affects the Parent, the Sub, the Company or any of
their respective subsidiaries or affiliates or the value of the Shares
or otherwise make consummation of the Offer, the Option or the Merger
unduly burdensome;
(b) there shall have been threatened, instituted or pending
any action, proceeding or counterclaim by or before any governmental,
administrative or regulatory agency or instrumentality or before any
court, arbitration tribunal or any other tribunal, domestic or foreign,
challenging the making of the Offer or the acquisition by the Sub of
the Shares pursuant to the Offer or the Option or the consummation of
the Merger, or seeking to obtain any material damages, or seeking to,
directly or indirectly, result in any of the consequences referred to
in clauses (i) through (vii) of paragraph (a) above;
(c) the Stock Option Agreement shall not be in full force and
effect (except due to the exercise thereof by the Sub) or there shall
be a material condition to the exercise of the Option outstanding and
not satisfied or the Option Grantor shall have breached in any material
respect any representation, warranty or covenant contained therein and
such breach shall have remained outstanding and uncured;
(d) there shall have occurred (i) for a period of more than
one full trading day any general suspension of, or limitation on prices
for, trading in securities on any national securities exchange or in
the over-the-counter market in the United States or the Toronto Stock
Exchange, (ii) the declaration of any banking moratorium or any
suspension of payments in respect of banks or any limitation (whether
or not mandatory) on the extension of credit by lending institutions in
the United States or Canada, (iii) the commencement of a war, armed
hostilities or any other international or national calamity involving
the United States or Canada, (iv) a material adverse change in the
United States or Canadian currency exchange rates or a suspension of,
or limitation on, the markets therefor, (v) in the case of any of the
foregoing existing at
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<PAGE> 60
the time of the execution of the Merger Agreement, a material
acceleration or worsening thereof;
(e) any Person, entity or "group" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than the Parent, the Sub or
Option Grantor or any of their respective affiliates shall have become
the beneficial owner (as that term is used in Rule 13d-3 under the
Exchange Act) of more than 14.9% of the outstanding Shares;
(f) the Company (or the Board of Directors or any committee
thereof of the Company) shall have approved, recommended, authorized,
proposed, filed a Schedule 14D-9 not opposing, or publicly announced
its intention to enter into, any Acquisition Transaction (other than
with the Parent, the Sub or any of their affiliates);
(g) there shall have occurred any change, condition, event or
development in the business, condition (financial or otherwise),
assets, liabilities, results of operations or prospects of the Company
or any of its subsidiaries that is, or is reasonably likely to be,
materially adverse to the Company and its subsidiaries taken as a whole
or that materially impairs, or is reasonably likely to materially
impair the ability of the parties to consummate the Offer or the
Merger;
(h) the Company shall have breached or failed to comply in any
material respect with any of its obligations, covenants, or agreements
under the Merger Agreement or any representation or warranty of the
Company contained in the Merger Agreement, which is qualified as to
materiality, shall not be true and correct, or any such representation
or warranty that is not so qualified, shall not be true and correct in
any material respect, in each case either as of when made or at any
time thereafter;
(i) the Merger Agreement shall have been terminated pursuant
to its terms or shall have been amended pursuant to its terms to
provide for such termination or amendment of the Offer; or
(j) the Board of Directors or any committee thereof of the
Company shall have modified or amended in any manner adverse to the
Parent or the Sub or shall have withdrawn its authorization, approval
or recommendation of the Offer, the Merger or the Merger Agreement, or
shall have failed to have reiterated its recommendation within five
business days of any written request by the Parent or the Sub therefor;
which, in the sole judgment of the Parent or the Sub, in any case, and
regardless of the circumstances (including any action or inaction by the Parent
or the Sub or any of their
A-3
<PAGE> 61
affiliates other than any action or inaction constituting a material breach by
the Parent or the Sub of their obligations under the Merger Agreement) giving
rise to any such condition, makes it inadvisable to proceed with the Offer or
with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of the
Parent and the Sub and may be asserted regardless of the circumstances
(including any action or inaction by the Parent or the Sub or any of their
affiliates giving rise to any such condition other than any action or inaction
constituting a material breach by the Parent or the Sub of their obligations
under the Merger Agreement) or waived by the Parent or the Sub in whole or in
part at any time or from time to time in its discretion subject to the terms and
conditions of the Merger Agreement. The failure of the Parent or the Sub at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Parent or
the Sub concerning the events described above will be final and binding on all
parties.
A-4
<PAGE> 1
STOCK OPTION AGREEMENT
AGREEMENT dated as of May 13, 1996, among Northern Telecom
Inc., a Delaware corporation ("Parent"), Elder Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), Odyssey Partners
L.P., a Delaware limited partnership (the "Stockholder") and (as to Section 5(g)
only) Odyssey Investors, Inc., a Delaware corporation and an affiliate of the
Stockholder ("Investors").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Sub and MICOM
Communications Corp., a Delaware corporation (the "Company"), are entering into
an Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein having the respective meanings given to them in the Merger Agreement),
pursuant to which Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that as soon as practicable (and not later than five business days) after
the execution and delivery of the Merger Agreement, Sub commence a cash tender
offer to purchase all outstanding shares of Company Common Stock (as defined in
Section 1) including all of the Option Shares (as defined in Section 2); and
WHEREAS, as an inducement and a condition to Parent and Sub
entering into the Merger Agreement, Parent and Sub have required that the
Stockholder and Investors (as to Section 5(g) only) agree, and the Stockholder
and Investors (as to Section 5(g) only) have agreed, to enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Transaction" shall mean any merger,
consolidation, liquidation, dissolution, recapitalization, reorganization or
other business combination, acquisition or sale or other disposition of a
material amount of assets or securities, tender offer or exchange offer or any
other similar transaction involving the Company, its securities or any of its
material subsidiaries or divisions.
(b) "beneficially own" or "beneficial ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities beneficially owned by a Person
shall include securities beneficially owned by all other Persons with whom such
<PAGE> 2
Person would constitute a "group" as within the meaning of Section 13(d)(3) of
the Exchange Act.
(c) "Company Common Stock" shall mean at any time the common
stock, $0.0000001 par value, of the Company.
(d) "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization or other entity.
2. Tender of Option Shares. To induce Parent and Sub to
enter into the Merger Agreement and subject to terms and conditions set forth
herein:
(a) Stockholder hereby agrees to validly tender (and not to
withdraw) pursuant to and in accordance with the terms of the Offer, not later
than the fifth business day after commencement of the Offer pursuant to Section
1.01 of the Merger Agreement and Rule 14d-2 under the Exchange Act, for
acceptance by Sub in the Offer, the number of shares of Company Common Stock set
forth opposite the Stockholder's name on Schedule I hereto (the "Existing
Shares" and, together with any shares of Company Common Stock acquired by the
Stockholder after the date hereof and prior to the termination of this Agreement
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise, the "Option Shares"), beneficially owned by
it; provided that, if the purchase price per share of Company Common Stock of
the Offer is for any reason increased to an amount greater than the Purchase
Price (as defined in Section 4), then (i) the Stockholder will not tender the
Option Shares into the Offer after the first public announcement of such
increase, and (ii) if any Option Shares were tendered into the Offer prior to
such first public announcement, the Stockholder will promptly withdraw its
tender of such Option Shares. In the event that the Stockholder is not permitted
to tender (or is required to withdraw) the Option Shares pursuant to the proviso
to the immediately preceding sentence, Sub shall be obligated to, and will,
exercise the Stock Option on the first business day following the purchase of
any shares of Company Common Stock pursuant to the Offer, in which case
(notwithstanding the notice period set forth in Section 4(b)), no notice need be
given to the Stockholder, and the closing of the purchase of the Option Shares
(the "Closing") shall also take place on the first business day following the
purchase of Shares pursuant to the Offer, at 11:00 A.M. (New York time) at
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, NY, or at such
other time and place as the parties shall agree. The Stockholder hereby
acknowledges and agrees that Sub's obligation to accept for payment and pay for
Company Common Stock in the Offer, including the Option Shares, is subject to
the terms and conditions of the Offer.
(b) The Stockholder hereby agrees to permit Parent and Sub
to publish and disclose in the Offer Documents and, if approval of the
stockholders of the Company is required under applicable law, the Proxy
Statement (including all documents and schedules filed with the Securities and
Exchange Commission) its identity and ownership of Company
2
<PAGE> 3
Common Stock and the nature of its commitments, arrangements and understandings
under this Agreement.
3. Provisions Concerning Company Common Stock. The
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the first to occur of (i) the Effective Time and (ii) the
termination of this Agreement as set forth in Section 8, at any meeting of the
holders of Company Common Stock, however called, or in connection with any
written consent of the holders of Company Common Stock, the Stockholder shall
vote (or cause to be voted) the Option Shares held of record or beneficially
owned by the Stockholder whether issued, heretofore owned or hereafter acquired,
(i) in favor of the approval and adoption of the agreement of merger (as such
term is used in Section 251 of the Delaware General Corporation Law) contained
in the Merger Agreement, (ii) in favor of any other action related to the Merger
or in furtherance of the transactions contemplated by the Merger Agreement and
this Agreement, (iii) against any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or this
Agreement, and (iv) except as otherwise agreed to in writing in advance by Sub,
against the following actions (other than the Merger and the transactions
contemplated by the Merger Agreement): (x) any Acquisition Transaction; and (y)
(1) any change in a majority of the persons who constitute the Board of
Directors of the Company; (2) any change in the present capitalization of the
Company or any amendment of Company's Certificate of Incorporation or By-laws;
(3) any other material change in the Company's corporate structure or business;
and (4) any other action involving the Company or its subsidiaries which is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or otherwise adversely affect the Offer, the Merger and the
transactions contemplated by this Agreement and the Merger Agreement. The
Stockholder shall not enter into any agreement or understanding with any Person
the effect of which would be inconsistent with or violative of the provisions
and agreements contained in this Section 3.
4. Option.
(a) To induce Parent and Sub to enter into the Merger
Agreement and subject to the terms and conditions set forth herein, the
Stockholder hereby grants to Sub an irrevocable option (the "Stock Option") to
purchase the Option Shares at a purchase price per share of $12.00 (the
"Purchase Price"). If (i) the Offer is terminated, abandoned or withdrawn by
Parent or Sub (whether due to the failure of any of the conditions thereto or
otherwise), (ii) the Offer is consummated but Sub has not accepted for payment
and paid for the Option Shares (whether due to the proviso to the first sentence
of Section 2 or otherwise) or (iii) the Merger Agreement is terminated in
accordance with its terms (other than for the failure of Parent or Sub to
fulfill any material obligation under the Merger Agreement or by mutual
agreement of the parties thereto), the Stock Option shall, in any such case,
become exercisable, in whole but not in part, upon the first to occur of any
such event and remain exercisable, in whole but not in part, until the date
which is 60 days after the date of the occurrence of such event, so long as: (x)
all waiting periods under the Hart-Scott-Rodino
3
<PAGE> 4
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), required for the
purchase of the Stock Option upon such exercise shall have expired or been
waived, and (y) there shall not then be in effect any preliminary or final
injunction or other order issued by any court or governmental, administrative or
regulatory agency or authority prohibiting the exercise of the Stock Option
pursuant to this Agreement. In the event that the Stock Option is not
exercisable because the circumstances described in clauses (x) and (y) do not
exist, then the Stock Option shall be exercisable for a period not exceeding an
additional 30 days after the 60-day period referred to in the immediately
preceding sentence.
(b) In the event that Sub wishes to exercise the Stock
Option, and subject to Section 2(a), Sub shall send a written notice to the
Stockholder identifying the place and time for the Closing at least three
business days, and not more than five business days, prior to the Closing.
Subject to the terms and conditions of this Agreement, in reliance on the
representations, warranties and covenants of the Stockholder contained herein
and in full payment for the Option Shares, Sub will deliver at the Closing to
the Stockholder, by wire transfer of immediately available funds to an account
designated by the Stockholder at least one business day in advance, an aggregate
amount equal to the product of (x) the Purchase Price and (y) the number of
Option Shares. At the Closing, the Stockholder will deliver, or cause to be
delivered, to Sub certificates representing the Option Shares duly endorsed to
Sub or accompanied by stock powers duly executed by the Stockholder in blank,
together with any necessary stock transfer stamps properly affixed.
(c) Acquired Option Shares. In the event the Option Shares
are acquired by Sub pursuant to the exercise of the Option ("Acquired Option
Shares"), the Stockholder shall be entitled to receive, upon any subsequent
disposition, transfer or sale (other than to an affiliate who takes such
Acquired Option Shares subject to Sub's obligations under this Section) ("Sale")
of the Acquired Option Shares for which a binding contract of sale is entered
into within 180 days of the Closing, an amount in cash equal to 50% of the
excess (if any) of the aggregate proceeds received in the Sale (net of selling
commissions, if any) over the aggregate Purchase Price for the Acquired Option
Shares subject to such Sale. If any of the consideration received by Sub in such
Sale consists of securities, for purposes hereof the proceeds of such Sale shall
be deemed to be the net amount that would actually have been received in an
orderly sale of such securities commencing on the first business day following
actual receipt of such securities by Sub, in the written opinion of an
investment banking firm of national reputation selected by Sub and reasonably
satisfactory to the Stockholder. Any payment due hereunder shall be paid by Sub
to the Stockholder within five days after receipt of the Sale proceeds or, if
any of the consideration consists of securities, after the receipt of such
investment banking firm's written opinion to the parties. Nothing herein shall
create any duty by Sub to engage in a Sale of the Acquired Option Shares.
