-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L13OpU048zinZYI4rPkDFmESQC1LFH0uEMVTI3IlbGOj/1X4178p1k8jlp037puk J7kEFCehoKpvEIjzTuoijA== 0000950008-97-000017.txt : 19970220 0000950008-97-000017.hdr.sgml : 19970220 ACCESSION NUMBER: 0000950008-97-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970117 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970203 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TANDEM COMPUTERS INC /DE/ CENTRAL INDEX KEY: 0000315180 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 942266618 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09430 FILM NUMBER: 97516653 BUSINESS ADDRESS: STREET 1: 19333 VALLCO PKWY CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4082854664 MAIL ADDRESS: STREET 1: 10435 N TANUTA AVE LOC 200 16 CITY: CUPERTINO STATE: CA ZIP: 95014 FORMER COMPANY: FORMER CONFORMED NAME: TCI DELAWARE INC DATE OF NAME CHANGE: 19600201 8-K 1 CURRENT REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 17, 1997 ---------------- TANDEM COMPUTERS INCORPORATED - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-9134 94-2266618 - ---------------------------- ----------------- --------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification Number) 19333 Vallco Parkway, Cupertino, CA 95014 ---------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) (408) 285-6000 ------------------------------- (Registrant's telephone number, including area code) Item 2. Acquisition or Disposition of Assets. ------------------------------------ Pursuant to the terms of a Stock Purchase Agreement dated January 17, 1997 (the "Agreement") by and among Newbridge Networks Corporation, a corporation organized under the laws of Canada ("Newbridge"), Newbridge Networks, Inc., a Delaware corporation and wholly owned subsidiary of Newbridge ("Newbridge Networks"), and Tandem Computers Incorporated, a Delaware corporation ("Tandem" or the "Company"), on January 17, 1997 Tandem sold all of the outstanding stock of Ungermann-Bass Networks, Inc., a Delaware corporation doing business as UB Networks, Inc. ("UB Networks"), to Newbridge Networks effective as of December 31, 1996. The consideration received by Tandem, valued at $118 million (the "Base Purchase Price"), consisted of a ninety percent cash payment to Tandem and a ten percent cash deposit into a one-year escrow account. Of the $118 million proceeds, $13 million is attributable to estimated cash disbursements by the Company to or on behalf of UB Networks during the period January 1, 1997 through January 17, 1997. Based upon the December 31, 1996 carrying value of UB Networks and estimated costs and expenses expected to be incurred in connection with this transaction, the Company anticipates that it will record a gain of approximately $3 million from this transaction in its second quarter ending March 31, 1997. In addition, the Base Purchase Price is subject to certain post-closing adjustments that Tandem estimates will be immaterial in the aggregate and is to be increased by amounts, if any, received by Tandem in the future pursuant to an earn-out provision the details of which have not yet been finalized. Item 7. Financial Statements and Exhibits. --------------------------------- (a) Not applicable. (b) Pro Forma Financial Information. Pro forma consolidated financial information for Tandem Computers Incorporated, showing the pro forma effects of the disposition of UB Networks, are submitted herewith as shown in Item 7(c) following. The pro forma consolidated balance sheet information is set forth for this transaction as if it had occurred on December 31, 1996. The September 30, 1996 historical consolidated balance sheet information is presented for comparative purposes. Pro forma consolidated statement of operations information is not required or presented as the Company's income (loss) from continuing operations, excluding the operating results of UB Networks, has been presented in the Company's historical consolidated financial statements. -2- (c) Exhibits. 2.1 Stock Purchase Agreement dated January 17, 1997 between Newbridge Networks Corporation, Newbridge Networks, Inc. and Tandem Computers Incorporated. The following Exhibits to this Stock Purchase Agreement are appended to Exhibit 2.1: Exhibit 1.3 Escrow Agreement Exhibit 2.3A 9/30/96 Financial Statements Exhibit 2.3B 12/31/96 Financial Statements Exhibit 2.11A Cross License Exhibit 2.11B Trademark License Exhibit 2.12 Proprietary Information and Rights Agreement Schedules to this Agreement omitted from this report will be furnished to the Securities and Exchange Commission upon request. Such omitted Schedules are as follows: Schedule 1.6(a) Pay to Stay Contracts Schedule 1.6(b) Management Contracts Schedule 1.8(a) Gross Profit Schedule 1.8(b) UB Products Schedule 2. Subsidiary Information Schedule 2.2 Equity Securities Of Persons Other Than Subsidiaries Owned by Company Schedule 2.2(a) Equity Securities of Company, Subsidiaries and Those Listed on Schedule are Owned, Free, and Clear of Encumbrances Schedule 2.2(b) Optionholder List Schedule 2.4 Indebtedness and Liabilities Schedule 2.5 Absence of Certain Changes or Events Schedule 2.7 Accounts Receivable List Schedule 2.8 Financial Institution List Schedule 2.10 Real Property List Schedule 2.11(a) Patent, Trademarks, and Trade Name List -3- Schedule 2.11(b) Intangible Property Owned by Company Schedule 2.11(c) Exceptions to Intangible Property Schedule 2.13(a) Transfer of Assets for Company and Subsidiaries Schedule 2.15 Litigation Matters Schedule 2.19(a) Material Contracts with Company Schedule 2.19(b) Employee Information with Subsidiaries Schedule 2.20 Insurance Policies List Schedule 2.21(a) Tax Information Schedule 2.21(c) Exception List of Audit Reports and Similar Documents Schedule 2.21(d) Exception of Pending Claims Schedule 2.21(e) Exception to Section 280G or Sections 162(m) of the Code or Comparable Foreign Tax Laws Schedule 2.21(f) Exception to Section 1504 of the Code Schedule 2.21(g)(1) Establishment in foreign countries Schedule 2.21(g)(2) Arrangements which may be taxed as a US foreign partnership Schedule 2.22 Back Order List Schedule 2.23 Miscellaneous Material Contracts List Schedule 2.23.2 Breach of Performance Schedule 2.24 Government Contracts Schedule 2.26 Power of Attorney and Suretyships List Schedule 2.34 Seller Consent(s) List Schedule 2.35 Effect of Investigation Schedule 3.3 Parent of Buyer Consent(s) List Schedule 4.4 Seller's Option List Schedule 5.1(a) Seller's Manufacturing Services Terms and Conditions Schedule 5.1(b) Company's Terms and Conditions 99.1 Pro Forma Consolidated Financial Information of Tandem Computers Incorporated: a. Pro Forma Consolidated Balance Sheet at December 31, 1996 (Unaudited) b. Notes to Pro Forma Consolidated Balance Sheet at December 31, 1996 (Unaudited) -4- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 3, 1997 TANDEM COMPUTERS INCORPORATED By /s/ Enrico L. Pesatori --------------------------------------- Enrico L. Pesatori President, Chief Operating Officer and Acting Chief Financial Officer -5- EXHIBIT INDEX ------------- Exhibit No. Description 2.1 Stock Purchase Agreement dated January 17, 1997 between Newbridge Networks Corporation, Newbridge Networks, Inc. and Tandem Computers Incorporated. The following Exhibits to this Stock Purchase Agreement are appended to Exhibit 2.1: Exhibit 1.3 Escrow Agreement Exhibit 2.3A 9/30/96 Financial Statements Exhibit 2.3B 12/31/96 Financial Statements Exhibit 2.11A Cross License Exhibit 2.11B Trademark License Exhibit 2.12 Proprietary Information and Rights Agreement Schedules to this Agreement omitted from this report will be furnished to the Securities and Exchange Commission upon request. 99.1 Pro Forma Consolidated Financial Information of Tandem Computers Incorporated. a. Pro Forma Consolidated Balance Sheet at December 31, 1996 (Unaudited) b. Notes to Pro Forma Consolidated Balance Sheet at December 31, 1996 (Unaudited) -6- EX-2.1 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT by and among NEWBRIDGE NETWORKS CORPORATION, NEWBRIDGE NETWORKS, INC and TANDEM COMPUTERS INCORPORATED January 17, 1997 EXHIBITS -------- Exhibit 1.3 Escrow Agreement Exhibit 2.4A [SIC] 9/30/96 Financial Statements Exhibit 2.4B [SIC] 12/31/96 Financial Statements Exhibit 2.11A Cross License Exhibit 2.11B Trademark License Exhibit 2.12 Proprietary Information and Rights Agreements i TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS; PURCHASE AND SALE............................. 1 1.1 Definitions................................................ 1 1.2 Transfer of Stock by Seller................................ 5 1.3 Purchase Price............................................. 5 1.4 Purchase Price Adjustments; Total Purchase Price........... 5 1.5 Funding Adjustment......................................... 6 1.6 Retention Adjustment....................................... 6 1.7 Tax Adjustment............................................. 6 1.8 Earn-Out................................................... 7 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER................... 8 2.1 Organization and Authority................................. 8 2.2 Capitalization; Subsidiaries............................... 9 2.3 Financial Statements; Auditors Reports .................... 10 2.4 Absence of Liabilities..................................... 10 2.5 Absence of Certain Changes or Events....................... 11 2.6 Inventories................................................ 12 2.7 Accounts Receivable........................................ 12 2.8 Bank Accounts.............................................. 13 2.9 Personal Property.......................................... 13 2.10 Real Property.............................................. 13 2.11 Intangible Property........................................ 13 2.12 Protection of Intangible Property and Confidential Information................................................ 14 2.13 Transferred Assets......................................... 14 2.14 Product Warranties and Returns............................. 14 2.15 Litigation................................................. 14 2.16 Permits.................................................... 15 2.17 Compliance with Law........................................ 15 2.18 Minute Books............................................... 15 2.19 Personnel.................................................. 15 2.20 Insurance.................................................. 16 2.21 Taxes...................................................... 16 2.22 Order Backlog.............................................. 18 2.23 Material Contracts......................................... 18 2.24 Government Contracts....................................... 19 2.25 Absence of Environmental Liabilities....................... 21 2.26 Power of Attorney and Suretyships.......................... 22 2.27 Certain Payments........................................... 22 2.28 Hart-Scott Rodino Notice................................... 23 2.29 Resignations of Directors.................................. 23 2.30 Brokers and Finders........................................ 23 2.31 Accuracy of Documents and Information...................... 23 2.32 Disclosure in Schedules.................................... 23 2.33 Authority Relating to this Agreement; No Violation of Other Instruments....................................... 24 2.34 Consents................................................... 24 2.35 Effect of Investigation.................................... 24 i TABLE OF CONTENTS ----------------- (continued) Page ---- ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER...................................................... 25 3.1 Organization and Authority................................. 25 3.2 Authority Relating to this Agreement; No Violation of Other Instruments....................................... 25 3.3 Consents................................................... 25 3.4 Hart-Scott-Rodino Notice................................... 26 3.5 Brokers and Finders........................................ 26 ARTICLE IV INDEMNITY AND SET-OFF...................................... 26 4.1 Indemnity.................................................. 26 4.2 Claims..................................................... 27 4.3 Set-off under Escrow Agreement............................. 28 4.4 Limitations................................................ 28 ARTICLE V COVENANTS.................................................. 29 5.1 Operational Support........................................ 29 5.2 Tax Covenants.............................................. 29 5.3 Cooperation................................................ 31 5.4 Transferred Inventory...................................... 31 ARTICLE VI MISCELLANEOUS.............................................. 31 6.1 Announcements.............................................. 31 6.2 Assignment................................................. 31 6.3 Expenses................................................... 32 6.4 Further Assurances......................................... 32 6.5 Notices.................................................... 32 6.6 Entire Agreement and Modification.......................... 32 6.7 Survival of Terms.......................................... 33 6.8 Governing Law.............................................. 33 6.9 Severability............................................... 33 6.10 Headings................................................... 33 6.11 Counterparts............................................... 33 6.12 Mutual Contribution........................................ 33 6.13 Dispute Resolution; Arbitration............................ 33 ii STOCK PURCHASE AGREEMENT ------------------------ This STOCK PURCHASE AGREEMENT (the "Agreement") dated January 17, 1997 by and among Newbridge Networks Corporation, a corporation organized under the laws of Canada ("Parent"), Newbridge Networks, Inc., a Delaware corporation and wholly owned subsidiary of Parent ("Buyer") and Tandem Computers Incorporated, a Delaware corporation ("Seller"), to be effective as of December 31, 1996 (the "Effective Date"). R E C I T A L S - - - - - - - - A. Seller owns all of the outstanding capital stock (the "Stock") of Ungermann-Bass Networks, Inc., a Delaware corporation doing business as UB Networks, Inc. (the "Company"). B. Subject to the terms and conditions of this Agreement, Seller desires to sell, and Parent desires to have Buyer purchase, the Stock of the Company for the consideration described herein. THE PARTIES AGREE as follows: ARTICLE I DEFINITIONS; PURCHASE AND SALE ------------------------------ 1.1 Definitions. When used in this Agreement, except as otherwise expressly ----------- provided, the following terms shall have the following meanings: "12/31/96 Balance Sheet" shall have the meaning set forth in Section 2.3. ---------------------- ----------- "Adjusted Purchase Price" shall have the meaning set forth in Section 1.4. ----------------------- ----------- "Affiliate" shall mean any entity which controls, is controlled by or is --------- under common control with a party. An entity shall be regarded as in control of another entity if it owns or controls at least 50% of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority). "Base Purchase Price" shall have the meaning set forth in Section 1.3. ------------------- ----------- "Business" shall mean the business of the Company and its Subsidiaries -------- taken together. "Closing Date" shall mean the date hereof. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Company" shall mean Ungermann-Bass Networks, Inc., a Delaware corporation ------- doing business as UB Networks, Inc. "Common Stock" shall have the meaning set forth in Section 2.2. ------------ ----------- "Contract" shall mean any agreement, arrangement, bond, commitment, -------- franchise, indemnity, indenture, instrument, lease, purchase order, sales order, license or understanding, whether or not in writing, to which the Company or a Subsidiary is a party. "Earn-out" shall have the meaning set forth in Section 1.8. -------- ----------- "Effective Date" shall mean December 31, 1996. -------------- "Employee Plans" shall mean all present and prior (including terminated and -------------- transferred) plans, programs, agreements, arrangements and methods of contributions or compensation (including all amendments to and components of the same, such as a trust with respect to a plan) providing any remuneration or benefits, other than current cash compensation, to any current or former employee of Company or any Subsidiary or to any other person who provides services directly to Company or any Subsidiary, (excluding employees of Seller and its Affiliates other than Company and its Subsidiaries), whether or not such plan or plans, programs, agreements, arrangements and methods of contribution or compensation are subject to ERISA and/or qualified under the Code. The term "Employee Plan" includes, but is not limited to, pension, retirement, profit sharing, percentage compensation, stock purchase, stock option, bonus and non-qualified deferred compensation plans. The term "Employee Plan" also includes, but it not limited to, disability, medical, dental, workers compensation, health insurance, life insurance or other death benefits, incentive, severance plans, vacation benefits and fringe benefits. "Equity Securities" shall mean any capital stock or other equity interest ----------------- or any securities convertible into or exchangeable for capital stock or any other rights, warrants or options to acquire any of the foregoing securities. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as ----- amended, and the related regulations and published interpretations. "Escrow Agreement" shall have the meaning set forth in Section 1.3. ---------------- ----------- "Escrow Holder" shall have the meaning set forth in Section 1.3. ------------- ----------- 2 "Financial Statements" shall have the meaning set forth in Section 2.3. -------------------- "GAAP" shall mean generally accepted United States accounting principles, ---- as in effect from time to time. "Governmental Body" shall mean any: (a) nation, state, commonwealth, ----------------- province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal). "Government Bid" shall mean any quotation, bid or proposal submitted to any -------------- Governmental Body or any proposed prime contractor or higher-tier subcontractor of any Governmental Body. "Government Contract" shall mean any prime contract, subcontract, letter ------------------- contract, purchase order or delivery order executed or submitted to or on behalf of any Governmental Body or any prime contractor or higher-tier subcontractor, or under which any Governmental Body or any such prime contractor or subcontractor otherwise has or may acquire any right or interest. "Gross Profit" shall have the meaning set forth in Section 1.8. ------------ ----------- "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of ------- 1976, as amended. "Intangible Property" shall mean all patents, trademarks, trade names, ------------------- copyrights, processes, designs, formulas, inventions, trade secrets, know-how, technology or other proprietary rights related to Company's or any Subsidiary's products or services and necessary to the conduct of the Business. "Legal Requirement" shall mean any federal, state, local, municipal, ----------------- foreign or other law, statute, constitution, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body. "Liens" shall mean all liens, charges, easements, security interests, ----- mortgages, conditional sale contracts, equities, rights of way, covenants, restrictions, title defects, objections, claims or other encumbrances. "Material Adverse Effect" shall mean any breach, ----------------------- 3 change or other matter that (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in this Agreement but for the presence of "Material Adverse Effect" or other materiality qualifications, or any similar qualifications, in such representations and warranties) would have a material adverse effect on the financial condition, assets, liabilities, business, prospects or results of operations of the Company and its Subsidiaries taken together. "Management Contracts" shall have the meaning set forth in Section 1.6. -------------------- ----------- "Material Contract" shall have the meaning set forth in Section 2.23. ----------------- ------------ "Partial Tax Year" means a taxable year which begins prior to the date ---------------- hereof, includes the date hereof, but does not end on the date hereof. "Pay to Stay Contracts" shall have the meaning set forth in Section 1.6. --------------------- ----------- "Person" shall mean an association, corporation, individual, partnership, ------ trust or any other entity or organization. "Permits" shall mean any license, permit, franchise, certificate of ------- authority, or order, or any waiver of the foregoing, required by any Governmental Body. "Pre-Closing Partial Period" shall mean the portion of the fiscal year of -------------------------- the Company beginning on October 1, 1996 and ending on the Closing Date. "Post-Effective Date Partial Period" shall mean the portion of the tax year ---------------------------------- of the Company beginning on the day following the Effective Date. "Pre-Effective Date Partial Period" shall mean the portion of the fiscal --------------------------------- year of the Company beginning on October 1, 1996 and ending on the Effective Date. "Real Property" shall have the meaning set forth in Section 2.10. ------------- ------------ "Stock" shall mean all of the outstanding capital stock of Company. ----- "Subsidiary" shall mean any Person in which the Company has a direct or ---------- indirect equity ownership interest of 50% or more. "Tax" shall mean any tax (including any income tax, --- 4 franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Governmental Body. "Tax Return" shall mean any return (including any information return), ---------- report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax. "Total Purchase Price" shall have the meaning set forth in Section 1.4. -------------------- ----------- "UB Products" shall have the meaning set forth in Section 1.8. ----------- ----------- 1.2 Transfer of Stock by Seller. On the Closing Date and subject to the --------------------------- terms and conditions of this Agreement, Seller shall sell the Stock to Buyer, free and clear of all Liens, and deliver certificates evidencing the Stock to Buyer. The certificates shall be properly endorsed for transfer to, or accompanied by a duly executed stock power in favor of, Buyer. 1.3 Purchase Price. On the Closing Date and subject to the terms and -------------- conditions of this Agreement, Buyer shall purchase the Stock from Seller and Buyer shall pay to Seller the sum of (U.S.) $118,000,000 (the "Base Purchase Price"). (U.S.) $106,200,000 of the Base Purchase Price shall be payable by wire transfer of immediately available funds and the balance of (U.S.) $11,800,000 shall be payable by delivery of a check payable to the order of Chemical Trust Company of California , as escrow holder ("Escrow Holder") pursuant to an escrow agreement between Seller, Buyer and Escrow Holder attached hereto as Exhibit 1.3 ----------- (the "Escrow Agreement"). 1.4 Purchase Price Adjustments; Total Purchase Price. The Base Purchase ------------------------------------------------ Price shall be subject to the adjustments set forth in Sections 1.5, 1.6 and 1.7 ------------ --- --- below, such Purchase Price as adjusted being the "Adjusted Purchase Price." The Adjusted Purchase Price shall be increased by any amounts paid by Buyer to Seller pursuant to the Earn-Out (the Adjusted Price as so increased being the "Total Purchase Price"). 5 1.5 Funding Adjustment. The Base Purchase Price shall be adjusted for (a) ------------------ any net cash payments made by Seller to or on behalf of Company and its Subsidiaries in the ordinary course of business consistent with past practices from the Effective Date to the Closing Date not already included in the Base Purchase Price and a true-up of the approximately (U.S.) $5,000,000 U.K. loan repayment and (b) simple interest on Seller's cash advances to Company and its Subsidiaries between the Effective Date and the Closing Date at the rate of six percent per annum (the "Funding Adjustment"). Seller shall deliver its calculation of the Funding Adjustment to Parent within three business days of the Closing Date. Parent shall have three business days to review Seller's calculation of the Funding Adjustment and shall notify Seller in writing ("Parent's Objection") of any disagreement, setting forth a specific description of the basis of Parent's Objection. If Parent and Seller are unable to resolve all of their disagreements with respect to the determination within ten days following the completion of the Seller's review of Buyer's Objection, they shall refer their remaining differences to KPMG Peat Marwick (the "CPA Firm") who shall, acting as experts and not as arbitrators, determine with respect to the remaining differences so submitted, any adjustment to the Funding Adjustment. The parties shall instruct the CPA Firm to deliver its written determination to Buyer and Parent no later than the twentieth day after the remaining differences underlying Buyer's Objection are referred to the CPA Firm. The CPA Firm's determination shall be conclusive and binding upon Buyer and Parent. The fees and disbursements of the CPA Firm shall be shared equally by Buyer and Parent. 1.6 Retention Adjustment. The Base Purchase Price shall be decreased by (a) -------------------- 100 percent of payments made by Company pursuant to the contracts listed on Schedule 1.6(a) hereto (the "Pay to Stay Contracts"), (b) 100 percent of the - --------------- payments made by Company pursuant to the contracts listed on Schedule 1.6(b) --------------- hereto (the "Management Contracts"), and (c) 50 percent of the lesser of (1) payments made by Company pursuant to any new Company retention plan that may be adopted after the Closing Date and that are to persons who are covered by the Management Contracts but do not receive payments under such contracts or (2) the amount such persons would be entitled to receive if the criteria of the Management Contracts were met. The payment for each such adjustment shall be made by Seller promptly upon receipt of notice and reasonable evidence from Company of a payment requiring the adjustment. 1.7 Tax Adjustment. -------------- (a) The Purchase Price has been calculated on the assumption that the Available Tax Savings to Buyer after Seller files its 1996 and 1997 United States Federal income tax returns shall be (U.S.) $20,000,000. For the purposes hereof, "Available Tax Savings" shall mean: (i) 34% of Company's and its U.S. 6 Subsidiaries' net operating loss carryforwards under Section 172 of the Code for regular United States Federal income tax purposes; (ii) 34% of any net built-in loss of the Company or any of its U.S. Subsidiaries within the meaning of Section 382 of the Code; (iii) to the extent not included in (i) or (ii), 34% of the deductible compensation paid by the Company or any of its U.S. Subsidiaries under the UB Retention Plan and reimbursed by Seller; (iv) 100% of Company's and its U.S. Subsidiaries' research credits which constitute a business credit carryforward under Section 39 of the Code for United States Federal income tax purposes to the extent such research credits will be available to by Buyer under Section 383 of the Code and will not be unavailable for use by Buyer by reason of the limitations on carryforwards contained in Section 39 of the Code and the limitations on use (including the ordering rules) contained in Section 383 of the Code and the Treasury Regulations thereunder; less (v) (U.S.) $2,720,000. (b) Within thirty days of the date Seller files its 1997 United States Federal income tax return, but in no event later than August 1, 1998, Seller shall deliver to Parent its calculation of the Available Tax Savings. Subject to the provisions of Section 1.6(c) hereof, the Base Purchase Price shall be decreased by 50 cents for every dollar the Available Tax Savings are below (U.S.) $20,000,000 or increased 50 cents for every dollar the Available Tax Savings exceeds (U.S.) $20,000,000; provided that the Base Purchase Price shall -------- not be increased by more than (U.S.) $1,000,000 and that the party required to make a payment pursuant to such adjustment shall promptly pay the other party. (c) Parent shall have fifteen days to review Seller's calculation of the Available Tax benefits under Section 1.6(b), and shall notify Seller in writing -------------- ("Parent's Objection") of any disagreement, setting forth a specific description of the basis of Parent's Objection and the adjustment which Buyer believes should be made. Seller shall have fifteen days to review and respond to Parent's Objection. If Parent and Seller are unable to resolve all of their disagreements with respect to the determination within ten days following the completion of the Seller's review of Parent's Objection, they shall refer their remaining differences to the CPA Firm who shall, acting as experts and not as arbitrators, determine with respect to the remaining differences so submitted, any adjustment to the Available Tax Savings. The parties shall instruct the CPA Firm to deliver its written determination to Parent and Seller no later than the twentieth day after the remaining differences underlying Parent's Objection are referred to the CPA Firm. The CPA Firm's determination shall be conclusive and binding upon Parent and Seller. The fees and disbursements of the CPA Firm shall be shared equally by Parent and Seller. 7 1.8 Earn-Out. -------- (a) For each of the first two four-quarter periods commencing with the calendar quarter beginning January 1, 1997, the Buyer will pay to Seller 50% of the Gross Profit generated on UB Products, to the extent such Gross Profit is in excess of (U.S.) $108,000,000 for such four-quarter period (the "Earn-Out"). For purposes of this calculation, "Gross Profit" shall be computed in accordance with GAAP and the historical practices of Company as set forth on Schedule -------- 1.8(a) hereto. The products to be included in such calculation shall be those - ------ products listed on Schedule 1.8(b) hereto (the "UB Products"). The Earn-Out will --------------- be payable at the end of each four-quarter period based on the Gross Profit during such period. The calculation for each such period shall be made on a non-cumulative basis, with no reach back or forward. (b) Within thirty days of the end of each four quarter period, Parent shall deliver to Seller its calculation of Gross Profits for such period, which shall disclose in reasonable detail the calculation of such Gross Profit, including any adjustments and reserves impacting the calculation, consistent with the basis for the established calculation formula. Seller shall have fifteen days to review Parent's calculation of the Earn-Out, and shall notify Parent in writing ("Seller's Objection") of any disagreement, setting forth in reasonable detail the basis of Seller's Objection and the adjustment which Seller believes should be made. Seller shall have fifteen days to review and respond to Parent's Objection. If Parent and Seller are unable to resolve all of their disagreements with respect to the determination within ten days following the completion of the Parent's review of Seller's Objection, they shall refer their remaining differences to the CPA Firm who shall, acting as experts and not as arbitrators, determine with respect to the remaining differences so submitted, any adjustment to the Available Tax Savings. The parties shall instruct the CPA Firm to deliver its written determination to Parent and Seller no later than the twentieth day after the remaining differences underlying Parent's Objection are referred to the CPA Firm. The CPA Firm's determination shall be conclusive and binding upon Parent and Seller. The fees and disbursements of the CPA Firm shall be shared equally by Parent and Seller. