-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, f/4PnHByVxhFDK8YBESAWVQDZnbNgCBjmoRemw5yOosq8EYwsS+OZGhiM+wO+f1+ eKhRUJJiU3TCFrdP38O9OQ== 0000738076-94-000005.txt : 19940214 0000738076-94-000005.hdr.sgml : 19940214 ACCESSION NUMBER: 0000738076-94-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940202 ITEM INFORMATION: 2 ITEM INFORMATION: 7 FILED AS OF DATE: 19940211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3COM CORP CENTRAL INDEX KEY: 0000738076 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 942605794 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: 34 SEC FILE NUMBER: 000-12867 FILM NUMBER: 94506683 BUSINESS ADDRESS: STREET 1: 5400 BAYFRONT PLZ CITY: SANTA CLARA STATE: CA ZIP: 95052 BUSINESS PHONE: 4087645000 8-K 1 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): February 2, 1994 3COM CORPORATION (Exact name of registrant as specified in its charter) California 0-12867 94-2605794 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer) incorporation or organization) Identification No.) 5400 Bayfront Plaza 95052 Santa Clara, California (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 764-5000 Item 2. Acquisition or Disposition of Assets (a) On February 2, 1994, pursuant to an Agreement and Plan of Reorganization dated January 18, 1994 (the "Agreement") among 3Com Corporation (the "Company"), 3Sub Acquisition Corporation, a California corporation and wholly-owned subsidiary of the Company ("3Sub"), and Centrum Communications, Inc., a California corporation ("Centrum"), 3Sub was merged with and into Centrum, which became a wholly-owned subsidiary of the Company. The negotiated value for all shares of Centrum stock outstanding was approximately $30,200,000. Such amount will be paid using funds from the Company's working capital. In addition, the Company assumed all outstanding options to acquire Centrum stock, which will be exercisable after the merger for shares of Company Common Stock. The holders of capital stock of Centrum received cash at the rate of approximately $1.567 per share. Such cash amount will be payable in two (2) installments, (i) 19/36ths will be payable at or as promptly after February 2, 1994 as is practicable, and (ii) 17/36ths shall be paid six months thereafter. Prior to this transaction, no material relationship existed between the Company and Centrum or any of its affiliates, any director or officer of the Company, or any associate of any such director or officer. Centrum is engaged in the business of developing, manufacturing, marketing and servicing computer software. 3Com intends to continue such business. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) The audited financial statements of Centrum for the years ended September 30, 1993 and September 30, 1992 are attached hereto as Exhibit 7.1. (b) It is currently impracticable to provide any pro forma financial information that may be required pursuant to Article 11 of Regulation S-X. The Company intends to file all required pro forma financial information on or before March 30, 1994. (c) The following exhibits are attached hereto and filed herewith: 7.2* Agreement and Plan of Reorganization dated January 18, 1994. 7.3* Indemnity and Escrow Agreement dated February 2, 1994. * Confidential treatment has been requested as to a portion of these Exhibits. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 3COM CORPORATION February 11, 1994 By: /S/Christopher B. Paisley Christopher B. Paisley, Chief Financial Officer INDEX TO EXHIBITS 7.1 Financial Statements of Centrum for the years ended September 30, 1993 and September 30, 1992 7.2* Agreement and Plan of Reorganization dated January 18, 1994 7.3* Indemnity and Escrow Agreement dated February 2, 1994 * Confidential treatment has been requested as to a portion of these Exhibits. EX-7 2 EXHIBIT 7.1 CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Financial Statements September 30, 1993 and 1992 (With Independent Auditors' Report Thereon) Independent Auditors' Report The Board of Directors Centrum Communications, Inc.: We have audited the accompanying balance sheets of Centrum Communications, Inc. (a wholly owned subsidiary of Centrum Technology Corporation) as of September 30, 1993 and 1992, and the related statements of operations, shareholder's equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Centrum Communications, Inc. (a wholly owned subsidiary of Centrum Technology Corporation) as of September 30, 1993 and 1992, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick December 17, 1993, except as to Note 7(b), which is as of December 30, 1993 CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Balance Sheets September 30, 1993 and 1992 Assets 1993 1992 Current assets: Cash and cash equivalents $140,400 $700,800 Accounts receivable, less allowance for doubtful accounts and returns of $8,500 in 1993 284,700 2,300 Inventories (Note 2) 476,600 27,100 Prepaid expenses and other assets 38,700 65,200 Total current assets 940,400 795,400 Property and equipment, net (Note 3) 288,600 87,400 Other assets 27,900 - $1,256,900 $ 882,800 Liabilities and Shareholder's Equity (Deficit) Current liabilities: Accounts payable 381,500 28,900 Accrued expenses 461,200 126,200 Intercompany payable (Notes 2 and 7) 894,400 28,400 Notes payable (Notes 5 and 7) 875,000 - Deferred revenue 118,000 - Total current liabilities 2,730,100 183,500 Shareholder's equity (deficit) (Note 7): Common stock; 1,000,000 shares authorized; 420,000 and 360,000 shares issued and outstanding as of September 30, 1993 and 1992, respectively 2,100,000 1,800,000 Accumulated deficit (3,573,200) (1,100,700) Total shareholder's equity (deficit) (1,473,200) 699,300 Commitments (Note 6) $1,256,900 $ 882,800 See accompanying notes to financial statements. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Statements of Operations Years ended September 30, 1993 and 1992 1993 1992 Sales $1,313,200 $ 2,300 Cost of goods sold 687,800 1,100 625,400 1,200 Operating expenses: Research and development 870,400 567,300 Sales and marketing 1,643,400 257,500 General and administrative 573,200 194,000 Loss from operations 2,461,600 1,017,600 Interest expense (income), net 10,100 (7,600) Loss before income taxes 2,471,700 1,010,000 Income tax expense (Note 4) 800 1,600 Net loss $2,472,500 $1,011,600 See accompanying notes to financial statements. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Statements of Shareholder's Equity (Deficit) Years ended September 30, 1993 and 1992 Total shareholder's Common Stock Accumulated equity Shares Amount deficit (deficit) Balances, September 30, 1991 60,000 $ 300,000 $ (89,100) $ 210,900 Sale of common stock at $5 per share 300,000 1,500,000 - 1,500,000 Net loss - - (1,011,600) (1,011,600) Balances, September 30, 1992 360,000 1,800,000 (1,100,700) 699,300 Sale of common stock at $5 per share 60,000 300,000 - 300,000 Net loss - - (2,472,500) (2,472,500) Balances, September 30, 1993 $420,000 $2,100,000 $(3,573,200) $(1,473,200) See accompanying notes to financial statements. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Statements of Cash Flows Years ended September 30, 1993 and 1992 1993 1992 Cash flows from operating activities: Net loss $(2,472,500) $(1,011,600) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 79,400 21,300 Changes in items affecting operations: Accounts receivable (282,400) (2,300) Inventories (449,500) (27,100) Prepaid expenses and other assets (1,400) (57,800) Accounts payable and accrued liabilities 687,600 133,000 Intercompany payable 866,000 - Deferred revenue 118,000 - Net cash used in operating activities (1,454,800) (944,500) Cash flows from investing activities: Purchases of equipment (280,600) (81,500) Cash flows from financing activities: Proceeds from issuance of common stock 300,000 1,500,000 Proceeds from short-term loan 875,000 - Net cash provided by financing activities 1,175,000 1,500,000 Net (decrease) increase in cash and cash equivalents (560,400) 474,000 Cash and cash equivalents at beginning of year 700,800 226,800 Cash and cash equivalents at end of year $ 140,400 $ 700,800 See accompanying notes to financial statements. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Notes to Financial Statements September 30, 1993 and 1992 (1) Description of Business and Summary of Significant Accounting Policies (a) The Company Centrum Communications, Inc. (the Company) was incorporated in California in July 1991 to engage in the development, manufacturing, and marketing of remote access products and technology. The Company is a wholly owned subsidiary of Centrum Technology Corporation (CTC), a company incorporated in the Republic of China. (b) Basis of Presentation As of September 30, 1992, the Company was a development stage company and, accordingly, directed its efforts and resources towards product and market planning, and research and development activities. As such, the accompanying statement of operations for the year ended September 30, 1992, should not be regarded as typical for normal years of operation. The Company commenced manufacturing and shipping product in September 1992 and, consequently, is no longer considered a development stage company as of September 30, 1993. The Company continues to expend significant resources on product research and development. (c) Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit with banks and certificates of deposit with maturities of three months or less. (d) Inventories Inventories are stated at the lower of cost (first-in, first- out method) or market and consist primarily of finished goods. (e) Property and Equipment Equipment is stated at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the respective assets, ranging from three to five years. Purchased software is amortized on a straight-line basis over the estimated useful life of three years. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Notes to Financial Statements September 30, 1993 and 1992 (f) Income Taxes The Company elected to adopt Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109 requires an asset and liability approach for financial reporting of income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary difference" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. (g) Revenue Recognition Revenue is recognized upon product shipment to customers with an appropriate allowance for any anticipated returns. (h) Development Costs Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. Through September 30, 1993, the Company's software development has been essentially completed concurrently with the establishment of technological feasibility, and accordingly, no costs have been capitalized to date. (i) Reclassifications Certain amounts in the accompanying 1992 financial statements have been reclassified to conform with the 1993 financial statement presentation. (2) Related Parties The Company purchases all inventory from the parent company, CTC. As of September 30, 1993 and 1992, the intercompany payable to CTC for inventory purchases was $894,400 and $28,400, respectively. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Notes to Financial Statements September 30, 1993 and 1992 (3) Property and Equipment A summary of property and equipment follows: 1993 1992 Equipment $301,300 $62,000 Purchased software 89,300 48,000 390,600 110,000 Less accumulated depreciation and amortization 102,000 22,600 $288,600 $87,400 (4) Income Taxes Income tax expense consists of the minimum California franchise tax for the years ended September 30, 1993 and 1992. For federal income tax purposes, the Company has net operating loss carryforwards of approximately $2,900,000, which expire in the tax years 2006 through 2008. For California income tax purposes, the Company has net operating loss carryforwards of approximately $1,400,000. The difference between the net operating loss carryforward for federal income tax purposes and for California income tax purposes results primarily from a 50% limitation on the California loss carryforwards. As of September 30, 1993, the Company has federal and state gross deferred tax assets of approximately $1,000,000 and $300,000, respectively, which were fully offset by a valuation allowance of $1,300,000. The Company's ability to utilize the net operating loss carryforwards and research credit carryforwards may be subject to certain limitations upon a change in ownership of the Company as defined in Internal Revenue Code Section 382. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Notes to Financial Statements September 30, 1993 and 1992 (5) Notes Payable Notes payable as of September 30, 1993, consist of the following: Notes payable, due December 31, 1993, plus interest at 7% $725,000 Notes payable, due December 31, 1993, plus interest at 3.87% 150,000 $875,000 Substantially all assets of the Company are pledged as collateral for the above notes payable. The outstanding balances are convertible at the option of the Company into shares of Series B preferred stock when the Company obtains additional financing of Series B preferred stock of not less than $2,000,000. In connection with the issuance of the notes payable, the Company agreed to issue 263,888 warrants to purchase shares of Series B preferred stock. The warrant exercise price and the notes payable conversion price shall be equal to the price per share of Series B preferred stock issued in any additional financing (see Note 7). (6) Leases The Company leases its facility under a noncancelable operating lease expiring January 1998. In addition, the Company leases certain machinery and equipment under operating leases. Future minimum lease payments under such lease agreements are as follows: Year ending September 30, Amount 1994 $ 221,200 1995 274,300 1996 283,600 1997 297,600 Thereafter 99,200 Total future minimum lease payments $1,175,900 Facility rent expense was approximately $200,000 and $39,000 for the years ended September 30, 1993 and 1992, respectively. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Notes to Financial Statements September 30, 1993 and 1992 (7) Subsequent Events (a) In October 1993, the Company issued $510,000 in notes payable to the holders of existing notes payable. In October 1993, the Company issued 4,690,000 shares of Series A preferred stock in exchange for 419,999 shares of common stock held by CTC, and 1,790,000 shares of Series A preferred stock in exchange for $894,400 in intercompany payable to CTC. In October 1993, the Company issued 9,472,224 shares of Series B preferred stock in exchange for $5,115,000 in cash. In connection with this financing, the Company also issued 2,564,815 shares of Series B preferred stock in exchange for $1,385,000 in notes payable and issued 263,888 warrants to purchase Series B preferred stock at $.54 per share to some of the same parties. The rights, preferences, and privileges of the preferred shareholders are as follows: o Series A and B preferred shareholders are entitled to receive noncumulative dividends, if and when declared by the Board of Directors, at the rate of 8% of the original issue price per annum on each outstanding share o Preferred stock votes equally with shares of common stock on an "as converted" basis. o Preferred shares have a liquidation preference equal to their respective original purchase price plus any declared and unpaid dividends. o As long as 500,000 shares of Series A or B preferred stock are outstanding, a majority of the Series A and B shares voting as a single class is required for certain actions of the Company. o Preferred shares are convertible to common stock, at the option of the holders. Preferred shareholders are protected by certain antidilutive provisions. Preferred shares automatically convert to common stock upon an initial public offering of at least $10,000,000. CENTRUM COMMUNICATIONS, INC. (A Wholly Owned Subsidiary of Centrum Technology Corporation) Notes to Financial Statements September 30, 1993 and 1992 No dividends have been declared or paid. In October 1993, the Company adopted a Stock Option Plan which authorized the granting of incentive stock and non- qualified stock options to employees, directors and consultants of the Company. The total number of shares that may be granted pursuant to this plan is 6,480,000 shares of common stock. Incentive stock options may be granted with exercise prices at no less than the fair market value, and non-qualified stock options may be granted at no less than 85% of the fair market value on the grant date, as determined by the Board of Directors. Incentive options generally vest over a 4-year period and expire 10 years from the date of grant. The Company has granted 3,640,250 options to employees. (b) In December 1993, the Company issued 300,000 shares of Series A preferred stock in exchange for the termination of a joint technology agreement with a company that is also a shareholder of CTC. EX-7 3 EXHIBIT 7.2 AGREEMENT AND PLAN OF REORGANIZATION ** Confidential treatment has been requested for those portions marked with asterisks. The confidential portions have been filed separately with the Securities and Exchange Commission. TABLE OF CONTENTS Page 1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1 2. Plan Of Reorganization. . . . . . . . . . . . . . . . . 2 2.1 The Merger . . . . . . . . . . . . . . . . . . . . 2 2.2 The Closing. . . . . . . . . . . . . . . . . . . . 4 2.3 Effective Date . . . . . . . . . . . . . . . . . . 4 3. Representations and Warranties of Centrum . . . . . . . 4 3.1 Organization . . . . . . . . . . . . . . . . . . . 4 3.2 Capitalization . . . . . . . . . . . . . . . . . . 4 3.3 Authority Relative to this Agreement . . . . . . . 5 3.4 Financial Statements . . . . . . . . . . . . . . . 6 3.5 Tax Matters. . . . . . . . . . . . . . . . . . . . 6 3.6 Absence of Certain Changes or Events . . . . . . . 7 3.7 Title and Related Matters. . . . . . . . . . . . . 8 3.8 Proprietary Rights . . . . . . . . . . . . . . . . 9 3.9 Employee Benefit Plans . . . . . . . . . . . . . . 11 3.10 Bank Accounts. . . . . . . . . . . . . . . . . . . 11 3.11 Contracts. . . . . . . . . . . . . . . . . . . . . 11 3.12 Orders, Commitments and Returns. . . . . . . . . . 13 3.13 Compliance With Law. . . . . . . . . . . . . . . . 13 3.14 Labor Difficulties . . . . . . . . . . . . . . . . 14 3.15 Trade Regulation . . . . . . . . . . . . . . . . . 14 3.16 Insider Transactions . . . . . . . . . . . . . . . 15 3.17 Employees, Independent Contractors and Consultants. . . . . . . . . . . . . . . . . . . . 15 3.18 Insurance. . . . . . . . . . . . . . . . . . . . . 15 3.19 Litigation . . . . . . . . . . . . . . . . . . . . 15 3.20 Governmental Authorizations and Regulations. . . . 15 3.21 Corporate Minutes, Etc . . . . . . . . . . . . . . 16 3.22 Section 341(f)(2). . . . . . . . . . . . . . . . . 16 3.23 Subsidiaries . . . . . . . . . . . . . . . . . . . 16 3.24 Compliance with Environmental Requirements . . . . 16 3.25 Corporate Documents. . . . . . . . . . . . . . . . 16 3.26 No Brokers . . . . . . . . . . . . . . . . . . . . 17 3.27 Disclosure . . . . . . . . . . . . . . . . . . . . 17 3.28 Centrum Options. . . . . . . . . . . . . . . . . . 17 3.29 Certain Contracts. . . . . . . . . . . . . . . . . 17 4. Representations and Warranties of 3Com and Sub. . . . . 18 4.1 Organization and Good Standing . . . . . . . . . . 18 4.2 Power, Authorization and Validity. . . . . . . . . 18 4.3 Capitalization . . . . . . . . . . . . . . . . . . 