5. Representations and Warranties of the Stockholder. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
4
<PAGE> 5
(a) Ownership of Option Shares. The Stockholder is the
record and beneficial owner of the number of Option Shares set forth opposite
Stockholder's name on Schedule I hereto. On the date hereof, the Existing Shares
set forth opposite the Stockholder's name on Schedule I hereto constitute all of
the Option Shares owned of record or beneficially owned by the Stockholder. The
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2, 3 and 4 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares set forth opposite the
Stockholder's name on Schedule I hereto, with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the terms
of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any voting agreement,
stockholders' agreement or voting trust. This Agreement has been duly and
validly executed and delivered by the Stockholder and constitutes a valid and
binding agreement of the Stockholder, enforceable against the Stockholder in
accordance with its terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the Stockholder is trustee
whose consent is required for the execution and delivery of this Agreement or
the consummation by the Stockholder of the transactions contemplated hereby. The
Stockholder hereby revokes any and all proxies with respect to any of the Option
Shares.
(c) No Conflicts. Except for (i) filings and approvals under
the HSR Act or the Exchange Act, if applicable, (x) no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority or any Person is necessary for the execution of this Agreement by
the Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby and (y) none of the execution and delivery of this Agreement
by the Stockholder, the consummation by the Stockholder of the transactions
contemplated hereby or compliance by the Stockholder with any of the provisions
hereof shall (1) conflict with or result in any breach of any applicable
organizational documents applicable to the Stockholder, (2) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, modification or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of the Stockholder's properties or assets may be bound, or
(3) violate any order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to the Stockholder or any of the Stockholder's
properties or assets.
5
<PAGE> 6
(d) No Finder's Fees. Except as disclosed in the Merger
Agreement, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder.
(e) No Encumbrances. The Option Shares and the certificates
representing such Option Shares are now, and at all times during the term hereof
will be, held by the Stockholder, or by a nominee or custodian for the benefit
of the Stockholder, free and clear of all liens, claims, options, charges,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other legal or equitable rights or encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder and except for
certain economic interests therein of employees and former employees of the
Stockholder. The transfer by the Stockholder of the Option Shares to Sub in the
Offer or to Parent hereunder (after payment in full of the purchase price
thereof) shall pass to and unconditionally vest in Sub good and valid title to
all Option Shares, free and clear of all claims, liens, restrictions, security
interests, pledges, limitations and encumbrances whatsoever.
(f) Reliance by Parent. The Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into, the
Merger Agreement in reliance upon the Stockholder's execution, delivery and
performance of this Agreement.
(g) Services Agreement. Investors hereby agrees that,
notwithstanding any provision to the contrary of the amended and restated
services agreement, dated as of June 3, 1994 and amended as of January 2, 1995,
between the Company and Investors (the "Services Agreement"), the Services
Agreement shall be automatically terminated, without notice, immediately upon
the consummation of the Offer and upon such termination (i) each party thereto
shall have no further rights, duties or liabilities under the Services
Agreement, (ii) upon Investors' receipt of a binding written agreement from the
Company and the Surviving Corporation (the "Releasees") similarly releasing and
discharging Investors, the Releasees shall automatically be released and
discharged by Investors from all actions, suits, debts, sums of money,
covenants, obligations, controversies, agreements, promises, damages, judgments,
claims, and demands whatsoever, in law or equity, against the Releasees which
Investors ever had, now has or hereafter shall or may have, for, upon, or by
reason of any matter, cause or thing whatsoever arising out of or in any way
relating to the Releasees' obligations under the Services Agreement, and (iii)
Investors shall automatically waive any amounts that it would have otherwise
received over and above an amount equal to the pro rata portion of the annual
fee under the Services Agreement for the period through the consummation of the
Offer or the Closing of the Option, as the case may be, plus any reimbursable
expenses incurred by Investors prior to such date and not yet reimbursed by the
Company pursuant to Section 4(b) of the Services Agreement.
6
<PAGE> 7
6. Additional Covenants of the Stockholder. In addition to
the covenants and agreements included elsewhere herein, the Stockholder
covenants and agrees as follows:
(a) No Solicitation. The Stockholder (and its officers,
directors, employees, controlling persons and representatives) shall not, in
their capacity as such, directly or indirectly, initiate, solicit (including by
way of furnishing information), encourage or respond to or take any other action
knowingly to facilitate, any inquiries or the making of any proposal by any
Person (other than Parent or any affiliate of Parent) with respect to, an
Acquisition Transaction (an "Acquisition Proposal"), or enter into or maintain
or continue discussions or negotiate with any Person (other than Parent or any
affiliate of Parent) in furtherance of such inquiries or to obtain any
Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or
authorize or permit any of its officers, directors, or employees or any Person
acting on behalf of the Stockholder to do any of the foregoing. The Stockholder
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Person conducted heretofore with respect to
any of the foregoing. If the Stockholder receives any inquiry or proposal
regarding any Acquisition Proposal, the Stockholder shall promptly inform Sub of
that inquiry or proposal, the details thereof, the identity of the Person making
such inquiry or proposal and shall in the case of written proposals or
inquiries, furnish Sub with a copy of such proposal or inquiry (and all
amendments and supplements thereto).
(b) Restriction on Transfer, Proxies and Non-Interference.
Except as contemplated by this Agreement, the Stockholder shall not directly or
indirectly, (i) offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to, or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Option Shares or any interest therein; (ii) grant any proxies or powers of
attorney, deposit any Option Shares into a voting trust or enter into a voting
agreement with respect to any Option Shares; or (iii) take any action that would
make any representation or warranty of the Stockholder contained herein untrue
or incorrect or have the effect of preventing or disabling the Stockholder from
performing the Stockholder's obligations under this Agreement.
(c) Waiver of Appraisal Rights. The Stockholder hereby
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that the Stockholder may have.
(d) Stop Transfer; Changes in Option Shares. The Stockholder
agrees with, and covenants to, Parent and Sub that the Stockholder shall not
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Option Shares,
unless such transfer is made in compliance with this Agreement. In the event of
a stock dividend or distribution, or any change in the Company Common Stock by
reason of any stock dividend, split-up, merger, recapitalization, combination,
conversion exchange of shares or the like (in each case with a record date prior
to the termination of this Agreement), (i) the term "Option Shares" shall be
deemed to refer to
7
<PAGE> 8
and include the Option Shares as well as all such stock dividends and
distributions and any securities into which or for which any or all of the
Option Shares may be changed or exchanged and such dividends, distributions and
securities, as the case may be, shall be paid to Sub at the Closing or promptly
following the receipt of such dividend or distribution, if the Closing
theretofor shall have occurred and (ii) the number and kind of shares subject to
this Agreement and Purchase Price shall be appropriately adjusted to reflect
changes made in the Company Common Stock so that Sub shall receive, upon
exercise of the Stock Option and payment of the Purchase Price, the number and
class of shares, other securities, property or cash that Sub would have received
in respect of the Option Shares if the Stock Option had been exercised and the
Option Shares had been issued to Sub immediately prior to such event or the
record date therefor, as applicable.
(e) Confidentiality. The Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, the Stockholder
hereby agrees not to disclose or discuss such matters with anyone not a party to
this Agreement (other than the Stockholder's counsel and advisors, if any)
without the prior written consent of Sub, except for filings required pursuant
to the Exchange Act and the rules and regulations thereunder or disclosures the
Stockholder's counsel advises are necessary in order to fulfill the
Stockholder's obligations imposed by law, in which event the Stockholder shall
give notice of such disclosure to Sub as promptly as practicable so as to enable
Sub to seek a protective order from a count of competent jurisdiction with
respect thereto.
(f) Yost Shares. Stockholder hereby consents to the
execution, delivery and performance by E.R. Yost of an agreement with Parent and
Subsubstantially identical hereto.
7. Fiduciary Duties. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein shall
not prevent any of the Stockholder's designees serving on the Company's Board of
Directors from taking any action, subject to the applicable provisions of the
Merger Agreement, while acting in compliance with such designee's fiduciary
duties in its capacity as a director of the Company.
8. Termination. This Agreement (other than Section 4(c) and
if, and to the extent, applicable) shall terminate, and no party shall have any
rights or obligations hereunder and this Agreement shall become null and void
and have no effect from and after the last date on which the Stock Option is
exercisable pursuant to Section 4.
8
<PAGE> 9
9. Miscellaneous.
(a) Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or appropriate to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement.
(b) Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Merger Agreement constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understanding, both written and oral, between the parties with
respect to the subject matter hereof. This Agreement is not intended for the
benefit of or intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
(c) Certain Events. The Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Option Shares and
shall be binding upon any Person to which legal or beneficial ownership of such
Option Shares shall pass, whether by operation of law or otherwise, including,
without limitation, the Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any transfer of Option Shares, the transferor shall
remain liable for the performance of all obligations under this Agreement of the
transferor.
(d) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties provided that Parent and Sub may assign, in their sole discretion, their
rights and obligations hereunder to any direct or indirect wholly-owned
subsidiary of Parent, although no such assignment shall relieve Parent or Sub of
their obligations hereunder if such assignee does not perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
relevant parties hereto; provided that Schedule I hereto may be supplemented by
Parent and Sub by adding the name and other relevant information concerning any
stockholder of the Company who agrees to be bound by the terms of this Agreement
without the agreement of any other party hereto, and thereafter such added
stockholder shall be treated as a "Stockholder" for all purposes of this
Agreement.
(f) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery, telegram or
telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
9
<PAGE> 10
If to the Stockholder: Odyssey Partners L.P.
31 W. 52nd Street, 17th Fl.
New York, New York 10019
Facsimile: 212-708-0750
Attention: Mr. Stephen Berger
copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile: 212-310-8007
Attention: Simeon Gold, Esq.
If to Parent or Sub: c/o Northern Telecom Limited
3 Robert Speck Parkway
Mississauga, Ontario
Canada L42 3C8
Facsimile: 905-566-3082
Attention: Mr. William R. Kerr
Vice President and Treasurer
copy to: Northern Telecom Limited
3 Robert Speck Parkway
Mississauga, Ontario
Canada L42 3C8
Facsimile: 905-566-3457
Attention: Anthony J. Lafleur, Esq.
Vice President and
Associate General Counsel
and to: Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
Facsimile: 212-225-3999
Attention: Victor I. Lewkow, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
10
<PAGE> 11
(g) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(h) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware or
the United States District Court for the Southern District of New York or any
court of the State of New York located in the City of New York in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein); provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this paragraph (l) and shall not be deemed to be
a general submission to the jurisdiction of said Courts or in the States of
Delaware or New York other than for such purposes. EACH PARTY HERETO HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR
PROCEEDING.
11
<PAGE> 12
(m) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, Parent, Sub and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
NORTHERN TELECOM INC.
By /s/ Peter W. Currie
---------------------------------------------
Name: Peter W. Currie
Title: Attorney-in-Fact
ELDER CORPORATION
By /s/ A. J. Lafleur
---------------------------------------------
Name: A. J. Lafleur
Title: Vice President and Assistant Secretary
ODYSSEY PARTNERS L.P.
By /s/ Stephen Berger
---------------------------------------------
Name: Stephen Berger
Title: General Partner
As to Section 5(g) only:
ODYSSEY INVESTORS, INC.
By /s/ Stephen Berger
---------------------------------------------
Name: Stephen Berger
Title: Vice President
<PAGE> 14
SCHEDULE I TO
STOCK OPTION AGREEMENT
<TABLE>
<CAPTION>
Name of Stockholder Number of Option Shares Owned
- ------------------- -----------------------------
<S> <C>
Odyssey Partners L.P. 4,737,733
</TABLE>
<PAGE> 1
STOCK OPTION AGREEMENT
AGREEMENT dated as of May 13, 1996, among Northern Telecom
Inc., a Delaware corporation ("Parent"), Elder Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub") and E. R.
Yost (the "Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Sub and MICOM
Communications Corp., a Delaware corporation (the "Company"), are entering into
an Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein having the respective meanings given to them in the Merger Agreement),
pursuant to which Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company
desire that as soon as practicable (and not later than five business days) after
the execution and delivery of the Merger Agreement, Sub commence a cash tender
offer to purchase all outstanding shares of Company Common Stock (as defined in
Section 1) including all of the Option Shares (as defined in Section 2); and
WHEREAS, as an inducement and a condition to Parent and Sub
entering into the Merger Agreement, Parent and Sub have required that the
Stockholder agree, and the Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "Acquisition Transaction" shall mean any merger,
consolidation, liquidation, dissolution, recapitalization, reorganization or
other business combination, acquisition or sale or other disposition of a
material amount of assets or securities, tender offer or exchange offer or any
other similar transaction involving the Company, its securities or any of its
material subsidiaries or divisions.