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller hereby represents and warrants to Parent and Buyer that: 2.1 Organization and Authority. Seller and Company are corporations duly -------------------------- organized, validly existing and in good 8 standing under the laws of the State of Delaware. Seller has all necessary corporate power and authority to execute, deliver and perform this Agreement and any related agreements to which it is a party. Schedule 2.1 lists (a) all ------------ Subsidiaries and correctly sets forth the capitalization of each Subsidiary and ownership interest of Company or any other Person therein, (b) the jurisdiction in which each Subsidiary is organized, (c) each jurisdiction in which Company and each Subsidiary is or is required to be qualified or licensed to do business as a foreign Person, except where failure to be so qualified, licensed or in good standing would not have a Material Adverse Effect; (d) a brief summary of each Subsidiary's business and material operations, and (e) the current directors and executive officers of Company and of each Subsidiary. Each of the Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, except where failure to be in good standing would not have a Material Adverse Effect. Each of Company and its Subsidiaries has all necessary corporate power and authority to own its properties and assets and to carry on its business as now conducted and is duly qualified or licensed to do business as a foreign Person in each jurisdiction where it conducts business or has assets, except where failure to be so qualified, licensed or in good standing would not have a Material Adverse Effect. Neither Company nor Seller has received notice of any failure of Company or any Subsidiary to be so qualified, licensed or in good standing in any jurisdiction. 2.2 Capitalization; Subsidiaries. Seller owns all of the outstanding ---------------------------- shares of capital stock of Company beneficially and of record. Except as described in Schedule 2.1, Company owns all of the outstanding Equity Securities ------------ of each of the Subsidiaries, beneficially and of record. Schedule 2.2 lists all ------------ Equity Securities of Persons other than Subsidiaries owned beneficially and of record by Company. All of such Equity Securities of Company, Subsidiaries and those listed on Schedule 2.2(a) are owned free and clear of any Encumbrance. --------------- Buyer will acquire good and marketable title to and complete ownership of the Stock, free of any Lien. The authorized capital stock of Company consists of 91,000,741 shares of capital stock of which 65,000,000 are denominated Common Stock, $.001 par value (the "Common Stock"), and 5,000,000 shares are denominated Preferred Stock, $.001 par value, and 21,000,741 shares are denominated Class A Common Stock, $.001 par value. There are 21,000,741 shares of Class A Common Stock outstanding and held by Seller and no shares denominated as Preferred Stock or Common Stock are outstanding. Company has outstanding options to purchase 2,220,334 shares of Common Stock. Schedule 2.2(b) lists the --------------- names of each person holding such options and the exercise price, expiration date and the number of shares of Common Stock issuable upon exercise of each such option. Except as set forth in Schedule 2.2(b), there are no outstanding --------------- Contracts or other rights to subscribe for or purchase, or Contracts or other obligations to issue or grant any rights to acquire, any Equity Securities of Company or any 9 Subsidiary, or to restructure or recapitalize Company or any Subsidiary. Except as set forth in Schedule 2.2(b), there are no outstanding --------------- Contracts of Seller, Company or any Subsidiary to repurchase, redeem or otherwise acquire any Equity Securities of Company or anySubsidiary, nor are there any Contracts of any other Person to do so. All outstanding Equity Securities of Company and its Subsidiaries, are duly authorized, validly issued, fully paid and nonassessable and were issued in conformity with applicable laws. There are no preemptive rights in respect of any Equity Securities of Company or any Subsidiary. Any Equity Securities of Company or any Subsidiary which were issued and reacquired by any of such entities were so reacquired (and, if reissued, so reissued) in compliance with all applicable laws, and neither Company nor any Subsidiary has any outstanding obligation or liability with respect thereto. 2.3 Financial Statements; Auditors Reports. Seller has delivered unaudited -------------------------------------- consolidated and consolidating financial statements of Company and its Subsidiaries (the "Financial Statements") to Parent as follows: Financial Statement Exhibit - ------------------------------------------------- -------------------- Balance Sheet of Company as of September 30, 1996 Attached hereto as and Statements of Income and Cash Flow for the Exhibit 2.3A fiscal year ended September 30, 1996 ------------ Balance Sheet of Company as of December 31, 1996 Attached hereto as ("12/31/96 Balance Sheet") and Statements of Exhibit 2.3B Income and Cash Flow for the period from ------------ September 30, 1996 through December 31, 1996 Each Financial Statement is in accordance with the books and records of Company and its Subsidiaries, fairly presents the financial position of Company and its Subsidiaries at the date indicated, and the incomes and expenses, results of operations and cash flow of Company and its Subsidiaries for the period indicated, and has been prepared in accordance with GAAP consistently applied, except that the Financial Statements do not contain detailed footnotes in conformity with GAAP requirements. Company or Seller has also delivered to Parent all management reports to Company or Seller or their respective Boards of Directors from Company's or Seller's auditors (or from any previous auditors of Company or Seller) relating to the Business received during the past five years and Company's or Seller's responses thereto. 2.4 Absence of Liabilities. Except as set forth in Schedule 2.4, as of ---------------------- ------------ December 31, 1996, neither the Company nor any Subsidiary had any indebtedness or liability (fixed or 10 contingent, accrued or unaccrued) which is not shown or provided for in accordance with GAAP on the 12/31/96 Balance Sheet. Except as set forth on Schedule 2.4, as of the Effective Date, there were no amounts owed by the - ------------ Company or any Subsidiary to Seller. 11 2.5 Absence of Certain Changes or Events. Since September 30, 1996, except ------------------------------------ as shown or provided for in accordance with GAAP on the 12/31/96 Balance Sheet or as set forth in Schedule 2.5, there have been no changes in the ------------ financial condition, assets, liabilities, business, prospects, or the results of operations of Company or any Subsidiary, other than changes in the ordinary course of business which have not had a Material Adverse Effect. Without limiting the foregoing, since September 30, 1996, except as shown or provided for in accordance with GAAP on the 12/31/96 Balance Sheet, as set forth in Schedule 2.5 or as contemplated by this Agreement: (i) neither the Company nor - ------------ any Subsidiary has entered into any transaction other than in the ordinary course of business; (ii) there have been no losses or damage to any of the assets of the Company or any Subsidiary due to fire or other casualty which are not covered by insurance; (iii) there has been no increase or decrease in the rates of direct compensation payable or to become payable by Company or any Subsidiary to any employee, agent or consultant (other than routine increases made in the ordinary course of business), or any bonus, percentage compensation, service award or other like benefit, granted, made or accrued to or to the credit of any such employee, agent or consultant, or any welfare, pension, retirement or similar payment or arrangement made or agreed to be made by Company or a Subsidiary (other than such events occurring pursuant to any previously existing benefit plan), nor has Company or any Subsidiary through negotiation or otherwise, made any commitment or incurred any liability or obligation to any labor organization; (iv) neither the Company nor any Subsidiary, nor any third party thereto, has executed, created, amended or terminated any Contract except in the ordinary course of business; (v) neither the Company nor any Subsidiary has declared or paid any dividend or made any distribution on its capital stock, nor redeemed, purchased or otherwise acquired any of its capital stock; (vi) neither the Company nor any Subsidiary has received notice that there has been a cancellation of an order for its products or services or a loss of a customer not reflected in Company or Subsidiary backlog as of December 31, 1996; (vii) there has been no resignation or termination of employment of any officer or key employee of the Company or any Subsidiary and neither Seller nor Company knows of the impending resignation or termination of employment of any officer or key employee of the Company or any Subsidiary, except as may be contemplated by Parent; (viii) there has been no change in the contingent obligations of Company or any Subsidiary by way of guaranty, endorsement, indemnity, warranty or otherwise; (ix) there have been no loans made by Company or any Subsidiary to any of their employees, officers or directors, other than travel advances and other advances made in the ordinary course of business; (x) there has been no waiver or compromise by the Company or any Subsidiary of a right or of a debt owed to it; (xi) neither the Company nor any Subsidiary has made or agreed to make any disbursements or payments of any kind to any member or members of its Board of Directors other than routine and ordinary payments in respect of service as such a member; (xii) there has 12 been no individual capital expenditure by the Company or its Subsidiaries exceeding (U.S.) $100,000; (xiii) there has been no change in accounting methods or practices (including without limitation, any change in depreciation or amortization policies or rates) by the Company; (xiv) there has been no revaluation by the Company of any of its assets; (xv) there has been no sale or transfer of any of the Company's or the Subsidiaries' assets, except in the ordinary course of business or as set forth on Schedule 2.13(a); (xvi) there has ---------------- been no loan by the Company or any Subsidiary to any person or entity other than in the ordinary course of business; (xvii) there has been no commencement or notice of threat of commencement of any proceeding against or investigation of the Company or any Subsidiary or their affairs by a Governmental Body; (xviii) there has been no revocation of any license or right to do business granted to the Company or any Subsidiary; (xix) the Company has not paid any obligation or liability (fixed, contingent or otherwise) or discharged or satisfied any Lien, or settled any liability, claim, dispute, proceeding, suit or appeal pending or threatened against it, except in the ordinary course of business; and (xx) there has been no agreement or commitment by the Company to do or perform any of the acts described in this Section 2.5. ----------- 2.6 Inventories. All inventories of the Company and its Subsidiaries ----------- included on the 12/31/96 Balance Sheet are of a quantity and quality consistent with good business practices, net of any reserves shown on the 12/31/96 Balance Sheet (which reserves were calculated on a basis consistent with GAAP), and were purchased in the ordinary course of the Business. The amounts shown for inventories on the Balance Sheet have been determined in accordance with GAAP on a first-in, first-out basis, with finished goods, raw materials and work-in-process stated at the lower of cost or net realizable value. All of the inventory and other goods manufactured by Company were produced in compliance with all applicable requirements of Sections 6, 7 and 12 of the Fair Labor Standards Act, as amended, and the regulations and orders issued under Section 14 thereof by the United States Department of Labor. 2.7 Accounts Receivable. The accounts receivable of Company reflected in ------------------- the 12/31/96 Balance Sheet represent sales actually made in the ordinary course of business, and have been properly accrued in accordance with GAAP net of any reserves shown on the 12/31/96 Balance Sheet (which reserves were calculated on a basis consistent with GAAP). Seller has delivered to Parent Schedule 2.7, ------------ which is a complete and accurate aging analysis of the receivables of Company and its Subsidiaries. In addition, Seller has delivered to Parent a complete and accurate list of all receivables of Company, UB Networks Limited and Ungermann-Bass Networks Kabushiki Kaisha. Except as set forth on Schedule 2.7, ------------ as of the Effective Date, there was no amount owed to the Company or any Subsidiary by Seller. 13 2.8 Bank Accounts. Schedule 2.8 lists each bank, trust company, savings ------------- ------------ institution, brokerage firm, mutual fund or other financial institution with which the Company or any Subsidiary has an account or safe deposit box and each credit card issued in the name of the Company or any Subsidiary and the names and identification of all persons authorized to draw thereon, have access thereto or have use thereof. 2.9 Personal Property. Company and its Subsidiaries own all fixed assets ----------------- and tangible personal property reflected in the 12/31/96 Balance Sheet, including, without limitation, all computers, equipment, supplies, furniture and fixtures, free and clear of all Liens. All such property is in good state of maintenance and repair, except for ordinary wear and tear. All of the leases to such property are valid and enforceable and are not in default. 2.10 Real Property. Schedule 2.10 lists all real property owned or leased ------------- ------------- by the Company or any Subsidiary (the "Real Property"). All of the leases to the Real Property are valid and enforceable and are not in default. The Real Property, the improvements located thereon, and the furniture, fixtures and equipment relating thereto (including plumbing, heating, air conditioning and electrical systems), conform to any and all applicable health, fire, safety, zoning, land use and building laws, ordinances and regulations, except where failure to comply with any such law, ordinance or regulation would not result in a Material Adverse Effect. Neither Company nor Seller has received notice of any lack of compliance with any such law, ordinance or regulation. There are no outstanding Contracts made by Company or any Subsidiary for any improvements made to the Real Property that have not been paid for or which are not reflected in the 12/31/96 Balance Sheet. 2.11 Intangible Property. All patents, trademarks and trade names ------------------- necessary to the conduct of the Business are listed on Schedule 2.11(a). ---------------- All Intangible Property is either (a) owned by the Company as sole and beneficial owner without restriction (including but not limited to charges, mortgages or licenses) or (b) is licensed to the Company under Contracts listed on Schedule 2.11(b). All Intangible Property owned by Seller which is necessary ---------------- to the conduct of the Business is licensed to the Company under the terms of the Cross License Agreement and Trademark Agreement between Company and Seller attached hereto as Exhibit 2.11A and Exhibit 2.11B, respectively. The conduct of ------------- ------------- the Business does not infringe, misuse or misappropriate any patent, trademark, trade name, copyright, process, design, formula, invention, trade secret, know-how, technology or other proprietary right of any other person. Except as otherwise noted on Schedule 2.11(c), no litigation is pending or has been ---------------- threatened against Company or any Subsidiary or any officer, director, shareholder, employee or agent of Company or any Subsidiary, for the infringement, misuse or 14 misappropriation of any patent, trademark, trade name, copyright, process, design, formula, invention, trade secret, know-how, technology or other proprietary right owned by any other person; nor, to the best of Seller's and Company's knowledge, does any basis exist for any such litigation. To the best of Seller's and Company's knowledge, there has been no infringement, misuse or misappropriation by any other person of any patent, trademark, trade name, copyright, process, design, formula, invention, trade secret, know-how, technology or other proprietary right belonging to Company or any Subsidiary. 2.12 Protection of Intangible Property and Confidential Information. -------------------------------------------------------------- Company or a Subsidiary and each employee of, and each consultant to, the Company or any Subsidiary who has worked on or contributed to the development of the Intangible Property has executed a proprietary information and inventions agreement substantially to the effect of one of the forms attached hereto as Exhibit 2.12 (each a "Proprietary Information and Rights Agreement"). No - ------------ individual employee or third-party contractor of, or consultant to, the Company or any Subsidiary who has worked on any Intangible Property has any individual rights to such Intangible Property. Neither the Company nor any Subsidiary has disclosed any confidential information of the Company or any Subsidiary, or any confidential information in the possession of the Company or any Subsidiary under an obligation of confidentiality to any third party, except pursuant to a valid and binding agreement that prevents disclosure or misuse of such information, except where such disclosure would not result in a Material Adverse Effect. 2.13 Transferred Assets. Company has transferred or assigned to Seller ------------------ those assets listed on Schedule 2.13(a). ---------------- 2.14 Product Warranties and Returns. Neither the Company nor any ------------------------------ Subsidiary has made any warranties or guarantees relating to the Company's or any Subsidiary's products that are not in the ordinary course of business and that have not been properly accrued in the 12/31/96 Balance Sheet in accordance with GAAP. Neither the Company nor any Subsidiary is subject to any pending or threatened product liability claim or action, and, to the best of Seller's and Company's knowledge, there is no basis for any claim or action in the future. 2.15 Litigation. Except as set forth on Schedule 2.15, there is no ---------- ------------- pending or, to Company's or Seller's knowledge, threatened action, suit, proceeding, arbitration or investigation, at law or in equity or otherwise in, for or by any court, other Governmental Body or arbitration to which Company or any Subsidiary, or any officer, director, shareholder, employee or agent of Company or any Subsidiary is a party or which could result in a Material Adverse Effect; nor, to Seller's and Company's knowledge, does any basis exist for any such action, suit, proceeding or investigation. Except as set forth on Schedule -------- 2.15, neither the Company nor any Subsidiary is subject - ---- 15 to any decree, judgment, order, law, regulation or award of any court, other Governmental Body or arbitration which could result in a Material Adverse Effect or which could prevent the transactions contemplated by this Agreement. 2.16 Permits. The Company and its Subsidiaries have at all times held all ------- permits that are required to permit each of them to conduct their respective businesses as now conducted, and all such permits are valid and in full force and effect and will remain so upon consummation of the transactions contemplated by this Agreement, except where failure to hold or have held any such permits would not result in a Material Adverse Effect. 2.17 Compliance with Law. The Company and its Subsidiaries are organized ------------------- and have conducted their respective businesses in accordance with all applicable laws, including without limitation export laws and regulations, and the forms, procedures and practices of the Company and its Subsidiaries are in compliance with all applicable laws in all respects, except where failure to comply would not result in a Material Adverse Effect. 2.18 Minute Books. Company or Seller has made available complete and ------------ accurate copies of the minute books of the Company and its Subsidiaries to Parent. The minute books reflect all material actions and proceedings taken to date by the respective shareholders, boards of directors and committees of the boards of directors of Company and its Subsidiaries, and such minute books contain true and complete copies of the charter documents of the Company and its Subsidiaries and all related amendments. 2.19 Personnel. Schedule 2.19(a) lists (i) all written Employee Plans, --------- ---------------- (ii) all written Contracts with directors, officers, management-level employees or unions, (iii) any other written Contracts applying generally to employees of Company or any Subsidiary, and (iv) all written Contracts with consultants providing services to Company or any Subsidiary at the rate of 32 hours per week or more, to which the Company or any Subsidiary is a party or is subject as of the date of this Agreement. Schedule 2.19(b) contains a complete ---------------- and accurate list of the following information for each employee of Ungermann-Bass Networks Kabushiki Kaisha and the European Subsidiaries: employer, name, birth date, hire date, job description and salary (other than routine increases in salary made in the ordinary course of business consistent with past practices). Neither the Company nor any Subsidiary is in default with respect to any obligation under the Employee Plans and other employment-related Contracts listed on Schedule 2.19(a), which default would result in a Material ---------------- Adverse Effect. Seller has made available to Parent complete and correct copies of all such written contractual obligations; there are no such oral obligations, except as referenced on Schedule 2.19(a). Except as set forth on Schedule ---------------- -------- 2.19(a), neither Seller, Company nor any Subsidiary has any union - ------- 16 contracts or collective bargaining agreements with, or any other obligations to, employee organizations or groups relating to the Business, nor is Seller, Company or any Subsidiary currently engaged in any labor negotiations relating to the Business except in minor grievances not involving any employee organization or group, nor, to the knowledge of Seller and Company, is the Company or any Subsidiary the subject of any union organizing activity affecting the Business. There is no pending or, to the best of Seller's and Company's knowledge, threatened labor dispute, strike or work stoppage affecting the Business. All Employee Plans and Contracts listed on Schedule 2.19(a) or ---------------- described in the materials included on Schedule 2.19(a) are in material ---------------- compliance with applicable provisions of ERISA and the Code, and there is no material unfunded liability with respect to such plans. Company and its Subsidiaries are in material compliance with all federal and state wage, tax, and withholding obligations for all current and former employees, whether or not correctly characterized as employees by Company or its Subsidiaries, including but not limited to personnel classified as freelancers, consultants, independent contractors, or temporary, casual or contract employees. Company and its Subsidiaries are also in material compliance with the terms of all Employee Plans for all such personnel, whether or not such personnel have been correctly characterized by Company or its Subsidiaries. 2.20 Insurance. Schedule 2.20 lists all insurance policies and bonds in --------- ------------- force with respect to Company and its Subsidiaries, its employees and its directors showing for each such policy or bond: (i) the owner; (ii) the coverage of such policy or bond; (iii) the name of the insurer; and (iv) the termination date of the policy or bond. All such insurance policies and bonds are in full force and effect. 2.21 Taxes. ----- (a) Schedule 2.21(a) contains a true and complete list of all types of ---------------- taxes paid or required to be paid by the Company and its Subsidiaries for each fiscal year ending after October 1, 1993 other than foreign taxes, and contains a statement of income or allocated consolidated net operating loss incurred in each such fiscal year for United States Federal income tax purposes and, for each loss as of the Closing Date, the last fiscal year for which such loss can be used to offset income for United States Federal income tax purposes. All Tax Returns required to be filed by or on behalf of the Company and each Subsidiary with any Governmental Body with respect to any taxable period after March 27, 1988 and ending on or before the Closing Date (the "Returns") (i) have been or will be filed when due, and (ii) have been, or will be when filed, accurately and completely prepared in all material respects in compliance with all applicable Legal Requirements. All amounts shown on the Returns to be due on or before the Closing Date have been paid. 17 (b) The Financial Statements fully accrue all actual and contingent liabilities for Taxes with respect to all periods through the dates thereof in accordance with GAAP. The Company has established, in the ordinary course of business and consistent with its past practices, accruals adequate for the payment of all Taxes for the period from September 30, 1996 through December 31, 1996, and from December 31, 1996 through the Closing Date, and Company has disclosed the dollar amount of such accruals to Buyer. (c) The Company has delivered to the Buyer accurate and complete copies of all audit reports and similar documents (to which Seller or the Company has access) relating to audits of the Returns not resolved prior to December 31, 1993. Except as set forth on Schedule 2.21(c), no extension or waiver of the ---------------- limitation period applicable to any of the Returns has been granted (by the Company, any Subsidiary or any other Person), and no such extension or waiver has been requested from Seller, the Company or any Subsidiary. (d) Except as set forth on Schedule 2.21(d), no claim or proceeding is ---------------- pending or, to Seller's or Company's knowledge, has been threatened against or with respect to the Company or any Subsidiary in respect of any Tax. There are no unsatisfied liabilities for Taxes (including liabilities for interest, additions to tax and penalties thereon and related expenses) with respect to any notice of deficiency or similar document received by the Company or any Subsidiary. Except as may exist with respect to a parcel of real property owned by the Company which is located in New Hampshire, there are no liens for Taxes upon any of the assets of the Company or any Subsidiary, except liens for current Taxes not yet due and payable. (e) Except as set forth on Schedule 2.21(e), there is no agreement, plan, ---------------- arrangement or other Contract covering any employee or independent contractor or former employee or independent contractor of the Company or any Subsidiary that, considered individually or considered collectively with any other such Contracts, will, or could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would not be deductible pursuant to Section 280G or Section 162(m) of the Code or comparable foreign Tax laws. (f) Neither the Company nor any Subsidiary is, or has ever been, a party to or bound by any tax indemnity agreement, tax sharing agreement, tax allocation agreement or similar Contract. Except as set forth on Schedule 2.21(f), Company ---------------- and any Subsidiary are not and, to Seller's knowledge, have never been includable corporations in an affiliated group of corporations, within the meaning of section 1504 of the Code, other than in the affiliated group of which Company was or Seller is the common parent corporation. (g) The Company has not filed a consent pursuant to 18 the collapsible corporation provisions of section 341(f) of the Code (or any corresponding provisions of state, local or foreign income Tax law) or agreed to have section 341(f)(2) of the Code (or any corresponding provisions of state, local or foreign income Tax law) apply to any disposition of any asset owned by it. None of the assets of the Company is property which the Company is required to treat a being owned by any other person pursuant to the so-called "safe harbor lease" provisions of former section 168(f)(8) of the Code. None of the assets of the Company is "tax-exempt use property" within the meaning of section 168(h) of the Code. The Company has not agreed to make, nor is it required to make, any adjustment under section 481(a) of the Code by reason of a change in accounting method or otherwise. Since March 27, 1988, Company has not participated in (and will not participate in) an international boycott within the meaning of section 999 of the Code. The Company is not, and has not been, a United States real property holding corporation (as defined in section 897(c)(2) of the Code) during the applicable period specified in section 897(c)(1)(A)(ii) of the Code. Except as set forth on Schedule 2.21(g)(1), neither the Company nor ------------------- any Subsidiary has a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country. Except as set forth in Schedule 2.21(g)(2), Company is ------------------- not a party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership for United States Federal income tax purposes. 2.22 Order Backlog. Schedule 2.22 comprises a statement of the aggregate ------------- ------------- backlog of orders for Company's and Subsidiaries' products as of December 31, 1996, listed by major product category. Except as set forth on Schedule 2.22, ------------- all such orders have been included in backlog on a basis consistent with the Company's historical practices and Seller is not aware of any customer who has placed an order included in such backlog having refused or who intends to refuse delivery of any ordered products in accordance with the terms of such orders. 