19 4.4 No Violation of Existing Agreements. . . . . . . . 19 4.5 Litigation . . . . . . . . . . . . . . . . . . . . 19 4.6 No Brokers . . . . . . . . . . . . . . . . . . . . 20 4.7 Disclosure . . . . . . . . . . . . . . . . . . . . 20 4.8 Compliance With Other Instruments and Laws.. . . . 20 4.9 SEC Documents. . . . . . . . . . . . . . . . . . . 20 4.10 No Material Adverse Change.. . . . . . . . . . . . 21 5. Preclosing Covenants of Centrum . . . . . . . . . . . . 21 5.1 Advice of Changes. . . . . . . . . . . . . . . . . 21 5.2 Conduct of Business. . . . . . . . . . . . . . . . 21 5.3 Access to Information. . . . . . . . . . . . . . . 22 5.4 Regulatory Approvals . . . . . . . . . . . . . . . 22 5.5 Satisfaction of Conditions Precedent . . . . . . . 23 5.6 Shareholder Vote . . . . . . . . . . . . . . . . . 23 5.7 Exclusivity. . . . . . . . . . . . . . . . . . . . 23 6. Preclosing Covenants of 3Com and Sub. . . . . . . . . . 23 6.1 Advice of Changes. . . . . . . . . . . . . . . . . 23 6.2 Regulatory Approvals . . . . . . . . . . . . . . . 23 6.3 Access to Information. . . . . . . . . . . . . . . 23 6.4 Satisfaction of Conditions Precedent.. . . . . . . 24 7. Post-Closing Covenants of 3Com. . . . . . . . . . . . . 24 7.1 Dividends, Etc.. . . . . . . . . . . . . . . . . . 24 7.2 Limitations on Liens.. . . . . . . . . . . . . . . 24 8. Mutual Covenants. . . . . . . . . . . . . . . . . . . . 25 8.1 Confidentiality. . . . . . . . . . . . . . . . . . 25 8.2 Further Assurances . . . . . . . . . . . . . . . . 25 8.3 Escrow; Escrow Agreement.. . . . . . . . . . . . . 25 9. The Closing . . . . . . . . . . . . . . . . . . . . . . 26 9.1 Merger . . . . . . . . . . . . . . . . . . . . . . 26 9.2 Additional Documents . . . . . . . . . . . . . . . 26 10. Conditions to Centrum's Obligations . . . . . . . . . . 26 10.1 Accuracy of Representations and Warranties . . . . 26 10.2 No Litigation. . . . . . . . . . . . . . . . . . . 27 10.3 Authorizations . . . . . . . . . . . . . . . . . . 27 10.4 Opinion of 3Com's Counsel. . . . . . . . . . . . . 27 10.5 Government Consents. . . . . . . . . . . . . . . . 27 10.6 Date of Closing. . . . . . . . . . . . . . . . . . 27 10.7 Federal and State Securities Laws. . . . . . . . . 27 10.8 Covenants. . . . . . . . . . . . . . . . . . . . . 27 10.9 No Adverse Development.. . . . . . . . . . . . . . 27 10.10 Required Consents. . . . . . . . . . . . . . 28 10.11 Shareholder Approval.. . . . . . . . . . . . 28 10.12 Warrants.. . . . . . . . . . . . . . . . . . 28 11. Conditions to 3Com's and Sub's Obligations. . . . . . . 28 11.1 Accuracy of Representations and Warranties . . . . 28 11.2 Covenants. . . . . . . . . . . . . . . . . . . . . 28 11.3 No Litigation. . . . . . . . . . . . . . . . . . . 28 11.4 Authorizations . . . . . . . . . . . . . . . . . . 28 11.5 Required Centrum Consents. . . . . . . . . . . . . 29 11.6 Clarification of Chipcom Contract. . . . . . . . . 29 11.7 Audited Financial Statements . . . . . . . . . . . 29 11.8 No Adverse Development . . . . . . . . . . . . . . 29 11.9 Required Consents. . . . . . . . . . . . . . . . . 29 11.10 Opinion of Centrum's Counsel . . . . . . . . 29 11.11 Opinion regarding Fairness . . . . . . . . . 29 11.12 Employment with 3Com . . . . . . . . . . . . 30 11.13 Government Consents. . . . . . . . . . . . . 30 11.14 Date of Closing. . . . . . . . . . . . . . . 30 11.15 Absence of Specific Changes. . . . . . . . . 30 11.16 Transfer of Technology . . . . . . . . . . . 30 11.17 Warrants.. . . . . . . . . . . . . . . . . . 30 12. Termination of Agreement. . . . . . . . . . . . . . . . 30 12.1 Prior to Closing . . . . . . . . . . . . . . . . . 30 12.2 At the Closing . . . . . . . . . . . . . . . . . . 30 12.3 No Liability . . . . . . . . . . . . . . . . . . . 31 12.4 Effect of Termination. . . . . . . . . . . . . . . 31 13. Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . 31 14. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 31 14.1 Governing Laws . . . . . . . . . . . . . . . . . . 31 14.2 Binding upon Successors and Assigns. . . . . . . . 31 14.3 Severability . . . . . . . . . . . . . . . . . . . 31 14.4 Entire Agreement . . . . . . . . . . . . . . . . . 32 14.5 Counterparts . . . . . . . . . . . . . . . . . . . 32 14.6 Expenses . . . . . . . . . . . . . . . . . . . . . 32 14.7 Other Remedies . . . . . . . . . . . . . . . . . . 32 14.8 Amendment and Waivers. . . . . . . . . . . . . . . 32 14.9 Survival of Agreements . . . . . . . . . . . . . . 33 14.10 No Waiver. . . . . . . . . . . . . . . . . . 33 14.11 Attorneys' Fees. . . . . . . . . . . . . . . 33 14.12 Notices. . . . . . . . . . . . . . . . . . . 33 14.13 Construction of Agreement. . . . . . . . . . 34 14.14 No Joint Venture . . . . . . . . . . . . . . 34 14.15 Further Assurances . . . . . . . . . . . . . 34 14.16 Absence of Third Party Beneficiary Rights . . . . . . . . . . . . . . . . . . . . . . 34 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION is entered into this 18th day of January 1994, by and among 3Com Corporation, a California corporation, ("3Com"), 3Sub Acquisition Corporation ("Sub"), a California corporation, and Centrum Communications, Inc., a California corporation ("Centrum"). R E C I T A L The parties intend that, subject to the terms and conditions hereinafter set forth, Sub be merged into and with Centrum, with Centrum the surviving corporation, pursuant to an Agreement of Merger substantially in the form attached hereto as Exhibit "A" (the "Agreement of Merger") and the applicable provisions of the laws of the State of California. Upon the Merger, the holders of the capital stock of Centrum shall receive cash and the holders of options to acquire Centrum stock shall receive options to purchase 3Com Common Stock in the manner and on the basis determined herein, all as provided in the Agreement of Merger. A G R E E M E N T NOW, THEREFORE, in reliance on the foregoing recitals and in and for the consideration and mutual covenants set forth herein, the parties agree as follows: 1. Definitions. The following terms when used herein shall have the meanings set forth below. 1.1 "Merger" shall mean the merger of Sub with and into Centrum, on the terms and conditions described herein. 1.2 "Options" shall mean the options to acquire Centrum Common Stock. 1.3 "Centrum Common Stock" shall having the meaning provided in Section 3.1. 1.4 "Preferred Stock" shall having the meaning provided in Section 3.2. 1.5 "Securities" shall mean the Centrum Common Stock, the Preferred Stock and the Options. 1.6 "Securities Act" shall mean the Securities Act of 1933, as amended. 1.7 "Commission" shall mean the Securities and Exchange Commission. 1.8 "Centrum Share Price" shall mean the price per share to be paid by 3Com for each share of Centrum Common Stock and Centrum Preferred Stock, which shall be equal to Thirty-Six Million Dollars ($36,000,000) divided by the total number of shares of Centrum Common Stock outstanding or issuable at any time pursuant to the Securities or pursuant to any other contract or commitment to issue securities. 1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.10 "Transaction Documents" shall mean all documents or agreements required to be delivered by any party hereunder including the Agreement of Merger. 1.11 "Centrum Products" shall have the meaning set forth in Section 3.8(b). 1.12 "Affiliate" shall have the meaning set forth in the rules and regulations promulgated by the Commission pursuant to the Securities Act. 1.13 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations thereunder, all as the same shall be in effect at the time. 1.14 "Effective Time" shall have the meaning set forth in Section 2.3. 1.15 "Proprietary Rights" shall have the meaning set forth in Section 3.8(a). 1.16 "3Com Closing Price" shall mean the average of the closing sales prices of 3Com Common Stock as reported by the National Market System of the National Association of Securities Dealers Automated Quotation System for the ten (10) trading days preceding (but not including) the Closing Date. 2. Plan Of Reorganization. 2.1 The Merger. (a) Subject to the terms and conditions of this Agreement and the Agreement of Merger, Sub shall be merged with and into Centrum in a statutory merger pursuant to the Agreement of Merger and in accordance with applicable provisions of California law so that: (i) Each share of common stock of Sub outstanding immediately prior to the Merger shall continue to be issued and shall be converted into one share of Centrum Common Stock outstanding after the Merger; and (ii) Each share of Centrum Common Stock and of Preferred Stock issued and outstanding at the Effective Time, other than the shares held by holders who perfect their dissenter's rights under California law with respect thereto ("Dissenters' Shares"), shall, by virtue of the Merger, and without further action on the part of any holder thereof, be canceled and converted into the right to receive cash in an amount equal to the Centrum Share Price. Such cash amount shall be payable in two installments, (i) the first payable at or as promptly after the Closing as is practicable and in an amount equal to 19/36 of the Centrum Share Price, and (ii) the second payable on the date six months after the Closing and in an amount equal to 17/36 of the Centrum Share Price. The aggregate cash payment to be made to the holders of Centrum Common Stock and Preferred Stock as described above in clause (i) is referred to herein as the "First Payment," and the aggregate cash payment to be made to the holders of Centrum Common Stock and Preferred Stock as described above in clause (ii) is referred to herein as the "Second Payment." (iii) Each Option outstanding at the Effective Time shall, by virtue of the Merger and without further action on the part of any option holder, be assumed by 3Com at the Effective Time. The Options assumed by 3Com will continue to be on the terms and conditions set forth in the respective option agreements, except that: (i) the Option shall be exercisable for a number of shares of 3Com Common Stock equal to the number of shares of Centrum Common Stock subject to such Option immediately prior to the Effective Time multiplied by a fraction, the numerator of which is the Centrum Share Price and the denominator of which is the 3Com Closing Price (with the resulting number of shares of 3Com Common Stock rounded down to the nearest whole number), (iii) the per share exercise price shall be an amount equal to the aggregate exercise price of the Option prior to the Merger divided by the number of shares of 3Com Common Stock subject to such Option rounded up to the nearest whole cent, and (iv) continuous employment with Centrum, whether occurring before or after the Effective Time, shall be credited to an optionee for purposes of determining the number of shares subject to exercise, vesting or repurchase after the Effective Time. It is the intention of the parties that the assumption of Options shall meet the requirements of Section 424(a) of the Code and that therefore the Options assumed by 3Com qualify following the Effective Time as incentive stock options as defined in Section 422 of the Code ("incentive stock options") to the extent the Options qualified as incentive stock options prior to the Effective Time. After the Effective Time, 3Com shall issue to each holder of an outstanding Option a document evidencing the foregoing assumption by 3Com. Such option assumption agreements will provide a mechanism for withholding or placing into escrow [** ] of the shares of 3Com Common Stock issuable under such options, or the proceeds thereof, as provided in Section 8.3. No fractional shares of 3Com Common Stock shall be issued in connection with options. All fractional shares which would otherwise be issuable shall be rounded down to the next full share. (b) At the closing of the Merger, 3Com will deduct from the First Payment to the former holders of Centrum stock (the "Centrum Shareholders"), on a pro rata basis, a total of [** ] of the First Payment, and, as provided in the Escrow Agreement, will deduct from the Second Payment to the Centrum Shareholders, on a pro-rata basis, up to a total of [** ] of the Second Payment, and will deliver such amounts to the escrow agent as provided under the Escrow Agreement as described in Section 8.3. The amount so delivered to the escrow agent is referred to herein as the "Escrow Amount," which will be paid to the parties as provided in the Escrow Agreement to be executed pursuant to Section 8.3. 2.2 The Closing. Subject to termination of this Agreement as provided in Section 12 below, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Gray Cary Ware & Freidenrich, 400 Hamilton Avenue, Palo Alto, California at 10 a.m. on January 28, 1994, or such other place, time and date as 3Com and Centrum may mutually select (the "Closing Date"). 2.3 Effective Date. Simultaneously with the Closing, the Agreement of Merger shall be filed in the office of the Secretary of State of the State of California. The Merger shall become effective immediately upon the filing of the Agreement of Merger (the "Effective Time"). 3. Representations and Warranties of Centrum. Except as otherwise set forth in the "Centrum Disclosure Schedule" attached hereto as Exhibit "B" ("Centrum Disclosure Schedule"), Centrum represents and warrants to 3Com as set forth below. No fact or circumstance disclosed to 3Com shall constitute an exception to these representations and warranties unless such fact or circumstance is set forth in the Centrum Disclosure Schedule attached hereto or such supplements thereto as may mutually be agreed upon in writing by Centrum and 3Com. Whenever the term "enforceable in accordance with its terms" or like expression is used, it is understood that excepted therefrom are any limitations on enforceability under applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditor's rights. 3.1 Organization. Centrum is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has corporate power and authority to carry on its business as it is now being conducted. Centrum is duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of its business or properties makes such qualification or licensing necessary except to the extent that any failure to qualify or obtain licenses would not in the aggregate have a material adverse effect on the operations, assets or financial condition of Centrum. The Centrum Disclosure Schedule contains a true and complete listing of the locations of all sales offices, manufacturing facilities, and any other offices or facilities of Centrum and a true and complete list of all states in which Centrum maintains any employees. The Centrum Disclosure Schedule contains a true and complete list of all states in which Centrum is duly qualified to transact business as a foreign corporation. True and complete copies of Centrum's Articles of Incorporation and By-laws, as in effect on the date hereof and as to be in effect as of the Closing have been provided to 3Com or its representatives. 3.2 Capitalization. The authorized capital stock of Centrum consists of (i) 30,000,000 shares of Common Stock ("Centrum Common Stock") and (ii) 19,350,000 shares of Preferred Stock, 7,000,000 of which are designated Series A Preferred Stock ("Series A Preferred") and 12,350,000 of which are designated Series B Preferred Stock ("Series B Preferred") (collectively, the Series A and Series B Preferred Stock are referred to as the "Preferred Stock"). Of such shares, one share of Centrum Common Stock, 6,780,000 shares of Series A Preferred, and 12,037,039 shares of Series B Preferred are issued and outstanding and held of record by Centrum's respective stockholders as set forth and identified in the stockholder lists provided to 3Com or its representatives. In addition, warrants to acquire 263,888 shares of Series B Preferred are issued and outstanding. All of the outstanding Securities have been duly authorized and are validly issued, fully paid and nonassessable. All outstanding Securities were issued in compliance with applicable securities laws. As of the date hereof, 6,480,000 shares of Centrum Common Stock are available or reserved for issuance under the Centrum 1993 Stock Option Plan, of which 3,693,750 are reserved to satisfy commitments made by the Centrum to its employees. Except as set forth above, and as otherwise set forth in the Centrum Disclosure Schedule, Centrum does not have any other shares of its capital stock issued or outstanding and does not have any other outstanding subscriptions, options, warrants, rights or other agreements or commitments obligating Centrum to issue shares of its capital stock or other securities. 3.3 Authority Relative to this Agreement. Centrum has the corporate power to enter into this Agreement and the other Transaction Documents to which it is a party and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by its Board of Directors and no other corporate proceedings on the part of Centrum are necessary to authorize this Agreement, the other Transaction Documents and the transactions contemplated herein and therein other than the consent of the holders of outstanding shares of Centrum. Centrum is not subject to or obligated under any charter, bylaw or contract provision or any license, franchise or permit, or subject to any order or decree, which would be breached or violated by or in conflict with its executing and carrying out this Agreement and the transactions contemplated hereunder and under the Transaction Documents. Except as contemplated by this Agreement, no consent of any person who is a party to a contract which is material to Centrum's business, nor consent of any governmental authority, is required to be obtained on the part of Centrum to permit the transactions contemplated herein and continue the business activities of Centrum as previously conducted by Centrum without material adverse change. This Agreement and the other agreements, forms of which are attached hereto as Exhibits, when executed by Centrum shall be the valid and binding obligations of Centrum enforceable against Centrum in accordance with their terms. 3.4 Financial Statements. (a) Centrum has delivered to 3Com copies of Centrum's unaudited balance sheet as of September 30, 1993 and unaudited balance sheet as of December 30, 1993 (the latter referred to herein as the "Centrum Balance Sheet") and statements of income, stockholders' equity and changes in financial position for the periods then ended. (b) All financial statements delivered pursuant to Section 3.4(a) (collectively, the "Centrum Financial Statements") present fairly the financial position of Centrum as of their historical dates. The Centrum Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods except with respect to the unaudited financial statements for the absence of footnotes and normal year-end adjustments, none of which would be material. Except as to the extent reflected or reserved against in such balance sheets (including the notes thereto), Centrum did not have, as of the dates of such balance sheets, any liabilities or obligations (absolute or contingent) of a nature required or customarily reflected in a balance sheet (or the notes thereto) prepared in accordance with generally accepted accounting principles. The reserves, if any, reflected on the Centrum Balance Sheet are adequate in light of the contingencies with respect to which they are made. The statements of income, stockholder's equity and changes in financial position present fairly the results of operations, equity transactions and changes in financial position of Centrum for the periods indicated. (c) Centrum has no debt, liability, or obligation of any nature, whether accrued, absolute, contingent, or otherwise, and whether due or to become due, that is not reflected or reserved against in the Centrum Financial Statements, except for those (i) that may have been incurred after the date of the Centrum Balance Sheet or (ii) that are not required by generally accepted accounting principles to be included in a balance sheet or the notes thereto, except that Centrum has not established any reserves with respect to the costs and fees associated with this Agreement and the transactions contemplated hereby. All material debts, liabilities, and obligations incurred after the date of the Centrum Financial Statements were incurred in the ordinary course of business, and are usual and normal in amount both individually and in the aggregate and none of which are material. 