(b) "beneficially own" or "beneficial ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities beneficially owned by a Person
shall include securities beneficially owned by all other Persons with whom such
Person would constitute a "group" as within the meaning of Section 13(d)(3) of
the Exchange Act.
<PAGE> 2
(c) "Company Common Stock" shall mean at any time the common
stock, $0.0000001 par value, of the Company.
(d) "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization or other entity.
2. Tender of Option Shares. To induce Parent and Sub to
enter into the Merger Agreement and subject to terms and conditions set forth
herein:
(a) Stockholder hereby agrees to validly tender (and not to
withdraw) pursuant to and in accordance with the terms of the Offer, not later
than the fifth business day after commencement of the Offer pursuant to Section
1.01 of the Merger Agreement and Rule 14d-2 under the Exchange Act, for
acceptance by Sub in the Offer, the number of shares of Company Common Stock set
forth opposite the Stockholder's name on Schedule I hereto (the "Existing
Shares" and, together with any shares of Company Common Stock acquired by the
Stockholder after the date hereof and prior to the termination of this Agreement
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise, the "Option Shares"), beneficially owned by
it; provided that, if the purchase price per share of Company Common Stock of
the Offer is for any reason increased to an amount greater than the Purchase
Price (as defined in Section 4), then (i) the Stockholder will not tender the
Option Shares into the Offer after the first public announcement of such
increase, and (ii) if any Option Shares were tendered into the Offer prior to
such first public announcement, the Stockholder will promptly withdraw its
tender of such Option Shares. In the event that the Stockholder is not permitted
to tender (or is required to withdraw) the Option Shares pursuant to the proviso
to the immediately preceding sentence, Sub shall be obligated to, and will,
exercise the Stock Option on the first business day following the purchase of
any shares of Company Common Stock pursuant to the Offer, in which case
(notwithstanding the notice period set forth in Section 4(b)), no notice need be
given to the Stockholder, and the closing of the purchase of the Option Shares
(the "Closing") shall also take place on the first business day following the
purchase of Shares pursuant to the Offer, at 11:00 A.M. (New York time) at
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, NY, or at such
other time and place as the parties shall agree. The Stockholder hereby
acknowledges and agrees that Sub's obligation to accept for payment and pay for
Company Common Stock in the Offer, including the Option Shares, is subject to
the terms and conditions of the Offer.
(b) The Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if approval of the stockholders
of the Company is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the Securities and Exchange Commission)
its identity and ownership of Company Common Stock and the nature of its
commitments, arrangements and understandings under this Agreement.
2
<PAGE> 3
3. Provisions Concerning Company Common Stock. The
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the first to occur of (i) the Effective Time and (ii) the
termination of this Agreement as set forth in Section 8, at any meeting of the
holders of Company Common Stock, however called, or in connection with any
written consent of the holders of Company Common Stock, the Stockholder shall
vote (or cause to be voted) the Option Shares held of record or beneficially
owned by the Stockholder whether issued, heretofore owned or hereafter acquired,
(i) in favor of the approval and adoption of the agreement of merger (as such
term is used in Section 251 of the Delaware General Corporation Law) contained
in the Merger Agreement, (ii) in favor of any other action related to the Merger
or in furtherance of the transactions contemplated by the Merger Agreement and
this Agreement, (iii) against any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or this
Agreement, and (iv) except as otherwise agreed to in writing in advance by Sub,
against the following actions (other than the Merger and the transactions
contemplated by the Merger Agreement): (x) any Acquisition Transaction; and (y)
(1) any change in a majority of the persons who constitute the Board of
Directors of the Company; (2) any change in the present capitalization of the
Company or any amendment of Company's Certificate of Incorporation or By-laws;
(3) any other material change in the Company's corporate structure or business;
and (4) any other action involving the Company or its subsidiaries which is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or otherwise adversely affect the Offer, the Merger and the
transactions contemplated by this Agreement and the Merger Agreement. The
Stockholder shall not enter into any agreement or understanding with any Person
the effect of which would be inconsistent with or violative of the provisions
and agreements contained in this Section 3.
4. Option.
(a) To induce Parent and Sub to enter into the Merger
Agreement and subject to the terms and conditions set forth herein, the
Stockholder hereby grants to Sub an irrevocable option (the "Stock Option") to
purchase the Option Shares at a purchase price per share of $12.00 (the
"Purchase Price"). If (i) the Offer is terminated, abandoned or withdrawn by
Parent or Sub (whether due to the failure of any of the conditions thereto or
otherwise), (ii) the Offer is consummated but Sub has not accepted for payment
and paid for the Option Shares (whether due to the proviso to the first sentence
of Section 2 or otherwise) or (iii) the Merger Agreement is terminated in
accordance with its terms (other than for the failure of Parent or Sub to
fulfill any material obligation under the Merger Agreement or by mutual
agreement of the parties thereto), the Stock Option shall, in any such case,
become exercisable, in whole but not in part, upon the first to occur of any
such event and remain exercisable, in whole but not in part, until the date
which is 60 days after the date of the occurrence of such event, so long as: (x)
all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), required for the purchase of the Stock Option
upon such exercise shall have expired or been waived, and (y) there shall not
then be in effect any preliminary or final injunction or other order issued by
any court or
3
<PAGE> 4
governmental, administrative or regulatory agency or authority prohibiting the
exercise of the Stock Option pursuant to this Agreement. In the event that the
Stock Option is not exercisable because the circumstances described in clauses
(x) and (y) do not exist, then the Stock Option shall be exercisable for a
period not exceeding an additional 30 days after the 60-day period referred to
in the immediately preceding sentence.
(b) In the event that Sub wishes to exercise the Stock
Option, and subject to Section 2(a), Sub shall send a written notice to the
Stockholder identifying the place and time for the Closing at least three
business days, and not more than five business days, prior to the Closing.
Subject to the terms and conditions of this Agreement, in reliance on the
representations, warranties and covenants of the Stockholder contained herein
and in full payment for the Option Shares, Sub will deliver at the Closing to
the Stockholder, by wire transfer of immediately available funds to an account
designated by the Stockholder at least one business day in advance, an aggregate
amount equal to the product of (x) the Purchase Price and (y) the number of
Option Shares. At the Closing, the Stockholder will deliver, or cause to be
delivered, to Sub certificates representing the Option Shares duly endorsed to
Sub or accompanied by stock powers duly executed by the Stockholder in blank,
together with any necessary stock transfer stamps properly affixed.
(c) Acquired Option Shares. In the event the Option Shares
are acquired by Sub pursuant to the exercise of the Option ("Acquired Option
Shares"), the Stockholder shall be entitled to receive, upon any subsequent
disposition, transfer or sale (other than to an affiliate who takes such
Acquired Option Shares subject to Sub's obligations under this Section) ("Sale")
of the Acquired Option Shares for which a binding contract of sale is entered
into within 180 days of the Closing, an amount in cash equal to 50% of the
excess (if any) of the aggregate proceeds received in the Sale (net of selling
commissions, if any) over the aggregate Purchase Price for the Acquired Option
Shares subject to such Sale. If any of the consideration received by Sub in such
Sale consists of securities, for purposes hereof the proceeds of such Sale shall
be deemed to be the net amount that would actually have been received in an
orderly sale of such securities commencing on the first business day following
actual receipt of such securities by Sub, in the written opinion of an
investment banking firm of national reputation selected by Sub and reasonably
satisfactory to the Stockholder. Any payment due hereunder shall be paid by Sub
to the Stockholder within five days after receipt of the Sale proceeds or, if
any of the consideration consists of securities, after the receipt of such
investment banking firm's written opinion to the parties. Nothing herein shall
create any duty by Sub to engage in a Sale of the Acquired Option Shares.
5. Representations and Warranties of the Stockholder. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) Ownership of Option Shares. The Stockholder is the record
and beneficial owner of the number of Option Shares set forth opposite
Stockholder's name on Schedule I hereto. On the date hereof, the Existing Shares
set forth opposite the Stockholder's name on Schedule I hereto constitute all of
the Option Shares owned of record or beneficially owned by
4
<PAGE> 5
the Stockholder. The Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Sections 2, 3 and 4
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Existing Shares set
forth opposite the Stockholder's name on Schedule I hereto, with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement, subject in each case to certain
contractual rights of Odyssey Partners L.P.
(b) Power; Binding Agreement. The Stockholder has the legal
capacity, power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
the Stockholder is a party including, without limitation, any voting agreement,
stockholders' agreement or voting trust. This Agreement has been duly and
validly executed and delivered by the Stockholder and constitutes a valid and
binding agreement of the Stockholder, enforceable against the Stockholder in
accordance with its terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which the Stockholder is trustee
whose consent is required for the execution and delivery of this Agreement or
the consummation by the Stockholder of the transactions contemplated hereby. The
Stockholder hereby revokes any and all proxies with respect to any of the Option
Shares.
(c) No Conflicts. Except for (i) filings and approvals under
the HSR Act or the Exchange Act, if applicable, (x) no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority or any Person is necessary for the execution of this Agreement by
the Stockholder and the consummation by the Stockholder of the transactions
contemplated hereby and (y) none of the execution and delivery of this Agreement
by the Stockholder, the consummation by the Stockholder of the transactions
contemplated hereby or compliance by the Stockholder with any of the provisions
hereof shall (1) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which the Stockholder is a
party or by which the Stockholder or any of the Stockholder's properties or
assets may be bound, or (2) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to the Stockholder or
any of the Stockholder's properties or assets.
(d) No Finder's Fees. No broker, investment banker, financial
advisor or other Person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(e) No Encumbrances. The Option Shares and the certificates
representing such Option Shares are now, and at all times during the term hereof
will be, held by the
5
<PAGE> 6
Stockholder, or by a nominee or custodian for the benefit of the Stockholder,
free and clear of all liens, claims, options, charges, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other legal or equitable rights or encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder. The transfer by the Stockholder of
the Option Shares to Sub in the Offer or to Parent hereunder (after payment in
full of the purchase price thereof) shall pass to and unconditionally vest in
Sub good and valid title to all Option Shares, free and clear of all claims,
liens, restrictions, security interests, pledges, limitations and encumbrances
whatsoever.
(f) Reliance by Parent. The Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into, the
Merger Agreement in reliance upon the Stockholder's execution, delivery and
performance of this Agreement.
6. Additional Covenants of the Stockholder. In addition to
the covenants and agreements included elsewhere herein, the Stockholder
covenants and agrees as follows:
(a) No Solicitation. The Stockholder (and Persons acting on
behalf of the Stockholder) shall not directly or indirectly, initiate, solicit
(including by way of furnishing information), encourage or respond to or take
any other action knowingly to facilitate, any inquiries or the making of any
proposal by any Person (other than Parent or any affiliate of Parent) with
respect to, an Acquisition Transaction (an "Acquisition Proposal"), or enter
into or maintain or continue discussions or negotiate with any Person (other
than Parent or any affiliate of Parent) in furtherance of such inquiries or to
obtain any Acquisition Proposal, or agree to or endorse any Acquisition
Proposal, or authorize or permit any Person acting on behalf of the Stockholder
to do any of the foregoing. The Stockholder will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
Person conducted heretofore with respect to any of the foregoing. If the
Stockholder receives any inquiry or proposal regarding any Acquisition Proposal,
the Stockholder shall promptly inform Sub of that inquiry or proposal, the
details thereof, the identity of the Person making such inquiry or proposal and
shall in the case of written proposals or inquiries, furnish Sub with a copy of
such proposal or inquiry (and all amendments and supplements thereto).
(b) Restriction on Transfer, Proxies and Non-Interference.
Except as contemplated by this Agreement, the Stockholder shall not directly or
indirectly, (i) offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to, or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Option Shares or any interest therein; (ii) grant any proxies or powers of
attorney, deposit any Option Shares into a voting trust or enter into a voting
agreement with respect to any Option Shares; or (iii) take any action that would
make any representation or warranty of the Stockholder contained herein untrue
or incorrect or have the effect of preventing or disabling the Stockholder from
performing the Stockholder's obligations under this Agreement.
6
<PAGE> 7
(c) Waiver of Appraisal Rights. The Stockholder hereby
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that the Stockholder may have.