2.23 Material Contracts. Each Contract that (a) is with an end-user who ------------------ either purchased more than (U.S.) $1,000,000 in goods and services from the Company and its Subsidiaries during the 1996 calendar year or from whom the Company and its Subsidiaries have a backlog of orders as of the Effective Date in excess of (U.S.) $500,000; (b) is with a reseller who purchased more than (U.S.) $1,000,000 in goods and services from the Company and its Subsidiaries during the 1996 calendar year; (c) provides for Company and its Subsidiaries to resell products of a third party, where such products are included on Company's or any Subsidiary's published price list, but excluding integration solution products; (d) is with a supplier of materials, parts, components or manufacturing services related to Company's or any Subsidiary's products or services from whom Company and its Subsidiaries purchased more than (U.S.) $1,000,000 of such goods or services during the 1996 calendar year or with whom the 19 Company and its Subsidiaries have outstanding purchase orders in excess of (U.S.) $500,000 as of the Effective Date, (e) contains a covenant by Company or any Subsidiary not to compete or otherwise significantly restricts the Business; (f) provides for the extension of credit other than consistent with prior Company practice; (g) provides for Company or any Subsidiary to borrow money; (h) grants a security interest or Lien in the property of Company or any Subsidiary, other an a purchase money security interest in the ordinary course of business; (i) requires exclusive purchase of goods or services used in the Business or is a requirements contract for such goods or services; (j) limits the ability of Company to conduct the Business in any material respect as to manner or place; (k) provides for a guaranty or indemnity by Company or any Subsidiary to a third party, other than a product or service warranty, intellectual property indemnity or indemnity related to negligence, in each case to the extent such warranty or indemnity is customary in the industry; (l) grants a power of attorney, agency or similar authority to another person or entity; (m) grants to any third party a right of first refusal with respect to the Stock or the material assets of Company; (n) has as a party any agency of the United States government, has been entered into since January 1, 1994, and pursuant to which more than (U.S.) $1,000,000 in goods in services have been purchased; (o) has as a party any Affiliate, officer or director or any associate of the Company, its Subsidiaries or Seller or any other company that is a member of the affiliated group that includes Seller and its Affiliates, (p) is listed on Schedule 2.11(b); or (q) is a Contract listed on Schedule 2.19(a); ---------------- ---------------- shall be deemed to be a Material Contract. Each Material Contract not listed on Schedule 2.11(b) or Schedule 2.19(a) is listed on Schedule 2.23. Seller has made - ---------------- ---------------- ------------- available to Parent complete and correct copies of the written Material Contracts, including all amendments and supplements. Schedule 2.23 includes a ------------- brief description of the material terms of all unwritten Material Contracts. Each Material Contract is valid, subsisting and enforceable in accordance with its terms; Company or the applicable Subsidiary has duly performed all its material obligations thereunder to the extent that such material obligations to perform have accrued, and Seller believes that Company or the applicable Subsidiary will be able to perform such obligations in the future; and no breach or default, alleged breach or default, or event which would (with the passage of time, notice or both) constitute a breach or default thereunder by Company or its Subsidiary or, to the best knowledge of Seller and Company, any other party or obligor with respect thereto, has occurred or as a result of this Agreement will occur, except where such breach or default would not result in a Material Adverse Effect. Except as set forth on Schedule 2.23, consummation of the ------------- transactions contemplated by this Agreement will not (and will not give any person a right to) terminate any Material Contract or modify any rights of, or accelerate or augment any obligation of, the Company or any Subsidiary included in a Material Contract. 21 2.24 Government Contracts. Since March 27, 1988, except as set forth in -------------------- Schedule 2.24, neither Seller nor Company has received a written notice stating ------------- or alleging, or has otherwise become aware, that: (i) either the Company or any Subsidiary has had any determination of noncompliance, entered into any consent order or undertaken any internal investigation relating directly or indirectly to any Government Contract or Government Bid; (ii) the Company or any Subsidiary has failed to comply in all material respects with all Legal Requirements with respect to all Government Contracts and Government Bids; (iii) the Company or any Subsidiary has, in obtaining or performing any Government Contract, violated any applicable procurement law or regulation or other material Legal Requirement; (iv) any facts set forth in or acknowledged by the Company or any Subsidiary in any certification, representation or disclosure statement submitted by the Company or any Subsidiary with respect to any Government Contract or Government Bid were not current, accurate and complete as of the date of submission; (v) the Company, any Subsidiary or any of their respective employees has been debarred or suspended from doing business with any Governmental Body, or any proceedings have been initiated against the Company, any Subsidiary or any employee of the Company or any Subsidiary that might result in such debarment or suspension; (vi) any negative determination of responsibility have been issued against the Company or any Subsidiary in connection with any Government Contract or Government Bid; (vii) any direct or indirect costs incurred by the Company or any Subsidiary have been questioned or disallowed as a result of a finding or determination of any kind by any Governmental Body; (viii) any Governmental Body, or prime contractor or higher-tier subcontractor of any Governmental Body, has withheld or set off, or threatened to withhold or set off, any amount due to the Company or any Subsidiary under any Government Contract; (ix) there have been any material irregularities, misstatements or omissions relating to any Government Contract or Government Bid that have led to or have a reasonable prospect of leading to (A) any administrative, civil, criminal or other investigation, legal proceeding or indictment involving the Company, any Subsidiary or any of their employees, (B) the questioning or disallowance of any costs submitted for payment by the Company or any Subsidiary, (C) the recoupment of any payments previously made to the Company or any Subsidiary, (D) a finding or claim of fraud, defective pricing, mischarging or improper payments on the part of the Company or any Subsidiary, or (E) the assessment of any penalties or damages of any kind against the Company or any Subsidiary; (x) there is or has been any (A) outstanding claim against the Company or any Subsidiary by, or dispute involving the Company or any Subsidiary with, any prime contractor, subcontractor, vendor or other Person arising under or relating to the award or performance of any Government Contract, (B) fact known by the Company upon which any such claim may be based or which may give rise to any such dispute, (C) final decision of any Governmental Body against the Company or any Subsidiary; (xi) Company or any Subsidiary is undergoing, has undergone an audit, and the Company has no 21 knowledge of any impending audit, arising under or relating to any Government Contract (other than normal routine audits conducted in the ordinary course of business); (xii) the Company or any Subsidiary has entered into any financing arrangement or assignment of proceeds with respect to the performance of any Government Contract; (xiii) any payment has been made by the Company or any Subsidiary or by any Person acting on the Company's or any Subsidiary's behalf to any Person (other than to any bona fide employee or agent of the Company or any Subsidiary) which is or was contingent upon the award of any GovernmentContract or which would otherwise be in violation of any applicable procurement law or regulation or any other Legal Requirement; (xiv) the Company's and each Subsidiary's cost accounting system is not in material compliance with applicable regulations and other applicable Legal Requirements, or has been determined by any Governmental Body not to be in material compliance with any Legal Requirement; (xv) the Company or any Subsidiary has failed to comply with all applicable regulations and other Legal Requirements and with all applicable contractual requirements relating to the placement of legends or restrictive markings on technical data, computer software and other Intangible Property; (xvi) the Company or any Subsidiary has made any disclosure to any Governmental Body pursuant to any formal agency disclosure program; (xvii) the Company or any Subsidiary has failed to reach agreement with the cognizant government representatives approving and "closing" all indirect costs charged to Government Contracts for any years which are not closed; (xviii) the responsible government representatives have failed to agree with the Company and each Subsidiary on the "forward pricing rates" that the Company or such Subsidiary is charging on cost-type Government Contracts and including in Government Bids; and (xix) with the exception of potential novation or change-of-name agreement that may be required by a Governmental Body under applicable Legal Requirements, the Company or any Subsidiary is or will be required to make any filing with or give any notice to, or to obtain any consent from, any Governmental Body under or in connection with any Government Contract or Government Bid as a result of or by virtue of (A) the execution, delivery or performance of this Agreement or any of the other agreements referred to in this Agreement, or (B) the consummation of the transactions contemplated by this Agreement. 2.25 Absence of Environmental Liabilities. At all times prior to the ------------------------------------ Closing Date, the Company and its Subsidiaries and, to the best of Seller's and Company's knowledge, all previous owners, lessees and occupants of the Real Property ("Prior Occupants") have complied with all applicable environmental laws, orders, regulations, rules and ordinances adopted, imposed or promulgated by any Governmental Body relating to the Real Property. Neither the Company, its Subsidiaries nor the Real Property is in violation of any federal, state or local law, ordinance or regulation relating to industrial hygiene, worker safety, Hazardous Material (as defined below) or waste or toxic materials on, under or about any of the properties, 22 including soil and ground water conditions. To the best of Seller's and Company's knowledge, no current use of the Real Property constitutes a public or private nuisance. All environmental licenses, permits, clearances, consents and authorizations material to the operations of the Company and its Subsidiaries and the conduct of those operations at or on the Real Property have been duly obtained and, to the best of Seller's and Company's knowledge, are in full force and effect. Any handling, transportation, storage, treatment or use of Hazardous Material (as defined below) that has occurred on the Real Property during the tenancy of the Company and its Subsidiaries and, to the best of Seller's and Company's knowledge, at all times prior to the Closing Date has been in compliance with all laws, regulations and orders relating to Hazardous Material. As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local Governmental Body, the State of California, any other state, or the United States government, including without limitation, any material or substance which is: (1) petroleum; (2) asbestos; (3) urea formaldehyde; (4) polychlorinated biphenyls; (5) listed as a chemical known to the State of California to cause cancer or reproductive toxicity pursuant to Section 25249.8 of the California Health and Safety Code, Division 20, Chapter 6.6, (Safe Drinking Water and Toxic Enforcement Act of 1986); or (6) defined as a "hazardous substance," "hazardous material" or "hazardous waste" under the relevant sections of any statute, ordinance, regulation or similar governmental mandate under any local, state or federal law, including, without limitation, under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act) or Section 101 of the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA"). The Real Property is free of Hazardous Material except where the presence of such material would not result in a Material Adverse Effect. No notification of release of Hazardous Material pursuant to CERCLA or the federal Clean Water Act, or any state or local environmental law or regulatory requirement has been received by Company as to the Real Property. Neither the Company nor any Subsidiary has received from any governmental authority (domestic or foreign) or third party any requests for information, notices of claim, demand letters, or other notification that it is or may be potentially responsible with respect to any investigation or clean-up of Hazardous Material. Neither the Company nor any Subsidiary has received notice of violation of any other environmental law. Neither the Company nor any Subsidiary is involved in any litigation or pending litigation pertaining to any claims under any environmental or health and safety laws and regulations. Seller is not aware of any fact or circumstance that in Seller's current good faith opinion could reasonably be expected to involve the Company, its Subsidiaries, Parent or Buyer in any environmental litigation or impose any environmental liability upon the Company, its Subsidiaries, Parent or Buyer. 23 2.26 Power of Attorney and Suretyships. Except as set forth on Schedule --------------------------------- -------- 2.26, the Company and its Subsidiaries have no power of attorney outstanding, - ---- nor has any obligation or liability, either actual, accrued, accruing or contingent, as guarantor, surety, cosigner, endorser, co-maker, indemnitor or otherwise in respect of any other person, corporation, partnership, joint venture, association, organization or other entity. 2.27 Certain Payments. Neither the Company nor any Subsidiary, nor any ---------------- shareholder, director, officer, employee or agent of the Company or any Subsidiary, has made or caused to be made, directly or indirectly, the payment of any consideration whatsoever on behalf of the Company or any Subsidiary to any public official, candidate for public office or political party in connection with the business or operations of the Company or its Subsidiaries, or pertaining to the Company's or its Subsidiaries' relations with any customer, supplier, or creditor, in contravention of the applicable law of any jurisdiction. 2.28 Hart-Scott Rodino Notice. In connection with the transactions ------------------------ contemplated by this Agreement, Seller has duly filed a notification and report form with the United States Department of Justice and with the Federal Trade Commission in compliance with the HSR Act. Early termination of the review under the HSR Act has been granted. 2.29 Resignations of Directors. Effective as of the Closing Date, each of ------------------------- the incumbent directors of Company, who is not employed by Company as of the Closing Date shall have tendered his or her resignation. 2.30 Brokers and Finders. Neither Seller nor Company nor any employee or ------------------- agent of Seller or of the Company has retained any broker, finder or investment banker in connection with the transactions contemplated by this Agreement, other than Lehman Brothers. Seller will indemnify and hold Parent, Buyer and Company harmless against all claims for brokers', finders' or bankers' fees made or asserted by any party claiming to have been employed by Seller or Company or employee or agent of Seller or of the Company in connection with the transactions contemplated by this Agreement and all costs and expenses (including the reasonable fees of counsel) of investigating and defending such claims. 2.31 Accuracy of Documents and Information. The copies of all instruments, ------------------------------------- agreements, other documents and written information set forth as, or referenced in, Exhibits or Schedules to this Agreement or specifically required to be furnished pursuant to this Agreement to Parent or Buyer by Seller are complete and correct in all respects. No representations or warranties made by Seller in this Agreement and no statement made in any Exhibit or Schedule contains any untrue statement of a 24 material fact, or omits to state a material fact necessary to make the statements or facts contained herein or therein, in light of the circumstances in which they were made, not misleading. For the purposes of the foregoing sentence, no such representation or warranty and no such Exhibit or Schedule shall be deemed to contain an untrue statement of fact or omit to state a material fact unless such untrue statement or omission shall have met the materiality test, if any, applicable to such representation, warranty, Exhibit or Schedule. 2.32 Disclosure in Schedules. Any disclosure made in a Schedule to this ----------------------- Article II shall be deemed disclosed for all of the purposes of this Article II, - ---------- ---------- provided that the disclosure is responsive to all the related sections of this Article II. - ---------- 2.33 Authority Relating to this Agreement; No Violation of Other ----------------------------------------------------------- Instruments. - ----------- 2.33.1 Seller has the legal capacity to enter into this Agreement. The execution and delivery of this Agreement and the performance hereunder by Seller has been duly authorized by all necessary action on the part of Seller and, assuming execution of this Agreement by Parent and Buyer, this Agreement will constitute a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject as to enforcement: (i) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (ii) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 2.33.2 Except as set forth in Schedule 2.33.2, neither the execution of --------------- this Agreement nor the performance hereof by Seller will: (i) conflict with or result in the breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other Governmental Body now in effect applicable to Seller or to Company or its Subsidiaries; (ii) conflict with, or result in, with or without the passage of time or the giving of notice, any breach of any of the terms, conditions and provisions of, or constitute a default under, any indenture, mortgage, lease, agreement or other instrument to which Seller, the Company or any Subsidiary is a party or by which any of them or their respective assets are bound, where such breach or default would result in a Material Adverse Effect; or (iii) violate or conflict with any provisions of the Articles of Incorporation, Bylaws, or similar organizational instruments of the Seller or of the Company or any of its Subsidiaries. 2.34 Consents. Except for the filings referred to in Section 2.29 and as -------- ------------ set forth on Schedule 2.34, no consent from any third party and no consent, ------------- approval or authorization of, or declaration, filing or registration with, any Governmental Body is required to be made or obtained by Seller in order to permit the execution, delivery or performance of this Agreement, or the 25 consummation of the transactions contemplated by this Agreement. 2.35 Effect of Investigation. No investigation or due diligence by Parent ----------------------- in contemplating or negotiating the transactions contemplated by this Agreement shall impair or diminish in any way the representations and warranties of Seller hereunder, except that Seller shall not be liable for breach of any representation and warranty to the extent any of the employees of Parent listed on Schedule 2.35 had actual knowledge of such breach prior to the Closing Date ------------- and Parent entered into this Agreement knowing that Seller was in breach of the representation and warranty. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER -------------------------------------------------- Each of Parent and Buyer hereby represents and warrants to Seller that: 3.1 Organization and Authority. Parent is a corporation duly organized and -------------------------- in good standing under the laws of Canada. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Parent and Buyer has all necessary corporate power and authority to enter into and to perform this Agreement. 3.2 Authority Relating to this Agreement; No Violation of Other ----------------------------------------------------------- Instruments. - ----------- 3.2.1 The execution and delivery of this Agreement and the performance hereunder by Parent and Buyer have been duly authorized by all necessary corporate action on the part of Parent and Buyer and, assuming execution of this Agreement by Seller, this Agreement will constitute a legal, valid and binding obligation of Parent and Buyer, enforceable against Parent and Buyer in accordance with its terms, subject as to enforcement: (i) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (ii) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. 3.2.2 Neither the execution of this Agreement nor the performance hereof by Parent or Buyer will: (i) conflict with or result in the breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other Governmental Body now in effect applicable to Parent or Buyer; (ii) conflict with, or result in, with or without the passage of time or the giving of notice, any breach of any of the terms, conditions and provisions of, or constitute a default under, any indenture, mortgage, lease, agreement or other instrument to which Parent or Buyer is a party or by which either is bound; or 26 (iii) violate or conflict with any provisions of Parent's or Buyer's Articles of Incorporation, Bylaws, or similar organizational instruments. 3.3 Consents. Except for the filings referred to in Section 3.4 below and -------- ----------- as set forth on Schedule 3.3, no consent from any third party and no consent, ------------ approval or authorization of, or declaration, filing or registration with, any Governmental Body is required to be made or obtained by Parent or Buyer in order to permit the execution, delivery or performance of this Agreement, or the consummation of the transactions contemplated by this Agreement. 3.4 Hart-Scott-Rodino Notice. In connection with the transactions ------------------------ contemplated by this Agreement, Parent has duly filed a notification and report form with the United States Department of Justice and with the Federal Trade Commission in compliance with the HSR Act. Early termination of the review under the HSR Act has been granted. 3.5 Brokers and Finders. Neither Parent, Buyer nor any shareholder, ------------------- director, officer, employee or agent of Parent or Buyer has retained any broker or finder in connection with the transactions contemplated by this Agreement and Parent and Buyer will indemnify and hold harmless Seller against all claims for brokers' or finders' fees made or asserted by any party claiming to have been employed by Parent or Buyer or any shareholder, director, officer, employee or agent of Parent or Buyer and all costs and expenses (including the reasonable fees of counsel) of investigating and defending such claims. ARTICLE IV INDEMNITY AND SET-OFF --------------------- 4.1 Indemnity. Seller agrees to indemnify and hold harmless Parent, Buyer, --------- their respective directors, officers and affiliates and their respective successors and permitted assigns (the "Indemnitees") on an after-tax basis from and against any and all losses, obligations, deficiencies, liabilities, claims, damages, fines, costs and expenses (including without limitation the amount of any compromise or settlement and all reasonable legal and other expenses incurred in connection with the investigation, prosecution or defense of any matter indemnified pursuant hereto) (collectively, "Damages") which any Indemnitee may sustain, suffer or incur directly or indirectly (including any Damages sustained, suffered or incurred by the Company and its Subsidiaries) and which result from, arise out of, are caused by or relate to or assert (a) the breach by Seller of any representation, warranty, covenant or agreement made by it in this Agreement or in any agreement or instrument executed and delivered by it pursuant hereto; (b) any liability of the Company and its Subsidiaries assumed by Seller pursuant to the 27 Assumption Agreement, which indemnification shall be funded promptly upon notice from the Indemnitee; (c) the incorrectness or subsequent adjustment of the net operating loss carryforwards or research credits used as the basis for the calculation of the payment under Section 1.7 hereof (including by reason of ----------- an adjustment of the income of Seller or of the consolidated group of which Seller is a part); or (d) those matters listed on Schedule 4.4, the exercise of ------------ options to purchase shares of Common Stock held by persons employed by Seller as of the Closing Date, and liability for Massachusetts sales tax for periods which are the subject of the letter from the Massachusetts tax authority received by Company in January 1997. 4.2 Claims. Any claim for indemnity under Section 4.1 shall be made by ------ ----------- written notice from the Indemnitee to the Seller specifying in reasonable detail the basis of the claim. When an Indemnitee seeking indemnification under Section 4.1 receives notice of any claim by a third party, including - ----------- without limitation any Governmental Body ("Third Party Claim") which is to be the basis for a claim for indemnification hereunder, the Indemnitee shall give written notice as soon as practicable, or within 20 days of the service upon Indemnitee of any Third Party Claim that is contained in a complaint filed with any governmental agency or court of any jurisdiction, to the Seller reasonably indicating (to the extent known) the nature of such claims and the basis thereof. Any failure by an Indemnitee to provide such notice shall not affect the Seller's obligations hereunder, except to the extent of any Damages caused by such delay. Upon notice from the Indemnitee, the Seller may, but shall not be required to, assume the defense of any such Third Party Claim, including its compromise or settlement, by representatives of its own choosing reasonably acceptable to Indemnitee, and the Seller shall pay all costs and expenses thereof and shall be fully responsible for the outcome thereof; provided, however, that the Seller shall consult regularly with the Indemnitee regarding the defense of such Third Party Claim and may not settle or compromise any Third Party Claim without the Indemnitee's prior written consent (which consent shall not be unreasonably withheld) and that the Indemnitee shall be entitled to participate in the defense of such Third Party Claim at its own expense. The Seller shall give written notice to the Indemnitee as to its intention to assume the defense of any such Third Party Claim within 20 days after the date of receipt of the Indemnitee's notice in respect of such Third Party Claim. At such time or as soon as practicable thereafter, Seller shall make a good faith effort to determine and inform Indemnitee of any reasonably anticipated basis upon which it might dispute its liability to the Indemnitee for any Damages which the Indemnitee might incur or suffer as a result of such Third Party Claim. If Seller does not, within 20 days after the Indemnitee's notice is given, give written notice to the Indemnitee of its assumption of the defense of the Third Party Claim, the Seller shall be deemed to have waived its rights to control the defense thereof. If the Indemnitee assumes the defense of any Third Party Claim because 28 of the failure of the Seller to do so in accordance with this Section 4.2, ----------- the Seller shall pay all reasonable costs and expenses of such defense and investigation as incurred and shall be fully responsible for the outcome thereof. The Seller shall have no liability with respect to any compromise or settlement thereof effected without its prior written consent (which consent shall not be unreasonably withheld). Notwithstanding the foregoing, in the event that the Indemnitee reasonably believes that the amount at risk in a Third Party Claim exceeds twice the amount then available for indemnification under Section 4.4(c) below, or that such Third Party Claim could result in remedies - -------------- other than monetary damages that could materially adversely affect the Business, the Indemnitee may, but shall not be required to, assume the defense of any such Third Party Claim, including its compromise or settlement, by representatives of its own choosing reasonably acceptable to the Seller; in which event, the Seller shall pay one half of all reasonable costs and expenses of such defense and investigation as incurred and the Seller shall be responsible for all other Damages related to the outcome thereof; provided, however, that the Indemnitee shall consult regularly with the Seller regarding the defense of such Third Party Claim and may not settle or compromise any such Third Party Claim without the Seller's prior written consent (which consent shall not be unreasonably withheld) and that the Seller shall be entitled to participate in the defense of any such Third Party Claim at its own expense. 4.3 Set-off under Escrow Agreement. Parent or Buyer may set-off the amount ------------------------------ of any claim for indemnity under this Article IV against any amounts held by the ---------- Escrow Holder in accordance with the Escrow Agreement. 4.4 Limitations. Claims for indemnification under this Article IV shall be ----------- ---------- subject to the following limitations: (a) Seller shall not be liable for claims for indemnification arising under Section 4.1(c) (relating to Available Tax Benefits) to the extent that Buyer has - -------------- realized tax benefits as a result of (i) California research credits or Japanese net operating losses accrued as of September 30, 1996, or (ii) U.S. Federal income tax benefits accrued as of the Closing Date and not taken into account as part of "Available Tax Benefits" as defined in Section 1.7(a). The amount of -------------- Buyer's benefit from such carryforwards shall be determined by calculating Buyer's consolidated liability for taxes with and without such benefits, applying such carryforwards as they would be applied under applicable tax law. (b) Seller shall not be liable unless and until the aggregate cumulative liability of Seller exceeds the sum of (i) (U.S.) $750,000, an amount estimated as the Company's reserves for Taxes on the Financial Statements, such amount to be finally agreed by the parties within ten days from the Closing Date, and (ii) (U.S.) $250,000, and then only for the amount by which such 29 aggregate cumulative liability is in excess of such sum. (c) The aggregate liability of Seller shall not exceed the amount equal to 20% of the Base Purchase Price, as adjusted pursuant to Section 1.7 plus the ----------- Earn-Out; provided, however, that any Damages exceeding (U.S.) $1,000,000 for each matter that arises out of any of the matters set forth on Schedule 4.4 ------------ hereto shall be excluded from this limitation and shall be indemnifiable in full; and provided, further, that any Damages relating to the exercise of options to purchase shares of Common Stock held by persons employed by Seller as of the Closing Date and to liability for Massachusetts sales tax for periods which are the subject of the letter from the Massachusetts tax authority received by Company in January 1997 shall be excluded from this limitation and shall be indemnifiable in full. (d) The amount of Damages shall be reduced by any recovery made by Company or any Subsidiary, Parent or Buyer from an insurance policy with respect to the Company or any Subsidiary. ARTICLE V COVENANTS --------- 5.1 Operational Support. Seller covenants that it will continue to provide ------------------- to Company operational support as follows: (a) Seller will continue to provide the manufacturing services described on Schedule 5.1(a) hereto, on the terms and conditions set forth therein, until - --------------- October 31, 1997 unless terminated earlier by Parent. Parent will provide not less than three months notice of the termination of the Company's need for Seller's manufacturing services, on a product platform basis. (b) Company and its Subsidiaries shall have the right, on the same terms and conditions as in effect on September 30, 1996, to occupy the facilities of Seller and its Affiliates set forth on Schedule 5.1(b) hereto until January 31, --------------- 1998 or, if sooner, until Seller's lease on any such facility expires. Schedule 5.1(b) sets forth the date when the lease on each such facility - --------------- listed thereon terminates. Parent shall provide not less than 60 days notice of the intention of the Company or its Subsidiary to vacate any such facility. 