3.5 Tax Matters. (a) Centrum has fully and timely, properly and accurately filed all tax returns and reports required to be filed by it prior to the date of this Agreement, including all federal, foreign, state and local tax returns for all years and periods (and portions thereof) for which any such returns and reports were due prior to the date of this Agreement. All such returns and reports were prepared in the manner required by applicable law. All income, sales, use, occupation, property or other taxes or assessments due from Centrum prior to the date of this Agreement have been paid other than taxes for which adequate reserves have been established on the Centrum Financial Statements. To Centrum's knowledge, there are no pending assessments, asserted deficiencies or claims for additional taxes that have not been paid. The reserves for taxes, if any, reflected on the Centrum Balance Sheet are adequate for any unpaid taxes for periods through the date of this Agreement and there are no tax liens on any property or assets of Centrum other than liens for taxes not yet due and payable. There have been no examinations of any tax returns or reports by any applicable governmental agency. To Centrum's knowledge, no state of facts exists or has existed which would constitute grounds for the assessment of any penalty or of any further tax liability beyond that shown on the respective tax reports or returns for any tax period ending on or prior to the date of this Agreement. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any federal income tax return or report for any period. (b) All taxes which Centrum has been required to collect or withhold have been duly withheld or collected and, to the extent required prior to the date of this Agreement, have been paid to the proper taxing authority. (c) Centrum is not a party to any tax-sharing agreement or similar arrangement with any other party. (d) At no time has Centrum been included in the federal consolidated income tax return of any affiliated group of corporations. (e) No payment which Centrum is obliged to pay to any director, officer, employee or independent contractor pursuant to the terms of an employment agreement, severance agreement or otherwise will constitute an excess parachute payment as defined in Section 280G of the Code. (f) Centrum will not be required to include any material adjustment in taxable income for any tax period (or portion thereof) ending after the Closing Date pursuant to Section 481(c) of the Code or any provision of the tax laws of any jurisdiction requiring tax adjustments as a result of a change in method of accounting implemented by Centrum prior to the Closing Date for any tax period (or portion thereof) ending on or before the Closing Date or pursuant to the provisions of any agreement entered into by Centrum prior to the Closing Date with any taxing authority with regard to the tax liability of Centrum for any tax period (or portion thereof) ending on or before the Closing Date. (g) Except as may disclosed in connection with Section 3.5(c) and except as required by this Agreement, Centrum is not currently under any contractual obligation to pay any tax obligations of any other person. 3.6 Absence of Certain Changes or Events. Since the date of the Centrum Balance Sheet, Centrum has not (a) suffered any material adverse change in its financial condition or in the operations of its business; (b) suffered any damage, destruction or loss, whether covered by insurance or not, materially and adversely affecting its properties or businesses; (c) granted any increase in the compensation payable or to become payable by Centrum to its officers or employees, except those occurring in the ordinary course of business; (d) declared, set aside or paid any dividend or made any other distribution on or in respect of the shares of the capital stock of Centrum or declared any direct or indirect redemption, retirement, purchase or other acquisition by Centrum of such shares; (e) issued any shares of capital stock of Centrum or any warrants, rights, options or entered into any commitment relating to the shares of Centrum except for the issuance of Centrum Shares pursuant to the exercise of outstanding Options or Securities described in Section 3.2; (f) made any material change in the accounting methods or practices it follows, whether for general financial or tax purposes, or any change in depreciation or amortization policies or rates adopted therein; (g) sold, leased, abandoned or otherwise disposed of any real property or any machinery, equipment or other operating property other than in the ordinary course of business (h) sold, assigned, transferred, licensed or otherwise disposed of any patent, trademark, trade name, brand name, copyright (or pending application for any patent, trademark or copyright) invention, process, know-how, formula or trade secret or interest thereunder or other intangible asset except in the ordinary course of its business; (i) suffered any labor dispute; (j) engaged in any activity or entered into any material commitment or transaction (including without limitation any borrowing or capital expenditure) other than in the ordinary course of business; (k) incurred any liabilities except in the ordinary course of business and consistent with past practice which would be required to be disclosed in financial statements prepared in accordance with generally accepted accounting principles; (l) permitted or allowed any of its property or assets to be subjected to any mortgage, deed of trust, pledge, lien, security interest or other encumbrance of any kind, except those permitted under Section 3.7 (Title and Related Matters) hereof, other than any purchase money security interests incurred in the ordinary course of business; (m) made any capital expenditure or commitment for additions to property, plant or equipment except in the ordinary course of business; (n) paid, loaned or advanced any amount to, or sold, transferred or leased any properties or assets to, or entered into any agreement or arrangement with any of its Affiliates, officers, directors or stockholder or any Affiliate or associate of any of the foregoing; (o) made any amendment to or terminated any agreement which, if not so amended or terminated, would be required to be disclosed on the Centrum Disclosure Schedule; or (p) agreed to take any action described in this Section 3.6 (Absence of Certain Changes or Events) or outside of its ordinary course of business or which would constitute a breach of any of the representations contained in this Agreement. 3.7 Title and Related Matters. Centrum has good and marketable title to all the properties, interests in properties and assets, real and personal, reflected in the Centrum Balance Sheet or acquired after the date of the Centrum Balance Sheet (except properties, interests in properties and assets sold or otherwise disposed of since the date of the Centrum Balance Sheet in the ordinary course of business), free and clear of all mortgages, liens, pledges, charges or encumbrances of any kind or character, except the lien of current taxes not yet due and payable and except for liens which in the aggregate do not secure more than Fifteen Thousand Dollars ($15,000) in liabilities. The equipment of Centrum necessary to the operation of its business is in good operating condition and repair, except for ordinary wear and tear and defects. All real or personal property leases to which Centrum is a party are valid, binding, enforceable and effective in accordance with their respective terms. There is not under any of such leases any existing material default or event of default or event which, with notice or lapse of time or both, would constitute a material default. The Centrum Disclosure Schedule contains a description of all real and personal property leased or owned by Centrum, describing its interest in said property and with respect to real property a description of each parcel and a summary description of the buildings, structures and improvements thereon. True and correct copies of Centrum's leases have been provided to 3Com or its representatives. 3.8 Proprietary Rights. (a) Centrum owns all right, title and interest in and to, or has licenses to, all patents, copyrights, technology, software, software tools, know-how, processes, trade secrets, trademarks, service marks, trade names and other proprietary rights used in or necessary for the conduct of Centrum's business as conducted to the date hereof or contemplated, including, without limitation, the technology and all proprietary rights developed or discovered in connection with or contained in the Centrum Products, free and clear of all liens, claims and encumbrances (including without limitation distribution rights) (all of which are referred to as "Proprietary Rights"). The foregoing representation as it relates to Third Party Technology (as hereinafter defined) is limited to Centrum's interest pursuant to the Third Party Licenses (as hereinafter defined), all of which are valid and enforceable and in full force and effect and which grant Centrum such right to Third Party Technology as are employed in or necessary to the business of Centrum as conducted or proposed to be conducted. The Centrum Disclosure Schedule contains an accurate and complete description of (i) all patents, trademarks (with separate listings of registered and unregistered trademarks), trade names, and registered copyrights in or related to the Centrum Products, all applications and registration statements therefor, and a list of all licenses and other agreements relating thereto, and (ii) a list of all licenses and other agreements with third parties (the "Third Party Licenses") relating to any software, technology, know-how, or processes that Centrum is licensed or otherwise authorized by such third parties to use, market, distribute or incorporate into products distributed by Centrum (such software, technology, know-how and processes are collectively referred to as the "Third Party Technology"). All of Centrum's trademark or trade name registrations related to the Centrum Products and all of Centrum's copyrights in any of the Centrum Products are valid and in full force and effect; and consummation of the transactions contemplated hereby will not alter or impair any such rights. No claims have been asserted against Centrum (and Centrum is not aware of any claims which are likely to be asserted against Centrum or which have been asserted against others) by any person challenging Centrum's use or distribution of any patents, trademarks, trade names, copyrights, trade secrets, software, technology, know-how or processes utilized by Centrum (including, without limitation, the Third Party Technology) or challenging or questioning the validity or effectiveness of any license or agreement relating thereto (including, without limitation, the Third Party Licenses). To Centrum's knowledge, there is no valid basis for any claim of the type specified in the immediately preceding sentence which could in any material way relate to or interfere with the continued enhancement and exploitation by Centrum of any of the Centrum Products. To Centrum's knowledge, none of the Centrum Products nor the use of any patents, trademarks, trade names, copyrights, software, technology, know-how or processes by Centrum in its current business infringes on the rights of, constitutes misappropriation of, or in any way involves unfair competition with respect to, any proprietary information or intangible property right of any third person or entity, including without limitation any patent, trade secret, copyright, trademark or trade name. (b) Centrum has not granted any third party any right to manufacture, reproduce, distribute, market or exploit any of the Centrum Products or any adaptations, translations, or derivative works based on the Centrum Products or any portion thereof. Except with respect to the rights of third parties to the Third Party Technology, no third party has any right to manufacture, reproduce, distribute, market or exploit any works or materials of which any of the Centrum Products are a "derivative work" as that term is defined in the United States Copyright Act, Title 17, U.S.C. Section 101. (c) All designs, drawings, specifications, source code, object code, documentation, flow charts and diagrams incorporating, embodying or reflecting any of the Centrum Products at any stage of their development (the "Centrum Components") were written, developed and created solely and exclusively by employees of Centrum without the assistance of any third party or entity or were created by third parties who assigned ownership of their rights to Centrum in valid and enforceable consultant confidentiality and invention assignment agreements. Centrum has at all times used commercially reasonable efforts to treat the Centrum Products and Centrum Components as containing trade secrets and has not disclosed or otherwise dealt with such items in such a manner as to cause the loss of such trade secrets by release into the public domain. (d) To Centrum's knowledge, no employee of Centrum is in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with Centrum or, to the best of Centrum's knowledge, any other party because of the nature of the business conducted by Centrum or proposed to be conducted by Centrum. (e) Each person presently or previously employed by Centrum (including independent contractors, if any) with access to confidential information has executed a confidentiality and non-disclosure agreement pursuant to the form of agreement previously provided to 3Com or its representatives. Such confidentiality and non-disclosure agreements constitute valid and binding obligations of Centrum and such person, enforceable in accordance with their respective terms. To the best of Centrum's knowledge, neither the execution or delivery of such agreements, nor the carrying on of Centrum's business as employees by such persons, nor the conduct of Centrum's business as currently anticipated, will conflict with or result in a breach of the terms, conditions or provisions of or constitute a default under any contract, covenant or instrument under which any of such persons is obligated. (f) No product liability or warranty claims which individually or in the aggregate could exceed $15,000 have been communicated to or threatened against Centrum nor, to the best of Centrum's knowledge, is there any specific situation, set of facts or occurrence that provides a basis for such claim. The Centrum Disclosure Schedule sets forth all software bugs or other product defects known to Centrum in the Centrum Products. 3.9 Employee Benefit Plans. There is no unfunded prior service cost with respect to any bonus, deferred compensation, pension, profit-sharing, retirement, stock purchase, stock option, or other employee benefit or fringe benefit plans, whether formal or informal, maintained by Centrum. To Centrum's knowledge, each bonus, deferred compensation, pension, profit-sharing, retirement, stock purchase, stock option, and other employee benefit or fringe benefit plans, whether formal or informal, maintained by Centrum conforms to all applicable requirements of the Employee Retirement Income Security Act of 1974. The Centrum Disclosure Schedule lists and describes all profit-sharing, bonus, incentive, deferred compensation, vacation, severance pay retirement, stock option, group insurance or other plans (whether written or not) providing employee benefits. 3.10 Bank Accounts. The Centrum Disclosure Schedule sets forth the names and locations of all banks, trusts, companies, savings and loan associations, and other financial institutions at which Centrum maintains accounts of any nature and the names of all persons authorized to draw thereon or make withdrawals therefrom. 