(d) Stop Transfer; Changes in Option Shares. The Stockholder
agrees with, and covenants to, Parent and Sub that the Stockholder shall not
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Option Shares,
unless such transfer is made in compliance with this Agreement. In the event of
a stock dividend or distribution, or any change in the Company Common Stock by
reason of any stock dividend, split-up, merger, recapitalization, combination,
conversion exchange of shares or the like (in each case with a record date prior
to the termination of this Agreement), (i) the term "Option Shares" shall be
deemed to refer to and include the Option Shares as well as all such stock
dividends and distributions and any securities into which or for which any or
all of the Option Shares may be changed or exchanged and such dividends,
distributions and securities, as the case may be, shall be paid to Sub at the
Closing or promptly following the receipt of such dividend or distribution, if
the Closing theretofor shall have occurred and (ii) the number and kind of
shares subject to this Agreement and Purchase Price shall be appropriately
adjusted to reflect changes made in the Company Common Stock so that Sub shall
receive, upon exercise of the Stock Option and payment of the Purchase Price,
the number and class of shares, other securities, property or cash that Sub
would have received in respect of the Option Shares if the Stock Option had been
exercised and the Option Shares had been issued to Sub immediately prior to such
event or the record date therefor, as applicable.
(e) Confidentiality. The Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement may
be dependent upon confidentiality with respect to the matters referred to
herein. In this connection, pending public disclosure thereof, the Stockholder
hereby agrees not to disclose or discuss such matters with anyone not a party to
this Agreement (other than the Stockholder's counsel and advisors, if any)
without the prior written consent of Sub, except for filings required pursuant
to the Exchange Act and the rules and regulations thereunder or disclosures the
Stockholder's counsel advises are necessary in order to fulfill the
Stockholder's obligations imposed by law, in which event the Stockholder shall
give notice of such disclosure to Sub as promptly as practicable so as to enable
Sub to seek a protective order from a count of competent jurisdiction with
respect thereto.
7. Termination. This Agreement (other than Section 4(c) if,
and to the extent applicable) shall terminate, and no party shall have any
rights or obligations hereunder and this Agreement shall become null and void
and have no effect from and after the last date on which the Stock Option is
exercisable pursuant to Section 4.
8. Miscellaneous.
(a) Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or appropriate to
7
<PAGE> 8
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
(b) Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Merger Agreement constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understanding, both written and oral, between the parties with
respect to the subject matter hereof. This Agreement is not intended for the
benefit of or intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
(c) Certain Events. The Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Option Shares and
shall be binding upon any Person to which legal or beneficial ownership of such
Option Shares shall pass, whether by operation of law or otherwise, including,
without limitation, the Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any transfer of Option Shares, the transferor shall
remain liable for the performance of all obligations under this Agreement of the
transferor.
(d) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties provided that Parent and Sub may assign, in their sole discretion, their
rights and obligations hereunder to any direct or indirect wholly-owned
subsidiary of Parent, although no such assignment shall relieve Parent or Sub of
their obligations hereunder if such assignee does not perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
relevant parties hereto; provided that Schedule I hereto may be supplemented by
Parent and Sub by adding the name and other relevant information concerning any
stockholder of the Company who agrees to be bound by the terms of this Agreement
without the agreement of any other party hereto, and thereafter such added
stockholder shall be treated as a "Stockholder" for all purposes of this
Agreement.
(f) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram or
telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholder: Mr. E. R. Yost
Six Ocean Course Drive
Kiaweh Island, South Carolina
Facsimile: (803) 768-5623
8
<PAGE> 9
If to Parent or Sub: c/o Northern Telecom Limited
3 Robert Speck Parkway
Mississauga, Ontario
Canada L42 3C8
Facsimile: 905-566-3082
Attention: Mr. William R. Kerr
Vice President and Treasurer
copy to: Northern Telecom Limited
3 Robert Speck Parkway
Mississauga, Ontario
Canada L42 3C8
Facsimile: 905-566-3457
Attention: Anthony J. Lafleur, Esq.
Vice President and
Associate General Counsel
and to: Cleary, Gottlieb, Steen & Hamilton
1 Liberty Plaza
New York, New York 10006
Facsimile: 212-225-3999
Attention: Victor I. Lewkow, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(h) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
9
<PAGE> 10
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware or
the United States District Court for the Southern District of New York or any
court of the State of New York located in the City of New York in any action,
suit or proceeding arising in connection with this Agreement, and agrees that
any such action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection to
venue therein); provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this paragraph (l) and shall not be deemed to be
a general submission to the jurisdiction of said Courts or in the States of
Delaware or New York other than for such purposes. EACH PARTY HERETO HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH ACTION, SUIT OR
PROCEEDING.
(m) Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
10
<PAGE> 11
IN WITNESS WHEREOF, Parent, Sub and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
NORTHERN TELECOM INC.
By /s/ Peter W. Currie
--------------------------------------------------
Name: Peter W. Currie
Title: Attorney-in-Fact
ELDER CORPORATION
By /s/ A. J. Lafleur
--------------------------------------------------
Name: A. J. Lafleur
Title: Vice President and Assistant Secretary
/s/ E. R. Yost
--------------------------------------------------
E. R. Yost
<PAGE> 12
SCHEDULE I TO
STOCK OPTION AGREEMENT
<TABLE>
<CAPTION>
Name of Stockholder Number of Option Shares Owned
- ------------------- -----------------------------
<S> <C>
E. R. Yost 413,412
</TABLE>
<PAGE> 1
Mr. Young has been a general partner of Eos Partners since January
1994. From February 1989 through January 1992, Mr. Young served as President
of MBCI. He was a general partner of Odyssey Partners from February 1986 to
December 1993. He is also Chairman of the Board of Gundle Environmental
Systems, Inc., and a Director of MBCl, Archer Resources Ltd. and The Caldor
Corporation.
Mr. Kwait has been a principal of Odyssey Partners since August 1989.
He is also a Director of The Scotsman Group, Inc.
BOARD OF DIRECTORS AND CERTAIN BOARD COMMITTEES
The Company's Board of Directors held five meetings during the fiscal
year ended April 2, 1995 ("fiscal 1995"). Each director attended at least
seventy-five percent (75 %) of the aggregate of the number of meetings of the
Board of Directors and any committee of which he is a member.
During fiscal 1995, directors who were not employees of the Company
received directors' fees of $7,500 per annum and an additional fee of $375 for
each meeting of the Board of Directors attended in person. In addition, the
Company maintains directors' and officers' liability insurance.
Audit Committee
The Board has an Audit Committee, consisting of Messrs. Young (as
Chairman) and Andrews. The Audit Committee's duties include recommending to
the Board of Directors the appointment of the independent auditors of the
Company, reviewing with the independent auditors their report and the Company's
accounting policies, procedures and internal controls, as well as any
recommendations, reviewing the independent auditor's fees for audit and
non-audit services, and determining whether there are any conflicts of interest
in financial or business matters between the Company and any of its officers or
employees. The Audit Committee met once in fiscal 1995.
Compensation Committee
The Board has a Compensation Committee, consisting of Messrs. Barker
(as Chairman), Norred and Fisher. The Compensation Committee is responsible
for reviewing and approving the compensation of the executive officers of the
Company, and approving and recommending changes to the incentive plans for
executive officers of the Company. The Compensation Committee met once in
fiscal 1995.
Option Committee
The Board has an Option Committee, consisting of Messrs. Young (as
Chairman) and Friedman. The Option Committee is responsible for administering
the Company's stock option plans. The Option Committee met once in fiscal
1995.
4
<PAGE> 2
Nomination Procedures
The Company does not have a standing nominating committee. The Board
of Directors, however, is responsible for the evaluation and recommendation of
qualified nominees, as well as other matters pertaining to Board composition
and size. The Board will give appropriate consideration to qualified persons
recommended by stockholders for nomination as director in accordance with the
Company's By-Laws.
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
Executive Officers
Set forth below are the names, ages and offices held by the executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
<S> <C> <C>
Warren B. Phelps, III . . . . . . . . . . 48 Chairman of the Board and Chief
Executive Officer
Gilbert Cabral . . . . . . . . . . . . . 47 President and Chief Operating Officer
Francine M. Good . . . . . . . . . . . . 47 Chief Financial Officer, Vice President,
Treasurer and Secretary
Kenneth R. Guy . . . . . . . . . . . . . 52 Vice President Marketing and Corporate
Strategy
Simon L. Lam . . . . . . . . . . . . . . 47 Vice President Product Development
Wallace D. Olson . . . . . . . . . . . . 43 Vice President Operations
</TABLE>
Executive officers of the Company are elected by and serve at the
discretion of the Board of Directors. Set forth below is a brief description
of the business experience of all executive officers, except Warren B. Phelps,
111. For information concerning the business experience of Mr. Phelps, who is
also the Chairman of the Board of Directors, see "Information Regarding the
Board of Directors and Nominees.
GILBERT CABRAL has held the position of President of the Company since
September 1988. Mr. Cabral became Chief Operating Officer of the Company in
February 1992.
FRANCINE M. GOOD was appointed Treasurer and Secretary of the Company
in October 1992. She has held the position of Chief Financial Officer and Vice
President of the Company since February 1992. She was Controller and Assistant
Treasurer of the Company from September 1989 to February 1992.
KENNETH R. GUY has held the position of Vice President Marketing and
Corporate Strategy of the Company since July 1994 and was Vice President
Corporate Strategy of the Company from September 1988 to July 1994.
SIMON L. LAM has held the position of Vice President Product
Development of the Company since November 1990. He was Assistant Vice
President Product Development from November 1989 to November 1990.
5
<PAGE> 3
WALLACE D. (DWIGHT) OLSON has held the position of Vice President
Operations of the Company since August 1988.
SECTION 16 MATTERS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and beneficial owners of ten percent
(10%) of the Common Stock outstanding to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers Automated Quotation System's National Market
System, and to furnish the Company with copies of all Section 16(a) forms they
file.
Based on its review of the copies of such forms received by it and on
written representations from the Company's directors and executive officers
that no Forms 5 were required for those persons, the Company believes that,
during fiscal 1995, all filing requirements applicable to its directors,
executive officers and beneficial owners of ten percent (10%) of the Common
Stock outstanding were complied with by such persons.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth all cash compensation paid by the
Company and its subsidiaries, as well as other compensation paid or accrued, to
the Company's chief executive officer and to the four most highly compensated
executive officers of the Company whose annual salary and bonus in fiscal 1995
exceeded $100,000 (collectively, the "Named Executive Officers") for each of
the fiscal years in the three-year period ended April 2, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS ALL
OPTIONS/ LTIP OTHER
NAME AND PRINCIPAL SALARY BONUS SARS PAYOUTS COMPENSATION(5)
POSITION Year ($) $(1) (#)(2) ($) ($)
- ------------------ ---- ------ ----- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Warren B. Phelps, III, 1995 237,538 62,500 71,084 504,167(3) 6.115
Chairman and Chief 1994 222,231 85,600 -0- -0- 3.612
Executive Officer 1993 214,000 112,500 -0- 1,847,986(4) 3.339
Gilbert Cabral, 1995 211,296 48,375 53,813 504,167(3) 6,739
President and Chief 1994 212,158 75,000 -0- -0- 3,572
Operating Officer 1993 204,300 112,500 1,847,986(4) 3.288
Wallace D. Olson, 1995 156,538 30,800 47,012 248,333(3) 3.835
Vice President 1994 155,769 50,000 -0- -0- 3,256
Operations 1993 146,923 56,250 -0- 510,494(4) 2,643
Kenneth R. Guy, 1995 151,231 30,800 47,012 248,333(3) 4.551
Vice President 1994 150,538 44,000 -0- -0- 3.397
Marketing and 1993 138,106 52,125 -0- 510,494(4) 2,899
Corporate Strategy
Simon L. Lam, 1995 141,750 28,350 36.678 165,000(3) 5.127
Vice President Product 1994 142,788 40,000 -0- -0- 2,992
Development 1993 130,692 49,359 -0- 489,871(4) 2,555
</TABLE>
6
<PAGE> 4
- ---------------
(1) While the Named Executive Officers enjoyed certain perquisites
commensurate with their positions with the Company, such perquisites
did not exceed the lesser of $50,000 or ten percent (10%) of such
officers' salary and bonus. Amounts set forth represent amounts
earned by the Named Executive Officers under the Company's Profit
Sharing Plan. Such amounts were paid to the Named Executive Officers
in fiscal 1996.
(2) Includes the adjustment of options granted to the Named Executive
Officers by MBCI in December 1992 and October 1993. See "Stock Option
Grants."
(3) Represents amounts earned by the Named Executive Officers under the
Company's Executive Bonus Plan. Such amounts were paid in fiscal
1996.
(4) Represents amounts earned by the Named Executive Officers under the
Company's Performance Unit Plan, which was adopted by the Company in
fiscal 1992 and amended in fiscal 1993. Such amounts were paid in
approximately equal installments on December 31, 1992, 1993 and 1994.
(5) Represents amounts contributed by the Company to the Company's 401(k)
plan on behalf of each Named Executive Officer and premiums paid by
the Company on behalf of such officer under the Company's group term
life insurance policy. In fiscal 1995, such amounts equaled $4,733
and $1,382 for Mr. Phelps, $5,471 and $1,268 for Mr. Cabral, $3,314
and $521 for Mr. Olson, $3,133 and $1,418 for Mr. Guy and $4,315 and
$812 for Mr. Lam, respectively.