5.2 Tax Covenants. Seller, Parent and Buyer covenant as follows: ------------- (a) Any taxes for a Partial Tax Year including a Pre-Effective Date Partial Period and a Post-Effective Date Partial Period shall be apportioned between such Pre-Effective Date Partial Period and such Post-Effective Date Partial Period, based, in the case of real and personal property Taxes, on a per 30 diem basis and, in the case of other Taxes, on the actual activities, taxable income or taxable loss of Company and the Subsidiaries during such Pre-Effective Date Partial Period and such Post-Effective Date Partial Period. Seller shall pay to Buyer the amount of any Tax reported due on a Tax Return for a Partial Tax Year which is attributable to the Pre-Effective Date Partial Period to the extent such Tax exceeds the current liability accrual for such Tax on the books of the Company as of the Effective Date. (b) Seller shall include Company and the Subsidiaries in the consolidated United States Federal income tax return filed by Seller for the period ending on or prior to the Closing Date. As soon as practicable following the Closing Date, Company shall prepare books and working papers (including a closing of the books) which will clearly demonstrate the income and activities of the Company and the Subsidiaries for the period ending on the Closing Date and for any other Pre-Closing Partial Period and shall furnish to Seller copies of such books and working papers to permit Seller to file its Federal income tax return and any state or local combined returns which are required to include the Company and the Subsidiaries; Seller shall prepare and file such returns. Seller shall assist Company in preparing all foreign income Tax Returns finally due on or before February 28, 1997, and such additional foreign income Tax Returns for periods ending prior to the Closing Date as Seller shall notify Buyer in writing on or before February 28, 1997. Buyer shall cause the Company and the Subsidiaries to be included in a single consolidated United States federal income tax return for the period beginning after the Closing Date. Buyer shall be responsible for causing the Company to prepare and file any Tax Return of the Company or a Subsidiary which does not include Seller and which is required to be filed after the Closing Date. (c) Seller, on the one hand, and Buyer, on the other hand, agree to give prompt notice to each other of any proposed adjustment to Taxes for periods ending on or prior to the Closing Date or any Pre-Closing Partial Period. Seller and Buyer shall cooperate with each other in the conduct of any audit or other proceedings involving Company or any Subsidiary for such periods and each may participate at its own expense, provided that Seller shall have the right to control the conduct of any such audit or proceeding for which Seller (i) agrees that any resulting Tax is covered by the indemnity provided in Article IV of this Agreement, and (ii) demonstrates to Buyer its ability to make such indemnity payment. Notwithstanding the foregoing, Seller may not settle or otherwise resolve any such claim, suit, or proceeding without the consent of Buyer, such consent not to be unreasonably withheld. (d) Seller, on the one hand, and Buyer, on the other hand, agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance (including access to books and records relating to 31 Company and the Subsidiaries as is reasonably necessary for the preparation of any return for Taxes, claim for refund or audit, and the prosecution or defense of any claim, suit or proceeding relating to any proposed adjustment. Furthermore, Seller will cooperate with Buyer in getting the District Director of the Internal Revenue Service to exercise its authority to limit the liability of the Company and the Subsidiaries under Treas. Reg. Section 1.1502-6 for Taxes of the affiliated group of which Seller is the common parent. (e) If requested by Seller, Buyer shall cause Company and any Subsidiary designated by Seller to sign an election prepared by Seller under Treas. Reg. Section 1.1502-20(g)(5) to reattribute losses and to attach a copy of such election to the United Sates Federal income tax return of Company and/or the affected Subsidiary for the first tax year ending after the due date, including extensions, of Seller's consolidated United States Federal income tax return for its fiscal year ending September 30, 1997; provided, that no such election shall reduce the amount of available Tax Benefits of the type described in Section 1.7(a)(i) below (U.S.) $22,000,000. (f) For a period of twelve months following the Closing Date, Seller shall provide information and reasonable assistance to Buyer, at Seller's expense, in determining the Company's basis in each Subsidiary and the earnings and profits of the Company and each Subsidiary as of the Closing Date. Seller shall cause Ernst & Young to produce reasonably accurate estimates of earnings and profits of UB Networks Canada Ltd. and two other foreign subsidiaries of Company to be named by Buyer within 30 days from the Closing Date. (g) Buyer shall not cause Company to realize any "extraordinary items" within the meaning of Treasury Regulation section.1.1502-76(b)(2)(ii)(C) on the Closing Date. 5.3 Cooperation. Seller and Parent agree to cooperate to achieve an orderly ----------- transition of the ownership of Company and the operation of the Business. In addition, Seller, Parent and Buyer agree to cooperate in the defense of any third-party claim relating to the Company and its Subsidiaries and agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance (including access to books and records relating to Company and the Subsidiaries) as is reasonably necessary for the defense of such claim. 5.4 Transferred Inventory. Parent covenants that, with respect to the --------------------- inventory acquired by Seller from Company and listed on Schedule 2.13(a) (the ---------------- "Transferred Inventory"), Parent and Company shall look to Seller as the first source of supply for any requirements of items of Transferred Inventory beyond the amounts of equivalent inventory retained by the Company as of the Closing Date. As needed, and to the extent such items of 32 Transferred Inventory are commercially useable and saleable, Parent shall purchase, or cause the Company to purchase, such items of Transferred Inventory from Seller at fair market value. This covenant is for the benefit of Seller, which shall have no obligation to maintain the Transferred Inventory. ARTICLE VI MISCELLANEOUS ------------- 6.1 Announcements. Parent and Seller shall coordinate all publicity ------------- relating to the transactions contemplated by this Agreement. 6.2 Assignment. This Agreement shall be binding upon and inure to the ---------- benefit of the successors and assigns of the parties; provided, however, that the rights and duties of Seller under this Agreement may not be assigned without the consent of Parent and the rights and duties of Parent and Buyer under this Agreement may not be assigned without the consent of Seller. 6.3 Expenses. Except as otherwise expressly provided herein, each party -------- will pay its own costs and expenses, including legal and accounting expenses, related to the transactions provided for herein, irrespective of when incurred. Seller shall pay all outside legal and accounting costs and expenses of Company related to the transactions provided for herein, irrespective of when incurred. 6.4 Further Assurances. Seller will from time to time subsequent to the ------------------ Closing Date, at Parent's request and without further consideration, execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as Parent may reasonably request in order more effectively to convey, assign, transfer to and vest in Buyer, the Stock and the right to operate the Business. 6.5 Notices. Any notice or other communication required or permitted ------- hereunder shall be in writing and shall be deemed to have been duly given on the date of service if served personally, on the date of electronic confirmation of receipt if served by facsimile, or five days after the date of mailing if mailed by first class mail, certified with return receipt requested, postage prepaid. Notices shall be addressed as follows: To Parent at: Newbridge Networks Corporation 600 March Road Kanata, Ontario K2K 2E6 Canada Facsimile: (613) 591-3680 Attention: President and Chief Operating Officer 33 To Buyer at: Newbridge Networks, Inc. 593 Herndon Parkway Herndon, VA 20170 Facsimile: (703) 736-5301 Attention: President To Seller at: Tandem Computers Incorporated 10435 N. Tantau Avenue Cupertino, California 95014 Facsimile: (408) 285-4634 Attention: General Counsel or to such other address as a party has designated by notice in writing to the other parties in the manner provided by this Section 6.5. ----------- 6.6 Entire Agreement and Modification. This Agreement and the other --------------------------------- documents entered into pursuant to this Agreement constitute and contain the entire agreement of the parties and supersede any and all prior negotiations, correspondence, warranties, understandings and agreements between the parties respecting the subject matter hereof. This Agreement may only be amended by written instrument signed by the parties. 6.7 Survival of Terms. All warranties and representations contained in this ----------------- Agreement or in any certificate or other instrument delivered by or on behalf of the parties pursuant to this Agreement shall be continuous and shall survive until the first anniversary of the Closing Date, except that representations and warranties related to taxes, environmental matters, pending litigation (including employment litigation), title to Equity Securities, and any undisclosed liabilities shall survive indefinitely. 6.8 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California excluding laws directing the application of the laws of another jurisdiction. 6.9 Severability. If any provision of this Agreement is held to be ------------ unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the fullest extent possible. 6.10 Headings. The headings appearing at the beginning of several sections -------- contained herein have been inserted for the convenience of the parties, and shall not be used to determine the construction or interpretation of this Agreement. 6.11 Counterparts. This Agreement may be executed in counterparts, each of ------------ which shall be deemed an original, but both of which when taken together shall constitute one and the same 34 instrument. 6.12 Mutual Contribution. The parties to this Agreement and their counsel ------------------- have mutually contributed to the drafting of this Agreement. No provision of this Agreement shall be construed against a party on the ground that that party or its counsel drafted the provision or that the provision contains a covenant of such party. 6.13 Dispute Resolution; Arbitration. The parties will attempt to resolve ------------------------------- any dispute under this Agreement by mutual agreement. If the Chief Financial Officers of Parent and Seller are not able to resolve a dispute within 30 days of their receipt of the notice of a dispute, there shall be a face-to-face meeting between the Vice Chairman and Chief Executive Officer or President of Seller and the President and Chief Operating Officer of Parent. Except as provided in Sections 1.5, 1.7 and 1.8 of this Agreement, any dispute under this ------------ --- --- Agreement which is not settled after such meeting, shall be finally settled by binding arbitration, conducted by and in accordance with the rules then in effect of the Judicial Arbitration and Mediation Service. The costs of the arbitration, including administrative and arbitrators' fees, shall be shared equally by the parties. Each party shall bear its own costs and attorneys' and witness' fees. The prevailing party in any arbitration, as determined by the arbitration panel, shall be entitled to an award against the other party in the amount of the prevailing party's costs and reasonable attorneys' fees. In making any such award, the arbitration panel shall take into consideration the outcome of the proceeding and the reasonableness of the conduct of each such party in connection with the dispute, in light of the facts known to such party at the time such party engaged in such conduct. The arbitration panel shall not have authority to award punitive damages hereunder. The arbitration shall be held in Seattle, Washington. 35 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above set forth. Parent: NEWBRIDGE NETWORKS CORPORATION By: /S/ JAMES C. AVIS ------------------------------------- Title: Executive Vice President, Business Development and General Counsel ---------------------------------- Buyer: NEWBRIDGE NETWORKS, INC. By: /S/ JAMES C. AVIS ------------------------------------- Title: Secretary ---------------------------------- Seller: TANDEM COMPUTERS INCORPORATED By: /S/ ENRICO L. PESATORI ------------------------------------- Title: President ---------------------------------- Exhibit 1.3 ----------- ESCROW AGREEMENT THIS ESCROW AGREEMENT ("Escrow Agreement") is made as of January 17, 1997 among Tandem Computers Incorporated, a Delaware corporation ("Seller"), Newbridge Networks Corporation, a corporation organized under the laws of Canada ("Parent"); and Chemical Trust Company of California, a California corporation ("Escrow Holder"). BACKGROUND A. Seller, Parent and Newbridge Networks, Inc., a Delaware corporation and wholly-owned subsidiary of Parent ("Buyer") have entered into a Stock Purchase Agreement dated January 17, 1997 (the "Agreement"), pursuant to which Buyer shall purchase from Seller, and Seller shall sell to Buyer all of the outstanding capital stock of Ungermann-Bass Networks, Inc. (the "Company"). B. Section 1.3 of the Agreement provides that (U.S.) Eleven Million Eight Hundred Thousand Dollars ($11,800,000) shall be delivered to the Escrow Holder in order to secure the indemnification obligations of Seller set forth in Article IV of the Agreement. THE PARTIES AGREE AS FOLLOWS: ARTICLE I DEFINITIONS ----------- Unless otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Agreement. In addition, for the purposes of this Escrow Agreement, the following terms shall have the following meanings: 1.1 Claim Certificate. "Claim Certificate" shall mean a certificate signed ----------------- by an officer of Parent stating (i) that an Indemnitee has incurred or reasonably believes it may in the future incur the amount of Damages specified in such Claim Certificate and (ii) in reasonable detail, the facts alleged as the basis for such claim and the section or sections of the Agreement alleged to have been violated 1.2 Escrow Fund. "Escrow Fund" shall mean the amount then held by the ----------- Escrow Holder. 1.3 Indemnitee. "Indemnitee" shall mean Parent, Buyer ---------- and any other entity or person who is a beneficiary of the indemnification obligations of Seller contained in Section 4.1 of the Agreement. ARTICLE II CREATION OF ESCROW ------------------ 2.1 Purpose. This Escrow Agreement is being executed and delivered, and the ------- deposit of the Escrow Fund hereunder is being made, for the purpose of securing the indemnification obligations of Seller set forth in Article IV of the Agreement. 2.2 Creation of Escrow Fund. Parent shall cause Buyer to deposit with the ----------------------- Escrow Holder in escrow for the account of Seller, but subject to this Escrow Agreement, a check in the amount of (U.S.) Eleven Million Eight Hundred Thousand Dollars ($11,800,000) payable to the order of Escrow Holder as escrow holder under this Escrow Agreement. 2.3 Investment of Escrow Fund. Upon receipt of the Escrow Fund, Escrow ------------------------- Holder shall invest such amount, at the direction of the Seller, in investments bearing the highest rating or rated "AAA" by Moody's or Standard and Poors, such as money market funds consisting of U.S. Treasury obligations or mutual fund alternatives. ARTICLE III CLAIMS ------ 3.1 Payment After Delivery of Claim Certificate. If ------------------------------------------- Parent gives the Escrow Holder and Seller a Claim Certificate as to damages actually incurred, then, with respect to Claim Certificates as to damages actually incurred, as soon as practicable but not earlier than 30 days after the receipt by the Escrow Holder of such Claim Certificate, the Escrow Holder, subject to the requirements of Section 3.2 hereof, shall pay to Buyer, from the Escrow Fund, on behalf of the Indemnitee (to the extent the Escrow Fund is sufficient for such purpose) an amount equal to the Damages specified in such Claim Certificate. If Parent gives the Escrow Holder and Seller a Claim Certificate as to damages it reasonably believes it may in the future incur and which have not been resolved or quantified, then, the Escrow Holder shall continue to hold that portion of the Escrow Fund, and all interest earned thereon, in accordance with Section 4.2. 3.2 Disputes Respecting Claims. Unless, within 30 days after the giving of -------------------------- any Claim Certificate by Parent as to damages actually incurred, Parent and the Escrow Holder receive a written notice from Seller stating that Seller questions the accuracy of a matter asserted in such Claim Certificate, such Claim Certificate shall constitute full authority to the Escrow Holder to take the action provided for in Section 3.1 and shall -2- be conclusive and binding on all parties hereto. If, however, Seller timely gives such a notice, the Escrow Holder shall not make any distribution to Buyer of that portion of the Escrow Fund which Seller asserts in its notice should not be so distributed until (i) the Escrow Holder receives the written consent of Seller and Parent to such distribution or (ii) there is a final decision rendered in accordance with Section 6.13 of the Agreement. 3.3 Interest. Any claim allowed against the Escrow Fund shall include all -------- interest earned under Section 2.3 hereof on the dollar amount of such claim from the date of this Escrow Agreement until payment of the claim. ARTICLE IV DISTRIBUTION OF ESCROW FUND --------------------------- 4.1 Distribution of Undisputed Amounts. Subject to Section 4.2 hereof, on ---------------------------------- the date one year after the date of this Escrow Agreement (the "Escrow Termination Date"), the Escrow Holder shall promptly distribute the entire remaining Escrow Fund, including interest, to Seller. 4.2 Distribution of Disputed Amounts or Unresolved Claims. Notwithstanding ----------------------------------------------------- the provisions of Section 4.1 hereof, if, prior to the Escrow Termination Date, Parent shall have given a Claim Certificate to Seller and the Escrow Holder in accordance with Section 3.2 hereof and either (i) the final damages as to the claim subject of such Claim Certificate have not been resolved or quantified or (ii) a dispute, in accordance with Section 3.2 hereof, respecting that Claim Certificate or the subject matter of such Claim Certificate has not yet been resolved in accordance with Section 3.2, then the Escrow Holder shall continue to hold that portion of the Escrow Fund, and all interest earned thereon, which is the subject of such dispute. Any portion of the Escrow Fund so withheld shall continue to be held by the Escrow Holder until it receives authorization to distribute the portion of the Escrow Fund so withheld in accordance with the second sentence of Section 3.2. 4.3 Inconsistent Directions. In the event the Escrow Holder receives any ----------------------- inconsistent directions from the parties hereto, it shall notify the parties of such inconsistency and, if the inconsistency is not resolved by the parties within 30 days of such notice, the Escrow Holder shall have the right to petition a court, or if an arbitration proceeding is pending pursuant to Section 6.8 request the arbitrator, to resolve the differences between such parties. -3- ARTICLE V ESCROW HOLDER ------------- 5.1 Limitation of Liability. It is agreed that the duties of the Escrow ----------------------- Holder are limited to those herein specifically provided and are ministerial in nature. It is further agreed that the Escrow Holder shall incur no liability whatever except by reason of its willful misconduct or gross negligence. The Escrow Holder shall be under no obligation in respect of the Escrow Fund other than faithfully to follow the written instructions herein contained or delivered to the Escrow Holder in accordance with this Escrow Agreement. The Escrow Holder may consult with counsel and shall be fully protected in any action taken in good faith in accordance with the advice of such counsel. It shall not be required to institute legal proceedings of any kind. It shall have no responsibility for the genuineness or validity of any document or other item deposited with it, and it shall be fully protected in acting in accordance with this Escrow Agreement upon any written instructions given to it and believed by it to have been duly executed by Parent or by Seller, as the case may be, in accordance herewith. Anything in this agreement to the contrary notwithstanding, in no event shall the Escrow Holder be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Holder has been advised of the likelihood of such loss or damage and regardless of the form of action. 5.2 Compensation; Reimbursement. The Escrow Holder shall be entitled to --------------------------- reasonable compensation for its services hereunder for so long as the Escrow Holder holds all or any portion of the Escrow Fund. Such compensation shall be at the rate set forth in Exhibit A hereto. The Escrow Holder shall be paid or --------- reimbursed upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Escrow Holder in accordance with any of the provisions of this Escrow Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its gross negligence or willful misconduct. The Escrow Holder shall be entitled to deduct compensation and reimbursement payments owing to it from the Escrow Fund, which shall be first charged against income thereon and which shall be paid prior to any distributions of the Escrow Fund pursuant to Article IV. 5.3 Indemnification. Parent and Seller, jointly and severally, agree to --------------- indemnify the Escrow Holder in any capacity under this Escrow Agreement and its agents, and to hold them harmless against, any loss, liability or expense incurred without gross negligence or willful misconduct on the part of the Escrow Holder or such agent, as the case may be, and arising out of or in connection with the acceptance or administration of this -4- escrow. The Escrow Holder shall have no obligation to undertake any action to the extent it, in its reasonable judgment, believes it is inadequately indemnified therefor. ARTICLE VI MISCELLANEOUS ------------- 6.1 Notices. Except as expressly provided in this Escrow Agreement, all ------- notices (including any Claim Certificate) given in connection with this Escrow Agreement shall be deemed to have been duly given on the date of delivery if personally delivered, on the date of electronic confirmation of receipt if served by facsimile, or five days after mailing if mailed by first class mail certified with return receipt requested, postage prepaid, addressed as follows: If to Parent: ------------ Newbridge Networks Corporation 600 March Road Kanata, Ontario K2K 2E6 Canada Facsimile: 613-591-0002 Attention: General Counsel If to Seller: ------------ Tandem Computers Incorporated 10435 N. Tantau Avenue Cupertino, California 95014 Facsimile: 408-285-4634 Attention: General Counsel If to the Escrow Holder: ----------------------- Chemical Trust Company of California 101 California Street, Suite 2725 San Francisco, California 94111 Facsimile: 415-693-8850 Attention: Corporate Trust # Such addresses may be changed from time to time by means of a notice given in the manner provided in this Section 6.1. 6.2 Successors and Assigns. This Escrow Agreement and all action taken ---------------------- hereunder in accordance with its terms shall be binding upon and inure to the benefit of the parties hereto and their respective transferees, successors and assigns. 6.3 Headings. The headings appearing at the beginning of several sections -------- contained herein have been inserted for the convenience of the parties, and shall not be used to determine the construction or interpretation of this Agreement. -5- 6.4 Counterparts. This Agreement may be executed in counterparts, each of ------------ which shall be deemed an original, but each of which when taken together shall constitute one and the same instrument. 6.5 Waiver; Amendment. Waiver of any term or condition of this Escrow ----------------- Agreement by any party shall not be construed as a waiver of a subsequent breach or failure of the same term or condition, or a waiver of any other term or condition of this Escrow Agreement. Amendment of this Escrow Agreement shall require the written consent of Parent, Seller and the Escrow Holder. 6.6 Nonlimitation of Liability. Nothing contained herein shall in any way -------------------------- limit Seller's liabilities or obligations to Parent or Buyer in relation to the Agreement. Parent and Buyer shall have all other rights and remedies set forth in the Agreement, as well as any other rights at law or equity. All rights shall be considered cumulative and not exclusive. 6.7 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California excluding laws directing the application of the laws of another jurisdiction. 6.8 Arbitration. The parties will attempt to resolve any dispute under this ----------- Agreement by mutual agreement. Any dispute under this Agreement which is not so resolved shall be finally settled by binding arbitration, conducted by and in accordance with the rules then in effect of the Judicial Arbitration and Mediation Service. The costs of the arbitration, including administrative and arbitrators' fees, shall be shared equally by the parties. Each party shall bear its own costs and attorneys' and witness' fees. The prevailing party in any arbitration, as determined by the arbitration panel, shall be entitled to an award against the other party or parties in the amount of the prevailing party's costs and reasonable attorneys' fees. In making any such award, the arbitration panel shall take into consideration the outcome of the proceeding and the reasonableness of the conduct of each such party in connection with the dispute, in light of the facts known to such party at the time such party engaged in such conduct. The arbitration panel shall not have authority to award punitive damages hereunder. The arbitration shall be held in Seattle, Washington. -6- IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be signed the day and year first above written. PARENT: NEWBRIDGE NETWORKS CORPORATION By:________________________________ Name:______________________________ Title:_____________________________ SELLER: TANDEM COMPUTERS INCORPORATED By:________________________________ Name:______________________________ Title:_____________________________ ESCROW HOLDER: CHEMICAL TRUST COMPANY OF CALIFORNIA By:________________________________ Name:______________________________ Title:_____________________________ -7- EXHIBIT A Escrow Holder Fees ------------------ EXHIBIT 2.3A UB Networks, Inc. Consolidated Balance Sheet At September 30, 1996
Q4 FY 1996 ------- Assets Current assets Cash and equivalents 8,457 Accounts receivable, net 66,734 Accounts receivable from parent (1,831) Inventories 42,805 Deferred income taxes -- Prepaid expenses and other 14,621 - ------------------------------------------------------------------------------- Total current assets 130,786 - ------------------------------------------------------------------------------ Property, plant and equipment, at cost 94,918 Accumulated depreciation and amortization (64,518) - ------------------------------------------------------------------------------ Net property, plant and equipment 30,400 - ------------------------------------------------------------------------------ Investments in equity affiliates 149 - ------------------------------------------------------------------------------ Cost in excess of net assets acquired, net -- - ------------------------------------------------------------------------------ Other assets 2,541 - ------------------------------------------------------------------------------ Total assets 163,876 ============================================================================== Liabilities and stockholder's investment Current liabilities Accounts payable 33,204 Income taxes payable 226 Accrued liabilities 38,509 Current maturities of long-term obligations -- Note payable to parent -- - ------------------------------------------------------------------------------- Total current liabilities 71,939 - ------------------------------------------------------------------------------- Long-term obligations 346 - ------------------------------------------------------------------------------- Deferred income taxes -- - ------------------------------------------------------------------------------- Minority interest 637 - ------------------------------------------------------------------------------- Stockholder's investment Common Stock 10,751 Additional paid-in capital 278,746 Unrealized gain on securities 1,568 Retained earnings (deficit) (198,624) Accumulated translation adjustments (1,487) - ------------------------------------------------------------------------------- Total stockholder's investment 90,954 Total liabilities and stockholder's investment 163,876 ===============================================================================
UB Networks, Inc. Consolidated Statement of Income Twelve months ended September 30, 1996
FY96 Revenues Product revenues 296,000 Service and other revenues 80,775 - -------------------------------------------------------------------------------- Total Revenues 376,775 - -------------------------------------------------------------------------------- Costs and expenses Cost of product revenues 202,058 Cost of service and other revenues 62,865 - -------------------------------------------------------------------------------- Total cost of revenues 264,923 - -------------------------------------------------------------------------------- Gross profit 111,852 - -------------------------------------------------------------------------------- Operating expenses Research and development 38,955 Marketing, general and administrative 121,524 Amortization of costs in excess of net assets acquired 66 Restructuring charges 0 - -------------------------------------------------------------------------------- Total operating expenses 160,545 - -------------------------------------------------------------------------------- Operating income (loss) (48,693) Gain on sale of investments and subsidiaries 32,682 Other non-operating expenses 0 Interest income 366 Interest expense (220) - -------------------------------------------------------------------------------- Income (loss) before inc. taxes, min. int., equity invtmt. (15,865) Provision for income taxes 380 Minority interest in earnings of subsidiaries 107 (Income) loss from equity investments 293 - -------------------------------------------------------------------------------- Net income (loss) (16,645) ================================================================================ This Income Statement does not include $4,084K of restructuring charges that are offset by Tandem's restructuring reserve.