3.11 Contracts. (a) Except as set forth in the Centrum Disclosure Schedule, Centrum has no agreements, contracts or commitments that provide for the sale, licensing or distribution by Centrum of any of its products, technology, know-how, trademarks or trade names except in the ordinary course of its business. True and correct copies of each document or instrument described in the Centrum Disclosure Schedule pursuant to this Subsection 3.11(a) have been made available to 3Com or its representatives. (b) Except as listed in the Centrum Disclosure Schedule, Centrum has no agreements, contracts or commitments that call for fixed and/or contingent payments or expenditures by or to Centrum of more than Twenty-Five Thousand Dollars ($25,000). True and correct copies of each document or instrument set forth in the Centrum Disclosure Schedule pursuant to this Section 3.11(b) have been made available to 3Com or its representatives. (c) Without limiting the provisions of Section 3.8 (Proprietary Rights) and except for any agreements with 3Com, Centrum has not granted to any third party (including, without limitation, OEMs and site license customers) any rights to reproduce or manufacture any of the Centrum Products, nor has Centrum granted to any third party any exclusive rights of any kind with respect to any of the Centrum Products, including, without limitation, territorial exclusivity or exclusivity with respect to particular versions, implementations or translations of any of the Centrum Products, nor has Centrum granted any third party any right to market any of the Centrum Products under any "private label" arrangements pursuant to which Centrum is not identified as the source of such goods. True and correct copies of each document or instrument listed on the Centrum Exception Schedule pursuant to this Section 3.11(c) have been made available to 3Com or its representatives. (d) There is no outstanding sales contract, commitment or proposal (including, without limitation, porting and development projects) of Centrum that is currently expected to result in any loss (before allocation of overhead and administrative costs) upon completion or performance thereof. (e) Centrum has no outstanding agreements, contracts or commitments with officers, employees, agents, consultants, advisors, salesmen, sales representatives, distributors or dealers that are not cancelable by it on notice of not longer than thirty (30) days and without liability, penalty or premium. (f) Centrum has no employment, independent contractor or similar agreement, contract or commitment that is not terminable on no more than thirty (30) days' notice without penalty or liability of any type, including without limitation severance or termination pay. (g) Centrum has no currently effective collective bargaining or union agreements, contracts or commitments. (h) Centrum is not restricted by agreement from carrying on its business anywhere in the world. (i) Centrum is under no liability or obligation, and no such outstanding claim has been made, with respect to the return of inventory or merchandise in the possession of wholesalers, distributors, retailers, or other customers, except such liabilities, obligations and claims as, in the aggregate, do not exceed Fifteen Thousand Dollars ($15,000). (j) Centrum has not guaranteed any obligations of other persons or made any agreements to acquire or guarantee any obligations of other persons. (k) Centrum has no outstanding loan or advance to any person; nor is it party to any line of credit, standby financing, revolving credit or other similar financing arrangement of any sort which would permit the borrowing by Centrum of any sum not reflected in the financial statements delivered pursuant to Section 3.4 (Financial Statements). (l) All material contracts, agreements and instruments to which Centrum is a party are valid, binding, in full force and effect, and enforceable by Centrum in accordance with their respective terms. No such material contract, agreement or instrument contains any material liquidated-damages, penalty or similar provision. To Centrum's knowledge, no party to any such material contract, agreement or instrument intends to cancel, withdraw, modify or amend such contract, agreement or arrangement. (m) The Centrum Disclosure Schedule lists all material agreements pursuant to which Centrum has agreed to manufacture for or supply to any third party any Centrum Products or components thereto. True and correct copies of each document or instrument listed on the Centrum Disclosure Schedule pursuant to this Section 3.11(m) have been provided to 3Com or its representatives. The Centrum Disclosure Schedule also lists each vendor that manufactures for or supplies to Centrum any material product or component. (n) Centrum is not in default under or in breach or violation of, nor, to Centrum's knowledge, is there any valid basis for any claim of default by Centrum under, or breach or violation by Centrum of, any contract, commitment or restriction to which Centrum is a party or to which it or any of its properties is bound, where such defaults, breaches, or violations would, in the aggregate, have a material adverse effect on the operations, assets, financial condition or prospects of Centrum. To the best of Centrum's knowledge, no other party is in default under or in breach or violation of, nor is there any valid basis for any claim of default by any other party under or any breach or violation by any other party of, any material contract, commitment, or restriction to which Centrum is bound or by which any of its properties is bound, where such defaults, breaches, or violations would, in the aggregate, have a material adverse effect on the operations, assets, financial condition or prospects of Centrum. 3.12 Orders, Commitments and Returns. All accepted and unfilled orders entered into by Centrum for the sale, license, or lease or other disposition by Centrum of its products, and all agreements, contracts, or commitments for the purchase of supplies, were made in the ordinary course of business. To Centrum's knowledge, no outstanding purchase or outstanding lease commitment of Centrum is in excess of the normal, ordinary and usual requirements of its business or was made at any price (on both a per unit and aggregate basis) materially in excess of the current market price at the time made, or contains terms and conditions materially more onerous to Centrum than those usual and customary in the industry. 3.13 Compliance With Law. Centrum is in compliance with all applicable laws and regulations, except to the extent that noncompliance would not have a material adverse effect on Centrum's business, financial condition or results of operations. Neither Centrum nor, to Centrum's knowledge, any of its employees has directly or indirectly paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent, government official or other party in the United States or any other country, that was or is in violation of any federal, state, or local statute or law or of any statute or law of any other country having jurisdiction, except to the extent that such violation would not have a material adverse effect on Centrum's business, financial condition or results of operations. Centrum has not participated directly or indirectly in any boycotts or other similar practices affecting any of its customers. Centrum has complied at all times with any and all applicable federal, state and foreign laws, rules, regulations, proclamations and orders relating to the importation or exportation of its products, except to the extent that noncompliance would not have a material adverse effect on Centrum's business, financial condition or results of operations. 3.14 Labor Difficulties. (a) Centrum is not engaged in any unfair labor practice and is not in material violation of any applicable laws respecting employment and employment practices, terms and conditions of employment, and wages and hours. (b) There is no unfair labor practice complaint against Centrum actually pending or threatened before the National Labor Relations Board. (c) There is no strike, labor dispute, slowdown, or stoppage actually pending or threatened against Centrum. (d) No union representation question exists respecting the employees of Centrum and, to Centrum's knowledge, no union organizing activities are taking place. (e) No grievance that might have a material adverse effect on Centrum or the conduct of its business, nor any arbitration proceeding arising out of or under any collective bargaining agreement is pending and no claims therefor exist. (f) No collective bargaining agreement that is binding on Centrum restricts it from relocating or closing any of its operations. (g) Centrum has not experienced any material work stoppage or other material labor difficulty. 3.15 Trade Regulation. Centrum has not, since October 31, 1993, terminated its relationship with or refused to ship Centrum Products to any dealer, distributor, OEM, third party marketing entity or customer which had theretofore paid or been obligated to pay Centrum in excess of Fifteen Thousand Dollars ($15,000) over any consecutive twelve (12) month period. All of the prices charged by Centrum in connection with the marketing or sale of any products or services have been in compliance with all applicable laws and regulations. No claims have been communicated or threatened against Centrum with respect to wrongful termination of any dealer, distributor or any other marketing entity, discriminatory pricing, price fixing, unfair competition, false advertising, or any other violation of any laws or regulations relating to anti-competitive practices or unfair trade practices of any kind, and, to Centrum's knowledge, no specific situation, set of facts, or occurrence provides any basis for any such claim. 3.16 Insider Transactions. To Centrum's knowledge, no Affiliate of Centrum has any interest in (i) any material equipment or other property, real or personal, tangible or intangible, including, without limitation, any item of intellectual property, used in connection with or pertaining to the business of Centrum, or (ii) any creditor, supplier, customer, manufacturer, agent, representative, or distributor of products of Centrum; provided, however, that no such Affiliate or other person shall be deemed to have such an interest solely by virtue of (a) the ownership of less than 1% of the outstanding stock or debt securities of any publicly-held company, the stock or debt securities of which are traded on a recognized stock exchange or quoted on the National Association of Securities Dealers Automated Quotation System or (b) interests of Affiliates engaged in venture capital in their portfolio companies. 3.17 Employees, Independent Contractors and Consultants. The Centrum Disclosure Schedule lists and describes all currently effective consulting, independent contractor and/or employment agreements and other material agreements concluded with individual employees, independent contractors or consultants to which Centrum is a party. True and correct copies of all such written agreements have been provided to 3Com or its representatives. All salaries and wages paid by Centrum are in compliance with applicable federal, state and local laws. Also shown on the Centrum Disclosure Schedule are the names of all persons whose annual rate of compensation, including bonuses and other payments of any kind, is in excess of Fifty Thousand Dollars ($50,000) and the names of all employees with a title of "Director" of a department or above and the salaries for each such person. Centrum's aggregate accrued vacation and severance pay as of December 31, 1993 was approximately Sixty-Two Thousand Three Hundred Dollars ($62,300). 3.18 Insurance. The Centrum Disclosure Schedule contains a list of the principal policies of fire, liability and other forms of insurance held by Centrum. Centrum has not done anything, either by way of action or inaction, that might invalidate such policies in whole or in part. 3.19 Litigation. There are no suits, actions or proceedings pending or, to the best of Centrum's knowledge, threatened against or affecting Centrum or which questions or challenges the validity of this Agreement. There is no judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against Centrum. 3.20 Governmental Authorizations and Regulations. All licenses, franchises, permits and other governmental authorizations held by Centrum and material to its business are valid and sufficient for the business presently carried on by Centrum. The business of Centrum is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for violations which either singly or in the aggregate do not and will not have a material adverse effect on the operations, assets or financial condition of Centrum. 3.21 Corporate Minutes, Etc. The corporate minute books, stock certificate books, stock registers and other corporate records of Centrum are complete and accurate in all material respects, and the signatures appearing on all documents contained therein are the true signatures of the persons purporting to have signed the same. All actions reflected in such books and records were duly and validly taken in compliance with the laws of the applicable jurisdiction. True and correct copies of such records have been made available to 3Com or its representatives. 3.22 Section 341(f)(2). Centrum has not, with regard to any property or assets held, acquired or to be acquired by it, at any time, filed a consent to the application of Section 341(f)(2) of the Code nor will any such consent be filed before the Closing. 3.23 Subsidiaries. Centrum has no subsidiaries. Centrum does not own or control (directly or indirectly) any capital stock, bonds or other securities of, and does not have any proprietary interest in, any other corporation, general or limited partnership, firm, association or business organization, entity or enterprise, and Centrum does not control (directly or indirectly) the management or policies of any other corporation, partnership, firm, association or business organization, entity or enterprise. 3.24 Compliance with Environmental Requirements. Centrum has obtained all material permits, licenses and other authorizations which are required under federal, state and local laws relating to pollution or protection of the environment, including laws or provisions relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials, substances, or wastes into air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials, substances, or wastes. Except as set forth in the Centrum Disclosure Schedule, Centrum is in material compliance with all terms and conditions of the required permits, licenses and authorizations. Except as set forth in the Centrum Disclosure Schedule, Centrum is not aware of any conditions, circumstances, activities, practices, incidents, or actions against Centrum which may form the basis of any claim, action, suit, proceeding, hearing, or investigation against Centrum, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, or hazardous or toxic substance, material or waste. 3.25 Corporate Documents. Centrum has furnished to 3Com for its examination: (i) all material permits, orders, and consents issued by any regulatory agency with respect to Centrum, or any securities of Centrum, and all applications for such permits, orders, and consents; and (ii) the stock transfer books of Centrum setting forth all transfers of any capital stock. 3.26 No Brokers. Neither Centrum nor to the best of Centrum's knowledge any Centrum stockholder, is obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or the Agreement of Merger or in connection with any transaction contemplated hereby or thereby. 3.27 Disclosure. No statements by Centrum contained in this Agreement and the Exhibits attached hereto, any other Transaction Document or any written statement or certificate furnished or to be furnished pursuant hereto or in connection with the transactions contemplated hereby and thereby (when read together) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. 3.28 Centrum Options. (a) Attached hereto as Exhibit "C" ("Centrum Option Holders") is a list, as of the date of this Agreement, of all holders of outstanding Options or persons to whom commitments have been made to grant options. (b) All Options outstanding as of the Effective Time have been issued in accordance with the terms of the Centrum 1993 Stock Plan and pursuant to the standard forms of option agreement previously provided to legal counsel for 3Com. (c) No Option will by its terms require an adjustment in connection with the Merger. (d) Neither the transactions contemplated by this Agreement nor any action taken by Centrum will result in (i) any acceleration of vesting in favor of any optionee under an Option; (ii) any additional benefits for any optionee under an Option, except for the assumption of Options provided for in Section 2.1(a)(iii); or (iii) the inability of 3Com after the Effective Time to exercise any right or benefit held by Centrum prior to the Effective Time with respect to an Option assumed by 3Com, including, without limitation, if applicable, the right to repurchase an optionee's unvested shares on termination of such optionee's employment. 3.29 Certain Contracts. (a) Centrum has performed all obligations (including but not limited to all development milestones or deliverables) under the Development Agreement between Centrum and Chipcom Corporation dated October 28, 1993 (the "Chipcom Agreement") required to be performed through the Closing Date (or will have performed such obligations as of the Closing Date), and Centrum is not aware of any fact or circumstance or inability on the part of Centrum which could cause Centrum to fail to perform an obligation under such agreement, other than failures which individually or in the aggregate would not result in any penalty or default under or any breach of such agreement. (b) The Centrum Disclosure Schedule includes a list of all Centrum products or releases and significant features which are not Technology Agreement Inventions as defined in the Termination Agreement dated December 27, 1993 between Accton Technology Corp., Centrum and certain other parties (the "Termination Agreement"). The Termination Agreement is, and in particular but not by way of limitation the provisions thereof prohibiting transfer of ownership and restricting disclosure of certain inventions are, enforceable in accordance with the terms thereof. There is no other agreement, contract or commitment which modifies, affects or alters the Termination Agreement, and there is no fact or circumstance which has or could with the passage of time cause such Agreement or the provisions thereof referred to in the prior sentence to become unenforceable in accordance with the terms thereof. OC Representations and Warranties of 3Com and Sub. Except as otherwise set forth in the "3Com Disclosure Schedule" attached hereto as Exhibit "D" ("3Com Disclosure Schedule"), 3Com and Sub jointly and severally represent and warrant to Centrum as set forth below. No fact or circumstance disclosed to Centrum shall constitute an exception to these representations and warranties unless such fact or circumstance is set forth in the 3Com Disclosure Schedule attached hereto or such supplements thereto as may mutually be agreed upon in writing by Centrum and 3Com. Whenever the term "enforceable in accordance with its terms" or like expression is used, it is understood that excepted therefrom are any limitations on enforceability under applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditor's rights. 4.1 Organization and Good Standing. 3Com and Sub are corporations duly organized, validly existing and in good standing under the laws of the State of California, and have full power and authority to carry on their businesses as now conducted. 3Com and Sub are each qualified as foreign corporations in any jurisdiction in which a failure to qualify would have a material adverse effect on the operations or financial condition of 3Com and/or Sub. Each of 3Com and Sub has furnished Centrum with copies of its respective Articles of Incorporation and Bylaws, as amended. Said copies are true, correct and complete and contain all amendments through the date of the Closing. 4.2 Power, Authorization and Validity. (a) 3Com and Sub have the right, power, legal capacity and authority to enter into and perform their respective obligations under this Agreement and the other Transaction Documents to which they are parties. (b) The execution, delivery and performance of this Agreement and the Transaction Documents have been, or will have been prior to the Closing, duly and validly approved and authorized by the Boards of Directors of 3Com and Sub and the shareholder of Sub. No authorization or approval, governmental or otherwise, is necessary in order to enable 3Com and Sub to enter into and to perform the terms of this Agreement or the Transaction Documents on their parts to be performed. (c) This Agreement and any agreements which are exhibits to this Agreement are the valid and binding obligations of 3Com and Sub enforceable in accordance with their terms. (d) Upon delivery in accordance herewith the Agreement of Merger shall be a binding obligation of 3Com and Sub enforceable in accordance with its terms. (e) No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental entity is required by or with respect to 3Com or Sub in connection with the execution and delivery of this Agreement or the Transaction Documents or the consummation by 3Com and Sub of the transactions contemplated hereby or thereby, except for the filing of the Agreement of Merger and officers' certificates with the California Secretary of State and appropriate documents with relevant authorities of other states in which 3Com and Sub are qualified to do business. 