Stock Option Grants
On May 10, 1994 the Board of Directors of MB Communications, Inc., the
former parent corporation of the Company ("MBCI"), which is now known as Black
Box Corporation, approved the distribution (the "Distribution") of two shares
of Common Stock for every three shares of MBCI common stock held by MBCI
stockholders on May 20, 1994. In connection with the Distribution, each
outstanding option under each of MBCI's Stock Option Plans (an "MBCI Option")
was adjusted by (a) issuing to the holder of an MBCI Option separate options to
purchase shares of Common Stock under each of the Company's Stock Option Plans
(the "Company Options") in an amount equal to two shares of Common Stock for
every three shares of MBCI common stock subject to that MBCI Option and (b)
decreasing the exercise price of each of the outstanding MBCI Options and the
newly granted Company Options so as to maintain the aggregate intrinsic value
of the original MBCI Options. The vesting schedule of each newly granted
Company Option reflected the vesting schedule of the MBCI Option related
thereto.
The following table sets forth information concerning the stock
options granted to each of the Company's Named Executive Officers in fiscal
1995:
7
<PAGE> 5
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
OPTIONS/SARS RATES OF STOCK PRICE
OPTIONS/ GRANTED TO APPRECIATION
SARS EMPLOYEES IN EXERCISE OR FOR OPTION TERM(2)
GRANTED FISCAL YEAR BASE PRICE EXPIRA- 5% 10%
NAME (#)(1) (%) ($/SH) TION DATE ($) ($)
----- -------- ------------ ----------- --------- ---- -----
S> <C> <C> <C> <C> <C> <C>
Warren B. Phelps, III . . . . 36,000 4.3 12.13 10/14/04 274,320 695,520
13,340 1.6 10.34 10/29/03 86,710 219,843
21,744 2.6 8.59 12/23/02 117,418 297,675
Gilbert Cabral . . . . . . . 27,000 3.2 12.13 10/14/04 205,740 521,640
10,005 1.2 10.34 10/29/03 65,033 164,882
16,808 2.0 8.59 12/23/02 90,763 230,102
Wallace D. Olson . . . . . . 24,000 2.9 12.13 10/14/04 182,880 463,680
10,005 1.2 10.34 10/29/03 65,033 164,882
13,007 1.6 8.59 12/23/02 70,238 178,066
Kenneth R. Guy . . . . . . . 24,000 2.9 12.13 10/14/04 182,880 463,680
10,005 1.2 10.34 10/29/03 65,033 164,882
13,007 1.6 8.59 12/23/02 70,238 178,066
Simon L. Lam . . . . . . . . 15,000 1.8 12.13 10/14/04 114,300 289,800
10,005 1.2 10.34 10/29/03 65,033 164,882
11,673 1.4 8.59 12/23/02 63,034 159,803
</TABLE>
- ---------------
(1) All options are non-qualified stock options and were granted under the
Company's 1994 Employee Stock Option Plan. Except as described above
under "Stock Option Grants," such options vest pro rata over the three
year period that commences on the date of grant.
(2) Potential realizable value is determined by taking the initial values
of $8.59, $10.34 and $12.13 per share, respectively, and applying the
stated annual appreciation rate, compounded annually, from the date of
the grant of the option through the expiration date of the option,
subtracting the exercise price per share at the end of the period and
multiplying the remaining number by the number of options granted.
The five percent (5%) and ten percent (10%) rates of appreciation are
set by the Securities and Exchange Commission and, therefore, are not
intended to forecast possible future appreciation, if any, in the
Common Stock. There can be no assurance that the amounts reflected in
this table will be achieved.
Option Exercises and Holdings
The following table sets forth information with respect to each of the
Company's Named Executive Officers concerning the exercise of options during
fiscal 1995 and unexercised options held as of April 2, 1995:
8
<PAGE> 6
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END
ON EXERCISE REALIZED (# EXERCISABLE/ ($ EXERCISABLE/
NAME (#) ($) # Unexercisable) $ UNEXERCISABLE)(1)
- ------------------------ ----------- -------- ---------------- --------------------
<S> <C> <C> <C> <C>
Warren B. Phelps, III . . . . -0- -0- 18,943 / 52,141 0 / 0
Gilbert Cabral . . . . . . . -0- -0- 14,541 / 39,272 0 / 0
Wallace D. Olson . . . . . . -0- -0- 12,007 / 35,005 0 / 0
Kenneth R. Guy . . . . . . . -0- -0- 12,007 / 35,005 0 / 0
Simon L. Lam . . . . . . . . -0- -0- 11,117 / 25,561 0 / 0
</TABLE>
- --------------
(1) The closing price of the Common Stock as reported by the NASDAQ National
Market System on March 31, 1995 was $7.50 per share. None of the options
set forth above have an exercise price below such price per share.
REPORT OF THE COMPENSATION COMMITTEE AND OPTION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors
is charged with administering the Company's compensation programs for executive
officers, including basic compensation and incentive compensation plans. The
Option Committee of the Board of Directors is charged with administering the
Company's stock option plans for all employees.
The Company's executive compensation policy is designed to establish
an appropriate relationship between executive pay and the Company's short-term
and long-term growth objectives, individual executive performance and
contribution, and the Company's ability to attract and retain qualified
executive officers. The Committee attempts to achieve these goals by
integrating competitive annual base salaries with (a) bonuses based on
short-term corporate performance and on the achievement of specified
performance objectives through the Profit Sharing Plan, (b) bonuses based on
long-term corporate performance through the Executive Bonus Plan and (c)
executive stock options. The Committee believes that cash compensation in the
form of salary and bonus provides Company executives with short term rewards
for success in operations and that long term compensation through the award of
stock options encourages growth in management stock ownership, which leads to
expansion of management's stake in the long term performance and success of the
Company.
BASE SALARY. Base salaries for executive officers are based upon
performance, experience, the requirements of the position and the executive's
ability to impact the Company's overall growth and success. In determining the
base salary of each of the executive officers, the Company relies primarily on
national and local surveys of salaries paid to executive officers. The Company
and the Committee believe that the base compensation of the Company's
executives is set generally at the average salary level reflected in these
surveys. Historically, the Company has relied upon its Board of Directors and
the Committee regarding their collective knowledge of the industry, the
functions that Company executives perform and comparative salaries in making
compensation decisions. Salaries and bonuses for fiscal 1995 were set in July
1994.
The primary goals for executives, in their respective positions, are
to help the Company achieve its yearly sales, profit and growth targets as
established by the Board of Directors. Salaries for the executives are
reviewed by the Committee on an annual basis and may be increased or decreased
based upon the Committee's
9
<PAGE> 7
decision that they are competitive in the industry, and/or that a particular
executive's contributions to the Company have been significant during the year.
As a group, the Company's executives received salary increases
averaging six and one-half percent (6.5%) for fiscal 1995.
BONUSES. The Company has two incentive compensation plans relating to
executive officers, a Profit Sharing Plan and an Executive Bonus Plan. All
employees of the Company are covered under the Profit Sharing Plan. Incentives
under these plans for the Company executives are intended to reflect the
Company's belief that management contribution to shareholder returns (via
increasing stock price) comes from maximizing earnings and the quality of those
earnings. Payments made to or earned by the Named Executive Officers under
these plans are set forth above in the Summary Compensation Table.
Awards under the Profit Sharing Plan are made annually and are based
on the attainment of specified Company objectives. The target bonus amount is
determined as a percentage of the recipient's base salary and is varied
reflecting the Company's belief that, as an executive's duties and
responsibilities in the Company increase, he will be increasingly responsible
for the performance of the Company. Accordingly, a larger portion of his
compensation should be incentive compensation. For fiscal 1995, executives
were assigned target bonus amounts ranging from forty percent (40%) to fifty
percent (50%) of their base salary. Reflecting the Company's performance in
fiscal 1995, the Company executives were paid fifty percent (50%) of their
assigned target bonus amounts in April 1995.
Incentives under the Executive Bonus Plan were based upon the
attainment of certain operating targets over a three year period. The target
bonus amount varied based on the executive's duties and responsibilities and
his ability to effect the performance of the Company. In April 1995 the
Company executives were paid their assigned target bonus amounts based on the
Company's performance over the last three fiscal years.
In the aggregate, approximately sixty-eight percent (68%) of the
Company's Named Executive Officers' cash compensation for fiscal 1995 on
average came from incentives directly related to Company performance. The
Company believes that the compensation paid to its executives for fiscal 1995
was reasonable in view of the Company's performance and the contributions of
those executives to this performance.
STOCK OPTIONS. The Option Committee believes that stock option grants
afford a desirable long-term compensation method because they closely ally the
interests of management with stockholder value and are the best way to link
directly the financial interests of management with those of stockholders. The
number of options that each executive is granted is based primarily on the
executive's ability to influence the Company's profitability and long term
growth. In fiscal 1995 stock options were granted to the executive officers
and other employees of the Company in amounts deemed reasonable and appropriate
by the Option Committee.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. In fiscal 1995, the annual
base salary of Mr. Phelps was raised from $214,000 to $250,000, an increase
determined (a) to be appropriate by the Committee in recognition of his efforts
to establish the Company as a separate public company and (b) to be competitive
with the compensation paid to chief executive officers at comparable companies.
Mr. Phelps's salary had not changed since he was appointed Chairman and Chief
Executive Officer in February 1992. Under the Profit Sharing Plan, Mr. Phelps
was paid fifty percent (50%) of his assigned target bonus amount of fifty
percent (50%) of his base salary. Mr. Phelps also received a grant of options
to purchase 36,000 shares of Common Stock, which amount constituted four and
three-tenths percent (4.3 %) of options granted to all Company officers and
employees in fiscal 1995.
10
<PAGE> 8
SUMMARY. The Committee and the Option Committee believe that the
compensation paid to Mr. Phelps and the other Named Executive Officers for
fiscal 1995 was reasonable in view of the Company's performance and the
contributions of those executives to that performance.
COMPENSATION COMMITTEE: OPTION COMMITTEE:
Michael E. Barker, Chairman Brian D. Young, Chairman
Ronald D. Fisher Steven M. Friedman
William A. Norred
PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on
the Company's Common Stock with the cumulative total stockholder return of the
companies listed in the NASDAQ Market Value Index and with a peer group of
companies constructed by the Company (the "Peer Group"), for the period from
June 6, 1994 (the first date that the Company's Common Stock was publicly
traded on the NASDAQ National Market System) to March 31, 1995. The Peer Group
consists of the following companies: Data Race, Inc., Netrix Corp., Network
Equipment Technologies, Inc., Newbridge Networks Corporation and Stratacorn,
Inc.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG MICOM COMMUNICATIONS CORP.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[GRAPH]
ASSUMES $100 INVESTED ON JUNE 6,1994.
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MAR. 31, 1995
The above graph represents and compares the value, through March 31,
1995, of a hypothetical investment of $100 made on June 6, 1994, in each of (i)
the Company's Common Stock, (ii) the NASDAQ Market Index, and (iii) the
companies comprising the Peer Group, assuming, in each case, the reinvestment
of dividends.
11
<PAGE> 9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In connection with the Distribution in June 1994, the Company entered
into a Services Agreement (the "Services Agreement") with Odyssey Investors,
Inc., an affiliate of Odyssey Partners ("Odyssey Investors"), pursuant to which
the Company agreed to pay to Odyssey Investors an annual fee of $150,000 for
providing certain services. On January 1, 1995, the annual fee was reduced to
$75,000. This Services Agreement is the continuation of a similar agreement
relating to the performance of services that the Company, Odyssey Investors and
others had entered into in connection with the December 1992 initial public
offering of MBCl. For fiscal 1995, the Company paid Odyssey Investors $131,250
under the Services Agreement.
Pursuant to the Services Agreement, the Company also will reimburse
Odyssey Investors for all fair and reasonable out-of-pocket expenses incurred
by Odyssey Investors in providing such services. The Services Agreement is for
an initial term of three years and automatically is renewed for successive
one-year terms unless either Odyssey Investors or the Company elects not to
renew such engagement at the end of the then current term. The Services
Agreement also is terminable by the Company for cause. Mr. Barker, an
affiliate of Odyssey Investors during a portion of fiscal 1995 and a director
of the Company, and Mr. Kwait, an affiliate of Odyssey Investors and a nominee
for director of the Company, may be deemed to receive, or to have received,
benefits from the Services Agreement.
Mr. Barker is the Chairman of the Compensation Committee. He also
serves as the Chairman of the Board of MBCI and, during a portion of fiscal
1995, was President of MBCl, although he receives no compensation from MBCI for
serving in such capacities. On January 2, 1995, the Company entered into an
agreement with Mr. Barker, pursuant to which the Company agreed to pay to Mr.
Barker a fee of $75,000 per annum for providing certain services related to
product and marketing strategies and channel development in Latin America. The
amount paid during fiscal 1995 under this agreement was $18,750.