Ungermann-Bass Networks Incorporated and Subsidiaries Consolidated Statements of Cash Flows For Year Ended September 30, 1996
FY96 ---- Cash flows from operating activities: Net income (16,645) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,882 Gain on sale of investment (32,766) Minority interest 106 Loss on disposition of property, plant & equipment 633 Changes in (net of acquisitions): Accounts receivable 2,912 Accounts receivable from parent 17,494 Inventories (8,924) Prepaid expenses and other (2,218) Other assets 240 Accounts payable (1,057) Income taxes payable (195) Accrued liabilities (245) ----------- Cash used by operating activities (29,783) Cash flows from investing activities: Investment in property, plant & equipment (10,882) Acquisition of businesses (281) Sale of investment 36,940 ----------- Cash provided by investing activities 25,777 Cash flows from financing activities: Borrowings 3 Dividends paid to minority shareholders (164) ----------- Cash used in financing activities (161) Effect of exchange rate fluctuations on cash and equivalents (921) ----------- Net decrease in cash and cash equivalents (5,088) Cash and cash equivalents at the beginning of the period 13,545 ----------- Cash and cash equivalents at the end of the period 8,457
UB Networks, Inc. 15-Jan-97 1:30 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of September 30, 1996 Sub-Total Sub-Total Tandem UBI Europe Pac Rim Japan Canada Brazil Debentures Cash (4,745,270) 4,507,059 1,351,583 5,033,426 2,274,451 35,638 - Accounts Receivable 19,811,029 31,107,097 1,439,321 11,470,206 2,906,192 - - Tandem I/C 15,322,298 32,394,861 (3,490,535) (3,875,628) (729,954) (0) 4,688,390 Inventory 29,122,934 8,540,731 1,350,118 6,282,717 410,997 - - Other Current Assets 10,268,642 2,938,564 294,792 666,916 462,025 2,907 - Total Current Assets 69,779,634 79,488,312 945,279 19,577,638 5,323,711 38,545 4,688,390 - - Fixed Assets 20,321,258 6,549,150 768,684 3,379,708 696,591 88,633 - Goodwill (0) - - - - - - Investments - - Other Non-current assets 69,895,375 112,930 154,047 1,813,084 - - - Total Non-Current Assets 90,216,633 6,662,080 922,731 5,192,792 696,591 88,633 - - - Total Assets 159,996,267 86,150,392 1,868,010 24,770,429 6,020,303 127,178 4,688,390 ============================================================================================= - - - - Accounts Payable (28,292,736) (1,361,990) (208,935) (3,284,435) (55,508) 3 - Taxes Payable (5,938) (91,063) (21,105) (107,398) (9) - - Deferred Taxes - Current (0) - - - - - - Accrued Expenses (18,993,795) (11,624,344) (2,434,467) (1,055,117) (963,160) (1) 253,838 - - Total Current Liab. (47,292,469) (13,077,397) (2,664,507) (4,446,950) (1,018,677) 2 253,838 - - Cap. Lease - Non-current - - 1 - - - - Notes Payable - NC (34,490,000) - - (5) - - 30,518,882 Deferred Taxes - Long Term - - - - - - - Total Non-Current Liab. (34,490,000) - 1 (5) - - 30,518,882 Total Liabilities (81,782,469) (13,077,397) (2,664,506) (4,446,955) (1,018,677) 2 30,772,720 - - Minority Interest - BS - - - - - - - - - Common Stock (18,681) (21,380,878) - (15,577,035) (30,000) (1,187,765) - Paid In Capital (114,421,350) - (65,867) (6,262,800) (1,000,000) - (29,600,281) Unrealized Gain on Securities (1,567,500) - - - - - - Retained Earnings 36,920,406 (52,099,607) 895,768 1,898,413 (4,577,456) 1,060,586 (5,860,828) Translation Adjustment 873,326 407,491 (33,405) (382,052) 605,831 - - Total Equity (78,213,798) (73,072,994) 796,496 (20,323,474) (5,001,625) (127,180) (35,461,109) - - Total Liab & Equity (159,996,267) (86,150,391) (1,868,010) (24,770,429) (6,020,303) (127,178) (4,688,390) =============================================================================================
UB Networks, Inc. 15-Jan-97 1:30 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of September 30, 1996 Eliminations Consol B/S UB PPA Combined B/S Cash - 8,456,888 - 8,456,888 Accounts Receivable - 66,733,845 - 66,733,845 Tandem I/C (2,720,410) 41,589,021 (43,420,218) (1,831,197) Inventory (2,902,382) 42,805,116 - 42,805,116 Other Current Assets (12,691) 14,621,155 - 14,621,155 Total Current Assets (5,635,483) 174,206,025 (43,420,218) 130,785,807 Fixed Assets (1,404,248) 30,399,776 - 30,399,776 Goodwill - (0) - (0) Investments - - Other Non-current assets (69,285,930) 2,689,506 - 2,689,506 Total Non-Current Assets (70,690,178) 33,089,282 - 33,089,282 Total Assets (76,325,660) 207,295,307 (43,420,218) 163,875,089 ============================================================ Accounts Payable - (33,203,601) - (33,203,601) Taxes Payable - (225,514) - (225,514) Deferred Taxes - Current - (0) - (0) Accrued Expenses - (34,817,046) (3,691,530) (38,508,576) Total Current Liab. - (68,246,161) (3,691,530) (71,937,691) Cap. Lease - Non-current - 1 - 1 Notes Payable - NC - (3,971,123) 3,624,814 (346,309) Deferred Taxes - Long Term - - - - Total Non-Current Liab. - (3,971,122) 3,624,814 (346,308) Total Liabilities - (72,217,283) (66,716) (72,283,999) Minority Interest - BS (637,237) (637,237) - (637,237) Common Stock 27,443,423 (10,750,936) - (10,750,936) Paid In Capital 40,730,698 (110,619,600) (168,126,054) (278,745,654) Unrealized Gain on Securities - (1,567,500) - (1,567,500) Retained Earnings 8,773,300 (12,989,419) 211,612,989 198,623,569 Translation Adjustment 15,476 1,486,667 - 1,486,667 Total Equity 76,962,897 (134,440,787) 43,486,934 (90,953,853) Total Liab & Equity 76,325,660 (207,295,307) 43,420,218 (163,875,089) ============================================================
UB Networks, Inc. 15-Jan-97 COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet 1:30:55 PM Consolidation Day 5 As of September 30, 1996
Thailand Sub Total Hong Kong India Korea Singapore Asia Pac Cash 31,675 53,035 121,315 98,662 304,687 Accounts Receivable - - - - - Tandem I/C (2,223,426) (678,692) (100,358) (110,162) (3,112,638) Inventory - - - - - Other Current Assets 58,211 4,535 5,680 30,939 99,365 Total Current Assets (2,133,540) (621,122) 26,637 19,439 - - - - (2,708,586) Fixed Assets 48,652 145,457 57,176 6,238 257,523 Goodwill - - - - - Investments - Other Non-current assets 17,572 72,972 45,235 18,268 154,047 Total Non-Current Assets 66,224 218,429 102,411 24,506 - - - - 411,570 Total Assets (2,067,316) (402,693) 129,048 43,945 - - - - (2,297,016) ================================================================================================== Accounts Payable (2,742) (11,924) (23,997) - (38,663) Taxes Payable - - (12,370) (8,735) (21,105) Deferred Taxes - Current - - - - - Accrued Expenses (9,939) - (22,174) (11,662) (43,775) - - - - - Total Current Liab. (12,681) (11,924) (58,541) (20,397) - - - - (103,543) Cap. Lease - Non-current - - - - - Notes Payable - NC - - - - - Deferred Taxes - Long Term - - - - - Total Non-Current Liab. - - - - - - - - - Total Liabilities (12,681) (11,924) (58,541) (20,397) - - - - (103,543) Minority Interest - BS - - - - - Common Stock - - - - - Paid In Capital - - (65,867) - (65,867) Unrealized Gain on Securities - - - - - Retained Earnings 2,079,672 421,628 (9,999) (22,479) 2,468,822 Translation Adjustment 325 (7,011) 5,359 (1,069) (2,396) Total Equity 2,079,997 414,617 (70,507) (23,548) - - - - 2,400,559 Total Liab & Equity 2,067,316 402,693 (129,048) (43,945) - - - - 2,297,016 ================================================================================================== Difference - - - - - - - - -
UB Networks, Inc. 15-Jan-97 COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet 1:30:55 PM Consolidation Day 5 As of September 30, 1996
Total Australia Pacific Rim Cash 1,046,896 1,351,583 Accounts Receivable 1,439,321 1,439,321 Tandem I/C (377,897) (3,490,535) Inventory 1,350,118 1,350,118 Other Current Assets 195,427 294,792 Total Current Assets 3,653,865 945,279 Fixed Assets 511,161 768,684 Goodwill - - Investments - Other Non-current assets - 154,047 Total Non-Current Assets 511,161 922,731 Total Assets 4,165,026 1,868,010 ============================= Accounts Payable (170,272) (208,935) Taxes Payable - (21,105) Deferred Taxes - Current - - Accrued Expenses (2,390,692) (2,434,467) - - Total Current Liab. (2,560,964) (2,664,507) Cap. Lease - Non-current 1 1 Notes Payable - NC - - Deferred Taxes - Long Term - - Total Non-Current Liab. 1 1 Total Liabilities (2,560,963) (2,664,506) Minority Interest - BS - - Common Stock - - Paid In Capital - (65,867) Unrealized Gain on Securities - - Retained Earnings (1,573,054) 895,768 Translation Adjustment (31,009) (33,405) Total Equity (1,604,063) 796,496 Total Liab & Equity (4,165,026) (1,868,010) ============================= Difference - -
UB Networks, Inc. 15-Jan-97 1:30:55 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of September 30, 1996
UBNEC UK Belgium Germany France Holland Cash 424,298 1,162,306 174,403 7,306 2,233,601 (1,511) Accounts Receivable 20,302,427 4,164,465 524,223 152,846 5,087,920 - Tandem I/C 37,382,569 3,123,316 (1,472,449) (1,695,398) (8,494,707) 54,321 Inventory 6,815,346 534,449 373,450 152,912 398,701 - Other Current Assets 27,571 1,108,480 591,611 54,919 990,011 26,464 Total Current Assets 64,952,211 10,093,016 191,239 (1,327,415) 215,526 79,274 Fixed Assets 3,537,237 1,376,128 644,993 153,564 395,501 30,289 Goodwill - - - - - - Investments Other Non-current assets - - 42,175 - 61,511 - Total Non-Current Assets 3,537,237 1,376,128 687,168 153,564 457,012 30,289 Total Assets 68,489,448 11,469,144 878,407 (1,173,851) 672,538 109,563 ========================================================================================= Accounts Payable (163,252) (246,717) (337,818) (93,336) (321,840) (29,920) Taxes Payable - (0) - - - (7,480) Deferred Taxes - Current - - - - - - Accrued Expenses (3,251,535) (3,918,062) (1,014,344) (268,032) (1,914,852) (36,248) Total Current Liab. (3,414,787) (4,164,779) (1,352,162) (361,368) (2,236,692) (73,648) Cap. Lease - Non-current - - - - - - Notes Payable - NC - - - - - - Deferred Taxes - Long Term - - - - - - Total Non-Current Liab. - - - - - - Total Liabilities (3,414,787) (4,164,779) (1,352,162) (361,368) (2,236,692) (73,648) Minority Interest - BS - - - - - - Common Stock (100) (4,897,199) (4,189,277) - (400,281) (25,058) Paid In Capital - - - - - - Unrealized Gain on Securities - - - - - - Retained Earnings (65,074,562) (2,479,734) 4,599,024 1,598,581 2,070,233 (12,202) Translation Adjustment 1 72,569 64,008 (63,362) (105,798) 1,345 Total Equity (65,074,661) (7,304,364) 473,755 1,535,219 1,564,154 (35,915) Total Liab & Equity (68,489,448) (11,469,143) (878,407) 1,173,851 (672,538) (109,563) ========================================================================================= Difference 0 0 (0) - - -
UB Networks, Inc. 15-Jan-97 1:30:55 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of September 30, 1996
Norway Czech Euro Total Holding Sweden Spain Republic Old UK Italy Hdqtrs Europe Cash 184,327 204,407 61,922 47,833 - 8,167 - 4,507,059 Accounts Receivable - 772,316 102,900 - - - - 31,107,097 Tandem I/C 278,613 (1,001,142) (422,454) (112,175) 4,841,514 (87,147) - 32,394,861 Inventory - 102,475 163,398 - - - - 8,540,731 Other Current Assets 16,021 69,665 5,342 14,946 - 33,534 - 2,938,564 Total Current Assets 478,961 147,721 (88,892) (49,396) 4,841,514 (45,446) - 79,488,312 Fixed Assets 14,967 172,736 165,940 24,362 - 33,432 - 6,549,150 Goodwill - - - - - - - - Investments - Other Non-current assets 3,161 - 5,952 - - 131 - 112,930 Total Non-Current Assets 18,128 172,736 171,892 24,362 - 33,563 - 6,662,080 Total Assets 497,089 320,457 83,000 (25,034) 4,841,514 (11,883) - 86,150,392 ================================================================================================ Accounts Payable (8,462) (103,106) (13,296) (17,382) - (26,861) - (1,361,990) Taxes Payable (55,962) (44,976) 17,355 - - - - (91,063) Deferred Taxes - Current - - - - - - - - Accrued Expenses (396,975) (549,000) (188,292) (3,925) - (83,080) - (11,624,344) Total Current Liab. (461,399) (697,082) (184,233) (21,307) - (109,941) - (13,077,397) Cap. Lease - Non-current - - - - - - - - Notes Payable - NC - - - - - - - - Deferred Taxes - Long Term - - - - - - - - Total Non-Current Liab. - - - - - - - - Total Liabilities (461,399) (697,082) (184,233) (21,307) - (109,941) - (13,077,397) Minority Interest - BS - - - - - - - - Common Stock - (1,069,020) (55,000) - (10,732,252) (12,691) - (21,380,878) Paid In Capital - - - - - - - - Unrealized Gain on Securities - - - - - - - - Retained Earnings (41,270) 1,332,912 101,303 44,823 5,626,210 135,076 - (52,099,607) Translation Adjustment 5,580 112,733 54,930 1,518 264,528 (561) - 407,491 Total Equity (35,690) 376,625 101,233 46,341 (4,841,514) 121,824 - (73,072,994) Total Liab & Equity (497,089) (320,457) (83,000) 25,034 (4,841,514) 11,883 - (86,150,391) (0) (0) ================================================================================================ Difference - - - - - - - 1
UB Networks, Inc. 15-Jan-97 1:30 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of September 30, 1996
Sub-Total Sub-Total UBI Europe Pac Rim Japan Canada Product Revenue (230,406,913) (139,902,922) (7,932,838) (54,447,896) (8,603,504) Service Revenue (49,364,581) (15,207,383) (3,559,187) (11,861,316) (2,846,605) Total Revenue (279,771,494) (155,110,305) (11,492,025) (66,309,212) (11,450,109) - - Product Cost of Sales 186,653,773 110,977,462 5,464,166 36,207,747 7,512,161 Service Cost of Sales 39,751,837 12,467,272 776,863 9,748,171 1,955,208 Total Cogs 226,405,610 123,444,734 6,241,029 45,955,918 9,467,369 - - Product Gross Margin (43,753,140) (28,925,460) (2,468,672) (18,240,149) (1,091,343) Service Gross Margin (9,612,744) (2,740,111) (2,782,324) (2,113,145) (891,397) Total Gross Margin (53,365,884) (31,665,571) (5,250,996) (20,353,294) (1,982,740) Gross Margin % 19.07% 20.41% 45.69% 30.69% 17.32% - - R&D 38,606,166 - - 348,803 - Sales 32,307,475 32,176,805 9,007,762 12,996,111 2,364,595 Marketing 16,625,083 679,218 - 32,896 - G&A 14,339,046 1,935,965 (1,899,700) 362,969 19,912 Goodwill Expense 95,227 - - - - - - Total Operating Exp 101,972,998 34,791,988 7,108,062 13,740,779 2,384,507 - - Operating (Profit)/Loss 48,607,114 3,126,417 1,857,066 (6,612,515) 401,767 Operating Profit % -17.37% -2.02% -16.16% 9.97% -3.51% - - Gain on Sale of Investment (32,681,698) - - Interest Inc/Exp 2,542,943 (192,834) (18,931) (10,293) (125,956) - - Profit Before Tax, Minority Int & - - Equity Investment (Income)/Loss 18,468,359 2,933,583 1,838,135 (6,622,808) 275,811 - - Minority Interest - IS - - - - - Restructuring 4,084,433 - - - - (Gain)/Loss from Equity Investment 292,532 - - Provision (credit) for Income Taxes 120,676 (74,019) 277,645 - 55,619 - - Net (Income)/loss 22,966,000 2,859,564 2,115,780 (6,622,808) 331,430 ================================================================================ - - Product Gross Margin % 18.99% 20.68% 31.12% 33.50% 12.68% Service Gross Margin % 19.47% 18.02% 78.17% 17.82% 31.31% Total Gross Margin % 19.07% 20.41% 45.69% 30.69% 17.32%
UB Networks, Inc. 15-Jan-97 1:30 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of September 30, 1996
Tandem Combined Brazil Debentures Eliminations Consol P&L UB PPA P&L Product Revenue - - 145,294,096 (295,999,977) - (295,999,977) Service Revenue - - 2,063,901 (80,775,171) - (80,775,171) Total Revenue - - 147,357,997 (376,775,148) - (376,775,148) Product Cost of Sales - - (144,757,226) 202,058,083 - 202,058,083 Service Cost of Sales - - (1,834,390) 62,864,961 - 62,864,961 Total Cogs - - (146,591,616) 264,923,044 - 264,923,044 Product Gross Margin - - 536,870 (93,941,894) - (93,941,894) Service Gross Margin - - 229,511 (17,910,210) - (17,910,210) Total Gross Margin - - 766,381 (111,852,104) - (111,852,104) Gross Margin % 0.52% 29.69% 29.69% R&D - - - 38,954,969 - 38,954,969 Sales 844,116 - - 89,696,864 - 89,696,864 Marketing - - - 17,337,197 - 17,337,197 G&A 2,686 - - 14,760,878 (271,236) 14,489,642 Goodwill Expense - - (28,756) 66,471 - 66,471 Total Operating Exp 846,802 - (28,756) 160,816,380 (271,236) 160,545,144 Operating (Profit)/Loss 846,802 - 737,625 48,964,276 (271,236) 48,693,040 Operating Profit % 0.50% -13.00% -12.92% Gain on Sale of Investment (32,681,698) (32,681,698) Interest Inc/Exp - (2,591,040) - (396,111) 249,996 (146,115) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss 846,802 (2,591,040) 737,625 15,886,467 (21,240) 15,865,227 Minority Interest - IS - - 106,513 106,513 - 106,513 Restructuring - - - 4,084,433 - 4,084,433 (Gain)/Loss from Equity Investment 292,532 292,532 Provision (credit) for Income Taxes - - - 379,921 - 379,921 Net (Income)/loss 846,802 (2,591,040) 844,138 20,749,867 (21,240) 20,728,627 ========================================================================================= Product Gross Margin % 0.37% 31.74% 31.74% Service Gross Margin % 11.12% 22.17% 22.17% Total Gross Margin % 0.52% 29.69% 29.69%
UB Networks, Inc. 15-Jan-97 1:30 PM Consolidated Statement of Operations Year-To-Date As of September 30, 1996
Thailand Sub Total Total Hong Kong India Korea Singapore Asia Pac Australia Pacific Rim Product Revenue - - - - - (7,932,838) (7,932,838) Service Revenue - - - - - (3,559,187) (3,559,187) Total Revenue - - - - - (11,492,025) (11,492,025) Product Cost of Sales - - - - - 5,464,166 5,464,166 Service Cost of Sales - - - - - 776,863 776,863 Total Cogs - - - - - 6,241,029 6,241,029 Product Gross Margin - - - - - (2,468,672) (2,468,672) Service Gross Margin - - - - - (2,782,324) (2,782,324) Total Gross Margin - - - - - (5,250,996) (5,250,996) Gross Margin % 45.69% 45.69% R&D - - - - - - - Sales 2,079,672 421,628 557,275 669,820 3,728,395 5,279,367 9,007,762 Marketing - - - - - - - G&A - - (578,480) (701,004) (1,279,484) (620,216) (1,899,700) Goodwill Expense - - - - - - - Total Operating Exp 2,079,672 421,628 (21,205) (31,184) 2,448,911 4,659,151 7,108,062 Operating (Profit)/Loss 2,079,672 421,628 (21,205) (31,184) 2,448,911 (591,845) 1,857,066 Operating Profit % 5.15% -16.16% Gain on Sale of Investment - - Interest Inc/Exp - - - - - (18,931) (18,931) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss 2,079,672 421,628 (21,205) (31,184) 2,448,911 (610,776) 1,838,135 Minority Interest - IS - - - - - - - Restructuring - - - - - - - (Gain)/Loss from Equity Investment - - Provision (credit) for Income Taxes - - 13,919 8,705 22,624 255,021 277,645 Net (Income)/loss 2,079,672 421,628 (7,286) (22,479) 2,471,535 (355,755) 2,115,780 =============================================================== ========================== Product Gross Margin % 31.12% 31.12% Service Gross Margin % 78.17% 78.17% Total Gross Margin % 45.69% 45.69%
UB Networks, Inc. 15-Jan-97 1:30 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of September 30, 1996
Norway UBNEC UK Belgium Holding France Sweden Germany Product Revenue (103,319,610) (15,526,059) 235,066 - (13,170,553) (8,215,985) 202,613 Service Revenue - (6,267,184) (3,192,270) - (3,583,892) (1,200,830) (586,855) Total Revenue (103,319,610) (21,793,243) (2,957,204) - (16,754,445) (9,416,815) (384,242) Product Cost of Sales 79,074,982 12,230,223 332,852 - 11,815,256 7,054,652 182,429 Service Cost of Sales 2,631,127 2,955,360 2,897,188 70,947 2,531,063 783,682 435,698 Total Cogs 81,706,109 15,185,583 3,230,040 70,947 14,346,319 7,838,334 618,127 Product Gross Margin (24,244,628) (3,295,836) 567,918 - (1,355,297) (1,161,333) 385,042 Service Gross Margin 2,631,127 (3,311,824) (295,082) 70,947 (1,052,829) (417,148) (151,157) Total Gross Margin (21,613,501) (6,607,660) 272,836 70,947 (2,408,126) (1,578,481) 233,885 Gross Margin % 20.92% 30.32% -9.23% 14.37% 16.76% -60.87% R&D - - - - - - - Sales 3,441,277 9,279,238 5,389,201 1,290,409 5,897,857 2,504,979 2,625,695 Marketing - 79,027 520,944 - 48,000 8,035 - G&A 17,058,461 (4,508,219) (5,633,545) (1,411,713) (959,492) 463,256 (1,871,099) Goodwill Expense - - - - - - - Total Operating Exp 20,499,738 4,850,046 276,600 (121,304) 4,986,365 2,976,270 754,596 Operating (Profit)/Loss (1,113,763) (1,757,614) 549,436 (50,357) 2,578,239 1,397,789 988,481 Operating Profit % 1.08% 8.06% -18.58% -15.39% -14.84% -257.25% Gain on Sale of Investment Interest Inc/Exp (103,503) (53,658) 903 (414) 994 (32,384) 257 Profit Before Tax, Minority Int & Equity Investment (Income)/Loss (1,217,266) (1,811,272) 550,339 (50,771) 2,579,233 1,365,405 988,738 Minority Interest - IS - - - - - - - Restructuring - - - - - - - (Gain)/Loss from Equity Investment Provision (credit) for Income Taxes - (284,970) - 48,367 11,633 111,800 - Net (Income)/loss (1,217,266) (2,096,242) 550,339 (2,404) 2,590,866 1,477,205 988,738 =============================================================================================== Product Gross Margin % 23.47% 21.23% 241.60% 10.29% 14.14% 190.04% Service Gross Margin % 52.84% 9.24% 29.38% 34.74% 25.76% Total Gross Margin % 20.92% 30.32% -9.23% 14.37% 16.76% -60.87%
UB Networks, Inc. 15-Jan-97 1:30 PM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of September 30, 1996
Czech Total Spain Republic Holland Italy Europe Product Revenue (108,394) - - - (139,902,922) Service Revenue (376,352) - - - (15,207,383) Total Revenue (484,746) - - - (155,110,305) Product Cost of Sales 287,068 - - - 110,977,462 Service Cost of Sales 162,207 - - - 12,467,272 Total Cogs 449,275 - - - 123,444,734 Product Gross Margin 178,674 - - - (28,925,460) Service Gross Margin (214,145) - - - (2,740,111) Total Gross Margin (35,471) - - - (31,665,571) Gross Margin % 7.32% 20.41% R&D - - - - - Sales 990,405 173,262 253,763 330,719 32,176,805 Marketing 23,212 - - - 679,218 G&A (618,092) (114,451) (273,498) (195,643) 1,935,965 Goodwill Expense - - - - - Total Operating Exp 395,525 58,811 (19,735) 135,076 34,791,988 Operating (Profit)/Loss 360,054 58,811 (19,735) 135,076 3,126,417 Operating Profit % -74.28% -2.02% Gain on Sale of Investment - Interest Inc/Exp (4,987) 6 (48) - (192,834) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss 355,067 58,817 (19,783) 135,076 2,933,583 Minority Interest - IS - - - - - Restructuring - - - - - (Gain)/Loss from Equity Investment - Provision (credit) for Income Taxes 31,566 4 7,581 - (74,019) Net (Income)/loss 386,633 58,821 (12,202) 135,076 2,859,564 =========================================================================== Product Gross Margin % -164.84% 20.68% Service Gross Margin % 56.90% 18.02% Total Gross Margin % 7.32% 20.41%
Exhibit 2.3B UB Networks, Inc. Consolidated Balance Sheet At December 31, 1996
Q1 FY 1997 Assets Current assets Cash and equivalents 9,451 Accounts receivable, net 53,787 Accounts receivable from parent (8,941) Inventories 41,184 Deferred income taxes -- Prepaid expenses and other 12,175 - -------------------------------------------------------------------------------- Total current assets 107,656 - -------------------------------------------------------------------------------- Property, plant and equipment, at cost 96,515 Accumulated depreciation and amortization (66,984) - -------------------------------------------------------------------------------- Net property, plant and equipment 29,531 - -------------------------------------------------------------------------------- Investments in equity affiliates 55 - -------------------------------------------------------------------------------- Cost in excess of net assets acquired, net -- - -------------------------------------------------------------------------------- Other assets 2,361 - -------------------------------------------------------------------------------- Total assets 139,603 ================================================================================ Liabilities and stockholder's investment Current liabilities Accounts payable 15,147 Income taxes payable 175 Accrued liabilities 35,409 Current maturities of long-term obligations -- Note payable to parent -- - -------------------------------------------------------------------------------- Total current liabilities 50,731 - -------------------------------------------------------------------------------- Long-term obligations 471 - -------------------------------------------------------------------------------- Deferred income taxes -- - -------------------------------------------------------------------------------- Minority interest 540 - -------------------------------------------------------------------------------- Stockholder's investment Common Stock 10,751 Additional paid-in capital 278,746 Unrealized gain on securities 619 Retained earnings (deficit) (201,129) Accumulated translation adjustments (1,126) - -------------------------------------------------------------------------------- Total stockholder's investment 87,861 Total liabilities and stockholder's investment 139,603 ================================================================================
UB Networks, Inc. Consolidated Statement of Income Three months ended December 31, 1996
Q197 Revenues Product revenues 50,168 Service and other revenues 19,373 - -------------------------------------------------------------------------------- Total Revenues 69,541 - -------------------------------------------------------------------------------- Costs and expenses Cost of product revenues 35,122 Cost of service and other revenues 15,831 - -------------------------------------------------------------------------------- Total cost of revenues 50,953 - -------------------------------------------------------------------------------- Gross profit 18,588 - -------------------------------------------------------------------------------- Operating expenses Research and development 9,446 Marketing, general and administrative 32,081 Amortization of costs in excess of net assets acquired 0 Restructuring charges 0 - -------------------------------------------------------------------------------- Total operating expenses 41,527 - -------------------------------------------------------------------------------- Operating income (loss) (22,939) Gain on sale of investments and subsidiaries 29,558 Other non-operating expenses 0 Interest income 206 Interest expense (9) - -------------------------------------------------------------------------------- Income (loss) before inc. taxes, min. int., equity invtmt 6,816 Provision for income taxes 82 Minority interest in earnings of subsidiaries (100) (Income) loss from equity investments 93 - -------------------------------------------------------------------------------- Net income (loss) 6,741 ================================================================================ This Income Statement does not include $245K of restructuring charges that are offset by Tandem's restructuring reserve.