4.3 Capitalization. The authorized capital of 3Com consists of One Hundred Million (100,000,000) shares of Common Stock, of which 30,968,523 shares were issued and outstanding on November 30, 1993. The authorized capital of Sub consists of one thousand shares (1,000) of Common Stock, all of which are issued and outstanding and are owned of record and beneficially by 3Com. All the issued and outstanding shares have been duly authorized and validly issued, are fully paid and non assessable are not subject to any right or claim of rescission, and have been offered, issued, sold and delivered by 3Com in compliance with all applicable federal and state securities laws. 4.4 No Violation of Existing Agreements. Neither the execution and delivery of this Agreement or the Transaction Documents nor the consummation of the transactions contemplated hereby or thereby will conflict with, or result in a material breach or violation of, any provision of 3Com's Articles of Incorporation or Sub's Articles of Incorporation, or their respective Bylaws, as currently in effect, any instrument or contract to which 3Com or Sub is a party or by which any such party is bound, or any federal, state or local judgment, writ, decree, order, statute, rule or regulation applicable to any such person. Neither the execution and delivery of this Agreement, nor any Agreement attached hereto as an Exhibit, nor the consummation of the transactions contemplated hereby or thereby will have a material adverse effect on the operations, assets, financial condition or prospects of 3Com. 4.5 Litigation. There is no action, proceeding, claim or investigation pending or, to the best of 3Com's knowledge, threatened against 3Com and Sub before any court or administrative agency which could have a material adverse effect upon 3Com's performance of its obligations hereunder. 4.6 No Brokers. Neither 3Com nor Sub is obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or the Agreement of Merger or in connection with any transaction contemplated hereby or thereby. 4.7 Disclosure. Neither this Agreement, its exhibits and schedules, nor any of the certificates or documents required to be delivered to Centrum under this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained herein and therein not misleading in light of the circumstances under which such statements were made. 4.8 Compliance With Other Instruments and Laws. 3Com is not in violation of any provisions of its Articles of Incorporation or Bylaws as currently in effect or in effect at the Closing, or any federal, state or local judgment, writ, decree or order applicable to 3Com. 3Com is not in default under or in breach or violation of, nor, to 3Com's knowledge, is there any valid basis for any claim of default by 3Com under, or breach or violation by 3Com of, any contract, commitment or restriction to which 3Com is a party or to which it or any of its properties is bound, where such defaults, breaches or violations would, in the aggregate, have a material adverse effect on the operations, assets, financial condition or prospects of 3Com. The operations of 3Com have not violated any federal, state or local laws, regulations or orders with which failure to comply would have a material adverse effect on the operations, assets, financial condition or prospects of 3Com. 4.9 SEC Documents. 3Com has delivered to Centrum true, accurate and complete copies of 3Com's most recent annual report to shareholders, proxy statement, report on Form 10-K, and any report on Form 10-Q or 8-K filed since the most recent 10-K (collectively, the "SEC Documents"). As of their respective filing dates, the SEC Documents complied as to form in all material respects with the applicable requirements of the Exchange Act and the Securities Act, and taken together, the SEC Documents contained no untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading except to the extent corrected by a subsequently filed SEC Document provided to Centrum prior to the execution of this Agreement. The financial statements of 3Com included in the SEC Documents (the "3Com Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Securities and Exchange Commission with respect thereto, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present the consolidated financial position of 3Com and its consolidated subsidiaries at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring audit adjustments). There has been no change in 3Com's accounting policies except as described in the notes to the 3Com Financial Statements. 4.10 No Material Adverse Change. Since November 30, 1993, 3Com has conducted its business in the ordinary course, with the exception of the acquisition by 3Com of Synernetics, Inc., and there has not occurred: (i) any material adverse change in 3Com's business, taken as a whole; (ii) any damage, destruction or loss, whether covered by insurance or not, materially and adversely affecting the properties or businesses of 3Com; or (iii) any sale of a material amount of property of 3Com, except in the ordinary course of business. 5. Preclosing Covenants of Centrum. Centrum covenants and agrees as provided in Sections 5.1 through 5.7, as follows: 5.1 Advice of Changes. Centrum will promptly advise 3Com in writing (i) of any event occurring subsequent to the date of this Agreement which would render any representation or warranty of Centrum contained in this Agreement, if made on or as of the date of such event or the Closing Date, untrue or inaccurate in any material respect and (ii) of any material adverse change in Centrum's business, taken as a whole. 5.2 Conduct of Business. Until the Closing, Centrum will continue to conduct its business and maintain its business relationships in the ordinary and usual course and will not, without the prior written consent of 3Com, which consent will not be unreasonably withheld: (a) borrow any money which borrowings exceed in the aggregate $50,000; (b) incur any liability other than in the ordinary and usual course of business or in connection with the performance or consummation of this Agreement; (c) encumber or permit to be encumbered any of its assets except in the ordinary course of its business; (d) dispose of any of its assets, except inventory in the regular and ordinary course of business; (e) enter into any lease or contract for the purchase or sale of any property, real or personal, except in the ordinary course of business; PCD fail to maintain its equipment and other assets in good working condition and repair according to the standards it has maintained up to the date of this Agreement, subject only to ordinary wear and tear; (g) pay any bonus, increased salary, or special remuneration to any officer or employee, including any amounts for accrued but unpaid salary or bonuses (other than amounts not in excess of normal payments made on a regular basis); (h) change accounting methods in any material manner; (i) declare, set aside or pay any cash or stock dividend or other distribution in respect of capital, or redeem or otherwise acquire any of its capital stock; (j) amend or terminate any material contract, agreement or license to which it is a party, or enter into any new such contract, agreement or license, except in the ordinary course of business; (k) loan any amount to any person or entity, or guaranty or act as a surety for any obligation, other than in connection with employee advances or transactions in the ordinary course of business; (l) waive or release any right or claim with a value in excess of $15,000, except in the ordinary course of business; (m) issue or sell any shares of its capital stock of any class or any other of its securities, or issue or create any warrants, obligations, subscriptions, options, convertible securities, or other commitments to issue shares of capital stock other than upon conversion or exercise of outstanding securities or as described in Section 3 or on the Centrum Disclosure Schedule; RS\ split or combine the outstanding shares of its capital stock of any class or enter into any recapitalization affecting the number of outstanding shares of its capital stock of any class or affecting any other of its securities; (o) merge, consolidate or reorganize with any entity; (p) amend its Articles of Incorporation or Bylaws; or (q) agree to do any of the things described in the preceding clauses of this Section 6.2. 5.3 Access to Information. Until the Closing, Centrum shall allow 3Com and its agents free access upon reasonable notice and during normal working hours to its files, books, records, and offices, including, without limitation, any and all information relating to taxes, commitments, contracts, leases, licenses, and personal property and financial condition. Until the Closing and thereafter, Centrum shall cause its accountants to cooperate with 3Com and its agents in making available all working papers pertaining to all financial statements prepared or audited by such accountants. 5.4 Regulatory Approvals. Prior to the Closing, Centrum shall execute and file, or join in the execution and filing, of any application or other document which may be necessary in order to obtain the authorization, approval or consent of any governmental body, federal, state or local, which may be reasonably required, or which 3Com may reasonably request, in connection with the consummation of the transactions contemplated by this Agreement. Such persons and entities shall use their best efforts to obtain all such authorizations, approvals and consents. 5.5 Satisfaction of Conditions Precedent. Centrum will use commercially reasonable efforts to satisfy or cause to be satisfied all the conditions precedent which are set forth in Section 11, and Centrum will use commercially reasonable best efforts to cause the transactions contemplated by this Agreement to be consummated, and, without limiting the generality of the foregoing, to obtain all consents and authorizations of third parties and to make all filings with, and give all notices to, third parties which may be necessary or reasonably required on its part in order to effect the transactions contemplated hereby. 5.6 Shareholder Vote. Prior to the Closing, whether by special meeting or written consent of its shareholders, Centrum will submit this Agreement and related matters to its shareholders for consideration and approval, and the Board of Directors of Centrum will recommend such approval to the Centrum shareholders. 5.7 Exclusivity. Until February 15, 1994, Centrum agrees that it will not (and that it will use commercially reasonable efforts to assure that its employees, agents and affiliates do not on its behalf) discuss or enter any agreement concerning the sale or acquisition of Centrum, its stock (including by means of any public offering thereof, but excluding issuance of stock and options to employees in the ordinary course of business consistent with past practices) or a substantial part of its assets with any party other than 3Com, and that any such discussions presently in progress will be terminated or suspended during that period. 6. Preclosing Covenants of 3Com and Sub. 6.1 Advice of Changes. 3Com and Sub will promptly advise Centrum in writing (i) of any event occurring subsequent to the date of this Agreement which would render any representation or warranty of 3Com or Sub contained in this Agreement, if made on or as of the date of such event or the Closing Date, untrue or inaccurate in any material respect and (ii) of any material adverse change in 3Com's business, taken as a whole. 6.2 Regulatory Approvals. Prior to the Closing, 3Com and Sub shall execute and file, or join in the execution and filing, of any application or other document which may be necessary in order to obtain the authorization, approval or consent of any governmental body, federal, state or local, which may be reasonably required, or which Centrum may reasonably request, in connection with the consummation of the transactions contemplated by this Agreement. Such persons and entities shall use their best efforts to obtain all such authorizations, approvals and consents. 6.3 Access to Information. Until the Closing, 3Com shall allow Centrum and its agents free access to the officers of 3Com upon reasonable notice and during normal working hours and shall provide all information or copies of all documents including, without limitation, any and all information relating to taxes, commitments, contracts, leases, licenses, and personal property and financial condition, subject to reasonable limits on access to 3Com's technical and other nonpublic information. 6.4 Satisfaction of Conditions Precedent. 3Com will use commercially reasonable efforts to satisfy or cause to be satisfied all the conditions precedent which are set forth in Section 10, and 3Com will use commercially reasonable efforts to cause the transactions contemplated by this Agreement to be consummated, and, without limiting the generality of the foregoing, to obtain all consents and authorizations of third parties and to make all filings with, and give all notices to, third parties which may be necessary or reasonably required on its part in order to effect the transactions contemplated hereby. 7. Post-Closing Covenants of 3Com. 3Com covenants and agrees as provided in Sections 7.1 through 7.2, any one or more of which may be waived by written consent of the Representative (as defined in the Escrow Agreement), which consent shall not be unreasonably withheld: 7.1 Dividends, Etc. Until the Second Payment has been paid in full, 3Com will not declare, set aside or pay any cash or stock dividend or other distribution to shareholders (other than dividends and distributions payable only in Common Stock of 3Com), or redeem or otherwise acquire any of its capital stock, other than repurchases of stock from time to time consistent with 3Com's previously announced stock repurchase program. 7.2 Limitations on Liens. Until the Second Payment has been paid in full, 3Com will not create or suffer to exist, or permit any subsidiary to create or suffer to exist, any lien, security interest or other charge or encumbrance, upon or with respect to any of its properties, whether now owned or hereafter acquired, other than (a) such liens, security interests or other charges or encumbrances as are in existence on the date of this Agreement securing indebtedness of not more than $250,000 in the aggregate; (b) to secure indebtedness of 3Com for money borrowed; (c) liens for taxes, fees, assessments, or other governmental charges (other than any such lien on inventory or other current assets) which are not delinquent or which remain payable without penalty; (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar liens (other than any such lien on inventory or other current assets) arising in the ordinary course of business which are not delinquent or which remain payable without penalty or which are being contested in good faith and by appropriate proceedings; (e) liens (other than any such lien on inventory or other current assets) on the property of 3Com or any of its subsidiaries incurred, or pledges or deposits required, in connection with workmen's compensation, unemployment insurance, and other special security legislation; (f) liens (other than any such lien on inventory or other current assets) on the property of 3Com or any of its subsidiaries securing (i) the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations; (ii) obligations on surety and appeal bonds; and (iii) other obligations of a like nature incurred in the ordinary course of business, provided all such liens in the aggregate have no reasonable likelihood of causing a material adverse effect upon the business of 3Com; (g) easements, rights-of-way, restrictions, and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the businesses of 3Com or any of its subsidiaries; and (h) purchase money security interests on any asset acquired or held by 3Com or any of its subsidiaries in the ordinary course of business, other than inventory or other current assets, securing only indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset; provided that any such lien attaches to such asset concurrently with or within thirty (30) days after the acquisition thereof. 8. Mutual Covenants. 8.1 Confidentiality. The parties acknowledge and agree that provisions of the Confidentiality Agreement dated December 21, 1993 shall be binding upon the parties hereto. The terms of that Confidentiality Agreement are incorporated in this Agreement by this reference. 8.2 Further Assurances. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurances, as may be reasonably requested by any other party to better evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. 8.3 Escrow; Escrow Agreement. Subject to the terms of the Escrow Agreement referenced below, 3Com and Centrum agree that on the Closing Date and date of the Second Payment, 3Com shall deposit the Escrow Amount into an escrow account (the "Escrow Account") maintained by an escrow agent (the "Escrow Agent") mutually agreeable to Centrum and 3Com. The Escrow Agent shall be subject to all of the terms of the Escrow Agreement in the form attached hereto as Exhibit "E" ("Form of Indemnity and Escrow Agreement"). Notwithstanding anything to the contrary set forth in this Agreement or in any of the other Transaction Documents: (a) the Escrow Account shall be the sole and exclusive source of any claim or remedy by 3Com or Sub arising out of the breach or alleged breach (other than fraud) by Centrum of any of the representations, warranties, covenants or agreements in this Agreement or in any of the other Transaction Documents, (b) no stockholder, officer, director or employee of Centrum shall have any other liability for any breach by Centrum of this Agreement or of any of the other Transaction Documents and (c) no claim may be made against the Escrow Account for any individual claim if it is less than [** ] and Centrum and the Centrum shareholders maximum liability shall not exceed [** ] all as more specifically provided in the Escrow Agreement. The option assumption agreements providing for options to acquire 3Com Common Stock provided for in Section 2.1(a)(iii) shall provide that in the event a claim is successfully asserted under the Escrow Agreement, the liability for such claim shall be proportionately shared by Centrum Shareholders and the Option holders based upon the proportion of the fully diluted capital stock of Centrum represented by such person's Centrum Common Stock, Preferred Stock and Options at the Effective Time, but with the Option holders' liability for such claim limited to the loss of the right to exercise a portion of the Option, not to exceed [** ] of the number of shares of 3Com Common Stock subject to such Option. 9. The Closing. 9.1 Merger. On the date of the Closing, but not prior to the Closing, the Agreement of Merger shall be filed with the California Secretary of State and the merger of Sub with and into Centrum shall be consummated. 9.2 Additional Documents. (a) At any time and from time to time at or after the Closing, the parties shall at the request of the other party execute and deliver or cause to be executed and delivered all such assignments, consents and other documents and take or cause to be taken all such other actions as either party may reasonably deem necessary or desirable, in order to more fully and effectively carry out the intents and purposes of this Agreement. (b) Centrum shall execute and deliver to 3Com a statement meeting the requirements of Treasury Regulation Section 1.897-2(h)(2) stating that interests in Centrum are not U.S. real property interests. 