Indebtedness of Management
At the end of fiscal 1995, Mr. Phelps was indebted to the Company in
an amount equal to $150,000, which amount was used by Mr. Phelps to purchase
real estate; such amount bears interest at an annual rate equal to five and
eight-tenths percent (5.8%). During fiscal 1995, the maximum amount of such
indebtedness was $150,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information available to the
Company as of June 23, 1995, regarding (a) the beneficial ownership of Common
Stock by all those known by the Company to be beneficial owners of more than
five percent (5%) of its outstanding Common Stock; and (b) the shares of Common
Stock beneficially owned by (i) each of the Company's directors and nominees;
(ii) each of the Company's Named Executive Officers; and (iii) all directors
and executive officers of the Company as a group. Unless otherwise indicated,
the stockholders have sole voting and investment power with respect to shares
beneficially owned by them, subject to community property laws, where
applicable.
12
<PAGE> 1
MICOM NORTEL
Communications Corp. NORTHERN TELECOM
NEWS RELEASE
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE May 13, 1996
NORTHERN TELECOM (NORTEL) AND MICOM COMMUNICATIONS
EXECUTE ACQUISITION AGREEMENT
TORONTO, Ontario and SIMI VALLEY, California--Northern Telecom Limited (Nortel)
[TSE: NTL; NYSE: NT] and MICOM Communications Corp. [NASDAQ: MICM] announced
today execution of a definitive agreement providing for Nortel's acquisition of
MICOM for approximately $US 150 million.
Under the agreement, Nortel will commence a cash tender offer, through an
indirect wholly owned subsidiary, later this week for all of MICOM's
approximately 11,450,000 outstanding common shares at a price of $US 12.00 net
per share. By unanimous vote of all directors present at a meeting, the MICOM
Board of Directors approved the agreement and recommended that MICOM
stockholders tender their shares pursuant to the offer. Following the successful
completion of the tender offer, remaining shares of MICOM will be acquired at
that price through a merger with the Nortel subsidiary. The MICOM Board of
Directors has received the opinion of Montgomery Securities that the
consideration payable in the tender offer and merger is fair, from a financial
point of view, to MICOM stockholders.
In connection with the acquisition agreement, certain stockholders including
Odyssey Partners L.P. have agreed to tender their 5,151,145 MICOM shares
(approximately 44% of MICOM's current outstanding stock), and have also granted
Nortel an option on such shares at $12.00 per share, which can be exercised
under certain circumstances.
- more -
<PAGE> 2
"MICOM's product portfolio, technologies and distribution channels
complement our rapidly expanding multimedia networks business which encompasses
legacy data, frame relay and ATM products and services for enterprises and
service providers", said Jean C. Monty, president and chief executive officer,
Northern Telecom Limited. "We are delighted to welcome the fine people of MICOM
to Nortel."
"We believe this transaction is an attractive one for our shareholders and
begins an exciting new era for MICOM", said Barry Phelps, chairman of the board
and chief executive officer of MICOM. "The acquisition had its origins in the
exploration of a strategic alliance between our two companies to co-develop a
new access platform, and evolved as the management of each company recognized
the advantages a closer relationship could bring. Nortel's commitment to our
product portfolio and accelerating new product development and market
penetration should result in greater opportunities for our people and more
exciting offerings for our customers."
CS First Boston will act as Dealer Manager for the tender offer. The
consummation of the tender offer is subject to a number of customary conditions,
including the tender of a majority of MICOM's outstanding shares (on a fully
diluted basis) and expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act.
MICOM Communications Corp. is an active member of the Frame Relay Forum and
the worldwide market leader in providing integrated networking solutions under
the brand names, "Marathon," "Netrunner," and "ClearVoice." MICOM products save
companies money by integrating remote data, voice, fax and LAN traffic over
private and public networks. Located in Simi Valley, California, MICOM is
represented by certified distributors in over 85 countries.
- more -
<PAGE> 3
Page 3
Nortel works with customers worldwide to design, build, and integrate
digital networks - for information, entertainment, education, and business -
offering one of the broadest choices of network solutions in the industry.
Nortel has shipped and installed more digital lines worldwide than any other
company.
Nortel's research capabilities around the world include a network of
research and development facilities, affiliated joint ventures, and other
collaborations fostering innovative product development and advanced design
research in 14 countries.
Nortel's common shares are listed on the New York, Toronto, Montreal,
Vancouver and London stock exchanges. Nortel had 1995 revenues of $US 10.7
billion and has approximately 63,000 employees worldwide.
-end-
For more information:
Robert O'Brien Francine Good
Nortel, Media Relations Vice President and CFO
(905) 566-3214 MICOM
(805) 583-8600 x3317
Bob Kaye / David Long Dawn Dover
Nortel, Investor Relations Kekst and Company
(905) 566-3178 / (905) 566-3098 (212) 593-2655
[email protected]
Or visit Nortel's web-site at http://www.nortel.com
<PAGE> 1
May 13, 1996
Board of Directors
MICOM Communications Corp.
4100 Los Angeles Avenue
Simi Valley, CA 93063
Gentlemen:
We understand that MICOM Communications Corp., a Delaware corporation
("Seller"), Northern Telecom Inc., a Delaware corporation ("Parent"), and Elder
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Buyer"), propose to enter into an Agreement and Plan of Merger dated as of
May 13, 1996 (the "Agreement"), pursuant to which Buyer will offer to purchase
all of the outstanding common stock, par value $0.0000001 per share, of Seller
("Seller Common Stock") at $12.00 per share in cash (the "Tender Offer").
Pursuant to the Agreement, upon successful completion of the Tender Offer Buyer
will be merged into Seller (the "Merger") in a transaction in which the
remaining shares of Seller Common Stock will be converted into the right to
receive $12.00 in cash (such per share consideration provided in the Tender
Offer and the Merger referred to collectively as the "Consideration"). The
terms and conditions of the Tender Offer and the Merger are set forth in more
detail in the 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 Tender Offer and 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 Parent, including the consolidated financial statements for Seller
for recent years and interim periods to March 31, 1996 and certain other
relevant financial and operating data relating to Seller and Parent made
available to us from published sources and from internal records of Seller;
MONTGOMERY SECURITIES
INVESTMENT BANKING, BROKERAGE, ASSET MANAGEMENT
600 MONTGOMERY STREET, SAN FRANCISCO,
CALIFORNIA 94111 TELEPHONE 415 627-2000
<PAGE> 2
Montgomery
(ii) reviewed the Agreement and reviewed the Stock Option Agreement (as defined
in the Agreement); (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, Seller Common Stock; (iv)
compared Seller from a financial point of view with certain other companies in
the networking 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 networking industry which we deemed to be
comparable, in whole or in part, to the Tender Offer and the Merger; (vi)
reviewed and discussed with representatives of the management of Seller certain
information of a business and financial nature regarding Seller, furnished to us
by them, including financial forecasts and related assumptions of Seller; (vii)
made inquiries regarding and discussed the Agreement and other matters related
thereto with Seller's counsel; and (viii) 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 Seller's 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 Seller's management 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. We have also assumed that there have
been no material changes in Seller's assets, financial condition, results of
operations, business or prospects since the date of Seller's 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 and the Agreement. We have assumed that the
Tender Offer and the Merger will be consummated in a manner that complies in
all respects with the applicable provisions of 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, nor have we been furnished
with any such appraisals.
We have further assumed with your consent that the Tender Offer and
the Merger will be consummated in accordance with the terms described in the
Agreement, without any further amendments thereto, and without waiver by Seller
of any of the, conditions to its obligations thereunder.
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.
<PAGE> 3
Montgomery
We have acted as financial advisor to Seller in connection with the
Agreement and will receive a fee for our services, including rendering this
opinion, a significant portion of which is contingent upon the consummation of
the Tender Offer and the Merger. In the ordinary course of our business, we
actively trade the equity securities of Seller and Parent for our own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities. We have also acted as an underwriter in
connection with offerings of securities of Seller and performed various
investment banking services for Seller.
This opinion is directed to the Board of Directors of Seller for the
purposes of their evaluation of the Tender Offer and the Merger and does not
constitute a recommendation to any shareholder of Seller as to whether such
shareholder should tender shares of Seller Common Stock or how such shareholder
should vote with respect to the Merger. Further this opinion is only directed
to the fairness of the Consideration to the shareholders of Seller from a
financial point of view and does not address any other aspect of the Tender
Offer or 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 Tender Offer and the Merger is fair to such shareholders
from a financial point of view, as of the date hereof.
Very truly yours,
/s/ Montogomery Securities
--------------------------------
MONTGOMERY SECURITIES
<PAGE> 1
LOGO
May 17, 1996
To our Stockholders:
I am pleased to inform you that, on May 13, 1996, MICOM Communications
Corp. ("MICOM") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Northern Telecom Inc. ("Parent") and Elder Corporation, a
wholly-owned subsidiary of Parent ("Purchaser"), pursuant to which Purchaser has
commenced a cash tender offer (the "Offer") to purchase all of the outstanding
shares of MICOM Common Stock (the "Shares") for $12.00 per share, net to the
seller in cash. Under the Merger Agreement, the Offer will be followed by a
merger (the "Merger") in which, among other things, any and all remaining Shares
of MICOM Common Stock will be converted into the right to receive $12.00 per
share in cash, without interest.
YOUR BOARD OF DIRECTORS HAS DETERMINED, BY THE UNANIMOUS VOTE OF THE
DIRECTORS PRESENT, THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTEREST OF, THE STOCKHOLDERS OF THE COMPANY, HAS APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER,
AND RECOMMENDS THAT MICOM STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, including, among other things, the opinion
of Montgomery Securities, MICOM's financial advisor, that the consideration to
be received by holders of MICOM Common Stock in the Offer and the Merger is fair
to such holders from a financial point of view. A more complete description of
the factors considered by the Board of Directors is set forth in the attached
Solicitation/Recommendation Statement on Schedule 14D-9.
A more complete description of the Offer and the Merger are set forth in
the accompanying Offer to Purchase dated May 17, 1996, together with related
materials, including a Letter of Transmittal to be used for tendering your
Shares. These documents set forth the terms and conditions of the Offer and the
Merger and provide instructions as to how to tender your Shares. I urge you to
read the enclosed material carefully before making a decision with respect to
tendering your Shares in the Offer.
Sincerely,
[SIGNATURE]
Warren B. (Barry) Phelps, III
Chairman of the Board
and Chief Executive Officer
MICOM Communications Corp.
4100 Los Angeles Avenue, Simi Valley, CA 93063-3397
(805) 583-8600 Fax (805) 583-1997
<PAGE> 1
SEVERANCE COMPENSATION AGREEMENT
This Severance Compensation Agreement ("Agreement") has been
entered into as of the _____ day of ______________ , 199_ by and between MICOM
Communications Corp., a Delaware corporation ("MICOM"), and __________________
(Executive"). It is made in the light of the following circumstances:
MICOM's Board of Directors considers the establishment and
maintenance of a sound and vital management team to be essential to protecting
and enhancing the best interests of MICOM and its stockholders. MICOM
recognizes that the possibility of a Change of control (as defined in this
Agreement), and the uncertainty and questions which that possibility may raise
among members of the management team, may result in the departure or
distraction of management personnel to the detriment of MICOM and its
stockholders. The Board of Directors has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of MICOM's management team, including Executive, to their
assigned duties.
Accordingly, the Board of Directors has proposed to enter into
this Agreement with Executive which sets forth the severance compensation which
MICOM agrees it will pay to Executive if Executive's employment with MICOM
should terminate under the circumstances described below following a Change of
Control of MICOM.
In the light of the foregoing the parties have agreed as
follows:
1. Basic Agreement.
In order to protect Executive against certain
possible consequences of a Change in Control of MICOM, and thereby to induce
Executive to continue to serve as a key employee of MICOM, MICOM agrees that if
there is a Change of Control of MICOM, and if Executive's employment by MICOM
is subsequently terminated, after, but within two years following, such Change
of Control, Executive shall be entitled to the severance compensation specified
in Section 3 hereof unless such termination is (a) a result of Executive's
death or Retirement (as defined in this Agreement); (b) by MICOM for Cause (as
defined in this Agreement); or (c) by Executive other than for Good Reason (as
defined in this Agreement).
As partial consideration for this Agreement,
Executive agrees that he or she will not voluntarily leave the employ of MICOM
and will continue to perform Executive's existing duties, or such other
comparable duties as may be assigned by MICOM, for a period of at least one (1)
year or until such earlier time as there may be a Change of Control, in which
case
<PAGE> 2
the other Sections hereof shall control. Notwithstanding the foregoing, MICOM
may terminate Executive's employment at any time, with or without cause,
subject to providing the benefits hereinafter specified in accordance with the
terms hereof if such termination occurs after a Change of Control.
2. Term of Agreement.
This Agreement shall initially continue until the
earlier to occur of (A) the termination of Executive's employment with MICOM
for any reason whatsoever, whether by action of Executive or of MICOM; or (B) a
Change of Control. In the former event, all rights of Executive hereunder
shall terminate at the time of such termination of employment. In the latter
case, this Agreement shall remain effective for a full term of two (2) years
from the date of such Change of Control, and shall not thereafter be terminated
until the expiration of such period.