UB Networks, Inc. Consolidated Statements of Cash Flows For the Three Months ended December 31, 1996
Q1 FY97 ------------- Cash flows from operating activities: Net income 6,741 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,040 Gain on sale of investment (29,558) Minority interest (71) Loss on disposition of property, plant & equipment 128 Changes in (net of acquisitions): Accounts receivable 13,766 Accounts receivable from parent (1,601) Inventories 230 Prepaid expenses and other 1,229 Other assets 177 Accounts payable (18,008) Income taxes payable (48) Accrued liabilities (3,899) ------------- Cash used by operating activities (27,874) Cash flows from investing activities: Investment in property, plant & equipment (1,129) Acquisition of businesses 0 Sale of investment 29,865 ------------- Cash provided by investing activities 28,736 Cash flows from financing activities: Borrowings 125 Dividends paid to minority shareholders 0 ------------- Cash used in financing activities 125 Effect of exchange rate fluctuations on cash and equivalents 7 ------------- Net increase in cash and cash equivalents 994 Cash and cash equivalents at the beginning of the period 8,457 ------------- Cash and cash equivalents at the end of the period 9,451
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of December 31, 1996
Sub-Total Sub-Total UBI Europe Pac Rim Japan Canada Brazil Cash (4,598,264) 4,843,780 1,498,287 4,802,850 2,888,272 15,886 Accounts Receivable 18,259,162 26,034,962 1,406,512 6,560,522 1,525,871 - Tandem I/C 13,680,806 27,319,936 (4,647,118) (3,640,742) (201,692) (0) Inventory 27,137,950 7,818,548 1,359,459 7,145,157 316,722 - Other Current Assets 7,922,665 2,297,856 368,137 1,357,513 241,255 751 Total Current Assets 62,402,319 68,315,082 (14,723) 16,225,301 4,770,428 16,637 - - Fixed Assets 19,284,276 6,803,539 773,327 3,424,372 672,726 (5) Goodwill (0) - - - - - Investments - - Other Non-current assets 71,821,873 115,467 148,541 1,744,313 - - Total Non-Current Assets 91,106,148 6,919,006 921,868 5,168,685 672,726 (5) - - Total Assets 153,508,467 75,234,088 907,145 21,393,985 5,443,155 16,632 ====================================================================================== - - - - Accounts Payable (11,491,810) (1,154,519) (225,664) (2,217,918) (57,133) 3 Taxes Payable (25,403) (93,225) (9,038) (47,644) (9) - Deferred Taxes - Current (0) - - - - - Accrued Expenses (20,328,824) (8,699,175) (2,216,912) (852,302) (528,717) (1) - - Total Current Liab. (31,846,037) (9,946,919) (2,451,614) (3,117,864) (585,859) 2 - - Cap. Lease - Non-current - (124,041) 1 - - - Notes Payable - NC (34,490,000) - - (5) - - Deferred Taxes - Long Term - - - - - - Total Non-Current Liab. (34,490,000) (124,041) 1 (5) - - Total Liabilities (66,336,037) (10,070,960) (2,451,613) (3,117,869) (585,859) 2 - - Minority Interest - BS - - - - - - - - Common Stock (18,681) (22,484,428) - (15,577,035) (30,000) (1,187,765) Paid In Capital (114,421,350) (1,024,588) (65,867) (6,262,800) (1,000,000) - Unrealized Gain on Securities (618,750) - - - - - Retained Earnings 27,008,201 (40,911,442) 1,649,397 3,185,947 (4,461,363) 1,171,132 Translation Adjustment 878,150 (742,669) (39,062) 377,772 634,068 - Total Equity (87,172,430) (65,163,127) 1,544,468 (18,276,116) (4,857,295) (16,634) - - Total Liab & Equity (153,508,467) (75,234,087) (907,145) (21,393,985) (5,443,155) (16,632) ======================================================================================
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of December 31, 1996
Tandem Debentures Eliminations Consol B/S UB PPA Combined B/S Cash - - 9,450,812 - 9,450,812 Accounts Receivable - - 53,787,029 - 53,787,029 Tandem I/C 4,688,390 (2,720,410) 34,479,169 (43,420,218) (8,941,049) Inventory - (2,593,654) 41,184,183 - 41,184,183 Other Current Assets - (12,691) 12,175,485 - 12,175,485 Total Current Assets 4,688,390 (5,326,755) 151,076,678 (43,420,218) 107,656,460 Fixed Assets - (1,427,037) 29,531,198 - 29,531,198 Goodwill - - (0) - (0) Investments - - Other Non-current assets - (71,414,068) 2,416,126 - 2,416,126 Total Non-Current Assets - (72,841,105) 31,947,323 - 31,947,323 Total Assets 4,688,390 (78,167,859) 183,024,001 (43,420,218) 139,603,783 ============================================================================ Accounts Payable - - (15,147,041) - (15,147,041) Taxes Payable - - (175,319) - (175,319) Deferred Taxes - Current - - (0) - (0) Accrued Expenses 839,817 - (31,786,114) (3,623,721) (35,409,835) Total Current Liab. 839,817 - (47,108,475) (3,623,721) (50,732,196) Cap. Lease - Non-current - - (124,040) - (124,040) Notes Payable - NC 30,580,662 - (3,909,343) 3,562,315 (347,028) Deferred Taxes - Long Term - - - - - Total Non-Current Liab. 30,580,662 - (4,033,383) 3,562,315 (471,068) Total Liabilities 31,420,480 - (51,141,858) (61,406) (51,203,263) Minority Interest - BS - (539,630) (539,630) - (539,630) Common Stock - 28,546,973 (10,750,936) - (10,750,936) Paid In Capital (29,600,281) 41,755,286 (110,619,600) (168,126,054) (278,745,654) Unrealized Gain on Securities - - (618,750) - (618,750) Retained Earnings (6,508,588) 8,387,375 (10,479,343) 211,607,679 201,128,336 Translation Adjustment - 17,855 1,126,114 - 1,126,114 Total Equity (36,108,869) 78,707,489 (131,342,514) 43,481,624 (87,860,890) Total Liab & Equity (4,688,390) 78,167,859 (183,024,002) 43,420,218 (139,603,783) ============================================================================
UB Networks, Inc. 14-Jan-97 COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet 7:31:58 AM Consolidation Day 5 As of December 31, 1996
Thailand People's Republic Hong Kong India Korea Singapore Taiwan of China Cash 177,180 105,804 57,898 152,075 - - Accounts Receivable - - - - - - Tandem I/C (3,000,010) (853,149) (55,158) (191,157) (65,632) (17,269) Inventory - - - - - - Other Current Assets 54,214 12,375 6,641 71,337 - 480 Total Current Assets (2,768,616) (734,970) 9,381 32,255 (65,632) (16,789) - - Fixed Assets 59,052 160,652 67,858 6,031 8,727 - Goodwill - - - - - - Investments Other Non-current assets 11,716 67,678 44,532 19,741 1,400 3,474 Total Non-Current Assets 70,768 228,330 112,390 25,772 10,127 3,474 - - Total Assets (2,697,848) (506,640) 121,771 58,027 (55,505) (13,315) - - =========================================================================================== Accounts Payable (3,427) (4,012) (13,649) - (647) (3,765) Taxes Payable - - (18) (9,020) - - Deferred Taxes - Current - - - - - - Accrued Expenses (4,526) (268) (24,717) (16,894) (647) - - - - - - - Total Current Liab. (7,953) (4,280) (38,384) (25,914) (1,294) (3,765) - - Cap. Lease - Non-current - - - - - - Notes Payable - NC - - - - - - Deferred Taxes - Long Term - - - - - - Total Non-Current Liab. - - - - - - - - Total Liabilities (7,953) (4,280) (38,384) (25,914) (1,294) (3,765) - - Minority Interest - BS - - - - - - Common Stock - - - - - - Paid In Capital - - (65,867) - - - Unrealized Gain on Securities - - - - - - Retained Earnings 2,705,468 519,396 (24,854) (29,637) 56,799 17,081 Translation Adjustment 333 (8,476) 7,334 (2,476) - (1) Total Equity 2,705,801 510,920 (83,387) (32,113) 56,799 17,080 - - Total Liab & Equity 2,697,848 506,640 (121,771) (58,027) 55,505 13,315 - - =========================================================================================== Difference - - - - - - - -
UB Networks, Inc. 14-Jan-97 COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet 7:31:58 AM Consolidation Day 5 As of December 31, 1996
Sub Total Total Asia Pac Australia Pacific Rim Cash 492,957 1,005,330 1,498,287 Accounts Receivable - 1,406,512 1,406,512 Tandem I/C (4,182,375) (464,743) (4,647,118) Inventory - 1,359,459 1,359,459 Other Current Assets 145,047 223,090 368,137 Total Current Assets (3,544,371) 3,529,648 (14,723) Fixed Assets 302,320 471,007 773,327 Goodwill - - - Investments - - Other Non-current assets 148,541 - 148,541 Total Non-Current Assets 450,861 471,007 921,868 Total Assets (3,093,510) 4,000,655 907,145 =========================================== Accounts Payable (25,500) (200,164) (225,664) Taxes Payable (9,038) - (9,038) Deferred Taxes - Current - - - Accrued Expenses (47,052) (2,169,860) (2,216,912) - - - Total Current Liab. (81,590) (2,370,024) (2,451,614) Cap. Lease - Non-current - 1 1 Notes Payable - NC - - - Deferred Taxes - Long Term - - - Total Non-Current Liab. - 1 1 Total Liabilities (81,590) (2,370,023) (2,451,613) Minority Interest - BS - - - Common Stock - - - Paid In Capital (65,867) - (65,867) Unrealized Gain on Securities - - - Retained Earnings 3,244,253 (1,594,856) 1,649,397 Translation Adjustment (3,286) (35,776) (39,062) Total Equity 3,175,100 (1,630,632) 1,544,468 Total Liab & Equity 3,093,510 (4,000,655) (907,145) =========================================== Difference - - -
UB Networks, Inc. 14-Jan-97 7:31:58 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of December 31, 1996
Norway UBNEC UK Belgium Germany France Holland Holding Cash 2,097,260 727,998 253,458 179,779 1,023,674 37,335 31,543 Accounts Receivable 15,462,384 4,744,485 630,727 112,169 4,213,409 - - Tandem I/C 29,811,780 2,497,885 (944,818) (2,016,122) (6,539,270) 67,678 227,191 Inventory 6,267,277 746,470 168,930 180,116 227,397 - - Other Current Assets 144,518 899,613 282,003 69,827 698,078 17,148 16,177 Total Current Assets 53,783,219 9,616,451 390,301 (1,474,231) (376,712) 122,161 274,911 Fixed Assets 3,771,851 1,396,906 528,922 140,058 536,995 29,311 18,092 Goodwill - - - - - - - Investments Other Non-current assets - - 41,777 - 61,224 - 2,223 Total Non-Current Assets 3,771,851 1,396,906 570,699 140,058 598,219 29,311 20,315 Total Assets 57,555,070 11,013,357 961,000 (1,334,173) 221,507 151,472 295,226 ============================================================================================== Accounts Payable (105,988) (194,760) (384,235) 6,513 (178,894) (47,013) (2,592) Taxes Payable - (0) - - - (12,664) (49,931) Deferred Taxes - Current - - - - - - - Accrued Expenses (2,701,893) (2,535,630) (534,027) (389,431) (1,561,026) (48,546) (200,798) Total Current Liab. (2,807,881) (2,730,390) (918,262) (382,918) (1,739,920) (108,223) (253,321) Cap. Lease - Non-current - - - - (124,041) - - Notes Payable - NC - - - - - - - Deferred Taxes - Long Term - - - - - - - Total Non-Current Liab. - - - - (124,041) - - Total Liabilities (2,807,881) (2,730,390) (918,262) (382,918) (1,863,961) (108,223) (253,321) Minority Interest - BS - - - - - - - Common Stock (100) (4,897,199) (5,292,827) - (400,281) (25,058) - Paid In Capital - - - - - - - Unrealized Gain on Securities - - - - - - - Retained Earnings (54,747,091) (2,791,561) 5,199,778 1,798,397 2,161,974 (20,317) (47,166) Translation Adjustment 1 (594,206) 50,311 (81,306) (119,239) 2,126 5,261 Total Equity (54,747,190) (8,282,966) (42,738) 1,717,091 1,642,454 (43,249) (41,905) Total Liab & Equity (57,555,070) (11,013,356) (961,000) 1,334,173 (221,507) (151,472) (295,226) ============================================================================================== Difference - 0 (0) - - - -
UB Networks, Inc. 14-Jan-97 7:31:58 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Balance Sheet Consolidation Day 5 As of December 31, 1996
Czech Total Sweden Spain Republic Old UBUK Italy Europe Cash 352,451 27,883 9,671 - 102,728 4,843,780 Accounts Receivable 783,427 88,361 - - - 26,034,962 Tandem I/C (538,236) (242,494) (75,578) 5,297,823 (225,903) 27,319,936 Inventory 88,187 140,171 - - - 7,818,548 Other Current Assets 85,920 1,501 36,278 - 46,793 2,297,856 Total Current Assets 771,749 15,422 (29,629) 5,297,823 (76,382) 68,315,082 Fixed Assets 185,202 147,521 16,850 - 31,830 6,803,539 Goodwill - - - - - - Investments - Other Non-current assets - 5,894 - - 4,349 115,467 Total Non-Current Assets 185,202 153,415 16,850 - 36,179 6,919,006 Total Assets 956,951 168,837 (12,779) 5,297,823 (40,203) 75,234,088 ============================================================================== Accounts Payable (189,180) (11,608) (14,860) - (31,902) (1,154,519) Taxes Payable (57,923) 27,293 - - - (93,225) Deferred Taxes - Current - - - - - - Accrued Expenses (478,943) (160,163) (8,823) - (79,896) (8,699,175) Total Current Liab. (726,046) (144,478) (23,683) - (111,798) (9,946,919) Cap. Lease - Non-current - - - - - (124,041) Notes Payable - NC - - - - - - Deferred Taxes - Long Term - - - - - - Total Non-Current Liab. - - - - - (124,041) Total Liabilities (726,046) (144,478) (23,683) - (111,798) (10,070,960) Minority Interest - BS - - - - - - Common Stock (1,069,020) (55,000) - (10,732,252) (12,691) (22,484,428) Paid In Capital (911,400) - - - (113,188) (1,024,588) Unrealized Gain on Securities - - - - - - Retained Earnings 1,622,610 (25,151) 35,383 5,626,210 275,492 (40,911,442) Translation Adjustment 126,905 55,792 1,079 (191,781) 2,388 (742,669) Total Equity (230,905) (24,359) 36,462 (5,297,823) 152,001 (65,163,127) Total Liab & Equity (956,951) (168,837) 12,779 (5,297,823) 40,203 (75,234,087) ============================================================================== Difference - - - - 0
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of December 31, 1996
Sub-Total Sub-Total UBI Europe Pac Rim Japan Canada Brazil Product Revenue (40,237,158) (26,960,667) (1,554,319) (6,909,485) (1,277,777) - Service Revenue (12,282,425) (3,838,954) (813,198) (2,109,578) (892,056) - Total Revenue (52,519,583) (30,799,621) (2,367,517) (9,019,063) (2,169,833) - - - Product Cost of Sales 33,121,792 21,677,338 1,083,383 5,048,178 1,180,937 - Service Cost of Sales 10,792,157 3,186,386 166,961 1,696,381 619,688 - Total Cogs 43,913,949 24,863,724 1,250,344 6,744,559 1,800,625 - - - Product Gross Margin (7,115,366) (5,283,329) (470,936) (1,861,307) (96,840) - Service Gross Margin (1,490,268) (652,568) (646,237) (413,197) (272,368) - Total Gross Margin (8,605,634) (5,935,897) (1,117,173) (2,274,504) (369,208) - Gross Margin % 16.39% 19.27% 47.19% 25.22% 17.02% - - R&D 9,445,703 - - - - - Sales 7,407,553 8,390,277 2,493,125 3,429,853 509,317 91,554 Marketing 4,277,377 181,587 - 3,644 - - G&A 6,163,207 (288,920) (609,237) 80,356 - 18,992 Goodwill Expense 0 - - - - - - - Total Operating Exp 27,293,840 8,282,944 1,883,888 3,513,853 509,317 110,546 - - Operating (Profit)/Loss 18,688,206 2,347,047 766,715 1,239,349 140,109 110,546 Operating Profit % -35.58% -7.62% -32.38% -13.74% -6.46% - - Gain on Sale of Investments (29,557,755) - - - - - Interest Inc/Exp 592,803 (164,260) (15,645) (297) (24,016) - - - Profit Before Tax, Minority Int & - - Equity Investment (Income)/Loss (10,276,746) 2,182,787 751,070 1,239,052 116,093 110,546 - - Minority Interest - IS - - - - - - (Gain)/Loss from Equity Invest 93,492 - - - - - Restructuring 245,173 - - Tax Expense 25,875 5,378 2,559 48,482 - - - - Net (Income)/loss (9,912,206) 2,188,165 753,629 1,287,534 116,093 110,546 ================================================================================ - - Product Gross Margin % 17.68% 19.60% 30.30% 26.94% 7.58% Service Gross Margin % 12.13% 17.00% 79.47% 19.59% 30.53% Total Gross Margin % 16.39% 19.27% 47.19% 25.22% 17.02%
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of December 31, 1996
Tandem Combined Debentures Eliminations Consol P&L UB PPA P&L Product Revenue - 26,771,755 (50,167,651) - (50,167,651) Service Revenue - 562,603 (19,373,608) - (19,373,608) Total Revenue - 27,334,358 (69,541,259) - (69,541,259) Product Cost of Sales - (26,989,920) 35,121,708 - 35,121,708 Service Cost of Sales - (630,377) 15,831,196 - 15,831,196 Total Cogs - (27,620,297) 50,952,904 - 50,952,904 Product Gross Margin - (218,165) 15,045,943 - 15,045,943 Service Gross Margin - (67,774) (3,542,412) - (3,542,412) Total Gross Margin - (285,939) (18,588,355) - (18,588,355) Gross Margin % -1.05% 26.73% 26.73% R&D - - 9,445,703 - 9,445,703 Sales - - 22,321,679 - 22,321,679 Marketing - - 4,462,608 - 4,462,608 G&A - - 5,364,398 (67,809) 5,296,589 Goodwill Expense - - 0 - 0 Total Operating Exp - - 41,594,388 (67,809) 41,526,579 Operating (Profit)/Loss - (285,939) 23,006,033 (67,809) 22,938,224 Operating Profit % -1.05% -33.08% -32.99% Gain on Sale of Investments - - (29,557,755) (29,557,755) Interest Inc/Exp (647,760) - (259,175) 62,499 (196,676) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss (647,760) (285,939) (6,810,897) (5,310) (6,816,207) Minority Interest - IS - (99,986) (99,986) - (99,986) (Gain)/Loss from Equity Invest - - 93,492 - 93,492 Restructuring 245,173 245,173 Tax Expense - - 82,294 - 82,294 Net (Income)/loss (647,760) (385,925) (6,489,924) (5,310) (6,495,234) =================================================================== Product Gross Margin % -0.81% 29.99% 29.99% Service Gross Margin % -12.05% 18.28% 18.28% Total Gross Margin % -1.05% 26.73% 26.73%
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of December 31, 1996
Thailand People's Sub Total Hong Kong India Korea Singapore Taiwan Republic of China Asia Pac Product Revenue - - - - - - - Service Revenue - - - - - - - Total Revenue - - - - - - - - Product Cost of Sales - - - - - - - Service Cost of Sales - - - - - - - Total Cogs - - - - - - - - Product Gross Margin - - - - - - - - Service Gross Margin - - - - - - - - Total Gross Margin - - - - - - - - Gross Margin % R&D - - - - - - - Sales 625,796 97,768 191,422 194,328 56,799 17,081 1,183,194 Marketing - - - - - - - G&A - - (206,277) (204,045) - - (410,322) Goodwill Expense - - - - - - - Total Operating Exp 625,796 97,768 (14,855) (9,717) 56,799 17,081 - 772,872 Operating (Profit)/Loss 625,796 97,768 (14,855) (9,717) 56,799 17,081 - 772,872 Operating Profit % Gain on Sale of Investment - Interest Inc/Exp - - - - - - - Profit Before Tax, Minority Int & Equity Investment (Income)/Loss 625,796 97,768 (14,855) (9,717) 56,799 17,081 - 772,872 Minority Interest - IS - - - - - - - (Gain)/Loss from Equity Invest - - - - - - - Restructuring - - - - - - Provision (credit) for Income Taxes - - - 2,559 - - 2,559 Net (Income)/loss 625,796 97,768 (14,855) (7,158) 56,799 17,081 - 775,431 ==================================================================================== Product Gross Margin % Service Gross Margin % Total Gross Margin %
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of December 31, 1996
Total Australia Pacific Rim Product Revenue (1,554,319) (1,554,319) Service Revenue (813,198) (813,198) Total Revenue (2,367,517) (2,367,517) Product Cost of Sales 1,083,383 1,083,383 Service Cost of Sales 166,961 166,961 Total Cogs 1,250,344 1,250,344 Product Gross Margin (470,936) (470,936) Service Gross Margin (646,237) (646,237) Total Gross Margin (1,117,173) (1,117,173) Gross Margin % 47.19% 47.19% R&D - - Sales 1,309,931 2,493,125 Marketing - - G&A (198,915) (609,237) Goodwill Expense - - Total Operating Exp 1,111,016 1,883,888 Operating (Profit)/Loss (6,157) 766,715 Operating Profit % 0.26% -32.38% Gain on Sale of Investment - Interest Inc/Exp (15,645) (15,645) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss (21,802) 751,070 Minority Interest - IS - - (Gain)/Loss from Equity Invest - - Restructuring - - Provision (credit) for Income Taxes - 2,559 Net (Income)/loss (21,802) 753,629 ============================ Product Gross Margin % 30.30% 30.30% Service Gross Margin % 79.47% 79.47% Total Gross Margin % 47.19% 47.19%
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 5 Year-To-Date As of December 31, 1996
Norway UBNEC UK Belgium Holding France Sweden Germany Product Revenue (20,292,139) (2,840,369) 55,747 - (2,980,648) (864,044) (10,908) Service Revenue - (1,854,374) (892,612) - (636,727) (302,485) (101,008) Total Revenue (20,292,139) (4,694,743) (836,865) - (3,617,375) (1,166,529) (111,916) Product Cost of Sales 16,020,133 2,293,317 193,643 - 2,400,799 728,521 (1,038) Service Cost of Sales 817,719 753,875 774,210 62,792 493,621 155,043 91,174 Total Cogs 16,837,852 3,047,192 967,853 62,792 2,894,420 883,564 90,136 Product Gross Margin (4,272,006) (547,052) 249,390 - (579,849) (135,523) (11,946) Service Gross Margin 817,719 (1,100,499) (118,402) 62,792 (143,106) (147,442) (9,834) Total Gross Margin (3,454,287) (1,647,551) 130,988 62,792 (722,955) (282,965) (21,780) Gross Margin % 17.02% 35.09% -15.65% 19.99% 24.26% 19.46% R&D - - - - - - - Sales 1,532,630 2,400,349 1,149,081 56,620 1,376,049 562,932 627,695 Marketing - 21,000 108,146 - 16,700 12,177 - G&A 3,288,715 (971,474) (787,461) (123,795) (585,072) 13,069 (405,950) Goodwill Expense - - - - - - - Total Operating Exp 4,821,345 1,449,875 469,766 (67,175) 807,677 588,178 221,745 Operating (Profit)/Loss 1,367,058 (197,676) 600,754 (4,383) 84,722 305,213 199,965 Operating Profit % -6.74% 4.21% -71.79% -2.34% -26.16% -178.67% Gain on Sale of Investment Interest Inc/Exp (39,586) (114,151) - (1,513) 7,019 (15,515) (149) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss 1,327,472 (311,827) 600,754 (5,896) 91,741 289,698 199,816 Minority Interest - IS - - - - - - - (Gain)/Loss from Equity Invest - - - - - - - Restructuring - - - - - - - Provision (credit) for Income Taxes - - - - - - - Net (Income)/loss 1,327,472 (311,827) 600,754 (5,896) 91,741 289,698 199,816 =========================================================================================== Product Gross Margin % 21.05% 19.26% 447.36% 19.45% 15.68% 109.52% Service Gross Margin % 59.35% 13.26% 22.48% 48.74% 9.74% Total Gross Margin % 17.02% 35.09% -15.65% 19.99% 24.26% 19.46%
UB Networks, Inc. 14-Jan-97 7:31 AM COMPANY CONFIDENITIAL - NEED TO KNOW ONLY Consolidated Statement of Operations Consolidation Day 13 Year-To-Date As of December 31, 1996
Czech Total Spain Republic Holland Italy Europe Product Revenue (28,306) - - - (26,960,667) Service Revenue (51,748) - - - (3,838,954) Total Revenue (80,054) - - - (30,799,621) Product Cost of Sales 41,963 - - - 21,677,338 Service Cost of Sales 37,952 - - - 3,186,386 Total Cogs 79,915 - - - 24,863,724 Product Gross Margin 13,657 - - - (5,283,329) Service Gross Margin (13,796) - - - (652,568) Total Gross Margin (139) - - - (5,935,897) Gross Margin % 0.17% 19.27% R&D - - - - - Sales 208,427 119,782 168,385 188,327 8,390,277 Marketing 4,631 - 11,433 7,500 181,587 G&A (338,990) (129,222) (193,329) (55,411) (288,920) Goodwill Expense - - - - - Total Operating Exp (125,932) (9,440) (13,511) 140,416 8,282,944 Operating (Profit)/Loss (126,071) (9,440) (13,511) 140,416 2,347,047 Operating Profit % 157.48% -7.62% Gain on Sale of Investment - Interest Inc/Exp (383) - 18 - (164,260) Profit Before Tax, Minority Int & Equity Investment (Income)/Loss (126,454) (9,440) (13,493) 140,416 2,182,787 Minority Interest - IS - - - - - (Gain)/Loss from Equity Invest - - - - - Restructuring - - - - - Provision (credit) for Income Taxes - - 5,378 - 5,378 Net (Income)/loss (126,454) (9,440) (8,115) 140,416 2,188,165 ================================================================= Product Gross Margin % -48.25% 19.60% Service Gross Margin % 26.66% 17.00% Total Gross Margin % 0.17% 19.27%