10. Conditions to Centrum's Obligations. Centrum's obligations hereunder are subject to the fulfillment or satisfaction on and as of the Closing, of each of the following conditions (any one or more of which may be waived by Centrum, but only in a writing signed by Centrum): 10.1 Accuracy of Representations and Warranties. The representations and warranties of 3Com and Sub set forth in Section 4 shall be true in all material respects on and as of the Closing with the same force and effect as if they had been made at the Closing, and Centrum shall receive a certificate to such effect from the President or a Vice President of 3Com and Sub, respectively. 10.2 No Litigation. No litigation or proceeding shall be threatened or pending against 3Com, Sub or Centrum with the purpose or with the probable effect of enjoining or preventing the consummation of any of the transactions contemplated by this Agreement, or which would have a material adverse effect on the business, liabilities, income, property, operations or prospects of 3Com subsequent to the Closing, and Centrum shall receive a certificate to such effect signed by the President or a Vice President of 3Com and Sub, respectively. 10.3 Authorizations. Centrum shall have received from 3Com and Sub written evidence that the execution, delivery and performance of 3Com and Sub's obligations under this Agreement and the Agreement of Merger have been duly and validly approved and authorized by the Board of Directors of 3Com and Sub, respectively, and the stockholder of Sub. 10.4 Opinion of 3Com's Counsel. Centrum shall have received from Gray Cary Ware & Freidenrich, counsel for 3Com, an opinion satisfactory to such parties in form and substance substantially as set forth in Exhibit "F" ("Opinion of Counsel to 3Com") hereto. 10.5 Government Consents. There shall have been obtained at or prior to the date of Closing such permits or authorizations, and there shall have been taken such other action, as may be required by any regulatory authority having jurisdiction over the parties and the subject matter and the actions herein proposed to be taken. 10.6 Date of Closing. The Closing shall occur on or before February 8, 1994. 10.7 Federal and State Securities Laws. Centrum and 3Com shall have complied with all applicable federal and state securities laws. 10.8 Covenants. 3Com shall have performed and complied with all of its covenants contained in Sections 6 and 8 on or before the Closing, and Centrum shall receive a certificate to such effect signed by the President or a Vice President of 3Com. 10.9 No Adverse Development. There shall be no order, decree or ruling by any court or governmental agency or threat thereof or any other fact or circumstance, which might prohibit or render illegal or have a material, adverse effect on the business, prospects, liabilities, income, property, assets or operations of 3Com subsequent to the Closing. 3Com shall not have sustained a loss, whether or not insured, by reason of physical damage caused by fire, flood or earthquake, accident or other calamity which materially affects the value of its assets or its ability to carry on its business as proposed to be conducted, and which, in the judgment of Centrum, renders it inadvisable to proceed with the Closing. There shall have been no other event which, in the judgment of Centrum, has a material and adverse effect on 3Com's assets, business, liabilities, income, property, assets, prospects or operations subsequent to the Closing. 10.10 Required Consents. Centrum shall have received all written consents, assignments, waivers, authorizations or other certificates reasonably deemed necessary by Centrum's legal counsel to provide for the continuation in full force and effect of any and all material contracts and leases of Centrum, or 3Com shall have waived any claim for indemnification for failure to obtain any such consent or approval. 10.11 Shareholder Approval. This Agreement and the Agreement of Merger shall have been approved and adopted by the affirmative vote of the holders of at least a majority of the outstanding shares of Centrum Common Stock and the holders of at least a majority of the outstanding shares of Centrum Preferred Stock, each voting separately as a class. 10.12 Warrants. All outstanding warrants to purchase shares of stock of Centrum shall be exercised in full or terminated prior to the Effective Time. 11. Conditions to 3Com's and Sub's Obligations. The obligations of 3Com and Sub hereunder are subject to the fulfillment or satisfaction on, and as of the Closing, of each of the following conditions (any one or more of which may be waived by 3Com, but only in a writing signed by 3Com): 11.1 Accuracy of Representations and Warranties. The representations and warranties of Centrum contained in Section 3 shall be true in all material respects on and as of the Closing with the same force and effect as if they had been made at the Closing, and 3Com shall receive a certificate from Centrum to such effect with respect to the representations and warranties of Centrum executed by the Chairman of the Board or the President of Centrum. 11.2 Covenants. Centrum shall have performed and complied with all of its covenants contained in Sections 5 and 8 on or before the Closing, and 3Com shall receive a certificate to such effect signed by the Chairman of the Board or the President of Centrum. 11.3 No Litigation. On and as of the Closing, no litigation or proceeding shall be threatened or pending against 3Com, Sub or Centrum for the purpose or with the probable effect of enjoining or preventing the consummation of any of the transactions contemplated by this Agreement, or which would have a material adverse effect on the business, liabilities, income, property, operations or prospects of Centrum subsequent to the Closing, and 3Com shall receive a certificate from Centrum to such effect signed by Chairman of the Board or the President of Centrum. 11.4 Authorizations. 3Com shall have received from Centrum written evidence that (i) the execution, delivery and performance of this Agreement and the Agreement of Merger have been duly and validly approved and authorized by its Board of Directors and by the Centrum Shareholders, and (ii) shareholders of Centrum holding no more than ten percent (10%) of the outstanding shares of Centrum Common Stock have, or might be able to perfect, dissenters' rights in connection with the Merger. 3Com shall have received a certificate from Centrum to such effect executed by the Chairman of the Board or the President of Centrum. 11.5 Required Centrum Consents. Centrum shall have received all written consents, assignments, waivers or authorizations reasonably deemed necessary by 3Com to provide for the continuation in full force and effect of any and all material contracts, licenses and leases of Centrum. 11.6 Clarification of Chipcom Contract. Centrum shall have obtained confirmation reasonably satisfactory to 3Com to the effect that the manufacturing license granted to Chipcom Corporation in the Chipcom Agreement does not take effect until the occurrence or satisfaction of one of the events set forth in Section V.C. of the Chipcom Agreement. 11.7 Audited Financial Statements. Centrum shall have delivered to 3Com audited financial statements of Centrum for the year ended September 30, 1993, which audited financial statements shall not differ materially and adversely from the Centrum Financial Statements as of and for the year ended September 30, 1993. 11.8 No Adverse Development. There shall be no order, decree, or ruling by any court or governmental agency or threat thereof or any other fact or circumstance, which might prohibit or render illegal or have a material, adverse effect on the business, prospects, liabilities, income, property, assets or operations of Centrum subsequent to the Closing. Centrum shall not have sustained a loss, whether or not insured, by reason of physical damage caused by fire, flood or earthquake, accident or other calamity which materially affects the value of its assets or its ability to carry on its business as proposed to be conducted, and which, in the judgment of 3Com, renders it inadvisable to proceed with the Closing. There shall have been no other event which, in the judgment of 3Com, has a material and adverse effect on Centrum's assets, business, liabilities, income, property, assets, prospects or operations subsequent to the Closing. 11.9 Required Consents. 3Com shall have received all written consents, assignments, waivers, authorizations or other certificates reasonably deemed necessary by 3Com's legal counsel to provide for the continuation in full force and effect of any and all material contracts and leases of Centrum, except to the extent that the Centrum Disclosure Schedule indicates that such items may not be obtained prior to the Closing. 11.10 Opinion of Centrum's Counsel. 3Com shall have received from Venture Law Group, counsel to Centrum, an opinion satisfactory to 3Com in form and substance substantially as set forth in Exhibit "G" ("Opinion of Counsel to Centrum") hereto. 11.11 Opinion regarding Fairness. 3Com shall have received from its investment adviser an opinion that the Merger is fair from a financial perspective. 11.12 Employment with 3Com; Non-compete Agreements. Vincent Liu, David Helfrich and Ann Zeichner shall have agreed to become employees of 3Com following the consummation of the Merger. Mr. Gilbert Hu shall have entered into a non-compete agreement in the form attached as Exhibit "H-1", with Mr. Hu's non-compete agreement having a term of four years from the date of Closing, and Vincent Liu and Ann Zeichner shall have entered into employment and non-compete agreements in the forms attached as Exhibits "H-2" and "H-3". 11.13 Government Consents. There shall have been obtained at or prior to the date of Closing such permits or authorizations and there shall have been taken such other action, as may be required by any regulatory authority having jurisdiction over the parties and the subject matter and the actions herein proposed to be taken, including compliance with applicable state and federal securities laws. 11.14 Date of Closing. The Closing shall occur on or before February 8, 1993. 11.15 Absence of Specific Changes. Since January 18, 1993, there shall have been no (i) new or significantly different commitments or contracts made by Centrum with any OEM or with any significant customer, and (ii) no changes in the balance sheet of Centrum as of the time of Closing from the Centrum Balance Sheet, including but not limited to cash distributions, except for those occurring in the ordinary course of business and those disclosed on the Centrum Disclosure Schedule. 11.16 Transfer of Technology. Each key technical employee and each independent contractor of Centrum shall have transferred to Centrum any and all right, title or interest such employee or contractor may have in any Proprietary Rights used in, relating to or made a part of the Centrum Products, free and clear of all liens, claims, encumbrances or other obligations, including any obligation to pay royalties or similar fees with respect thereto (other than as disclosed on the Centrum Disclosure Schedule) and shall have executed such additional documents as may be required, in 3Com's judgment, to effect the intent of this Section. 11.17 Warrants. All outstanding warrants to purchase shares of stock of Centrum shall be exercised in full or terminated prior to the Effective Time. 12. Termination of Agreement. 12.1 Prior to Closing. This Agreement may be terminated at any time prior to the Closing by the mutual written consent of each of the parties hereto, or by Centrum or 3Com upon delivery of notice to the other party if the Merger shall not have been consummated on or before February 8, 1993 for any reason other than matters within the direct control of such party. 12.2 At the Closing. At the Closing, this Agreement may be terminated and abandoned: (a) By 3Com if any of the conditions precedent to 3Com or Sub's obligations pursuant to Section 11 shall not have been fulfilled at and as of the Closing; or (b) By Centrum if any of the conditions precedent to Centrum's obligations pursuant to Section 10 above shall not have been fulfilled at and as of the Closing. Any termination of this Agreement under this Section 12.2 shall be effective by the delivery of notice of the terminating party to the other parties hereto. 12.3 No Liability. Any termination of this Agreement pursuant to this Section 12 shall be without further obligation or liability upon any party in favor of any other party hereto. 12.4 Effect of Termination. The termination of the Agreement shall terminate all Sections hereof other than Section 8.1 13. Survival of Representations, Warranties and Covenants. The representations and warranties of the parties shall survive until the date [** ] and shall terminate thereupon, except to the extent related to any Claim that has been asserted under the Escrow Agreement. 14. Miscellaneous. 14.1 Governing Laws. It is the intention of the parties hereto that the internal laws of the State of California (irrespective of its choice of law principles) shall govern the validity of this Agreement, the construction of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto. The parties hereby agree that any suit to enforce any provision of this Agreement or arising out of or based upon this Agreement or the business relationship between any of the parties hereto shall be brought in the United States District Court for the Northern District of California or the Superior or Municipal Court in and for the County of Santa Clara, California. Each party hereby agrees that such courts shall have in personam jurisdiction with respect to such party, and such party hereby submits to the in personam jurisdiction of such courts. \P06 Binding upon Successors and Assigns. Subject to, and unless otherwise provided in, this Agreement, each and all of the covenants, terms, provisions, and agreements contained herein shall be binding upon, and inure to the benefit of, the permitted successors, executors, heirs, representatives, administrators and assigns of the parties hereto. 14.3 Severability. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances shall be interpreted so as best to reasonably effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision. 14.4 Entire Agreement. This Agreement, the exhibits hereto, the documents referenced herein, and the exhibits thereto, constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto and thereto. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. 14.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original as against any party whose signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as signatories. 14.6 Expenses. Each party shall pay all of its own costs and expenses incurred with respect to the negotiation, execution and delivery of this Agreement and the exhibits hereto; provided, however, that any accounting, legal or other advisory fees incurred by Centrum with respect to such matters in excess of [** ] shall constitute an uncontestable Claim under the Escrow Agreement without any minimum claim requirement or threshold. 14.7 Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law on such party, and the exercise of any one remedy shall not preclude the exercise of any other. 14.8 Amendment and Waivers. Any term or provision of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the party to be bound thereby; provided, however, that no amendment of Section 7 or Section 8.3 may be effected without the written approval of the Representative (as defined in the Escrow Agreement), and after approval of this Agreement has been obtained from the Centrum Shareholders, no amendment shall be effected which by law requires the further approval of the Centrum Shareholders without obtaining such further approval. The waiver by a party of any breach hereof for default in payment of any amount due hereunder or default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. 14.9 Survival of Agreements. All covenants, agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby notwithstanding any investigation of the parties hereto, subject to the limitations provided herein. 14.10 No Waiver. The failure of any party to enforce any of the provisions hereof shall not be construed to be a waiver of the right of such party thereafter to enforce such provisions. 14.11 Attorneys' Fees. Should suit be brought to enforce or interpret any part of this Agreement, the prevailing party shall be entitled to recover, as an element of the costs of suit and not as damages, reasonable attorneys' fees to be fixed by the court (including without limitation, costs, expenses and fees on any appeal). The prevailing party shall be the party entitled to recover its costs of suit, regardless of whether such suit proceeds to final judgment. A party not entitled to recover its costs shall not be entitled to recover attorneys' fees. No sum for attorneys' fees shall be counted in calculating the amount of a judgment for purposes of determining if a party is entitled to recover costs or attorneys' fees. 14.12 Notices. Whenever any party hereto desires or is required to give any notice, demand, or request with respect to this Agreement, each such communication shall be in writing and shall be effective only if it is delivered by personal service or mailed, United States registered or certified mail, postage prepaid, addressed as follows: Centrum: 2835 Zanker Road San Jose, California, 95134 Attention: President With copy to: Venture Law Group 2700 Sand Hill Road Menlo Park, CA 94025 Attention: Mark Medearis 3Com: 5400 Bayfront Plaza Santa Clara, CA 95052-8145 Attention: Mark Michael, General Counsel with copy to: Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, CA 94301 Attention: J. Howard Clowes Such communications shall be effective when they are received by the addressee thereof; but if sent by registered or certified mail in the manner set forth above, they shall be effective five (5) days after being deposited in the United States mail. Any party may change its address for such communications by giving notice thereof to the other parties in conformity with this Section. 14.13 Construction of Agreement. This Agreement has been negotiated by the respective parties hereto and their attorneys and the language hereof shall not be construed for or against any party. The titles and headings herein are for reference purposes only and shall not in any manner limit the construction of this Agreement, which shall be considered as a whole. 14.14 No Joint Venture. Nothing contained in this Agreement shall be deemed or construed as creating a joint venture or partnership between any of the parties hereto. No party is by virtue of this Agreement authorized as an agent, employee or legal representative of any other party. No party shall have the power to control the activities and operations of any other and their status is, and at all times, will continue to be, that of independent contractors with respect to each other. No party shall have any power or authority to bind or commit any other. No party shall hold itself out as having any authority or relationship in contravention of this Section. 14.15 Further Assurances. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurances, as may be reasonably requested by any other party to better evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. 