3. Severance Compensation.
If MICOM shall terminate Executive's employment other
than by reason of Disability (Section 5.1), Retirement (Section 5.2) or for
Cause (Section 5.3), or if Executive shall terminate his or her employment for
Good Reason (Section 5.4), in any such case within two (2) years following a
Change of Control, then MICOM shall pay to Executive, as severance pay, in a
lump sum, in cash, on the 5th day following the Payment Date (as defined in
Section 5.6 of this Agreement), an amount equal to (a) one year's base
compensation at the rate at which Executive was being compensated immediately
prior to such termination (except that if the termination is based on a
reduction in compensation, it shall be the rate of compensation immediately
prior to such reduction); plus (b) the annual bonus target for the full fiscal
year of MICOM during which such termination occurred.
In addition to the foregoing, MICOM shall, subject to
the following sentence, under the circumstances set forth above, provide
continuing coverage of Executive under all employee benefit plans affording
protection against medical costs, including any medical, excess medical,
hospitalization or similar insurance or reimbursement plan. Such coverage
shall be provided at MICOM's cost for a period of one year from the Payment
Date or until Executive obtains other employment if that shall occur before one
year from the Payment Date; provided, however, that MICOM shall have no
obligation to provide any such coverage if a dispute exists pursuant to clause
(2) or (3) in Section 5.6(a).
Notwithstanding the foregoing provisions of this
Section 3, if the severance compensation provided in this Section 31 either
alone or together with other payments which Executive would have the right to
receive from MICOM, would constitute a "parachute payment," as defined in
Section 280G of the Internal Revenue Code of 1986 (the "Code"), as in effect at
the time of
2.
<PAGE> 3
payment, such payment shall be reduced to the largest amount as will result in
no portion being subject to the excise tax imposed by Section 4999 of the Code
or the disallowance of a deduction BY MICOM pursuant to Section 280G(a) of the
Code. The determination of the amount of any reduction pursuant to this
paragraph, and the payments or other compensation to which such reductions
shall apply, shall be made in good faith by MICOM, and such determination shall
be binding on Executive.
4. Change of Control.
No benefits shall be payable hereunder unless there
shall have been a Change of Control of MICOM, as defined in this Section 4 and
Executive's employment by MICOM shall thereafter have been terminated as
described in Section 5 below.
4.1 For purposes of this Agreement, "Change of
Control" shall mean the happening of any of the following:
(i) The acquisition by any
Holder, at any time after the date hereof, of
Beneficial Ownership of securities of MICOM
representing 50% or more of the combined voting power
of the then outstanding securities of MICOM.
(ii) The occurrence of a
transaction requiring approval by the stockholders of
MICOM for the acquisition of MICOM through the
purchase of all or substantially all of MICOM's
securities or assets, or by merger, or otherwise.
(iii) The election, during any
period of 24 months or less, of a majority of the
members of the Board of Directors of MICOM without the
approval of the nominations of such members by a
majority of the Board members who were serving as such
at the beginning of such period.
(iv) A transaction in which a
business operation conducted by MICOM, whether as a
division, subsidiary or otherwise, is sold or
transferred to some other person, or distributed to
MICOM's shareholders, and Executive is assigned to
such operation, whether as a continuing employee
thereof or as part of the transfer or distribution.
4.2 "Beneficial ownership" or "Beneficially
owned" shall have the meaning set forth in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended.
4.3 "Group" shall mean persons who act in concert
as described in sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended, and the regulations thereunder. The formation of a Group, or
any change in the membership of a
3.
<PAGE> 4
Group, shall be deemed to be an acquisition by the Group of the aggregate
number of MICOM securities Beneficially Owned by each member thereof.
4.4 "Holder" shall mean any entity, person or
Group other than the Corporation, Odyssey Partners, L.P. (or an affiliate
thereof) or an employee benefit plan maintained by the corporation.
5. Termination Following Change of Control.
If there shall have been a Change of Control as
defined in Section 4 above, Executive shall be entitled to the severance
compensation provided in Section 3 hereof in the event that Executive's
employment by MICOM is terminated within two (2) years thereafter; unless such
termination is (a) because of Executive's death or Retirement; (b) by MICOM for
Cause or Disability; or (c) by Executive other than for Good Reason. For these
purposes, the following definitions shall apply:
5.1 "Disability" shall mean absence from full
time performance of Executive's duties with MICOM for one hundred thirty (130)
consecutive business days, as a result of Executive's incapacity due to
physical or mental illness, unless within thirty (30) days after Notice of
Termination (as hereinafter defined) is given following such absence Executive
shall have returned to the full time performance of Executive's duties.
5.2 "Retirement" shall mean a termination of
employment in accordance with the retirement policy generally applicable to all
salaried employees at the time of the Change of Control.
5.3 "Cause" shall mean:
(a) the deliberate and intentional
failure by Executive to devote substantially his or her entire business time
and efforts to the performance of his or her duties (other than any such
failure resulting from Executive's incapacity due to physical or mental illness
or disability);
(b) engaging by Executive in gross
misconduct materially and demonstrably injurious to MICOM;
(c) Executive's commission of any crime
(other than minor traffic offenses and similar infractions); or
(d) Executive's willful failure to
comply with instructions of the Board of Directors of MICOM.
5.4 "Good Reason" shall mean the occurrence of:
4.
<PAGE> 5
(a) without Executive's express written
consent, the assignment to Executive of any duties materially and substantially
less favorable than his or her positions, duties, responsibilities and status
with MICOM immediately prior to the Change in Control, or a material adverse
change in his or her reporting responsibilities, titles or offices as in effect
immediately prior to a Change in Control;
(b) a reduction by MICOM in Executive's
base salary as in effect at the time of the Change in Control;
(c) a failure by MICOM to continue to
provide incentive compensation comparable to that provided by MICOM immediately
prior to any Change in Control;
(d) the failure by MICOM after a Change
in Control to continue in effect any benefit or compensation plan, stock option
plan, pension plan, health and accident plan or disability plan in which
Executive is participating immediately prior thereto (provided, however, that
there shall not be deemed to be any such failure if MICOM substitutes for the
discontinued plan, a plan providing Executive with substantially similar
benefits) or the taking of any action by MICOM which would adversely affect
Executive's participation in or materially reduce Executive's benefits under
any of such plans or deprive Executive of any material fringe benefit enjoyed
by Executive immediately prior to a Change in Control (provided, however, that
any act or failure to act by MICOM that is on a plan-wide basis, i.e., it
similarly affects all employees of MICOM or all employees eligible to
participate in any such plan, as the case may be, shall not constitute Good
Reason); or
(e) the failure of MICOM to obtain the
assumption of this Agreement by any successor as contemplated in Section 7.1
hereof.
5.5 Notice of Termination. Any termination by
MICOM pursuant to Sections 5.1 or 5.3 above shall be communicated by a Notice
of Termination. The term "Notice of Termination" shall mean a written notice
indicating those specific termination provisions in this Agreement relied upon
and which sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the
provisions so indicated and otherwise complies with Sections 5.1 or 5.3, as
applicable. No termination by MICOM shall be effective for purposes of
Sections 5.1 or 5.3 above without such Notice of Termination.
5.6 Payment Date.
(a) The term "Payment Date" shall mean
(1) if Executive's employment is terminated by MICOM without allegation that
such termination is by reason of Disability (Section 5.1), Retirement (Section
5.2) or for Cause (Section
5.
<PAGE> 6
5.3), the actual effective date of such termination as specified by MICOM in
its notice of such termination given to Executive; (2) if Executive's
employment is terminated by MICOM purportedly for Cause and if (i) within 30
days after MICOM's giving of the Notice of Termination prescribed by Section
5.5, Executive notifies MICOM that a dispute exists concerning whether or not
the termination is legitimately for Cause, and (ii) it is finally determined,
whether by mutual agreement by the parties or upon final judgment, order or
decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected), that such termination is
not legitimately for Cause, the Payment Date shall be the date the dispute is
so finally determined; and (3) if Executive's employment is terminated by
Executive purportedly for Good Reason, 30 days after Executive so notifies
MICOM, which notice shall fully describe the basis which the Executive alleges
to constitute Good Reason; provided, however, that if, within such 30-day
period, MICOM notifies Executive that a dispute exists concerning whether or
not the termination is legitimately for Good Reason, the Payment Date shall be
the date that it is finally determined (but only if so determined), whether by
mutual agreement by the parties or upon final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected), that such termination by Executive is
legitimately for Good Reason.
(b) Notwithstanding the foregoing, the
definition of "Payment Date" shall not entitle Executive to any compensation
with respect to any period during which Executive's employment has actually
ceased. Rather, such definition shall be used solely to determine the date, if
applicable, upon which severance pay becomes payable to Executive pursuant to
Section 3 of this Agreement.
6. No Obligation to Mitigate.
6.1 Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Executive as the result of employment by any other person after the termination
of employment with MICOM, or otherwise, except as provided in Section 3.
6.2 The provisions of this Agreement, and any
payment provided for hereunder, shall not reduce any amounts otherwise payable,
or in any way diminish Executive's existing rights, or rights which would
accrue solely as a result of the passage of time, under any benefit plan,
incentive plan or securities plan, employment agreement or other contract, plan
or arrangement.
6.
<PAGE> 7
7. Binding on Successors.
7.1 This Agreement shall be binding on and inure
to the benefit of any successor to MICOM. MICOM agrees to require any
successor or assign to all or substantially all of its business and/or assets,
by written agreement, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that MICOM would be required to
perform it if no such transaction had taken place, except where such assignment
occurs as a matter of law (e.g., in the case of a merger or consolidation), in
which case no such formal assumption shall be required. Any failure of MICOM
to obtain such agreement prior to the effectiveness of any such transaction
shall be a material breach of this Agreement and shall entitle Executive to
terminate his employment for Good Reason, but shall not otherwise affect the
rights of MICOM or such successor or assign under any such agreement between
them, nor invalidate any such agreement. As used in this Agreement, "MICOM"
shall mean MICOM as presently constituted and any successor or assign to its
business and/or assets which executes and delivers the agreement provided for
in this Section 7 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
7.2 This Agreement shall inure to the benefit of
and be enforceable by Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devotees and
legatees. If Executive should die while any amounts are still payable to him
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Executive's estate.
8. Notices.
8.1 Method of Giving Notice. Any notice (which
term includes payments and communications of any sort whatsoever) required or
permitted to be delivered under this Agreement shall be in writing and shall be
delivered to the party to whom addressed in person, or by certified mail,
return receipt requested, addressed as follows:
If to Company: MICOM Communications Corp.
4100 Los Angeles Avenue
Simi Valley, CA 93062
If to Executive: At his or her address as shown on
the records of MICOM.
8.2 Change of Address. Any person whose address
is specified herein may change such address by giving notice to the other in
the manner herein provided.
8.3 Effectiveness of Notice. All notices given
in accordance with this Agreement shall, if mailed, be deemed to
7.
<PAGE> 8
have been given or delivered two (2) days after the date they are placed in the
United States mail, postage prepaid, properly addressed as herein required. If
delivered personally or by courier, they shall be deemed given when actually
received.
9. Choice of Law.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California.
10. Severability.
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Legal Fees and Expenses.
In the event of any dispute under this Agreement, the
prevailing party shall be entitled to recover all legal fees and expenses which
it may incur in resolving such dispute.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
MICOM COMMUNICATIONS CORP. EXECUTIVE:
By:
---------------------------- ------------------------------------
(Signature)
Title:
----------------------------
8.
<PAGE> 1
SECOND AMENDMENT TO STRAIGHT NOTE
This Second Amendment to Straight Note (this "Second Amendment") is
dated as of this 8th day of Nov., 1995 and entered into by and between Warren
B. Phelps, III, an individual, and Patricia Phelps, an individual
(collectively, "Trustor"), and MICOM Communications Corp., a Delaware
corporation ("MICOM").
RECITALS:
A. Trustor is the maker and MICOM is the holder of that certain
Straight Note in the original principal amount of One Hundred Fifty Thousand
Dollars ($150,000) dated September 21, 1987, as amended on August 9, 1994 (the
"Note").
B. Trustor and MICOM wish to further amend the Note, as set forth
herein.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Forgiveness of Principal. Section 3 of the Note is hereby
amended by adding the following text to the end of such
section:
"Notwithstanding anything contained herein to the contrary, following
a Change in Control, the principal balance due on the Note shall be forgiven,
the Note shall be deemed fully paid and the original Note, stamped "canceled"
by an authorized officer of MICOM, shall be delivered to Trustor.
For purposes of this Section 3, "Change of Control" shall mean the
happening of any of the following:
(i) The acquisition by any Holder, at any time after the
date hereof, of Beneficial Ownership of securities of MICOM
representing 50% of more of the combined voting power of the then
outstanding securities of MICOM.