Exhibit 2.11a ------------- CROSS LICENSE AGREEMENT THIS CROSS LICENSE AGREEMENT is made this 17th day of January 1997 (the "Effective Date"), by and between Ungermann-Bass Networks, Inc., a Delaware corporation doing business as UB Networks, Inc. ("UB"), and Tandem Computers Incorporated, A Delaware corporation ("Tandem"). RECITALS A. Tandem, Newbridge Networks Corporation, a corporation organized under the laws of Canada ("Newbridge") and Newbridge Networks, Inc., a Delaware corporation and wholly-owned subsidiary of Newbridge ("NNI"), have entered into a Stock Purchase Agreement (the "Agreement") dated as of January 17, 1997, pursuant to which NNI shall purchase from Tandem all of the outstanding stock of UB. B. Subject to the terms and conditions of this Agreement, UB and Tandem are willing to enter into a cross license arrangement with each party providing to the other a license to certain patents and other intellectual property currently used in the operation of its business. NOW THEREFORE, it is hereby agreed between the parties as follows: ARTICLE I DEFINITIONS 1.1 "Affiliate" shall mean any entity which controls, is controlled by or --------- is under common control with a party. An entity shall be regarded as in control of another entity if it owns or controls, directly or indirectly, at least 50% of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority). An entity shall only be deemed an Affiliate of another entity for so long as the foregoing control relationship exists. 1.2 "Intellectual Property Rights" shall mean any and all (i) inventions, ---------------------------- discoveries and related subject matter, whether or not patentable, and patent rights and rights, title and interest in letters patent and applications for letters patent, (ii) all right, title and interest in trade secrets and trade secret rights, (iii) writings, software, works and copyrightable subject matter and copyright rights and rights, title and interest in copyrights and copyright registrations, (iv) rights, title and interest in know-how, technical information, processes, practices and systems, whether or not protectable by patent, copyright or trade secret law or as a registered mask work, and (v) licenses granted by third parties of rights to use any of the foregoing where the licensed rights can be sublicensed as provided in Article II below, provided that if such sublicense results in a royalty or other payment obligation to a third party, then the sublicensee shall be responsible for paying such royalty or other amount. "Intellectual Property Rights" shall not include any trademarks, trade names, service marks, emblems, logos, symbols and insignia and rights with respect thereto, including registrations and registration rights. 1.3 "Tandem Intellectual Property Rights" shall mean the Tandem Patents and ----------------------------------- other Intellectual Property Rights owned by Tandem as of the date hereof, in each case to the extent (and only to the extent) that, as of the Effective Date, such Tandem Patents and other Intellectual Property Rights are utilized in, read upon or otherwise cover a product which is manufactured by or for UB and offered for sale by UB as of the Effective Date. 1.4 "Tandem Patents" shall (i) mean the patents owned by Tandem as of the -------------- date hereof; (ii) any continuations, continuations-in-part, divisionals, reexaminations, reissues or extensions of (i) above; and (iii) any foreign counterparts issued or issuing on any of (i) or (ii) above, in the case of each of clauses (i), (ii) and (iii) where such patents, continuations, continuations-in-part, divisionals, reexaminations, reissues, extensions or foreign counterparts have or claim a convention priority date on or prior to the Effective Date. 1.5 "Tandem Products" shall mean (i) those products manufactured by or for --------------- Tandem and available for sale by Tandem or its Affiliates as of the Effective Date incorporating UB Intellectual Property Rights, and (ii) future versions and other derivative works of the products described in clause (i). 1.6 "UB Intellectual Property Rights" shall mean the UB Patents and other ------------------------------- Intellectual Property Rights owned by UB as of the date hereof, in each case to the extent (and only to the extent) that, as of the Effective Date, such UB Patents and other Intellectual Property Rights are utilized in, read upon or otherwise cover a product which is manufactured by or for Tandem and offered for sale by Tandem as of the Effective Date. 1.7 "UB Patents" shall (i) mean the patents owned by UB as of the date ---------- hereof; (ii) any continuations, continuations-in-part, divisionals, reexaminations, reissues or extensions of (i) above; and (iii) any foreign counterparts issued or issuing on any of (i) or (ii) above, in the case of each of clauses (i), (i) and (iii) where such patents, continuations, continuations-in-part, divisionals, reexaminations, reissues, extensions or foreign counterparts have or claim a convention priority date on or prior to the Effective Date. 1.8 "UB Products" shall mean (i) those products manufactured by or for UB ----------- and available for sale by UB or its Affiliates as of -2- the Effective Date incorporating Tandem Intellectual Property Rights, and (ii) future versions and other derivative works of the products described in clause (i). ARTICLE II GRANTS OF LICENSES 2.1 Grant of License by UB. Subject to the terms and conditions of this ---------------------- License Agreement, and subject to any existing licenses, UB hereby grants to Tandem and its Affiliates a non-exclusive, non-transferable (except as provided in Section 5.1), perpetual, irrevocable, world-wide, royalty-free license, without the right to sublicense except for use in connection with Tandem Products, to use and practice the UB Intellectual Property Rights to make, have made, use, sell, copy or otherwise reproduce or have reproduced, enhance or otherwise modify or have modified, prepare or have prepared derivative works, import, market or otherwise advertise, license, distribute, maintain and support the Tandem Products, and for no other purpose whatsoever. 2.2 Grant of License by Tandem. Subject to the terms and conditions of this -------------------------- License Agreement, and subject to any existing licenses, Tandem hereby grants to UB and its Affiliates a non-exclusive, non-transferable, (except as provided in Section 5.1), perpetual, irrevocable, world-wide, royalty-free license, without the right to sublicense except for use in connection with UB Products, to use and practice the Tandem Intellectual Property Rights to make, have made, use, sell, copy or otherwise reproduce or have reproduced, enhance or otherwise modify or have modified, prepare or have prepared derivative works, import, market or otherwise advertise, license, distribute, maintain and support the UB Products, and for no other purpose whatsoever. 2.3 Residual Rights. Neither party shall be restricted from, or have any --------------- liability to the other party for, using Residual Information (as defined below) derived from the Intellectual Property Rights of the other party. "Residual Information" means ideas, concepts, know-how and other information that remains part of the general knowledge of a person after access to the tangible embodiment of the other party's Intellectual Property Rights. ARTICLE III WARRANTIES; INDEMNIFICATION 3.1 Limited Use. Each of UB and Tandem represents and warrants that, to the ----------- best of its knowledge, its current uses (other than the provision of manufacturing services to the other party) of the other party's Intellectual Property Rights have not been and will not be material to the business of either party. 3.2 Disclaimer. EACH OF UB AND TANDEM DISCLAIMS ANY ---------- -3- EXPRESS OR IMPLIED WARRANTY (i) THAT ITS INTELLECTUAL PROPERTY RIGHTS WILL BE FREE FROM ANY CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF PROPRIETARY INFORMATION OF ANY THIRD PARTY AND (ii) OF THE ACCURACY, RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS, MERCHANTABILITY, OR SUITABILITY OR FITNESS FOR ANY PURPOSE WHATSOEVER WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT. EACH OF UB AND TANDEM DISCLAIMS ALL OTHER WARRANTIES OF WHATEVER NATURE, EXPRESS OR IMPLIED. ARTICLE IV TERM AND TERMINATION 4.1 Term. This License Agreement shall begin on the first date set forth ---- hereinabove and shall continue in effect unless terminated by mutual agreement of the parties. ARTICLE V MISCELLANEOUS PROVISIONS 5.1 Assignment. This License Agreement may not be assigned by a party, ---------- whether by operation of law or otherwise, without the express written consent of the other party, and any attempted assignment in violation of the foregoing shall be null and void. Notwithstanding the foregoing, either party may assign this License Agreement to an acquiror of such party in connection with such acquisition, whether such acquisition is effected by means of a merger, consolidation, sale of assets or otherwise. 5.2 Amendment; No Waiver. This License Agreement may be amended, modified, -------------------- superseded or canceled, and any of the terms and conditions hereof may be waived, only by a written instrument executed by the parties or, in the case of a waiver, by the party waiving compliance. Failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same, and no waiver of any nature, whether by conduct or otherwise, in any one or more instances, shall be deemed to be or considered as a further or continuing waiver of any other provision of this License Agreement. 5.3 Notice. All notices, requests, demands and other communications ------ permitted or required hereunder shall be given in writing and may be delivered personally, by confirmed facsimile transmission, by courier or by prepaid, registered mail, addressed as follows: If to UB: Ungermann-Bass Networks, Inc. 3990 Freedom Circle Santa Clara, CA 95054 Facsimile: (408) 970-7387 Attention: President -4- With a copy to: Newbridge Networks Corporation 600 March Road Kanata, Ontario K2K 2E6 Canada Facsimile: (613) 591-3680 Attention: President and Chief Operating Officer If to Tandem: Tandem Computer Corporation 10435 N. Tantau Avenue Cupertino, California 95014 Facsimile: (408) 285-4634 Attention: General Counsel A party hereto may change its address for the purposes of this License Agreement by giving the other party written notice of its new address in accordance with this Section 5.3. 5.4 Severability. If any provision of this License Agreement is held to be ------------ unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this License Agreement shall be deemed valid and enforceable to the full extent possible. 5.5 Survival. The provisions of Article III shall survive any termination -------- of this License Agreement. 5.6 Entire Agreement. This License Agreement constitutes the entire ---------------- agreement between the parties hereto with respect to the subject matter hereof. 5.7 Governing Law. This License Agreement and the rights and obligations of ------------- the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of California as applied to contracts between residents of California to be performed wholly within the State. 5.8 Counterparts. This License Agreement may be executed in several ------------ counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 5.9 Headings. The headings in this License Agreement are inserted for -------- convenience and identification only and are in no way intended to describe, interpret, define nor limit the scope, extent or intent of this License Agreement or any provision hereof. 5.10 IBM Cross License. Tandem agrees upon request from UB to provide ----------------- Tandem's written consent to International Business -5- Machines Corporation ("IBM") to allow UB to request various patent license rights from IBM as provided for in Section 3.2 of a patent cross license agreement entered into between IBM and Tandem dated June 11, 1986, as amended July 1, 1991. IN WITNESS WHEREOF, the parties hereto have executed this License Agreement as of the day and year first above written. UNGERMANN-BASS NETWORKS, INC. By: ------------------------------- Title: ---------------------------- TANDEM COMPUTERS INCORPORATED By: ------------------------------- Title: ---------------------------- -6- Exhibit 2.11B TRADEMARK LICENSE AGREEMENT THIS TRADEMARK LICENSE AGREEMENT (this "Agreement") is made and entered into this 17th day of January 1997, by and between Tandem Computers Incorporated, a corporation formed under the laws of the State of Delaware with its principal place of business located at 19191 Vallco Parkway, Cupertino, California 95014-2599 ("Licensor"), and Ungermann-Bass Networks, Inc., a corporation formed under the laws of the State of Delaware doing business as UB Networks, Inc., with its principal place of business located at 3990 Freedom Circle, Santa Clara, California, 95051 ("Licensee"). WITNESSETH WHEREAS, Licensor owns the trademarks, service marks, logos and other commercial symbols and the registrations and registration applications thereof that are listed on Exhibit A hereto (the "Marks"); and WHEREAS, Licensor desires to grant Licensee the right to use the Marks in accordance with the terms hereof; NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, the parties hereby agree as follows: 1. Grant of License. Licensor grants to Licensee the non-exclusive right to ---------------- use the Marks in relation to Licensee's GeoLan product family (including future versions and other derivative works thereof) including, without limitation, the use of the Marks in connection with the development, operation and promotion of such product family using the NONSTOP brand worldwide, provided that Licensee shall acknowledge Licensor's ownership of the Marks in connection with Licensee's usage thereof in a manner consistent with Licensor's practice in this regard. 2. Reasonable Commercial Efforts. Licensee agrees to use its reasonable ----------------------------- commercial efforts to exploit the use of the Marks. 3. Term. The term of this Agreement (the "Term") shall commence on the date ---- hereof and shall continue in effect until terminated in accordance with Section 8 below. 4. Licensor's Title and Rights. Licensee recognizes Licensor's title in and --------------------------- to the Marks and, subject to Section 2 above, will not at any time knowingly do or suffer to be done any act or thing which will in any way impair the rights of the Licensor in and to the Marks. 5. Quality Control. Licensee acknowledges the importance of maintaining --------------- high, uniform standards of quality for the products sold under the Marks to Licensor's reputation and goodwill. Therefore, Licensee shall maintain the same standard of quality as maintained by Licensor in its usage of the Marks and follow the same standards and specifications as followed by Licensor from time to time relating to the type, nature and quality of the products sold under the Marks; and, Licensor shall have the right to inspect the products sold upon reasonable notice during normal business hours to determine whether Licensee is complying with such standards and specifications. 6. Infringement/Oppositions. While Licensor, as the owner of the Marks, has ------------------------ the ultimate responsibility for preserving and protecting the integrity of the Marks, Licensee shall have the right to institute whatever trademark infringement and opposition proceedings that Licensee considers to be appropriate in order to prevent the unauthorized use or registration of the Marks or any trademarks, service marks, trade names or logos that are confusingly similar to the Marks. Licensor agrees to cooperate fully with Licensee in its prosecution of such actions and to reimburse Licensee for any cost it incurs in instituting and prosecuting such actions. Licensor hereby appoints Licensee as Licensor's attorney-in-fact to take whatever actions that the Licensor deems to be necessary or appropriate in order for Licensee to institute and prosecute any such infringement and opposition proceedings, either in its own name or on behalf of Licensee and Licensor jointly. 7. Assignment. This Agreement may not be assigned by a party, whether by ---------- operation of law or otherwise, without the express written consent of the other party, and any attempted assignment in violation of the foregoing shall be null and void. Notwithstanding the foregoing, either party may assign this Agreement to an acquiror of such party in connection with such acquisition, whether such acquisition is effected by means of a merger, consolidation, sale of assets or otherwise. 8. Termination. Either party shall have the right to terminate this ----------- Agreement as follows: a) If either party materially breaches any of the obligations set forth herein, the other party shall have the rights to terminate this Agreement by the delivery to the breaching party of thirty (30) days' prior written notice of termination. 9. Waiver. The waiver by either party of a breach or provision of this ------ Agreement by the other shall not operate or be construed as a waiver of any subsequent breach by such other party. 10. Binding Effect. This Agreement shall be binding upon and shall inure to -------------- the benefit of the parties hereto and their respective successors and assigns. 11. Serverability. The invalidity, illegality or unenforceability of any ------------- provision hereof shall not in any way affect, impair, invalidate or render unenforceable this Agreement or any other provision thereof. 12. Choice of Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California. 2 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed the day and year first above written. Tandem Computers Incorporated By: ------------------------------------ Title: ---------------------------------- Ungermann-Bass Networks, Inc. By: ------------------------------------- Title: ---------------------------------- 3 EXHIBIT A Mark: NONSTOP
Country Classes App. # App. Date Reg. # Reg. Date Status - ------- ------- ------ --------- ------ --------- ------ AIPO 9 PV.79373 1/19/90 29827 1/19/90 Registered (African Unloa) Argentina 9 1960125 2/6/95 1573294 8/29/95 Registered Argentina 16 1960126 2/6/95 1122810 Renewal Pending Argentina 15 1730375 3/5/90 1392044 3/31/92 Registered Argentina 42 1859196 10/15/92 1464768 8/31/93 Registered Argentina 16 1730374 3/5/90 1392043 3/31/92 Registered Arizona 21 19381 8/30/88 Registered Armenia 9 0098 11/20/95 Pending Austria 9, 16 110065 11/8/94 110065 8/16/95 Registered Azerbaijan 9 237NPT 1/19/94 Pending Bahrain 9 7/2/91 Renewal Received Bahrain 16 7/2/91 Renewal Received Belarus 9 BY630 9/28/93 630 9/28/93 Registered Benelux 9, 16 375838 6/13/91 375838 7/7/91 Registered Benelux 9, 16 375838 6/13/91 375838 7/7/91 Registered Brazil 9.4, 9.55, 9.80 810721929 1/13/93 810721929 Renewal Pending California 58540 10/12/78 11420 10/12/88 Registered Canada 0 478504 11/19/81 278012 3/25/83 Registered Chile 9 158553 8/8/90 363349 1/3/91 Registered Colombia 16 320921 4/27/90 108193 5/3/90 Registered Colombia 9 345518 8/9/91 143662 11/17/93 Registered Connecticut 21 4105 9/5/88 Registered Denmark 3, 9, 16, 25, 29, 917-1933 10/6/92 917-1933 9/6/93 Registered 31, 32, 35 Egypt 9 60313 12/24/91 60313 3/10/92 Registered Egypt 16 60314 12/24/91 60314 3/10/92 Registered Egypt 42 60315 12/24/91 60315 3/10/92 Registered Estonia 9 3787 4/15/93 8369 2/23/94 Registered Finland 9, 42 R-4894/95 11/23/95 94356 12/5/95 Registered France 9 104777 1/23/89 1510215 1/23/89 Registered Georgia 9 4830/03 7/30/93 Pending Germany 9 395076315 2/20/95 Pending Greece 9, 16 69650 8/18/91 69650 8/18/91 Registered Guatemala 9 3001-86 8/20/86 53627/5/119 8/11/87 Registered Guatemala 16 3002-86 8/20/86 53624/2/119 8/11/87 Registered Hong Kong 9 4346/93 6/17/94 4346/93 6/17/94 Registered Hungary 9 M9300414 1/29/93 139157 1/29/93 Registered Illinois 47046 9/11/88 Registered India 16 382879B 11/9/95 382879B Renewal Pending India 9 388254 1/1/81 Pending Indonesia 16 H4HCO1012456 9/27/93 164618 Renewal Pending Iran 9, 16, 35 54662 6/19/91 54662 9/20/91 Registered -1- Ireland 9 B103980 4/28/88 Registered Israel 9 52600 7/27/88 Registered Israel 42 52601 7/27/88 Registered Italy 9, 16, 42 34577C/81 7/31/81 440958 8/11/86 Registered Japan 11 80567/1979 10/24/70 2181096 10/31/89 Registered Kazakhstan 9 2573 10/14/93 Pending Kenya 9 28971 6/22/88 8/14/88 Registered Kuwait 9 19369 8/5/96 18178 Renewal Pending Kuwait 16 19370 8/5/96 18179 Renewal Pending Latvia 9 M-93-6356 6/29/93 M19327 1/20/95 Registered Lithuania 9 RL10855 9/1/93 Pending Malaya 9 M/92077 9/7/81 Pending Malaysia 9 88/04466 8/22/95 88/04466 9/1/95 Registered Mexico 35 267421 8/13/91 267421 6/10/93 Registered Mexico 26 267424 8/13/91 267424 6/11/93 Registered Minnesota 5876 8/31/78 Registered Missouri 6072 9/1/88 Registered Nebraska 10246 9/1/88 10246 9/1/88 Registered New York R-25221 9/14/88 Registered New Zealand 9 165573 5/20/86 B165573 10/20/94 Registered New Zealand 16 165572 5/20/86 B165572 5//20/86 Registered North Carolina 3210 10/24/88 Registered Norway 9, 42 125265 2/22/96 125265 5/29/96 Registered Pennsylvania 1360 9/8/78 Registered Pennsylvania 21 1360 9/8/78 1360 9/8/88 Registered Peru 9 195067 12/20/91 64650 2/25/92 Registered Phillippines 9 94351 8/5/94 Pending Ras Al-Khaimah 9 7121 7/12/90 6980 3/4/91 Registered Russian Federation 9 134925 4/19/91 100682 12/6/91 Registered Saudi Arabia 9 164/77 7/15/96 164/77 7/29/96 Registered Saudi Arabia 16 164/78 7/15/96 164/78 7/29/96 Registered Singapore 9 B42/87 1/5/94 B42/87 1/5/94 Registered Slovenia 9, 16 Z9570350 3/16/95 9570350 6/3/96 Pending South Africa 9 92/2346 3/20/92 B92/2346 3/20/92 Registered South Korea 39 92-1084 8/25/92 83580 1/14/93 Registered Spain 16 987444 9/30/81 987444 12/4/82 Registered Spain 9 987749 7/10/81 987749 6/5/82 Registered Sri Lanka 9 72717 12/19/94 Pending Sweden 9, 35, 42 189790 12/3/93 189790 1/20/94 Registered Taiwan 80 173499 1/21/92 173499 3/1/92 Registered Taiwan 8 7788 7/8/92 7780 8/16/92 Registered Tajhkistan 9 94000985 9/20/94 Pending Texas 35272 9/18/88 Registered Thailand 9 265830 6/3/94 KOR19374 7/26/94 Registered Ukraine 9 2446 6/14/93 2446 11/15/93 Registered United Arab Emirates 9, 16, 37, 42 Dispatched United Kingdom 9 B1213241 B1213241 2/22/91 Registered -2- United Kingdom 16 B1213242 B1213242 2/22/91 Registered United States 9, 16 73/786393 3/13/89 1563187 10/31/89 Registered United States 42 183892 8/29/78 1181573 12/8/81 Registered Uzbekistan 9 93020603 9/7/93 1110 8/15/94 Registered Venezuela 26 5987-91 4/10/91 Pending Venezuela 38 2044-86 2/21/86 133431/F 6/1/88 Registered Venezuela 21 10421 11/28/81 115485 10/8/85 Registered Vietnam 9 12639 3/30/93 10495 12/23/3 Registered Virginia ??? 10/27/78 Registered
Mark: NONSTOP (IN KATAKANA)
Country Classes App. # App. Date Reg. # Reg. Date Status - ------- ------- ------ --------- ------ --------- ------ Japan 11 74818/1991 7/16/91 2704003 2/28/95 Registered
-3- Exhibit 2.12 PLEASE BE SURE AND SIGN PAGES 5 & 6 TO: All Employees FROM: Carol Berge, General Counsel SUBJ: Proprietary Information and Inventions Agreement The long term success of our Company is highly dependent upon our ability to protect proprietary information and trade secrets from our competitors and potential competitors. In order for this to occur, it is essential that each employee of the Company has an understanding of the definition of proprietary information. It is also important that each individual takes responsibility for protecting that information. "Proprietary information" is information that is not made available to the general public by the Company and that may give the Company a competitive advantage. Most employees have access to information in their work area that would be classified as proprietary. Proprietary information includes, for instance, processes, formulas, data, know-how, improvements, firmware, marketing plans, strategies, forecasts, new products, unpublished financial statements, budgets, licenses, prices, costs, the abilities and compensation levels of our employees and customer and supplier lists that are used in our business and provide an advantage over competitors. In order to protect this competitive advantage, it is critical that all information which is proprietary be clearly identified as such and safeguarded from persons other than employees with a need to access this information. Information such as drawings, diagrams, lists, computer printouts and documents, if they are proprietary, should be labeled or stamped "Proprietary Information" or "Company Private" and kept in a secure place. When these items are no longer in use, they must be properly destroyed. You should not assume, however, that information which is not labeled proprietary or private is free to be communicated outside the Company. If you are in doubt as to whether or not to show Company documents to or discuss Company business of any kind with people outside the Company, don't. A large part of ensuring the success of Ungermann-Bass Networks, Inc. is protecting the leading edge we have over our competitors and that responsibility belongs to each one of us. If you have any questions, please discuss them with your manager, supervisor or me. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT ------------------------------------------------ I recognize that UB Networks, a California corporation, together with its subsidiaries (hereinafter collectively called the "Company") is engaged in a continuous program of research, development, and production respecting its business. I understand that: (a) As part of my employment by the company I am expected to make new contributions and inventions of value of the Company. (b) My employment creates a relationship of confidence and trust between me and the Company with respect to any information applicable to the business of the Company or to the business of any client or customer of the Company, which I receive from the Company or any client or customer of the Company, of which I learn during the period of my employment. (c) The Company possesses information that has been created, discovered, or developed, acquired or otherwise become known to the Company (including but not limited to information I have created, discovered, or developed, during or as a result of my employment by the Company). This information has commercial value in the Company's business. All such information is hereinafter called "Proprietary Information". Proprietary Information includes but is not limited to all or any part of any inventions (including machines, articles of manufacture, compositions of matter, methods, processes, arts and all other inventions whether or not patentable), developments, technical data, discoveries, ideas, techniques, trade secrets, algorithms, flow charts, works (including mask works, computer software, firmware, computer programs, computer documentation, data bases, listings, books, manuals and all other works whether or not registerable), business information (such as plans, proposals, reports, strategies, forecasts, financial data, supplier lists, customer lists, prospect lists, contact-persons and the identities, abilities and compensation levels of other employees), confidential information and materials and other confidential things of all kinds. (d) In consideration of my employment (including any time I am retained by the Company as a consultant) I hereby agree as follows: 1. Proprietary Information Belongs to Company ------------------------------------------ All Proprietary Information shall be the sole property of the Company and the Company shall be the sole owner of all inventions, patents, copyrights, copyright registrations, maskworks, mask-work registrations, trade secrets and other rights related to Proprietary Information. I hereby assign to the Company any rights I may have or acquire in the Proprietary Information. At all times both during and after my employment by the Company I will keep in confidence and trust all Proprietary Information, and I will not use 2 or disclose any Proprietary Information or anything relating thereto without the prior written consent of the Company, except as may be necessary in the ordinary course of performing my duties as an employee of the Company. Any Proprietary Information I am authorized to disclose, I will conspicuously mark or otherwise identify clearly as Proprietary Information. 