14.16 Absence of Third Party Beneficiary Rights. No provisions of this Agreement are intended, nor shall be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any client, customer, affiliate, shareholder, partner of any party hereto or any other person or entity unless specifically provided otherwise herein, and, except as so provided, all provisions hereof shall be personal solely between the parties to this Agreement (except as to the Centrum Shareholders and holders of Centrum Options with respect to any material breach by 3Com or Sub of any representations, warranties or covenants provided in this Agreement and the Exhibits hereto). IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of January 18, 1994. 3COM CORPORATION By: Janice M. Roberts VP Marketing Printed Name and Title 3SUB ACQUISITION CORPORATION By: Janice M. Roberts President Printed Name and Title CENTRUM COMMUNICATIONS, INC. By: Andrew W. Verhalen Chairman Printed Name and Title EXHIBITS A - Agreement of Merger B - Centrum Disclosure Schedule C - Centrum Option Holders D - 3Com Disclosure Schedule E - Form of Indemnity and Escrow Agreement F - Opinion of Counsel to 3Com G - Opinion of Counsel to Centrum H-1 - Gilbert Hu Agreement Not to Compete H-2 - Vincent Liu Employment and Non-competition Agreement H-3 - Ann Zeichner Employment and Non-competition Agreement EX-7 4 EXHIBIT 7.3 ** Confidential treatment has been requested for those portions marked with asterisks. The confidential portions have been filed separately with the Securities and Exchange Commission. INDEMNITY AND ESCROW AGREEMENT This Indemnity and Escrow Agreement (the "Agreement") is entered into as of February , 1994 by and among 3Com Corporation, a California corporation ("3Com"), Centrum Communications, Inc., a California corporation ("Centrum"), the Representative named in Section 2 (Representative) hereof and the Escrow Agent named herein. RECITALS A. 3Com, 3Sub Acquisition Corporation, a California corporation and a wholly-owned subsidiary of 3Com ("Sub"), and Centrum have entered into an Agreement and Plan of Reorganization dated as of January 18, 1994 (the "Plan") pursuant to which Sub will merge with and into Centrum, with Centrum surviving the Merger. Capitalized terms used in this Agreement and not otherwise defined herein will have the meanings given them in the Plan. B. The Plan provides for [** ] of the amount of the First Payment and, if and to the extent any Claims (as defined below) have been made and remain unresolved at the time the Second Payment becomes payable, for up to [** ] of the amount of the Second Payment (together with the amount withheld from the First Payment, the "Escrow Amount") to be placed in an escrow account (the "Escrow Account") to secure certain obligations to 3Com under the Plan on the terms and conditions set forth herein. C. The parties hereto desire to establish the terms and conditions pursuant to which the Escrow Amount will be withheld by 3Com and subsequently deposited, held in, and disbursed from the Escrow Account. NOW, THEREFORE, the parties hereto agree as follows: 1. Indemnification. 1.1 Indemnification by Centrum Securityholders from Escrow Amount. If the Merger occurs, all the representations, warranties, covenants and agreements of Centrum in the Plan shall survive the Effective Time, but Centrum shall have no further liability with respect thereto, and all such liability will become the obligation and collective responsibility of the shareholders of Centrum immediately after the Closing (collectively "the Centrum Shareholders") and the holders of Options (collectively, the "Centrum Optionholders"), in accordance with this Agreement, subject to the limitations set forth herein. The Centrum Shareholders and the Centrum Optionholders are collectively referred to herein as the "Centrum Securityholders." Centrum having originally made such representations, warranties, covenants and agreements shall in no way limit the obligations of the Centrum Securityholders pursuant to this Agreement, which obligations shall remain in full force and effect, subject to the limitations set forth herein. All the representations, warranties, covenants and agreements of Centrum in the Plan shall survive the Effective Time as to the Centrum Securityholders, subject to the limitations set forth herein. Pursuant to and subject to the provisions of this Agreement, the Centrum Securityholders shall indemnify and hold harmless 3Com and Centrum in respect of any and all claims, losses, damages, liabilities, demands, assessments, judgments, costs and expenses (including, without limitation, settlement costs and any legal or other expenses for investigating, bringing or defending any actions or threatened actions) (collectively the "Costs") incurred or suffered by 3Com or Centrum resulting from (i) any breach of any representation, warranty, covenant, agreement or obligation made by Centrum in the Plan or in any of the other Transaction Documents and (ii) any matter set forth on Schedule A hereto. Nothing in this Agreement or in the Plan shall limit 3Com rights or claims with respect to any Centrum Shareholder immediately prior to the Effective Time arising out of such Centrum Shareholder's failure to own all right, title and interest in and to the shares of Centrum listed of record as owned by such Centrum Shareholder. 1.2 Payment for Indemnification Claims; Threshold. The Centrum Securityholders agree to pay 3Com for Costs claimed by 3Com in the manner and to the extent provided in this Agreement. The parties agree that the Escrow Amount will be security for this obligation. Promptly after the receipt by 3Com of notice or discovery of any claim, damage or legal action or proceeding giving rise to rights under Section 1.1 (Indemnification by Centrum Securityholders from Escrow Amount), 3Com will give the Representative and the Escrow Agent written notice of such claim, damage, legal action or proceeding (a "Claim") in accordance with Section 4 (Notice of Claim) hereof. 3Com shall notify the Representative of the status or progress of any such Claim. Notwithstanding anything to the contrary set forth in this Agreement or in any of the other Transaction Documents, in the absence of fraud, if the Merger is consummated: (a) the Escrow Amount shall be the sole and exclusive remedy and source of compensation to 3Com for any Costs incurred by 3Com or Sub arising out of the breach or alleged breach by Centrum of any of its representations, warranties, covenants or agreements in the Plan or in any of the other Transaction Documents and for any matter set forth on Schedule A, and (b) except as specifically provided in the following paragraph or in Schedule A, Centrum and the Centrum Securityholders shall be liable only as to any individual claim if it involves [** ] provided that, once such [** ] then 3Com will be entitled to make Claim for indemnification of all such Costs [** ] 1.3 Allocation of Costs between Shareholders and Optionholders. With respect to any Costs for which 3Com may be entitled to indemnification under this Agreement, 3Com will be entitled to be paid in cash out of the Escrow Amount that percentage of such Costs equal to the percentage of all fully diluted Common Stock equivalents of Centrum (assuming conversion of all outstanding Preferred Stock and exercise of all outstanding Options whether vested or not) represented by the outstanding Centrum Common Stock and Preferred Stock immediately prior to the Closing. All such fully diluted Common Stock equivalents are referred to herein as the "Centrum Shares." All such fully diluted Common Stock equivalents are referred to herein as the "Centrum Shares." The remainder of such Costs will be subject to indemnification by means of corresponding provisions in the assumption agreements pursuant to which 3Com assumes the Options, with the Optionholders' indemnification for such Costs effected through the loss of the right to exercise a portion of their Options, not to exceed [** ] of the number of shares of 3Com Common Stock subject to such options immediately after the Closing, in the absence of fraud. 1.4 Limitation on Liability. In the absence of fraud, if the Merger is consummated, the maximum liability of Centrum and the Centrum Shareholders for any matter set forth in this Agreement shall not exceed [** ] Payments for Costs shall be deducted from the Escrow Amount payable to each Centrum Shareholder in proportion to the ratio of the number of shares of Centrum Common Stock and Preferred Stock held by such Centrum Shareholder over the total number of outstanding shares of Centrum Common Stock and Preferred Stock immediately prior to the Effective Time, and shall be deducted from shares of 3Com Common Stock issuable upon exercise of Options held by each Centrum Optionholder in proportion to the number of shares of Centrum Common Stock issuable upon exercise of Options held by such Centrum Optionholder over the total number of shares of Centrum Common Stock issuable upon exercise of all Options immediately prior to the Effective Time. 2. Representative. 2.1 Appointment; Acceptance. Andrew W. Verhalen and his successors are hereby irrevocably constituted and appointed as attorney-in-fact and agent for each of the Centrum Securityholders, to act as herein provided, in his/her/its name, place and stead in connection with the transactions contemplated by this Agreement (the "Representative"), and such appointment is coupled with an interest. By executing and delivering this Agreement under the heading "Representative," Andrew W. Verhalen and his successors hereby accepts his appointment and authorization to act as the Representative as attorney-in-fact and agent on behalf of the Centrum Securityholders in accordance with the terms of this Agreement and agrees to perform his obligations hereunder, and otherwise comply with this Section 2 (Representative). 2.2 Authority. (a) The Centrum Securityholders shall be bound by all notices received and agreements and determinations made by and documents executed and delivered by the Representative pursuant to this Agreement. (b) The Representative is authorized to take any and all actions and the make any decisions required or permitted to be taken by him under this Agreement, including, without limitation, the exercise of the power to (i) authorize disposition by or delivery to 3Com of the Escrow Amount and the loss of rights to exercise Options, or any portion thereof, in satisfaction of Claims, (ii) agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with respect to such Claims, (iii) resolve any Claims, (iv) give instructions to 3Com and the Escrow Agent, (v) agree to extend the term of this Agreement and the duration of Escrow Account, and (vi) take all actions necessary in the judgment of the Representative for the accomplishment of the foregoing and all of the other terms, conditions and limitations of this Agreement or the Plan. Accordingly, the Representative has unlimited authority and power to act on behalf of Centrum and each Centrum Securityholder with respect to this Agreement or the Plan and the disposition, settlement or other handling of all Claims, rights or obligations arising under this Agreement or the Plan. The Centrum Securityholders will be bound by all actions taken by the Representative in connection with this Agreement or the Plan and 3Com shall be entitled to rely on any action or decision of the Representative. (c) The Representative is authorized and directed to receive payments, if any, made to the Representative for the account of the Centrum Shareholders under this Agreement, to invest such funds pending their disbursement in such manner as the Representative in his sole discretion deems appropriate; and to disburse pro rata any payments due the Centrum Shareholders under this Agreement in accordance with their interest, after (i) payment of any attorneys' and accountants' and other fees and expenses incurred on behalf of the Centrum Securityholders in connection with the consummation of the transactions contemplated by this Agreement and (ii) withholding such amounts to pay costs and expenses relating to potential disputes arising with respect to indemnification or other obligations of the Centrum Securityholders under this Agreement. 2.3 Actions. The Representative is authorized to act on behalf of each of the Centrum Securityholders, notwithstanding any dispute or disagreement among the Centrum Securityholders, and 3Com and the Escrow Agent and any other person or entity shall be entitled to rely on any and all actions taken by the Representative under this Agreement without any liability to, or obligation to inquire of, any of the Centrum Securityholders. All notices, counternotices or other instruments or designations delivered by the Representative shall not be effective unless, but shall be effective if, signed by the Representative, and if not, such document shall have no force and effect whatsoever hereunder and 3Com and any other person or entity may proceed without regard to any such document. 3Com, the Escrow Agent and any other person or entity are hereby expressly authorized to rely on the genuineness of the signature of the Representative, and upon receipt of any writing which reasonably appears to have been signed by the Representative, 3Com, the Escrow Agent and any other person or entity may act upon the same without any further duty of inquiry as to the genuineness of the writing. 2.4 Effectiveness. The authorizations of the Representative shall be irrevocable and effective until his rights and obligations under this Agreement terminate by virtue of the termination of any and all of the obligations of the Centrum Shareholders, Centrum and 3Com under this Agreement. 2.5 Liability of Representative. In performing his functions hereunder and under the Plan, the Representative will not be liable in any manner whatsoever to the Centrum Securityholders. 2.6 Successors. At any time during the term of this Agreement, the Centrum Securityholders who together held a majority of the Centrum Shares immediately prior to the closing of the Merger can appoint a new Representative by written consent by sending notice and a copy of the written consent appointing such new Representative, duly signed by sufficient Centrum Securityholders, to 3Com and the Escrow Agent. Such appointment will be effective upon the later of the date indicated in the consent or the date such consent is received by 3Com and the Escrow Agent. If Andrew W. Verhalen ceases to function in his capacity as Representative for any reason whatsoever, and if for any reason no successor has been appointed pursuant to the foregoing within thirty (30) days, then 3Com shall have the right to petition a court of competent jurisdiction for appointment of a successor. 2.7 Survival of Authorizations. The authorizations and agreements in this Section 3 (Deposit of Escrow Amount; Release from Escrow) shall remain in force and not be affected if any Centrum Securityholder becomes mentally or physically disabled or incompetent, and the Representative is hereby authorized to make such recordings and filings hereof as 3Com or the Representative may deem appropriate, and no filing of accounts or inventories or posting of a surety bond shall be required. 3. Deposit of Escrow Amount; Release from Escrow. 3.1 Delivery of Escrow Amount. Immediately after the Effective Time, [** ] of the amount of the First Payment will be delivered by 3Com to the Escrow Agent by check made payable to the Escrow Account. If any Claims have been made and remain unresolved at the time the Second Payment becomes payable, that portion of [** ] of the amount of the Second Payment necessary to ensure that the Escrow Agent holds a portion of the Escrow Amount sufficient to cover such Claims in accordance with Section 5.2 (Contested Claims) below will be delivered by 3Com to the Escrow Agent by check made payable to the Escrow Account. The Escrow Account (or portion thereof) will be held by The First National Bank of Boston (the "Escrow Agent"), as collateral for the obligations of Centrum and the Centrum Shareholders under this Agreement, until 3Com is required to release such amount pursuant to the terms of this Agreement. The Escrow Agent agrees to accept delivery of the Escrow Amount (or portion thereof) and to hold such amount in escrow subject to the terms and conditions of this Agreement. 3.2 Release of Escrow Account and Distribution to the Centrum Shareholders. The Escrow Amount (or portion thereof) will be held by the Escrow Agent until the later of [** ] or (b) such time as all Claims for which 3Com has provided notice to the Representative and Escrow Agent within such six-month period are resloved. Within 5 business days thereafter, the Escrow Agent will deliver to each Centrum Shareholder the amount to be released on such date as identified by 3Com and the Representative to the Escrow Agent in writing, together with interest accrued on such released amount. 3Com and the Representative undertake to deliver a notice to the Escrow Agent identifying the Escrow Amount (or portion thereof) to be released within such five-day period. The released amount shall be released to the respective Centrum Shareholders in proportion to their respective interests. 3.3 Extension of Escrow Term. Notwithstanding any other provision in this Agreement to the contrary, and whether or not any Notice of Claim has been delivered by 3Com, this Agreement and the duration of the Escrow Account can be extended on one or more occasions by mutual agreement of 3Com and the Representative in any manner they deem appropriate to provide adequate time to cost effectively deal with Claims or circumstances that create the potential for Claims. 3.4 Investment of Escrow Account. The Escrow Agent shall invest the Escrow Account as directed in writing by the Representative (or by 3Com if the Representative does not so direct) in any of the following: (a) obligations issued or guaranteed by The United States of America or any agency or instrumentality thereof; (b) certificates of deposit or interest bearing accounts with national banks or corporations endowed with trust powers having capital and surplus in excess of $500,000,000; (c) commercial paper that at the time of investment is rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investors Service, Inc.; (d) repurchase agreements with any bank or corporation described in clause (ii) fully secured by obligations described in clause (i); or (e) the 1784 Institutional U.S. Treasury Money Market Fund. 3.5 Interest. Accrued interest on the balance of the escrow amount due the Centrum Shareholders at the expiration of the escrow period shall be paid to the Centrum Shareholders. Accrued interest on any amounts delivered to 3Com out of the Escrow Account in satisfaction of Claims by 3Com shall be paid to 3Com at the time such amount is delivered to 3Com. The parties hereto and the Centrum Shareholders agree to provide the Escrow Agent with certified taxpayer identification numbers prior to the release of any funds from the Escrow Account. 3.6 No Encumbrance. No interest in the Escrow Amount or any beneficial interest therein may be pledged, sold, assigned or transferred, including by operation of law, by any Centrum Shareholder or be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of a Centrum Shareholder, prior to the delivery to such Centrum Shareholder of the released amount by the Escrow Agent. 