(ii) The occurrence of a transaction requiring approval by
the stockholders of MICOM for the acquisition of MICOM through the
purchase of all or substantially all of MICOM's securities or assets,
or by merger, or otherwise.
(iii) The election, during any period of twenty-four (24)
months or less, of a majority of the members of the Board of Directors
of MICOM without the approval of the nominations of such members by a
majority of the Board members who were serving as such at the
beginning of such period.
<PAGE> 2
(iv) A transaction in which a business operation conducted
by MICOM, whether as a division, subsidiary or otherwise, is sold or
transferred to some other person, or distributed to MICOM's
shareholders, and Warren B. Phelps, III is assigned to such operation,
whether as a continuing, employee thereof or as part of the transfer
or distribution.
"Beneficial Ownership" or "Beneficially Owned" shall have the meaning
set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
"Group" shall mean persons who act in concert as described in Sections
13(d)(3) or 14(d)(2) of the Exchange Act, and the regulations thereunder. The
formation of a Group, or any change in the membership of a Group, shall be
deemed to be an acquisition by the Group of the aggregate number of MICOM
securities Beneficially Owned by each member thereof
"Holder" shall mean any entity, person or Group other than MICOM,
Odyssey Partners, L.P. (or an affiliate thereof) or an employee benefit plan
maintained by MICOM."
2. No Further Modification. Except as set forth in this Second
Amendment, no other provision of the Note is otherwise amended, modified or
altered in any manner and the Note shall remain in full force and effect.
IN WITNESS WHEREOF, this Second Amendment has been executed as of the
date first written above.
/s/ WARREN B. PHELPS, III
-----------------------------
WARREN B. PHELPS, III
/s/ PATRICIA PHELPS
-----------------------------
PATRICIA PHELPS
MICOM Communications Corp.,
a Delaware corporation
By
----------------------------
Francine M. Good
Vice President and
Chief Financial Officer
<PAGE> 1
SECOND AMENDMENT TO STRAIGHT NOTE
This Second Amendment to Straight Note (this "Second Amendment") is
dated as of this 8th day of Nov., 1995 and entered into by and between Gilbert
Cabral, an individual, and Rosemary Cabral, an individual (collectivelv,
"Trustor"), and MICOM Communications Corp., a Delaware corporation ("MICOM")
RECITALS:
A. Trustor is the maker and MICOM is the holder of that certain
Straight Note in the original principal amount of Fifty Thousand Dollars
($50,000) dated March 15, 1988, as amended on August 9, 1994 (the "Note").
B. Trustor and MICOM wish to further amend the Note, as set forth
herein.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Forgiveness of Principal. Section 3 of the Note is hereby
amended by adding the following text to the end of such
section:
"Notwithstanding anything contained herein to the contrary, following
a Change in Control, the principal balance due on the Note shall be forgiven,
the Note shall be deemed fully paid and the original Note, stamped "canceled"
by an authorized officer of MICOM, shall be delivered to Trustor.
For purposes of this Section 3, "Change of Control" shall mean the
happening of any of the following:
(i) The acquisition by any Holder, at any time
after the date hereof, of Beneficial Ownership of securities
of MICOM representing 50% of more of the combined voting power
of the then outstanding securities of MICOM.
(ii) The occurrence of a transaction requiring
approval by the stockholders of MICOM for the acquisition of
MICOM through the purchase of all or substantially all of
MICOM's securities or assets, or by merger, or otherwise.
(iii) The election, during any period of
twenty-four (24) months or less, of a majority of the members
of the Board of Directors of MICOM without the approval of the
nominations of such members by a majority of the Board members
who were serving as such at the beginning of such period.
<PAGE> 2
(iv) A transaction in which a business operation
conducted by MICOM, whether as a division, subsidiary or
otherwise, is sold or transferred to some other person, or
distributed to MlCOM's shareholders, and Gilbert Cabral is
assigned to such operation, whether as a continuing employee
thereof or as part of the transfer or distribution.
"Beneficial Ownership" or "Beneficially Owned" shall have the meaning
set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
"Group" shall mean persons who act in concert as described in Sections
13(d)(3) or 14(d)(2) of the Exchange Act, and the regulations thereunder. The
formation of a Group, or any change in the membership of a Group, shall be
deemed to be an acquisition by the Group of the aggregate number of MICOM
securities Beneficially Owned by each member thereof.
"Holder" shall mean any entity, person or Group other than MICOM,
Odyssey Partners, L.P. (or an affiliate thereof) or an employee benefit plan
maintained by MICOM."
2. No Further Modification. Except as set forth in this Second
Amendment, no other provision of the Note is otherwise amended, modified or
altered in any manner and the Note shall remain in full force and effect.
IN WITNESS WHEREOF, this Second Amendment has been executed as of the
date first written above.
/s/ GILBERT CABRAL
-------------------------------------
Gilbert Cabral
/s/ ROSEMARY CABRAL
-------------------------------------
Rosemary Cabral
MICOM Communications Corp.,
a Delaware corporation
By: /s/ FRANCINE M. GOOD
----------------------------------
Francine M. Good
Vice President and
Chief Financial Officer
<PAGE> 1
CONFIDENTIAL AGREEMENT
February 27, 1996
MICOM Communications Corp.
4100 Los Angeles Avenue
Simi Valley, CA 93063-3397
Dear Sirs:
In connection with our interest in a possible transaction involving us
and MICOM Communications Corp. (the "Company"), the Company is furnishing us
with certain information which is either non-public, confidential or proprietary
in nature. All information furnished to us, our directors, officers, employees,
agents or representatives, including without limitation attorneys, accountants,
consultants and financial advisors (collectively, "representatives"), by the
Company, or any of its representatives, and all analyses, compilations, data,
studies or other documents prepared by us or our representatives containing or
based in whole or in part on any such furnished information or reflecting our
review of, or interest in, the Company is hereinafter referred to as the
"Information." In consideration of our being furnished with the Information, we
agree that:
1. The Information will be kept confidential and will not, without the
prior written consent of the Company, be disclosed by us or our representatives
to any other person, in any manner whatsoever, in whole or in part, and will
not be used by us or our representatives directly or indirectly for any purpose
other than evaluating the transactions referred to above. Moreover, we agree to
transmit the Information only to those of our representatives who need to know
the Information for the purpose of evaluating the transactions referred to
above, who are informed by us of the confidential nature of the Information
and who agree to be bound by the terms of this Agreement. We agree to notify
the Company prior to the delivery or disclosure of any Information to our
representatives, as to the identity of such representatives. We will be
responsible for any breach of this Agreement by our representatives. In that
regard, without the prior consent of the Company, we will not disclose any of
the Information to any entity that is our affiliate (as such term is defined in
Rule 12B-2 of the Securities Exchange Act of 1934, as amended) except with
respect to Northern Telecom Inc. and Bell Northern Research Ltd.
2. Without the prior written consent of the Company, except to the
extent provided by this Agreement, we and our representatives will not disclose
to any other person the fact that the Information has been made available, that
discussions or negotiations are taking place concerning a possible transaction
involving us and the Company, or any of the terms, conditions or other facts
with respect to any such possible transaction, including the status thereof,
except as required by law and then only with proper prior written notice as
soon as possible to the Company in order to provide the Company with a
reasonable opportunity to evaluate the legal necessity and content of the
proposed disclosures. The term "person" as used in this letter shall be
broadly interpreted to include without limitation any corporation, company,
government agency, group, partnership or individual.
<PAGE> 2
MICOM Communications Corp.
February 27, 1996
Page 2
3. The Information and all copies thereof will be destroyed or
returned immediately without retaining any copies thereof, if we do not within
a reasonable time proceed with a transaction involving the Company, or upon
request by the Company at any time. Our obligation of confidentiality shall
expire three years after the Information is destroyed or returned.
4. This Agreement shall be inoperative as to such portions of the
Information which (i) are or become generally available to the public other than
as a result of a disclosure by us or our representatives; (ii) become available
to us on a non-confidential basis from a source other than the Company or one
of its representatives which has represented to us (and which we have no
reason to believe after due inquiry) is entitled to publicly disclose it; or
(iii) are known to us on a non-confidential basis prior to their disclosure to
us by the Company or one of its representatives.
5. Until the earlier of (i) a definitive agreement regarding the
acquisition of substantially all of the assets or stock of the Company by us
has been executed; (ii) an acquisition of substantially all of the assets or
stock of the Company by a third party has been consummated; or (iii) two years
from the date of this Agreement, we agree not to initiate or maintain contact
(except for those contacts made in the ordinary course of our business) with
any officer, director or employee of the Company regarding the Company's
business, prospects, operations or finances, except with the express permission
of the Company acting through its authorized representative. It is understood
that the Company or its authorized representatives will arrange for appropriate
contacts for due diligence purposes. All (i) communications regarding a
possible transaction; (ii) requests for additional Information; (iii) requests
for facility tours or management meetings; and (iv) discussions or questions
regarding procedures, will be submitted or directed to the Company or its
representatives.
6. We agree that, without the Company's prior written consent, we will
not, for a period of one year from the date of this Agreement, directly or
indirectly, knowingly solicit the employment of any key employee, officer or
senior manager of the Company or any former key employee, officer or senior
manager whose employment with the Company has ceased within six months of such
solicitation.
7. In consideration of the Information being furnished to us, we agree
that, without the prior written consent of the Board of Directors of the
Company, for a period of two years from the date of this Agreement, we will not
(i) acquire or offer or agree to acquire, directly or indirectly, by purchase
or otherwise, any securities or material assets (or direct or indirect rights
or options to acquire any such securities or assets) of the Company; (ii)
enter, agree to enter or propose to enter into, directly or indirectly, any
merger or business combination involving the Company; (iii) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" (as such
terms are used in the rules of the Securities and Exchange Commission) or
consent to vote, or seek to advise or influence any person or entity with
respect to the voting of, any voting securities of the Company; (iv) make any
public announcement with respect to any extraordinary transactions involving the
Company or its securities or assets; (v) form, join or in any way participate in
a "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) with respect to
<PAGE> 3
MICOM Communications Corp.
February 27, 1996
Page 3
any of the foregoing; or (vi) otherwise seek to influence or control, in any
manner whatsoever, the Board of Directors or the business, management, or
policies of the Company.
8. We understand that the Company has endeavored to include in the
Information those materials which it believes to be suitable and relevant for
the purpose of our evaluation, but we acknowledge that neither the Company nor
any of its representatives or advisors makes any representation or warranty as
to the accuracy or completeness of the Information. We agree that neither the
Company nor any of its representatives or advisors shall have any liability to
us or to any of our representatives as a result of the use of the Information
by us and our representatives, and we understand that only those particular
representations and warranties which may be made by the Company to the
purchaser of the assets, stock or business of the Company in a definitive
agreement, when, as and if it is executed, and subject to such limitations and
restrictions as may be specified in such definitive agreement, shall have any
legal effect.
We hereby acknowledge that we are aware and that we will advise our
directors, officers, employees and representatives who are informed as to the
matters which are the subject of this Agreement, that the United States
securities laws prohibit any person who has received from an issuer material,
non-public information concerning the issuer from purchasing or selling
securities of such issuer or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities.
9. In the event that we or anyone to whom we transmit the
Information pursuant to this Agreement are requested in connection with legal
proceedings or become legally compelled (by oral questions, interrogatories,
request for information or documents, subpoena, civil investigative demand or
similar process) to disclose any of the Information, we will provide the Company
with prompt written notice so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the Company waives compliance with the provisions of this
Agreement, we will furnish only that portion of the Information which is legally
required and will exercise our best efforts to obtain reliable assurance that
confidential treatment will be accorded the Information.
10. We agree that money damages would not be a sufficient remedy for
any breach of this Agreement by us or our representatives and the Company shall
be entitled to seek, in a court of appropriate jurisdiction, equitable relief,
including injunction and specific performance, in the event of any breach of
the provisions of paragraphs 1, 2, 3, 5, 6, 7, or 9 of this Agreement. Such
remedies shall not be deemed to be the exclusive remedies for a breach of this
Agreement by us or our representatives but shall be in addition to all other
remedies available at law or equity. We agree to waive, and to use our best
efforts to cause our directors, officers, employees or agents to waive, any
requirement for the accounting or posting of any bond in connection with such
remedy. We understand and agree that in the event that there is a sale of a
controlling interest in the Company, the acquiror of such interest shall, should
the Company so elect, also acquire all rights of the Company pursuant
<PAGE> 4
MICOM Communications Corp.
February 27, 1996
Page 4
to this Agreement including without limitation, the right to enforce all terms
of this Agreement. We understand that this Agreement is for the benefit of the
Company and the Company shall have the right to enforce all the terms of this
Agreement.
11. It is further understood and agreed that no failure or delay by
the Company in exercising any right, power or privilege under this Agreement
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercises of any right, power or
privileges hereunder.
12. This Agreement shall be governed and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed within such state.
Very truly yours,
Northern Telecom Limited
By: /s/ KLAUS BUECHNER
------------------
Title: GVP - Multimedia Networks
------------------------