2. I Will Not Compete or Create Conflict of Interest ------------------------------------------------- While employed by the Company I will not directly or indirectly compete with the Company or do anything that could conflict with my obligation to work solely for the Company's benefit. 3. I Will Return Company Documents ------------------------------- In the event of the termination of my employment by me or by the Company for any reason, I will deliver to the Company all documents and data of any nature pertaining to the Company and I will not take with me originals or copies of any such documents or data. 4. I Will Disclose Inventions -------------------------- I will promptly disclose to the Company, or any persons designated by it, all improvements, inventions, formulas, processes, techniques, know-how, software, mask-works, memoranda works of authorship, and data, whether or not patentable, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment which are related to or useful in the business of the Company, or result from tasks assigned me by the Company or result from use of premises owned, leased, or contracted for by the Company (all said improvements, inventions, formulas, processes, techniques, know-how, software, mask-works, memoranda and data shall be collectively hereinafter called "Inventions"). 5. I Assign My Inventions to Company --------------------------------- All Inventions shall be the sole property of the Company and the Company shall be the sole owner of all patents, copyrights, copyright registrations, mask-works, mask-work registrations, trade secrets and other rights related to any Inventions. I hereby assign to the Company any rights I may have or acquire in such Inventions. I will assist the Company in every proper way (but at the Company's expense) to obtain and enforce patents, copyright registrations, mask-work registrations and other rights on any Inventions and in any countries. To that end I will execute all documents for use in applying for, obtaining and enforcing such patents and for assigning them to the Company or persons designated by it. My obligation to assist the Company under this paragraph shall continue beyond the termination of my employment, provided that the Company will reasonably compensate me for such assistance. 3 In the event the Company is unable, after reasonable effort, to secure my signature on any document or documents needed to apply for or prosecute any patent, copyright or mask-wok registration, or other right or protection relating to an Invention, whether because of my physical or mental incapacity or for any reason, I hereby irrevocably appoint the Company and its authorized officers and agents as my agent and attorney-in-fact, to act in my behalf to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of patent, copyright or mask-work registrations, or similar protections with the same legal force and effect as if executed by me. I understand that to the extent California law is applicable to the agreement, this paragraph 5 does not apply to inventions which qualify fully for protection under Section 2870 of the California Labor Code which provides as follows: Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of his or her rights in an invention to his or her employer shall not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee's time, and (a) which does not relate (1) to the business of the employer or (2) to the employer's actual or demonstrably anticipated research or development, or (b) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable". 6. I Have Identified My Past Inventions ------------------------------------ I have identified on Exhibit A attached hereto all inventions and improvements relevant to the subject matter of my employment by the Company which I made, conceived or first reduced to practice, alone or jointly with others, prior to my employment by the Company and which I desire to remove from the operation of this Agreement. If there is no such list on Exhibit A, I represent that I have made no such inventions and improvements. 7. No Breach of My Past Agreements, Duties --------------------------------------- My performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence proprietary information acquired by me prior to my employment by the Company or any other obligation to any former employer. 4 8. No Unauthorized Use of Prior Employers' Materials ------------------------------------------------- The only materials or documents of a former employer which are not generally available to the public that I have brought or will bring to the Company or use in my employment are identified on Exhibit A attached hereto. I have obtained, prior to my employment with the Company, written authorization from such former employee for the possession and use of each such item in my employment with the Company. 9. Effective Date -------------- This agreement shall be effective as of the first day of my employment by the Company, namely: ---------------------- 10. Agreement Binding on My Successors ---------------------------------- This Agreement shall be binding upon me, my heirs, executors, assigns, and administrators and shall insure to the benefit of the Company, its successors, and assigns. THIS AGREEMENT DOES NOT CONSTITUTE A CONTRACT OF EMPLOYMENT AND DOES NOT AFFECT THE AT-WILL STATUS OF MY EMPLOYMENT. Dated: ____________________ By: __________________________________ (Signature) ---------------------------------- (Print name) ACCEPTED AND AGREED TO: UNGERMANN-BASS NETWORKS, INC. By: 5 EXHIBIT A Ungermann-Bass Networks, Inc. 3900 Freedom Circle Santa Clara, CA 95052 Gentlemen: 1. The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by Ungermann-Bass Networks, Inc. (the "Company") which I made or conceived or first reduced to practice, alone or jointly with others prior to my engagement by the Company (if none, write NONE below) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Attach additional sheets if necessary) 2. I have obtained the written authorization of a previous employer (a copy of which is attached hereto) to bring to and use in my employment with the Company the following materials and documents of such former employer which are not generally available to the public (if none, write NONE below): - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Attach additional sheets if necessary) 6 - ------------------------ ------------------------------------- Date Employee Signature 7 UNGERMANN-BASS NETWORKS, INC. CORPORATE PURCHASE AGREEMENT (CONSULTING) AGREEMENT NO. CS- This Consulting Agreement (Agreement) is made as of (date) , between ----------- UNGERMANN-BASS NETWORKS, INC located at 3900 Freedom Circle, Santa Clara, California 95054 and (Consultant Name) ("Consultant"), located at ______________________________. 1. THE SERVICES. Consultant shall provide the services described in any Work ------------ Statement to which this Agreement relates (the Services). Work Product shall mean all deliverables, recommendations, reports, designs, diagrams, specifications, writings of any nature, photographs, artwork, audio and audio-visual works, computer programs, inventions, discoveries, and improvements developed, conceived, or reduced to practice in the course of or arising out of any services. A Work Statement may only be changed in a writing signed by both parties. 2. CONFLICTS OF TERMS. The Services and Work Product shall be provided solely ------------------ under the terms of this Agreement and its attachments, which shall override any language in any other document. 3. TERM OF AGREEMENT. The term of this Agreement shall be one (1) year from ----------------- the Effective date, unless earlier terminated as provided herein. The term of this Agreement shall be extended for additional one (1) year terms thereafter automatically and without any act of either party, unless Customer gives written notice to Consultant prior to the end of any term that it has elected not to renew the Agreement for the ensuing term. The terms and conditions of this Agreement shall apply to any Work Statement issued hereunder, whether or not the Agreement remains in effect when performance or any claim under Work Statement is made. 4. MANNER OF PERFORMANCE OF SERVICES. Consultant shall be an independent --------------------------------- contractor, will perform the Services without direct supervision of Customers personnel, and in such manner as Consultant shall determine, consistent with the Work Statement. Consultant shall have no authority to represent or create any obligation on behalf of Customer . 5. PRICE AND PAYMENT. Upon completion to Customer's satisfaction of the ----------------- Services, Customer shall pay Consultant the amounts in the Work Statement. Unless otherwise provided in the Work Statement, Customer shall pay Consultant within thirty (30) days of receipt of an undisputed invoice for Services. The charges shall be deemed inclusive of all costs, taxes and fees, and Consultant will be responsible for its own expenses incurred in connection with the Services unless otherwise specified in a Work Statement. Any expense reimbursement permitted by Customer will be in accordance with Customer's then-current policies. 6. OWNERSHIP OF WORK PRODUCT. All Work Product shall be disclosed promptly to ------------------------- Customer and be a "work for hire" and the exclusive property of Customer. Consultant transfers and assigns to Customer all right, title, and interest in the Work Product, including all rights in any patents, copyrights, trade secrets, inventions, copyrightable materials, or other intellectual property rights relating to the Work Product. Consultant shall execute any documents and otherwise cooperate with Customer, at Customer's expense but without further compensation to Consultant, in any action Customer deems necessary to secure fully to Customer all rights in the Work Product or to obtain, maintain, or defend for Customer's benefit any of the intellectual property rights identified above. 7. INFRINGEMENT. Consultant warrants that Consultant has the right to make any ------------ use of the Work Product and any materials, concepts, processes, or information contained therein as Customer may determine, without violation of any right of any third party and without creating any obligation on the part of Customer to pay any fee, license, penalty, or other expense in connection with Customer's use, reproduction, marketing, licensing or sale. 8. TERMINATION OF SERVICES. Customer may terminate this Agreement and any Work ----------------------- Statement hereunder for its convenience at any time upon three (3) days written notice to Consultant. In such event, Customer will, as its sole and exclusive obligation, pay Consultant for the value to Customer of the Services rendered prior to notification to Consultant, as determined by Customer in good faith. Customer may terminate this Agreement and any Work Statement thirty (30) days after notifying Consultant in writing that Consultant has breached this Agreement, unless such breach is cured within said thirty (30) days. Customer may, in addition to any other remedies at law or in equity, recover the reasonable costs of completing the Services. In its sole discretion, Customer may also accept and pay for the services or Work Product which were properly performed and completed prior to the default, and may offset the value of such services and Work Product against the damages caused by such default. The prevailing party in any dispute hereunder shall be entitled to recover its costs, including reasonable attorneys' fees, incurred in contesting such dispute. The parties acknowledge that if Consultant breaches its obligations under Sections 6, 7 or 9, Customer will suffer irreparable injury and that money damages will not provide an adequate remedy. In such circumstances, Customer shall have the right, in addition to any other rights and remedies available to it, to have such obligations specifically enforced by any court having equity jurisdiction. Consultant's obligations under Sections 6, 7, 9, 11 and this Section 8 shall survive expiration or termination of this Agreement. Upon any termination or expiration of this Agreement or a Work Statement, Consultant shall deliver promptly to Customer all Work Product together with all copies of any documents, software, specifications, and materials of any sort which were furnished by Customer to Consultant or are Customers property. Customer may withhold final payment until receipt of all such materials, or in its discretion may offset from such final payment its good faith estimate of the value of any such materials not returned. 9. CONFIDENTIALITY. --------------- 9.1 Consultant acknowledges and agrees that the Work Product as well as any information, oral or written, that is not generally known outside of Customer, including without limitation, information relating to Customer's products, designs or research, information relating to Customers business operations, such as its marketing plans, customer lists, pricing methods and personnel, and information disclosed to Customer in confidence by third parties, (collectively "Confidential Information"), is the confidential information of Customer. 9.2 Consultant agrees to receive and maintain all Confidential Information in the strictest confidence and, except as provided herein, shall not use Confidential Information for its own benefit or disclose it or otherwise make it available in whole or in part to third parties without the prior written consent of Customer. Consultant agrees to limit the disclosure of Confidential Information to only those employees who are under a commitment of confidentiality with regard thereto and who need Confidential Information to perform Services for Customer, and to advise all employees of Customer's rights in the Confidential Information. Customer shall have the right to require reasonable modifications of Consultant's security procedures to safeguard Customer's Confidential Information. 9.3 Nothing in this Agreement shall be construed as granting or conferring any rights by license or otherwise in any Confidential Information, patents, trademarks or copyrights of Customer except as necessary for the limited purposes of Consultant's performance of Services. Consultant agrees that it shall not attempt to interfere with the business of Customer and shall not attempt to use any information or experience gained in performing the Services in a manner that would harm Customer in any way. 9.4 Consultant shall not disclose or disseminate to any third party the fact that it has furnished or contracted to furnish Customer with Products hereunder or the specific contents or provisions of this Agreement without the prior express written consent of Customer. 9.5 Non-confidential Information Consultant shall have no obligation not to disclose or use information to the extent such information: A. Is or becomes generally available to the public other than as a consequence of a breach of an obligation of confidentiality to Customer; or B. Is furnished on five (5) or more occasions to third parties by Customer without a restriction on disclosure; or C. Is known to or independently developed by Consultant prior to disclosure by Customer; or D. Is received from a third party independent of Customer without breaching an obligation of confidentiality; or E. Is required to be disclosed by operation of law or by an instrumentality of the government, including but not limited to any court, tribunal or administrative agency. 9.6 To the extent Consultant makes available to Customer information which constitutes and is clearly marked as confidential or proprietary information of Consultant, Customer shall be subject to the provisions of Sections 9.2 and 9.5 above with regard to such information, to the same extent as Consultant is subject to such provisions with regard to the Confidential Information of Customer. 10. NOTICES. All notices shall be in writing and sent to the parties at their ------- addresses set forth in this Agreement or as modified by written notice to the other party. Such notices shall be deemed given when delivered personally or three (3) days after postmark date if mailed by certified or registered mail, postage prepaid, return receipt requested, addressed to a party as stated above. 11. HOLD HARMLESS. Consultant agrees to defend, indemnify, and hold Customer, ------------- its parent corporation, subsidiaries and employees harmless against all suits, claims, liabilities, causes of action, losses, and expenses, including reasonable attorneys fees and costs of suit, resulting from any act or omission of Consultant relating to the Services, or from any claim that the Work Product infringes any patent or copyright, or otherwise violates the rights of any third party. 12. ENTIRE AGREEMENT. This Agreement represents the entire agreement and ---------------- supersedes all prior agreements and understandings between the parties relating to the subject matter hereof and may be changed only in writing signed by both parties. If a provision shall be judicially held invalid or unenforceable, such provision shall be deemed omitted or modified to the minimum extent required by such court, and the remainder of this Agreement, including any modified provision, shall continue in full force. No delay or failure of either party to enforce any right hereunder shall be deemed a waiver thereof or of any other right hereunder, and no waiver shall constitute a continuing waiver or such right. 13. EEO. Contractor agrees to comply with all applicable laws including, if --- appropriate, Executive Order 11246, as amended, 38 USC 2012 of the Vietnam Era Veterans Readjustment Act of 1974 and Section 503 of the Rehabilitation Act of 1973, as amended, and the regulations at 41 CFR Parts 60-1 through 60-60, 60-250 and 60-741. 14. ASSIGNMENT. Consultant may not assign this Agreement; any such attempted ---------- assignment shall be void. 15. APPLICABLE LAW. This Agreement shall be governed by the laws of the State -------------- of California as they apply to agreements executed and performed entirely in California. 16. SIGNATURES ---------- Customer: Consultant: UNGERMANN-BASS NETWORKS, INC. By: By: Name Name Title Title Date Date ATTACHMENT A WORK STATEMENT AGREEMENT NO. CS-____ Work Statement No. __ 1. General ------- This Work Statement defines work to be done on a work-for-hire basis for UNGERMANN-BASS NETWORKS, INC. by ______________________ under Corporate Purchasing Agreement No. ______. 2. General Description of Project/Services: --------------------------------------- 3. Project Coordinators Name and Phone Number -------------------- --------------------- Customer Contract Coordinator: James Garcia (408)562-7809 Consultant Contract Coordinator: Customer Technical Coordinator: Consultant Technical Coordinator: 4. Detailed Description of Services: -------------------------------- 5. Equipment and Resources to be Provided by Customer -------------------------------------------------- Customer shall provide and make available to Consultant, on a loan basis only, the following materials, documentation and equipment: 6. Consultant Resources -------------------- List the Key Person(s) who will perform the Service (or the specific sub-tasks set forth in this Work Statement) including their job title. 7. Description of Deliverables --------------------------- Include a list of deliverables and a detailed description of what is included in each deliverable with time schedule for performance and delivery. 8. Special Terms ------------- 9. Method of Payment ----------------- 10. Payment Schedule: ---------------- 11. Schedule and Performance Milestones ----------------------------------- The following schedule sets the target dates and performance milestones for the preparation and delivery of the Deliverables by Consultant. ------------------------------------------------------- 12. Acceptance and Testing Procedures --------------------------------- ------------------------------------------------------- 13. Warranty -------- Specify the warranty period, if any, required. Include the kind of support you require during the warranty period. -------------------------------------------------------- 14. Location of Work Facilities --------------------------- ----------------------------------------------------------- 15. Government Contracts -------------------- If any of the work to be performed under this Work Statement is rendered pursuant to or under a contract with a government agency, the clauses identified on the attached page(s) shall be a part of the Agreement governing Consultants performance of the Services and are hereby incorporated by this reference. 16. Signatures ---------- Customer: Consultant: UNGERMANN-BASS NETWORKS, INC. By:_____________________ By:_______________________ - ------------------------ -------------------------- Name Name - ------------------------- -------------------------- Title Title EX-99.1 3 CONSOLIDATED PRO FORMA FINANCIAL INFORMATION Exhibit 99.1 TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------------------- September 30, 1996 December 31, 1996 - ---------------------------------------------------------------------------------------------------------------------------- Historical Historical Consolidated Pro-Forma Consolidated Balance Sheet Pro-Forma Consolidated (In thousands except per share amount) Balance Sheet (Unaudited) Adjustments Balance Sheet - ---------------------------------------------------------------------------------------------------------------------------- Assets - ---------------------------------------------------------------------------------------------------------------------------- Current assets Cash and equivalents $ 87,813 $ 128,326 $ 93,200 (a) $ 221,526 Accounts receivable, net 475,464 399,510 399,510 Current portion of lease receivables 74,624 75,738 75,738 Inventories 115,320 119,140 119,140 Prepaid expenses and other 43,749 65,307 11,800 (a) 77,107 Net current assets of discontinued operations 62,593 60,985 (60,985) (d) -- - --------------------------------------------------------------------------------------------------------------------------- Total current assets 859,563 849,006 44,015 893,021 - --------------------------------------------------------------------------------------------------------------------------- Property, plant, and equipment, at cost 1,246,950 1,255,413 1,255,413 Accumulated depreciation and amortization (696,140) (721,634) (721,634) Net property, plant, and equipment of discontinued operations 30,402 29,533 (29,533) (d) -- - --------------------------------------------------------------------------------------------------------------------------- Net property, plant, and equipment 581,212 563,312 (29,533) 533,779 - --------------------------------------------------------------------------------------------------------------------------- Lease receivables 86,618 91,214 91,214 - --------------------------------------------------------------------------------------------------------------------------- Other assets 217,580 230,311 1,600 (b) 231,911 - --------------------------------------------------------------------------------------------------------------------------- Total assets $1,744,973 $1,733,843 $ 16,082 $1,749,925 - --------------------------------------------------------------------------------------------------------------------------- Liabilities and stockholders' investment - --------------------------------------------------------------------------------------------------------------------------- Current liabilities Accounts payable $ 135,821 $ 133,099 $ 133,099 Accrued liabilities 353,765 326,213 $ 13,096 (c) 339,309 Current maturities of long-term obligations 93,740 91,195 91,195 - --------------------------------------------------------------------------------------------------------------------------- Total current liabilities 583,326 550,507 13,096 563,603 - --------------------------------------------------------------------------------------------------------------------------- Long-term obligations 75,225 77,171 77,171 - --------------------------------------------------------------------------------------------------------------------------- Stockholders' investment Common Stock $.025 par value, authorized 400,000 shares, outstanding 122,020 shares at December 31 and 121,318 shares at September 30 3,033 3,050 3,050 Additional paid-in capital 710,264 717,474 717,474 Retained earnings 420,363 432,043 2,986 435,029 Accumulated translation adjustments 3,629 4,460 4,460 Treasury stock, at cost (50,867) (50,862) (50,862) - --------------------------------------------------------------------------------------------------------------------------- Total stockholders' investment 1,086,422 1,106,165 2,986 1,109,151 - --------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' investment $1,744,973 $1,733,843 $ 16,082 $1,749,925 =========================================================================================================================== (a) Represents sale proceeds of $118 million (cash and escrow deposit) received by the Company at closing, less $13 million estimated cash disbursements to or on behalf of UB Networks between the effective date and January 17, 1997. (b) Represents miscellaneous assets UB Networks retained by the Company. (c) Represents estimated net liability for UB Networks employee transition arrangements and other costs and expenses related to the transaction. (d) Represents elimination of the net assets of UB Networks.
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