4. Notice of Claim. 4.1 Each notice of a Claim by 3Com (the "Notice of Claim") shall be in writing to the Representative and the Escrow Agent and shall contain the following information to the extent it is reasonably available to 3Com: (a) 3Com's good faith estimate of the reasonably foreseeable maximum amount of the alleged Costs; and (b) A brief description in reasonable detail of the facts, circumstances or events giving rise to the alleged Costs based on 3Com's good faith belief thereof. 4.2 3Com shall provide written notice of any third party claim which could result in a Notice of Claim promptly after 3Com becomes aware of such third party claim. 3Com agrees not to settle such claims without the prior written consent of Representative, which shall not be unreasonably withheld. 4.3 The Escrow Agent will not release any of the Escrow Amount held in the Escrow Account to 3Com pursuant to a Notice of Claim until such Notice of Claim has been resolved in accordance with Section 5 (Resolution of Notice of Claim) below. 4.4 In the event 3Com receives a claim from a third party for damages caused by one or more breaches of the representations and warranties set forth in the Plan, 3Com shall promptly send a Notice of Claim in accordance with this Section 4 (Notice of Claim) and shall keep the Representative and Escrow Agent informed of the status of such claim. 5. Resolution of Notice of Claim. Any Notice of Claim received by Representative and the Escrow Agent pursuant to Section 4 (Notice of Claim) above will be resolved as follows: 5.1 Uncontested Claims. In the event that the Representative does not contest a Notice of Claim by delivering a notice to that effect in writing to the Escrow Agent and 3Com within 30 calendar days after such Notice of Claim is deemed delivered pursuant to Section 7 (Notices) below, the Escrow Agent will immediately deliver to 3Com an amount equal to the amount specified in the Notice of Claim and notify the Representative of such transfer. 5.2 Contested Claims. In the event that the Representative gives written notice contesting all or a portion of a Notice of Claim to 3Com and the Escrow Agent (a "Contested Claim") within the 30-day period provided above, the matter will be settled by binding arbitration in accordance with this Section 5.2 (Contested Claims). Any portion of the Notice of Claim which is not contested shall be resolved as set forth above in Section 5.1 (Uncontested Claims). The final decision of the arbitrator shall be furnished to the Escrow Agent, the Representative, and 3Com in writing and will constitute a conclusive determination of the issue in question, binding upon Centrum Securityholders, the Representative and 3Com and shall not be contested by any of them. After notice that the Notice of Claim is contested by the Representative, the Escrow Agent will continue to hold in the Escrow Account a portion of the Escrow Amount sufficient to cover that portion of such Claim for which the Centrum Shareholders are responsible under Section 1.3 (Allocation of Costs between Shareholders and Options holders) above until (i) execution of a settlement agreement by 3Com and the Representative setting forth a resolution of the Notice of Claim, or (ii) receipt of a copy of the final award of the arbitrator. (a) Arbitration. Any Contested Claim shall be settled by arbitration in Santa Clara, California and, except as herein specifically stated, in accordance with the commercial arbitration rules of the American Arbitration Association ("AAA Rules") then in effect. However, in all events, these arbitration provisions shall govern over any conflicting rules which may now or hereafter be contained in the AAA Rules. Any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction over the subject matter thereof. The arbitrator shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding instituted to resolve a Contested Claim. (b) Compensation of Arbitrator. Any such arbitration shall be conducted before a single arbitrator who shall be compensated for his or her services at a rate to be determined by the parties or by the American Arbitration Association, but based upon reasonable hourly or daily consulting rates for the arbitrator in the event the parties are not able to agree upon his or her rate of compensation. (c) Selection of Arbitrator. The AAA Rules for the selection of the arbitrator shall be followed. (d) Payment of Costs. 3Com and Centrum Shareholders as a group shall each advance fifty percent (50%) of the initial compensation to be paid to the arbitrator in any such arbitration and fifty percent (50%) of the costs of transcripts and other normal and regular expenses of the arbitration proceedings; provided, however, that the arbitrator shall have the discretion to grant to the prevailing party in any arbitration an award of attorneys' fees and costs, and all costs of arbitration. (e) Discovery. The parties shall be entitled to conduct discovery proceedings in accordance with the provisions of the Federal Rules of Civil Procedure, subject to any limitation imposed by the arbitrator. (f) Burden of Proof. For any claim submitted to arbitration, the burden of proof shall be as it would be if the claim were litigated in a judicial proceeding. (g) Judgment. Upon the conclusion of any arbitration proceedings hereunder, the arbitrator shall render findings of fact and conclusions of law and a written opinion setting forth the basis and reasons for any decision reached by him or her and shall deliver such documents to each party to the Agreement along with a signed copy of the award. (h) Terms of Arbitration. The arbitrator chosen in accordance with these provisions shall not have the power to alter, amend or otherwise affect the terms of these arbitration provisions or the provisions of this Agreement or the Plan. (i) Exclusive Remedy. Except as specifically provided in this Agreement or the Plan, arbitration shall be the sole and exclusive remedy of the parties for any Contested Claim arising out of such Agreement or Plan. 5.3 No Exhaustion of Remedies. The parties acknowledge that no other action need be taken by 3Com before proceeding directly in accordance with the provisions of this Agreement. 3Com need not exhaust any other remedies that may be available to it but may proceed directly in accordance with the provisions of this Agreement. 3Com may institute Claims against the Escrow Amount and in satisfaction thereof may recover the Escrow Amount, in accordance with the terms of this Agreement, without making any other Claims directly against the Centrum Shareholders and without rescinding or attempting to rescind the transactions consummated pursuant to the Plan. The assertion of any single Claim for payment hereunder will not bar 3Com from asserting other claims hereunder. 6. Limitation of Escrow Agent's Liability. 6.1 The Escrow Agent will incur no liability with respect to any action taken or suffered by it in reliance upon any notice, direction, instruction, consent, statement or other document believed by it to be genuine and duly authorized, nor for any other action or inaction, except its own willful misconduct or negligence. The Escrow Agent will not be responsible for the validity or sufficiency of this Agreement or any agreement amendatory or supplemental hereto. In all questions arising under the Agreement, the Escrow Agent may rely on the advice or opinion of counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based on such advice or opinion, the Escrow Agent will not be liable to anyone. The Escrow Agent will not be required to take any action hereunder involving any expense unless the payment of such expense is made or provided for in a manner satisfactory to it. 6.2 In the event conflicting demands are made or notices are served upon the Escrow Agent with respect to the Escrow Account, the Escrow Agent will have the absolute right, at the Escrow Agent's election, to do either or both of the following: resign so a successor can be appointed pursuant to Section 10 (Successor Escrow Agreement) or file a suit in interpleader and obtain an order from a court of competent jurisdiction requiring the parties to interplead and litigate in such court their several claims and rights among themselves. In the event such interpleader suit is brought, the Escrow Agent will thereby be fully released and discharged from all further obligations imposed upon it under this Agreement, and 3Com will pay the Escrow Agent (subject to reimbursement from the Centrum Shareholders pursuant to Section 9 (Expenses) hereof) all costs, expenses and reasonable attorneys' fees expended or incurred by the Escrow Agent pursuant to the exercise of Escrow Agent's rights under this Section 6 (Limitation of Escrow Agent's Liability) (such costs, fees and expenses shall be treated as extraordinary fees and expenses for the purposes of Section 9 (Expenses) hereof). 6.3 In consideration of its acceptance of the appointment as Escrow Agent, the other parties hereto, jointly and severally, agree to indemnify and hold the Escrow Agent harmless as to any liability incurred by it to any person, firm or corporation by reason of its having accepted the same or in carrying out any of the terms hereof, and to reimburse the Escrow Agent for all its costs and expenses, including, but not limited to, reasonable counsel fees and expenses, incurred by reason of any matter as to which an indemnity is paid; provided, however, that no indemnity need be paid in the case of the Escrow Agent's negligence or willful misconduct. 7. Notices. Any notice provided for or permitted under this Agreement will be treated as having been given when (a) delivered personally, (b) sent by confirmed telex or telecopy, (c) sent by commercial overnight courier with written verification of receipt, or (d) mailed postage prepaid by certified or registered mail, return receipt requested, to the party to be notified, at the address set forth below, or at such other place of which the other party has been notified in accordance with the provisions of Section 14.12 of the Plan. Centrum: Centrum Communications, Inc. 2835 Zanker Road San Jose, CA 95134 Tel: 408-894-1800 Fax: 408- Attention: Mr. Vincent Liu With copy to: VENTURE LAW GROUP 2800 Sand Hill Road Menlo Park, CA 94025 Tel: 415-854-4488 Fax: 415-854-1121 Attention: Mark A. Medearis 3Com: 3Com Corporation 5400 Bayfront Plaza Santa Clara, CA 95052 Attention: General Counsel With copy to: Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, CA 94301 Attention: J. Howard Clowes Escrow Agent: The First National Bank of Boston 150 Royall Street, Mail Stop 45-02-15 Canton, MA 02021 Attention: Tracy Martin Representative: Mr. Andrew W. Verhalen Matrix Partners 2500 Sand Hill Road, Suite 113 Menlo Park, CA 94025 Such notice will be treated as having been received upon actual receipt by all necessary parties. 8. General. 8.1 Governing Law, Assigns. This Agreement will be governed by and construed in accordance with the internal laws of the State of California without regard to conflict-of-law principles and will be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. 8.2 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 8.3 Entire Agreement. Except as set forth in the Plan and the Agreement of Merger between 3Com and Centrum, this Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof. 8.4 Waivers. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the party to be bound thereby. The waiver by a party of any breach hereof for default in payment of any amount due hereunder or default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. 9. Expenses. 9.1 Escrow Agent and Arbitrator. All fees and expenses of the Escrow Agent incurred in the ordinary course of performing its responsibilities hereunder will be paid by 3Com upon receipt of a written invoice by Escrow Agent. Any extraordinary fees and expenses, including without limitation any fees or expenses incurred by the Escrow Agent in connection with a dispute over the distribution of the Escrow Amount or the validity of a Notice of Claim, will be paid fifty percent (50%) by 3Com and fifty percent (50%) by Centrum. Centrum' liability for the fees and expenses of the Escrow Agent or of the arbitrator appointed under Section 5.2 (Contested Claims) may be paid by 3Com and recovered as a Claim hereunder out of the Escrow Amount. If 3Com has paid the Centrum Shareholders' portion of such fees and expenses as permitted hereunder, then the Escrow Agent will, upon demand by 3Com, deliver to 3Com a portion of the Escrow Amount equal to such portion of fees and expenses. 9.2 Representative. The Representative shall not be entitled to receive any compensation from 3Com or the Centrum Shareholders in connection with this Agreement. Any fees and expenses incurred by the Representative in connection with actions taken pursuant to the terms of this Agreement shall be paid by 3Com and recovered as a Claim hereunder out of the Escrow Account. 10. Successor Escrow Agent. In the event the Escrow Agent becomes unavailable or unwilling to continue in its capacity herewith, the Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving resignation to the parties to this Agreement, specifying not less than sixty (60) days' prior written notice of such a date when such resignation will take effect. 3Com shall designate a successor Escrow Agent prior to the expiration of such 60-day period by giving written notice to the Escrow Agent and the Representative. 3Com may appoint a successor Escrow Agent without the consent of the Centrum Shareholders or the Representative so long as such successor is a bank with assets of at least $50 million, and may appoint any other successor Escrow Agent with the consent of the Representative, which will not be unreasonably withheld. The Escrow Agent will promptly deliver the portion of the Escrow Amount remaining in the Escrow Account at such time to such designated successor. 11. Limitation of Responsibility; Notices. The Escrow Agent's duties are limited to those set forth in this Agreement and the Escrow Agent may rely upon the written notices delivered to the Escrow Agent hereunder. 12. Amendment. This Agreement may be amended with the written consent of 3Com, the Escrow Agent and the Representative, provided that if the Escrow Agent does not agree to an amendment agreed upon by 3Com and the Representative, 3Com shall appoint a successor Escrow Agent in accordance with Section 10 (Successor Escrow Agent) above. 13. Miscellaneous. Escrow Agent may execute any of its powers or responsibilities hereunder and exercise any rights hereunder either directly or by or through its agents or attorneys. Nothing in this Escrow Agreement shall be deemed to impose upon Escrow Agent any duty to qualify to do business or act as fiduciary or otherwise in any jurisdiction other than The Commonwealth of Massachusetts. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written and shall be effective as to all the Centrum Securityholders when executed by 3Com, the Escrow Agent, the Representative and approved by the Centrum Securityholders holding a majority of the Centrum Shares outstanding immediately prior to the closing of the Merger. 3COM CORPORATION REPRESENTATIVE: By: Mark Michael Andrew W. Verhalen Title: VP, General Counsel & Secretary CENTRUM COMMUNICATIONS, INC. By: Andrew W. Verhalen Title: Chairman ESCROW AGENT: THE FIRST NATIONAL BANK OF BOSTON By: Eric Donaghey Title: Account Manager SCHEDULE A TO INDEMNITY AND ESCROW AGREEMENT Matters subject to special indemnification: A. One-half of all Costs, as qualified below, of 3Com or Centrum due to claims by or disputes with the following international distributors (the "Distributors") of Centrum: a. Sumitronics, Inc. and Sumisho Electronics Co., LTD, arising out of that certain Centrum Communications, Inc. International Distributor Agreement dated August 11, 1993, as amended; b. DynaLab INC. arising out of that certain Centrum Communications, Inc. Distribution Agreement dated March 1, 1993, as amended; c. Netcom Ltd. arising out of that certain Centrum Communications, Inc. International Distributor Agreement dated September 1, 1993, as amended. in light of the following circumstances and mutual understandings: 1. Notwithstanding the terms of the existing contracts with the Distributors, 3Com will commence distribution of Centrum products through normal 3Com international distribution channels, including those in effect in the territories allocated by Centrum to the Distributors. 2. 3Com will promptly offer each Distributor the opportunity, and will use commercially reasonable efforts to obtain the Distributor's agreement, to terminate its respective distribution agreement with Centrum and in place thereof to enter into a new international distribution agreement on 3Com standard terms appointing the Distributor as a nonexclusive distributor of the same Centrum products in the same territory now subject to the distribution agreement with Centrum (but not additional 3Com products) for a one year term. In the case of Sumitronics/Sumisho, the appropriate territory is understood to be Japan; in the case of DynaLab, the appropriate territory is understood to be Taiwan, Hong Kong, Korea and Mainland China. 3. 3Com will cause the individual employee performance plan for Ann Zeichner (assuming she agrees to remain an employee of Centrum or 3Com following the Merger) to include a milestone relating to the successful transitioning of the Distributors to nonexclusive, one year status consistent with this Schedule, will tie a reasonable amount of her incentive compensation package to such milestone, and will empower her to take an active role in bringing about a cost-effective transition. The individual performance plan contemplated by this paragraph is to be specified within forty days after the Effective Date. 4. 3Com will keep the Representative informed of the status of discussions with each Distributor, and will not enter into any settlement with a Distributor or agree to make any payment that would be subject to indemnification under the Indemnity and Escrow Agreement without the prior written consent of the Representative, which consent will not be unreasonably withheld. 5. 3Com will not be entitled to make any Claim for 3Com's internal costs incurred in managing the relationship with or negotiating the transition of the Distributors as contemplated by this Schedule, nor for any legal or other fees and expenses incurred in the course of negotiating and documenting a transition to nonexclusive, one year distributor contracts, but will be entitled to make a Claim for any payments to a Distributor or other out-of-pocket costs beyond the foregoing, and for any Costs (including any legal or other fees) with respect to any Distributor after such time as the Distributor makes a written claim for damages or commences a formal dispute. B. All Costs of 3Com or Centrum due to claims by Ming-Chih Hsieh with respect to ownership or rights in intellectual property relating to work product provided by him to Centrum for which written assignment from him was not obtained at the time of the Closing. C. Any Costs subject to indemnification under this Schedule A shall not be subject to the minimum amounts and threshold set forth in Section 1.2 (Payment for Indemnification Claims; Threshold) of the Escrow Agreement. -----END PRIVACY-ENHANCED MESSAGE-----